Press Releases



Mediclinic Intnl plc - Final Results

25/05/2016
RNS Number : 1973Z
Mediclinic International PLC
25 May 2016
 

Mediclinic International plc ("Mediclinic" or the "Company")

(Incorporated in England and Wales)

Company Number: 08338604

LSE Share Code: MDC

JSE Share Code: MEI

NSX Share Code: MEP

ISIN: GB00B8HX8Z88

 

Mediclinic International plc reports its audited results for the year ended 31 March 2016

 

SUMMARY Group Results for the year ended 31 MARCH 2016

 

(£ million)

2016

2015

Variance

%

Revenue

2 107

1 977

7%

EBITDA(1)

382

406

(6%)

Underlying EBITDA(1)

428

403

6%

Operating profit

288

345

(17%)

Earnings(2)

177

241

(27%)

Underlying earnings(1)

219

193

13%

Basic earnings per share,pence

29.6

44.6

(34%)

Underlying basic earnings per share, pence(1)

36.7

35.8

3%

Dividend per share, pence*

7.90

9.33

(15%)

Net debt at the year end

1 536

1 353

14%

 

*The total dividend for the year ended 31 March 2016 in pound sterling comprises the proposed final dividend of 5.24 pence per share and the equivalent interim dividend (adjusted for the 0.625 exchange ratio) of 2.66 pence per share, paid in December 2015 by Mediclinic International Limited.

 

Group financial and operating highlights

 

·      Strong patient growth across all the operating platforms

·      Continued investments in patient experience and clinical quality initiatives

·      Successful completion of Mediclinic and Al Noor Combination and acquisition of 29.9% stake in Spire Healthcare Group

·      Solid financial performance with stable margins and good cash generation

·      Revenue growth of 7% with stable margins at 20.3% driving strong underlying earnings growth

·      Underlying basic earnings per share increased by 3% to 36.7 pence

·      Proposed final dividend per ordinary share of 5.24 pence

 

Notes

1

See the reconciliations between the statutory and the non-GAAP earning measures in the financial review below.

 

2

Earnings refer to profit attributable to equity holders.

 

The Al Noor acquisition has been classified as a reverse takeover in terms of IFRS3. Since Mediclinic International Limited has been identified as the acquirer, the comparative figures are those of Mediclinic International Limited's 2015 group results excluding Al Noor and are re-presented in pounds sterling. Al Noor's results have been consolidated from the effective date of the acquisition (15 February 2016).

 

Group results are subject to movements in foreign currency exchange rates. Refer to the financial review below for exchange rates used to convert the operating platforms' results to pound sterling.

 

Danie Meintjes, CEO of Mediclinic International, commented:

 

"We are pleased to announce trading for the year has been in line with management's expectations. The Group continues to deliver against its key performance indicators with growth in patient activity across all platforms at stable margins. With the Al Noor transaction completing on 15 February, we are now focused on the smooth integration of the business.

 

We expect an increase in demand for cost-effective quality hospital services and increasingly complex clinical services to continue leading to further volume growth. In line with industry trends, we are continuing to see the impact on our business of on-going regulatory initiatives and increasing competition. We strive to differentiate ourselves from our peers in terms of our focus on patients, quality and safety. Leveraging on our Group strength, our platform distribution and our combined knowledge will allow us to unlock further benefits for both patients and shareholders."

 

For further information please contact:

 

Mediclinic International

Craig Tingle, Chief Financial Officer

Gert Hattingh, Group Services Executive

+27 (0)21 809 6500

 

Bell Pottinger

Liz Morley/Aarti Iyer

+44 (0)203 772 2468

 

Registered address: 1st Floor, 40 Dukes Place, London, EC3A 7NH, United Kingdom

Website: www.mediclinic.com

JSE sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)

NSX sponsor: Simonis Storm Securities (Pty) Ltd

 

About Mediclinic

 

Mediclinic is an international private healthcare group with three operating platforms in Southern Africa (South Africa and Namibia), Switzerland and the United Arab Emirates. Its core purpose is to enhance the quality of life of patients by providing acute care, specialist-orientated, multi-disciplinary healthcare services. Mediclinic also holds a 29.9% interest in Spire Healthcare Group plc ("Spire"), a LSE listed and UK-based private healthcare group.

 

During February 2016 the reverse takeover (the "Combination") by the Company (previously named Al Noor Hospitals Group plc), with operations mainly in Abu Dhabi in the United Arab Emirates, by Mediclinic International Limited was completed. Mediclinic International Limited was a South African based international private healthcare group founded in 1983 and listed on the JSE, the South African stock exchange, since 1986, with operations in South Africa, Namibia, Switzerland and the United Arab Emirates (mainly in Dubai). The Combination resulted in the enlarged Mediclinic group, renamed Mediclinic International plc comprising 73 hospitals and 45 clinics.

 

Today, Mediclinic Southern Africa operates 49 hospitals and 2 day clinics throughout South Africa and 3 hospitals in Namibia with more than 8 000 inpatient beds in total; Hirslanden operates 16 private acute care facilities and 4 clinics in Switzerland with more than 1 600 inpatient beds; and Mediclinic Middle East operates 5 hospitals and 39 clinics with more than 700 inpatient beds in the United Arab Emirates.

 

Mediclinic puts science at the heart of its care approach, focusing on providing the best possible facilities with international-standard technology, backed-up by sound medical expertise and the empathy of its nursing staff.

 

Mediclinic has a primary listing on the Main Market of the LSE, with secondary listings on the JSE in South Africa and the NSX in Namibia.

 

Cautionary statement

 

This preliminary announcement contains certain forward-looking statements relating to the business of the Company and its subsidiaries (collectively, the "Group"), including with respect to the progress, timing and completion of the Group's development, the Group's ability to treat, attract, and retain patients and customers, its ability to engage consultants and GPs and to operate its business and increase referrals, the integration of prior acquisitions, the Group's estimates for future performance and its estimates regarding anticipated operating results, future revenue, capital requirements, shareholder structure and financing. In addition, even if the Group's actual results or development are consistent with the forward-looking statements contained in this preliminary announcement, those results or developments may not be indicative of the Group's results or developments in the future. In some cases, you can identify forward-looking statements by words such as "could," "should," "may," "expects," "aims," "targets," "anticipates," "believes," "intends," "estimates," or similar words. These forward-looking statements are based largely on the Group's current expectations as of the date of this preliminary announcement and are subject to a number of known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to be materially different from any future results, performance or achievement expressed or implied by these forward-looking statements. In particular, the Group's expectations could be affected by, among other things, uncertainties involved in the integration of acquisitions or new developments, changes in legislation or the regulatory regime governing healthcare in Switzerland, South Africa, Namibia and the UAE and poor performance by healthcare practitioners who practice at our facilities, unexpected regulatory actions or suspensions, competition in general, the impact of global economic changes, and the Group's ability to obtain or maintain accreditation or approval for its facilities or service lines. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made in this preliminary announcement will in fact be realised and no representation or warranty is given as to the completeness or accuracy of the forward-looking statements contained in this preliminary announcement.

 

The Group is providing the information in this preliminary announcement as of this date, and we disclaim any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

 

Analyst and investor meeting

 

There will be an analyst and investor meeting on Wednesday, 25 May 2016 at 09:00 BST Aldersgate, London, EC1A 4HD. A live audiocast of the presentation will be available at 9am BST (10am SAST) on www.mediclinic.com.

 

https://secure.emincote.com/client/mediclinic/mediclinic003/

 

Enquiries:

Aarti Iyer, Bell Pottinger

+44 (0)203 772 2468

aiyer@bellpottinger.com

 

OPERATING REVIEW

 

The period under review was one of the most significant in Mediclinic's three-decade history.  Through the Combination of the businesses of Mediclinic International Limited and the Al Noor Hospitals Group, we boosted our presence on an international scale, doubled the size of our UAE business in a fast-growing market, and secured a listing as a FTSE 100 company on the London Stock Exchange.  With the investment in Spire Healthcare, we also established a footprint in the dynamic UK healthcare markets. 

 

Our financial performance for the year was good. Increased patient volumes in all our operating platforms led to overall revenue growth of 7% and underlying EBITDA growth of 6%. This growth was supported by investments in selected capacity projects as well as new service lines. A strong focus on efficiencies has ensured stable margins.

 

Overall, the developments during the period under review enabled us to accelerate progress against our strategic priorities, in all our key markets. Our main strategic focus remains in ensuring high-quality care and optimal patient experience. To this end, we continue to invest heavily in our people, their training, the facilities in which they work, and the technology they use. Our growing international scale also enables us to unlock further value through promoting collaboration and best practice transfer between our operating platforms and to leverage the benefits of scale through synergies and cost-efficiencies.

 

The 2016/17 financial year is set to be another exciting year for Mediclinic. Our number one priority is to stay focused on patients, and to remain their demonstrable first choice.  Despite the uncertain economic environment, the market fundamentals remain sound, and we anticipate continued capacity and footprint expansion at attractive returns across all of our operating platforms.  The Group is well positioned to deliver long-term value to our shareholders - a well-balanced portfolio of operations, a leading position across a mix of attractive healthcare markets and a strong management team at the helm.

 

OPERATIONS IN SWITZERLAND

 

HIRSLANDEN

 

Key highlights

Inpatient numbers increased by 4.9% and total revenue by 6%. Inpatient revenue per case increased by 0.5% as a result of increased case complexity. Underlying EBITDA margin increased to 19.7% mainly as a result of cost-containment measures implemented during the year.

 

Financial performance

Mediclinic Switzerland contributed £101m (2015: £88m) to the Group's underlying earnings. Financial highlights include:

·     Revenue increased  by 8% from £1 044m to £1 130m

·     Underlying EBITDA increased  by 9% from £203m to £221m

 

In local currency:

·     Revenue increased by 6% from CHF1 563m to CHF1 657m

·     Underlying EBITDA increased by 7% from CHF303m to CHF325m

·     Underlying earnings increased by 12% from CHF132m to CHF148m

 

Projects and capital expenditure

During the period under review, Hirslanden invested £47m in expansion capital projects and new equipment and £51m on the replacement of existing equipment. Projects concluded include the Lausanne Radiology Institute (IROL - Institut de radiologie de l'ouest lausannois), the radiology and doctor office complex at Hirslanden Klinik Birshof, a hybrid operating theatre and outpatient surgical centre at Hirslanden Clinique Cecil, an enlarged emergency unit, ICU and cath lab at Hirslanden Klinik Aarau and Praxiszentrum Düdingen with an outpatient clinic with an integrated radiology institute in Fribourg canton. Technology investments include new linear accelerators at Klinik Hirslanden and Hirslanden Klinik Aarau, a surgical imaging system at Clinique La Colline, MRI's at Hirslanden Clinique Bois-Cerf and Hirslanden Klinik St. Anna and a CT scanner at Klinik Hirslanden.

 

The number of inpatient beds increased from 1 655 to 1677 during the period under review with the opening on new beds at Hirslanden Klinik Stephanshorn and Hirslanden Klinik Aarau.

 

Regulatory environment

The national outpatient tariff ("TARMED") is being revised and expected to be implemented in 2017 or 2018. The canton of Zurich is considering cost saving measures which might in due course have an impact on private healthcare.

 

OPERATIONS IN SOUTHERN AFRICA

 

MEDICLINIC SOUTHERN AFRICA

 

Key highlights

Admissions increased by 1.3%, bed days sold by 2.9% and revenue per bed day by 6.3%. This resulted in total revenue growth of 9% in South African rand. Underlying EBITDA margin increased to 21.4%

 

Financial performance

Mediclinic Southern Africa contributed £63m (2015: £63m) to the Group's underlying earnings. Financial highlights include:

·     Revenue declined by 6% from £691m to £649m

·     Underlying EBITDA declined by 5% from £147m to £139m

 

In local currency:

·     Revenue increased by 9% from R12 323m to R13 450m

·     Underlying EBITDA increased by 10% from R2 625m to R2 877m

·     Underlying earnings increased by 17% from R1 118m to R1 305m

 

Projects and capital expenditure

During the period under review, the Southern African operations spent £37m on expansion capital projects and new equipment and £15m on the replacement of existing equipment.

 

The number of beds increased from 7 885 to 8 017 during the period under review. This comprised of the development of two new day clinics (Mediclinic Limpopo Day Clinic and Mediclinic Durbanville Day Clinic) as well as the expansion of existing hospitals.

 

Regulatory environment

The South African Government is seeking to address the shortcomings of the public health system through the phased introduction of a National Health Insurance system over the next 14 years. A White Paper outlining the financing and design of the envisaged system has been released for consultation and Mediclinic will be submitting comprehensive comments.

 

The South African Competition Commission is currently undertaking a market inquiry into the private healthcare sector in South Africa to both understand whether there are features of the sector that prevent, distort or restrict competition, and how competition in the sector can be promoted.  The enquiry is due to publish its recommendations in December 2016.

 

OPERATIONS IN UNITED ARAB EMIRATES

 

MEDICLINIC MIDDLE EAST

 

Key highlights

 

The Al Noor business was acquired on 15 February 2016 and the financial results include Al Noor trading for this period. The operational statistics below exclude the Al Noor business, except where otherwise stated due to the short period involved and the mid-month effective date.

 

Admissions increased by 3.0%, bed days occupied by 5.7% and outpatient and accident and emergencies attendance by 1.8%. This resulted in a revenue increase of 8%. Al Noor revenue for the period was AED 258.7m (£50m).

 

Financial performance

Mediclinic Middle East contributed £57m (2015: £42m) to the Group's underlying earnings (including £5m contribution by Al Noor).

 

Excluding Al Noor the financial highlights include:

·     Revenue increased by 15% from £242m to £279m

·     Underlying EBITDA increased by 17% from £53m to £62m 

 

In local currency:

·     Revenue increased by 8% from AED1 430m to AED1 544m

·     Underlying EBITDA increased by 11% from AED312m to AED345m

·     Underlying earnings increased by 15% from AED252m  to AED291m

 

Projects and capital expenditure

During the period under review, Mediclinic Middle East invested £30m in expansion capital projects and new equipment and £5m on the replacement of existing equipment. The major component of the capex spend was on the Mediclinic City Hospital North Wing expansion.

 

The total number of beds in the group is now 721, comprising 371 beds in the Mediclinic Middle East facilities and 350 in the Al Noor group facilities.

 

Regulatory environment

The regulatory environment in the UAE continues to be dynamic with major developments during the year being the rollout of mandatory health insurance in Dubai as well as the announcement of a planned limited DRG inpatient tariff implementation during 2017.

 

BOARD CHANGES

 

After the successful completion of the Al Noor Combination, the newly formed Mediclinic International plc Board consists of the following individuals:

 

Name

Date of appointment

Ian Tyler

5 June 2013

Seamus Keating

5 June 2013

Dr Edwin Hertzog*

15 February 2016

Danie Meintjes*

15 February 2016

Craig Tingle*

15 February 2016

Jannie Durand*

15 February 2016

Alan Grieve*

15 February 2016

Prof Dr Robert Leu*

15 February 2016

Nandi Mandela*

15 February 2016

Trevor Petersen*

15 February 2016

Desmond Smith*

15 February 2016

 

*These directors were members of the Mediclinic International Limited Board prior to the Combination with Al Noor.

 

NEW CHIEF FINANCIAL OFFICER

 

Since the year end, Craig Tingle, Chief Financial Officer, announced his early retirement and will be leaving Mediclinic on 15 June 2016. On 11 May 2016 Mediclinic announced that Jurgens Myburgh will be appointed as Executive Director and Group Chief Financial Officer and will join the Company effective 1 August 2016.

 

OVERVIEW AND OUTLOOK

 

Notwithstanding the on-going changes in the global and regional economies and the regulatory changes that continue to impact healthcare and its affordability, we are continuing to see a strong demand for quality private healthcare services across our three operating platforms.

 

Mediclinic has continued to deliver strong revenue and profit growth. Our three operating platforms in Southern Africa, Switzerland and United Arab Emirates have all achieved good growth in patient numbers and we continue to invest in buildings, technology and people to ensure we offer high quality private healthcare service to both in and out patients.

 

At Hirslanden, given our high occupancy levels we anticipate modest growth at stable margins.

 

In Mediclinic Southern Africa, we expect continued growth, notwithstanding macro-economic challenges and increased competition anticipated in the year ahead. In line with our key strategic initiatives we will continue to make additional investment in our operations to drive competitive advantage.

 

In Mediclinic Middle East, following the Combination with Al Noor we expect to deliver continued strong growth supported by increased capacity and beneficial underlying demographics. Successful integration of the business is well underway and cost synergies have been identified, which will be partially offset by new project start-up costs and incremental operational investment.

 

We will continue to focus on our patients' needs by improving our value proposition in terms of technology, care and the latest improvements in medicine and surgery. With three operating platforms and a significant investment in the UK, we can leverage best practice in terms of experience, knowledge and skills. Mediclinic remains well positioned for future growth.

 

FINANCIAL REVIEW

 

Group revenue increased by 7% to £2 107m (2015: £1 977m) for the period under review.

 

Underlying operating profit before interest, tax, depreciation and amortisation ("underlying EBITDA") was 6% higher at £428m (2015: £403m) and basic underlying earnings per share were 3% higher at 36.7 pence (2015: 35.8 pence).

 

Effective from 24 August 2015, the Group acquired a 29.9% shareholding in Spire. As Spire's financial year end is 31 December, the income from associate was not recognised for the 3 months from January 2016 to March 2016. Underlying pro-forma earnings was adjusted to include the income from associate for that period. Basic underlying pro-forma earnings per share were 5% higher at 37.5 pence (2015: 35.8 pence)

 

Underlying margins remained stable at 20.4%.

 

EARNINGS RECONCILIATION

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Corporate

Switzerland

Southern Africa

Middle East

United Kingdom

2016 STATUTORY RESULTS

 

£'m

£'m

£'m

£'m

£'m

£'m

 

 

 

 

 

 

 

 

Revenue

 

2 107

-

1 130

649

328

-

Operating profit

 

288

(44)

165

109

58

-

Profit attributable to equity holders

 

177

(50)

113

53

55

6

 

 

 

 

 

 

 

 

RECONCILIATIONS

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Operating profit

 

288

(44)

165

109

58

-

Add back:

 

 

 

 

 

 

 

- Other gains and losses

 

1

1

-

-

-

-

- Depreciation

 

93

-

63

20

10

-

EBITDA

 

382

(43)

228

129

68

-

 

 

 

 

 

 

 

 

One-off and exceptional items:

 

 

 

 

 

 

 

Transaction cost (Al Noor acquisition)

 

41

41

-

-

-

-

Accelerated share-based payment charges

 

10

-

-

10

-

-

Pre-acquisition Swiss tariff provision release

 

(7)

-

(7)

-

-

-

Restructuring cost

 

2

-

-

-

2

-

Underlying EBITDA

 

428

(2)

221

139

70

-

 

 

 

 

 

 

 

 

Profit attributable to equity holders

 

177

(50)

113

53

55

6

One-off and exceptional items:

 

 

 

 

 

 

 

Transaction cost (Al Noor acquisition)

 

41

41

-

-

-

-

Tax

 

-

-

-

-

-

-

Accelerated share-based payment charges

 

10

-

-

10

-

-

Tax

 

-

-

-

-

-

-

Pre-acquisition Swiss tariff provision release

 

(7)

-

(7)

-

-

-

Tax

 

2

-

2

-

-

-

Restructuring cost

 

2

-

-

-

2

-

Tax

 

-

-

-

-

-

-

Fair value gains on ineffective cash flow hedges

 

(8)

-

(8)

-

-

-

Tax

 

1

-

1

-

-

-

Other gains and losses

 

1

1

-

-

-

-

Tax

 

-

-

-

-

-

-

Underlying earnings

 

219

(8)

101

63

57

6

Weighted average number of shares (millions)

 

598.4

 

 

 

 

 

Underlying earnings per share (pence)

 

36.7

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

Corporate

Switzerland

Southern Africa

Middle East

United Kingdom

2015 STATUTORY RESULTS

 

£'m

£'m

£'m

£'m

£'m

£'m

Revenue

 

1 977

-

1 044

691

242

-

Operating profit

 

345

2

161

137

45

-

Profit attributable to equity holders

 

241

2

124

73

42

-

 

 

 

 

 

 

 

 

RECONCILIATIONS

 

 

 

 

 

 

-

Operating profit

 

345

2

161

137

45

-

Add back:

 

 

 

 

 

 

-

- Other gains and losses

 

(24)

(2)

(13)

(9)

-

-

- Depreciation

 

85

-

55

22

8

-

EBITDA

 

406

-

203

150

53

-

 

 

 

 

 

 

 

 

One-off and exceptional items:

 

 

 

 

 

 

-

Impairment of property and equipment

 

2

-

-

2

-

-

Profit on sale of property, equipment and vehicles

 

(5)

-

-

(5)

-

-

Underlying EBITDA

 

403

-

203

147

53

-

 

 

 

 

 

 

 

 

Profit attributable to equity holders

 

241

2

124

73

42

-

One-off and exceptional items:

 

 

 

 

 

 

-

Impairment of property

 

2

-

-

2

-

-

Tax

 

-

-

-

-

-

-

Insurance proceeds

 

(9)

-

-

(9)

-

-

Tax

 

1

-

-

1

-

-

Gain on disposal of subsidiary

 

(2)

-

(2)

-

-

-

Tax

 

-

-

-

-

-

-

Profit on disposal of property, equipment and vehicles

 

(5)

-

-

(5)

-

-

Tax

 

1

-

-

1

-

-

Realised gain on foreign currency forward contract

 

(2)

(2)

-

-

-

-

Tax

 

-

-

-

-

-

-

Ineffective cash flow hedges

 

19

-

19

-

-

-

Tax

 

(4)

-

(4)

-

-

-

Swiss tax rate charges relating to prior years

 

(40)

-

(40)

-

-

-

Tax

 

-

-

-

-

-

-

Discount on loan repayment

 

(11)

-

(11)

-

-

-

Tax

 

2

-

2

-

-

-

Underlying earnings

 

193

-

88

63

42

-

Weighted average number of shares (millions)

 

540.3

 

 

 

 

 

Underlying earnings per share (pence)

 

35.8

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The current Group results include the following exceptional and one-off items which were adjusted to determine underlying earnings:

·     One-off transaction costs of £41m (£41m after tax) relating to the Al Noor acquisition. The transaction cost is mainly comprised of advisor fees and South African securities transfer tax.

 

·     A one-off non-cash IFRS 2 accelerated share-based payment charge of £10m (£10m after tax) relating to employee share trusts for Southern African employees.

 

After the announcement of the proposed Mediclinic/Al Noor Combination, the trustees of the employee trusts and the relevant participating employer companies agreed to accelerate the vesting of the underlying assets of the trusts to the beneficiaries and to close down the trusts. The underlying shares were sold in two book building exercises previously announced in December 2015 and January 2016.

 

·     £7m (£5m after tax) was released in respect of a pre-acquisition Swiss tariff provision. When Mediclinic acquired the Hirslanden business in 2007, a provision relating to a specific tariff dispute was included in the opening accounts. After lengthy judicial processes and a court ruling in the 2013 financial year an increased provision was made which was excluded in the measurement of underlying performance for the year. The dispute has now been finally settled and the balance of the provision released. Given that the exceptional charge was adjusted from underlying earnings in 2013, its release has been treated consistently by being excluded from underlying earnings in 2016.

 

·     £8m (£7m after tax) mark-to-market fair value gain, relating to the ineffective Swiss interest rate swaps. The group uses floating-to-fixed interest rate swaps on certain loan agreements to hedge against interest movements which have the economic effect of converting floating rate borrowings to fixed rate borrowings. The group applies hedge accounting and therefore fair value adjustments are booked to the consolidated statement of comprehensive income.

 

With the removal of the Swiss franc/euro peg during January 2015 and the introduction of negative interest rates in Switzerland, the Swiss interest rate hedges became ineffective once Libor is below zero as bank funding at Libor plus relevant margins is subject to a zero rate Libor floor. Effective from 1 October 2014, the mark-to -market movements are charged to the income statement. As these are non-cash flow items and to provide balanced operational reporting the group excluded the charge in the measurement of underlying performance in the 2015 financial year and consistently excludes the gain arising this year. The swaps expire in 2017 and 2018.

 

·     Al Noor post acquisition restructuring costs of £2m.

 

·     Loss of £1m on foreign currency forward contracts.

 

Foreign exchange rates

Although the Group reports its results in pound sterling, the underlying operation segments earnings are generated in Swiss franc, UAE dirham and the South African rand. Consequently, movement in exchange rates affected the reported earnings and reported balances in the statement of financial position. The impact of a 10% change in the GBP/South African rand exchange rates for a sustained period of one year is: profit for the year would increase/decrease by £7m (2015: increase/decrease by £10m) due to exposure to the GBP/South African Rand exchange rate.

 

During the period under review, the average exchange rates were the following:

 

 

2016

 Variance

2015

Average rates:

 

 

 

    GBP/Swiss franc

1.47

(2.0%)

1.50

    GBP/UAE dirham

5.54

(6.4%)

5.92

    GBP/South African rand

20.73

16.3%

17.82

 

 

 

 

Period end rates:

 

 

 

    GBP/Swiss franc

1.38

(4.2%)

1.44

    GBP/UAE dirham

5.28

(2.8%)

5.43

    GBP/South African rand

21.21

17.7%

18.02

  

Mediclinic / Al Noor Combination

The Combination became effective on 15 February 2016. The results of Al Noor have been consolidated from that date. The integration of Al Noor is on-going and the performance until now is in line with expectations.

 

The fair value exercise over the opening balance sheet of Al Noor remains provisional at 31 March 2016 as permitted by IFRS 3.  Since the Group is in discussions with UAE medical insurance funders and other third parties about conforming Al Noor's commercial practices with the rest of the Group, there is still a degree of uncertainty about the fair value of certain acquired assets and liabilities.  This is expected to be finalised during the next year. 

 

Cash flow

The Group continued to deliver strong cash flow. The Group converted 96% (2015: 109%) of underlying EBITDA into cash generated from operations. Cash and cash equivalents increased from £265m to £305m.

 

Interest-bearing borrowings

Interest-bearing borrowings increased from £1 618m to £1 841m. The increase is mainly because of the bridge facility which was utilised to fund the tender offer to Al Noor Hospitals Group plc shareholders. The refinancing of the bridge is underway and details will be provided on conclusion thereof.

 

 

2016

£m

2015

£m

Interest-bearing

1 841

1 618

Less: cash and cash equivalents

(305)

(265)

Net debt

1 536

1 353

 

 

 

Total equity

3 570

1 840

Debt-to-equity capital ratio

0.4

0.7

 

Assets

Intangible assets increased from £642m at 31 March 2015 to £1 927m at 31 March 2016 mainly because of the goodwill recognised in respect of the Al Noor acquisition.

 

Tax

The Group's effective tax rate was increased from 4.3% to 22.4%. In the prior year, the tax rate was impacted by the release of £43m Swiss income tax liabilities in relation to historic uncertain tax positions. For the period under review, the transaction cost relating to the Al Noor Combination was non-deductible for tax purposes and this had a tax effect of £10m. Furthermore, the non-deductibility of the accelerated IFRS 2 charges affected the tax charge by £3m.

 

Weighted average number of shares adjustment

During the period under review, shares were issued at a discount. As required by the accounting standards (IAS 33 paragraph 26), an adjustment was made to the weighted average number of shares in issue for the current and the prior year. Basic earnings per share for the prior year was adjusted and decreased by 1.1 pence from 45.7 pence to 44.6 pence and basic underlying earnings per share for the prior year decreased by 0.8 pence from 36.6 to 35.8 pence.

 

Underlying non-IFRS financial measures

The Group uses underlying income statement reporting as non-IFRS measures in evaluating performance and as a method to provide shareholders with clear and consistent reporting.

 

The Group's non-IFRS measures are intended to remove from reported earnings volatility associated with the following types of one-off income and charges: 

·     restructuring provisions;

·     profit/loss on sale of significant assets;

·     past service cost charges / credits in relation to pension fund conversion rate changes;

·     significant prior year tax and deferred tax adjustments;

·     accelerated IFRS 2 charges;

·     significant tariff provision charges / releases;

·     mark-to-market fair value gains / losses, relating to ineffective interest rate swaps;

·     significant impairment charges;

·     significant insurance proceeds; and

·     significant transaction costs incurred during acquisitions.

 

The Group has consistently applied this definition of underlying measures as it has reported on its financial performance in the past as the directors believe this additional information is important to allow shareholders to better understand the Group's trading performance for the year. It is the Group's intention to continue to consistently apply this definition in the future.

 

 

INVESTMENT IN ASSOCIATE AND CORPORATE EXPENDITURE

 

On 24 August 2015, the Group acquired a 29.9% shareholding in Spire for £447m. The investment in Spire contributed £6m to the Group's underlying earnings.

 

In addition, corporate expenditure was incurred amounting to £8m, of which £6m relates to the finance charges in respect of the bridge facility.

 

DIVIDEND POLICY AND DIVIDEND

 

Following the completion of the Combination of Mediclinic International Limited and Al Noor, the Board has reviewed and amended the dividend policy to target a pay-out ratio of between 25% and 30% of underlying earnings. The Board may revise the policy from time to time.

 

The Board proposes a final dividend of 5.24 pence per ordinary share for the year ended 31 March 2016. Together with the interim dividend of 1.66 pence per share for the six months ended 30 September 2015 (paid on 7 December 2015), the total final proposed dividend reflects a 25% distribution of underlying group earnings attributable to ordinary shareholders.

 

Shareholders on the South African register will be paid the ZAR cash equivalent of 119.52 cents per share. The ZAR cash equivalent has been calculated using the following exchange rate: £1: ZAR 22.81, being the 5 day average ZAR/GBP exchange rate at 3:00pm GMT Bloomberg.

 

The final dividend will be paid on Friday, 25 July 2016 to all ordinary shareholders who are on the register of members at the close of business on the record date of Friday, 17 June 2016.

 

The salient dates for the dividend will be as follows:

Dividend announcement date

Last date to trade cum dividend (SA register)

First date of trading ex-dividend: SA

First date of trading ex-dividend: UK

Record date

AGM approval

Payment date

Wednesday, 25 May 2016

Thursday, 9 June 2016

Friday, 10 June 2016

Thursday, 16 June 2016

Friday, 17 June 2016

Wednesday, 20 July 2016

Monday, 25 July 2016

 

No dematerialisation or rematerialisation within Strate and no transfers between the UK and SA registers may take place between Friday, 10 June 2016 and Friday, 17 June 2016, both dates inclusive.

 

By order of the Board.

 

 

Danie Meintjes

Chief Executive Officer

Craig Tingle

Chief Financial Officer

 

25 May 2016

 

 

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 March 2016

 

 

GROUP

 

Notes

2016

£'m

(Restated)

2015

£'m

(Restated)

2014

£'m

ASSETS

Non-current assets

 

5 604

3 654

3 368

Property, equipment and vehicles

 

3 199

2 985

2 817

Intangible assets

 

1 927

642

523

Equity accounted investments

3

455

4

4

Other investments and loans

 

4

5

4

Receivables

 

2

-

-

Derivative financial instruments

 

1

1

3

Deferred income tax assets

 

16

17

17

 

Current assets

 

945

742

637

Inventories

 

75

60

51

Trade and other receivables

 

561

415

384

Current income tax assets

 

2

2

2

Derivative financial instruments

 

2

-

-

Cash and cash equivalents

 

305

265

200

Total assets

 

6 549

4 396

4 005

 

EQUITY

Capital and reserves

Share capital

4

74

994

821

Share premium reserve

4

690

-

-

Treasury shares

4

(2)

(23)

(22)

Retained earnings

5

5 320

485

321

Other reserves

4, 6

(2 573)

323

268

Attributable to equity holders of the Company

 

3 509

1 779

1 388

Non-controlling interests

 

61

61

51

Total equity

 

3 570

1 840

1 439

 

LIABILITIES

Non-current liabilities

 

2 192

2 114

2 096

Borrowings

7

1 524

1 550

1 630

Deferred income tax liabilities

 

446

429

412

Retirement benefit obligations

 

179

87

34

Provisions

 

24

22

18

Derivative financial instruments

 

19

26

2

 

Current liabilities

 

787

442

470

Trade and other payables

 

431

335

288

Borrowings

7

317

68

95

Provisions

 

19

24

20

Retirement benefit obligations

 

9

1

1

Derivative financial instruments

 

1

1

-

Current income tax liabilities

 

10

13

66

 

Total liabilities

 

2 979

2 556

2 566

 

Total equity and liabilities

 

6 549

4 396

4 005

 

These consolidated financial statements and the accompanying notes were approved for issue by the Board of Directors on 25 May 2016 and were signed on its behalf by:

 

D Meintjes

Chief Executive Officer

 

CI Tingle

Chief Financial Officer

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2016

 

 

GROUP

 

Notes

2016

£'m

(Restated)

2015

£'m

Revenue

 

2 107

1 977

Cost of sales

 

(1 264)

(1 184)

Administration and other operating expenses

 

(554)

(472)

Other gains and losses

 

(1)

24

Operating profit

 

288

345

Finance income

 

9

6

Finance cost

9

(58)

(85)

Share of profit of equity accounted investments

 

6

-

Profit before tax

 

245

266

Income tax expense

10

(55)

(12)

Profit for the year

 

190

254

 

Attributable to:

Equity holders of the Company

 

177

241

Non-controlling interests

 

13

13

 

 

190

254

 

 

 

 

Earnings per ordinary share attributable to the equity holders of the Company - pence

 

 

 

Basic

11

29.6

44.6

Diluted

11

29.5

43.8

 

 

CONDENSED CONSOLIDATED INCOME STATEMENT

for the year ended 31 March 2016

 

 

GROUP

 

Notes

2016

£'m

(Restated)

2015

£'m

Profit for the year

 

190

254

 

Other comprehensive income

Items that may be reclassified to the income statement

Currency translation differences

 

92

59

Fair value adjustment - cash flow hedges

 

2

(5)

 

 

94

54

Items that may not be reclassified to the income statement

Actuarial gains and losses

 

(56)

(31)

 

Other comprehensive income, net of tax

 

38

23

 

Total comprehensive income for the year

 

228

277

 

Attributable to:

Equity holders of the Company

 

224

264

Non-controlling interests

 

4

13

 

 

228

277

 

 

CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY

for the year ended 31 March 2016

 

 

 

 

 

Share

capital

(note 4)

£'m

 

 

Capital

redemp-tion

reserve

(note 4)

£'m

 

Share premium

reserve

(note 4)

£'m

 

 

Reverse

acqui-sition

reserve

(note 4)

£'

 

Treasury

shares

(note 4)

£'m

Share-based

payment

reserve

(note 6)

£'m

Foreign

currency

trans-

lation

reserve

(note 6)

£'m

Hedging

reserve

(note 6)

£'m

Retained

earnings

(note 5)

£'m

Share-

holders'

equity

£'m

 Non-

control-ling

interests

£'m

Total

equity

£'m

Balance at 31 March 2014 (restated in £)

821

-

-

-

(21)

13

247

7

321

1 388

51

1 439

Profit for the year

-

-

-

-

-

-

-

-

241

241

13

254

Other compre-hensive income/(loss) for the year

-

-

-

-

-

-

59

(5)

(31)

23

-

23

Total comprehensive income for the year

-

-

-

-

-

-

59

(5)

210

264

13

277

Shares issued

177

-

-

-

-

-

-

-

-

177

-

177

Share issue costs

(4)

-

-

-

-

-

-

-

-

(4)

-

(4)

Treasury shares purchased (Forfeitable Share Plan)

-

-

-

-

(1)

-

-

-

-

(1)

-

(1)

Share-based payment expense

-

-

-

-

-

1

-

-

-

1

-

1

Transactions with non-controlling shareholders

-

-

-

-

-

-

-

-

1

1

4

5

Dividends paid

-

-

-

-

-

-

-

-

(47)

(47)

(7)

(54)

Balance at 31 March 2015 (restated in £)

994

-

-

-

(22)

14

306

2

485

1 779

61

1 840

Profit for the year

-

-

-

-

-

-

-

 

177

177

13

190

Other comprehensive income/(loss) for the year

-

-

-

-

-

-

101

2

(56)

47

(9)

38

Total comprehensive income for the year

-

-

-

-

-

-

101

2

121

224

4

228

Shares issued (August 2015)

479

-

-

 

-

-

-

-

-

479

-

479

Share issue costs (August 2015)

(4)

-

-

 

-

-

-

-

-

(4)

-

(4)

Reverse acquisition

(1 402)

6

4862

(3 014)

-

-

-

-

(6)

446

-

446

Share subscription (February 2016)

7

-

593

-

-

-

-

-

-

600

-

600

Reduction of share premium

 

 

(4 765)

-

 

 

 

 

4 765

-

 

-

Utilised by the Mpilo Trusts

-

-

-

-

21

-

-

-

-

21

-

21

Treasury shares purchased (Forfeitable Share Plan)

-

-

-

-

(1)

-

-

-

-

(1)

-

(1)

Share-based payment expense

-

-

-

-

-

10

-

-

-

10

-

10

Transactions with non-controlling shareholders

-

-

-

-

-

-

-

-

3

3

3

6

Dividends paid

-

-

-

-

-

-

-

-

(48)

(48)

(7)

(55)

Balance at 31 March 2016

74

6

690

(3 014)

(2)

24

407

4

5 320

3 509

61

3 570

 

 

CONDENSED CONSOLIDATED SUMMARISED STATEMENT OF CASH FLOWS

for the year ended 31 March 2016

 

GROUP

 

Notes

2016

£'m

Inflow/(outflow)

(Restated)

2015

£'m

Inflow/(outflow)

Cash flow from operating activities

Cash received from customers

 

2 078

1 980

Cash paid to suppliers and employees

 

(1 667)

(1 540)

Cash generated from operations

 

411

440

Interest received

 

9

6

Interest paid

 

(55)

(57)

Tax paid

 

(45)

(52)

Net cash generated from operating activities

 

320

337

 

Cash flow from investment activities

 

(1 549)

(257)

Investment to maintain operations

 

(72)

(68)

Investment to expand operations

 

(114)

(124)

Business combinations

12

(17)

(81)

Al Noor Hospitals Group plc shares repurchased

12

(530)

-

Special dividend to existing Al Noor Hospitals Group plc shareholders

 

(383)

-

Proceeds on disposal of property, equipment and vehicles

 

1

5

Disposal of subsidiary

 

-

3

Acquisition of investment in associate

 

(446)

-

Dividends received from equity accounted investment

 

2

-

Proceeds from money market fund

 

10

-

Insurance proceeds

 

-

9

Loans advanced

 

-

(1)

Net cash (utilised)/generated before financing activities

 

(1 229)

80

 

Cash flow from financing activities

 

1 242

(23)

Proceeds of shares issued

 

479

177

Share issue costs

 

(4)

(4)

Share subscription (February 2016)

 

600

-

Distributions to non-controlling interests

 

(7)

(7)

Distributions to shareholders

 

(48)

(47)

Proceeds from borrowings

 

302

279

Repayment of borrowings

 

(85)

(417)

Refinancing transaction costs

 

(6)

(7)

Settlement of Al Noor Hospitals Group plc share option scheme

 

(2)

-

Shares purchased (Forfeitable Share Plan)

 

(1)

(1)

Proceeds from disposal of treasury shares

 

12

-

Acquisition of non-controlling interest

 

(2)

-

Proceeds on disposal of non-controlling interest

 

4

4

 

Net increase in cash and cash equivalents

 

13

57

Opening balance of cash and cash equivalents

 

265

198

Exchange rate fluctuations on foreign cash

 

27

10

Closing balance of cash and cash equivalents

 

305

265

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

1

BASIS OF PREPARATION

 

The condensed consolidated financial statements included in the preliminary results announcement for the year ended 31 March 2016 have been extracted from the full Annual Report which was approved by the Board of Directors on 25 May 2016. The consolidated financial statements within the full Annual Report are prepared in accordance with International Financial Reporting Standards ('IFRS') as adopted by the European Union ('EU'), the Companies Act 2006 and Article 4 of the EU IAS Regulations.

 

The auditor's report on those consolidated financial statements was unqualified, did not draw attention to any matters by way of emphasis without qualifying their report, and did not contain statements under section 498(2) or 498(3) of the Companies Act 2006. The preliminary results do not comprise statutory accounts within the meaning of section 434(3) of the Companies Act 2006. The Annual Report for the year ended 31 March 2016 will be delivered to the Registrar of Companies following the Company's annual general meeting to be held on 20 July 2016.  

 

Following the combination of Al Noor Hospitals Group plc and Mediclinic International Limited on 15 February 2016, the comparatives relate to the consolidated results of Mediclinic International Limited, previously a South African registered group listed on the Johannesburg Stock Exchange and the auditor's report on those financial statements was unqualified. The combination has been accounted for as a reverse acquisition by the Group.

 

The condensed consolidated financial statements included in this preliminary announcement do not itself contain sufficient information to comply with IFRS. The Company will publish full financial statements that comply with IFRS in June 2016.

 

This preliminary results announcement has been prepared applying consistent accounting policies to those applied by the Group in the comparative period, except as described below. The Group has prepared the consolidated financial statements on a going concern basis.

 

Functional and presentation currency

The financial statements and financial information are presented in pound sterling, rounded to the nearest million. The functional currency of the majority of the Group's entities, and the currencies of the primary economic environments in which they operate, is the South African rand, Swiss franc and United Arab Emirates dirham. The United Arab Emirates dirham is pegged against the United States dollar at a rate of 3.6725 per US Dollar. Due to the reverse acquisition which occurred during the financial year, the Group's presentation currency changed from the South African rand in 2015 to pound sterling in 2016.  A change in presentational currency is a change in accounting policy which is accounted for retrospectively.  Financial information reported in rand in the prior year's financial statements has been translated to sterling using the procedures outlined below:

- Assets and liabilities were translated at the closing sterling rates;

- Income and expenses were translated at average sterling exchange rates; and

- Differences resulting from retranslation have been recognised in the foreign currency translation reserve.

 

The comparative numbers have been restated for the change in presentation currency.

 

Within the consolidated income statement certain line items were reclassified for the year ended 31 March 2015.  The reclassifications had no impact on the reported profit or net asset measures of the Group.

 

The following reclassifications have been made to the consolidated income statement:  

1) The mark-to-market loss of £19m relating to the ineffective cash flow hedge has been reclassified from other gains of losses to finance cost as the ineffective portion of the hedge should match the classification of the hedged item.

2) Operating profit includes other gains of £24m. Previously it was shown below operating profit to present the income statement by function in terms of IAS 1.

3) Depreciation and amortisation of £68m and £17m has been included in cost of sales and administration and other operating expenses respectively in order to present the income statement by function in terms of IAS1.

 

The following reclassification has been made to the statement of financial position:  

The UAE end of service benefit obligation of £15m was reclassified from provisions to retirement benefit obligations. The table below shows the impact on the consolidated income statement and statement of financial position:

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

1.

BASIS OF PREPARATION (continued)

 

 

 

 

 

2015 figures as presented in prior year

Reclassification

2015 figure as presented in current year

 

Consolidated income statement

 

 

 

 

Cost of sales

(1 116)

(68)

(1 184)

 

Administration and other operating expenses

(455)

(17)

(472)

 

Other gains and losses

5

19

24

 

Depreciation and amortisation

(85)

85

-

 

Finance cost

(66)

(19)

(85)

 

Effect on profit before tax

 (1 717)

-

(1 717)

 

 

 

 

 

 

Consolidated statement of financial position

 

 

 

 

Retirement benefit obligations

72

15

87

 

Provisions

37

(14)

23

 

Non-current liabilities

109

1

110

 

Provisions

24

(1)

23

 

Current liabilities

24

(1)

23

 

Total liabilities

133

-

133

 

 

 

 

 

2.

GOING CONCERN

 

Having assessed the principal risks and the other matters discussed in connection with the viability statement, the directors considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

3.

EQUITY ACCOUNTED INVESTMENTS

 

GROUP

 

2016

£'m

2015

£'m

 

Investment in associates

452

-

 

Investment in joint venture

3

4

 

 

455

4

 

Investment in associates:

 

Listed investments

451

-

 

Unlisted investments

1

-

 

 

452

-

 

 

 

Reconciliation of carrying value at the beginning and end of the period

 

Listed investment

 

Total cost of equity investment

447

-

 

Share of profit of associated companies

6

-

 

Dividends received from associated companies

(2)

-

 

 

451

-

 

 

 

Set out below are details of the associate which is material to the group:

 

Name of entity

Country of incorporation and place of business

% ownership

 

Spire Healthcare Group plc

United Kingdom

29.9%

 

 

 

Spire Healthcare Group plc is listed on the London Stock Exchange. It does not issue publicly available quarterly financial information and has a December year-end. The associate was acquired on 24 August 2015. The investment in associate was equity accounted for the 4 months to 31 December 2015. No significant events occurred since 1 January 2016 to the reporting date.

 

A provisional notional purchase price allocation assessment did not identify any significant intangible assets other than goodwill.

 

           

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

4.

SHARE CAPITAL

 

 

 

 

 

 

 

Ordinary shares

Number

of

shares

Share capital

£'m

 

Capital

redemption

Reserve**

£'m

Share

premium

£'m

Reverse

acquisition

reserve***

£'m

Total

 

At 1 April 2014

516 851 655

821

-

-

-

821

 

Shares issued

25 625 000

177

-

-

-

177

 

Share issue costs

-

(4)

-

-

-

(4)

 

At 31 March 2015

542 476 655

994

-

-

-

994

 

Shares issued (August 2015)

69 444 444

479

-

-

-

479

 

Share issue costs

 

(4)

-

-

-

(4)

 

At 14 February 2016

611 921 099

1 469

-

-

-

1 469

 

 Reverse acquisition*

53 207 327

(1 402)

 

6

4 862

(3 014)

452

 

Combined capital structure on 15 February 2016

665 128 426

67

6

4 862

(3 014)

1 921

 

Share subscription

72 115 384

7

-

593

 

600

 

Reduction of share premium

-

-

-

(4 765)

-

(4 765)

 

 

737 243 810

74

6

690

(3 014)

(2 244)

 

 

 

*The company received legal advice on the scheme of arrangement and the premium on issue of share capital to Mediclinic International Limited shareholders did not qualify as merger relief under United Kingdom law.

 

Reverse acquisition

The prior number of shares from 1 April 2015 to 14 February 2016 represents equivalent number of Mediclinic International Limited shares converted using the Mediclinic scheme of arrangement conversion ratio of 0.625. From 15 February 2016 the capital structure of the Group represents that of Mediclinic International plc.

 

**The Companies Act provides that where shares of a company are repurchased and funded by a new issue of shares, the amount by which the Company's issued share capital is diminished on cancellation of the shares are transferred to a capital redemption reserve to maintain capital.    The reduction of the company's share capital shall be treated as if the capital redemption reserve were paid up capital of the Company.

 

***The reverse acquisition reserve represents the net of the following adjustments resulting from the Al Noor  reverse acquisition:

- adjustment of the capital structure (share capital and share premium) of the Group to that of the legal parent;

- adjustment to account for the premium on shares issued to the Mediclinic International Limited shareholders;

- the share value component of the total consideration.

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

4.

SHARE CAPITAL (continued)

 

 

 

 

 

 

 

 

 

 

 

Treasury shares

Number of shares

 

 

Total

 

 

 

 

 

£'m

 

At 1 April 2014

8 450 612

 

 

(21)

 

Repurchase of shares - Forfeitable Share Plan

155 454

 

 

(1)

 

Utilised by the Mpilo Trusts

(178 875)

 

 

-

 

At 31 March 2015

8 427 191

 

 

(22)

 

Repurchase of shares - Forfeitable Share Plan

129 927

 

 

(1)

 

Disposal of shares - Forfeitable Share Plan

(46 091)

 

 

-

 

Utilised by the Mpilo Trusts

(8 238 246)

 

 

21

 

At 31 March 2016

272 781

 

 

(2)

 

 

 

 

 

 

 

The balance of the treasury comprise:

 

 

 

 

 

Forfeitable Share Plan

239 290

 

 

 

 

Mpilo Trusts

33 491

 

 

 

 

 

272 781

 

 

 

 

 

 

*The prior year number of shares have been converted using the Mediclinic scheme of arrangement conversion ratio of 0.625 Mediclinic International plc shares for each Mediclinic International Limited share held.

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

GROUP

 

 

2016

£'m

2015

£'m

5.

Retained earnings

 

Opening balance

485

321

 

Profit for the year

177

241

 

Dividends paid

(48)

(47)

 

Capital redemption on tender offer

(6)

-

 

Reduction of share premium

4 765

-

 

Actuarial gains and losses

(56)

(31)

 

Transactions with non-controlling shareholders

3

1

 

Balance at the end of the year

5 320

485

 

 

6.

Other reserves

 

 

 

Share-based payment reserve

24

14

 

Opening balance

14

13

 

Forfeitable Share Plan

1

-

 

Mpilo trusts

11

1

 

Al Noor share option scheme

(2)

-

 

 

 

The balance of the share-based payment reserve comprise:

 

 Executive share option scheme

1

1

 

 Forfeitable share plan

1

-

 

 Al Noor share option scheme

(2)

-

 

 Mpilo trusts (Employee share trusts)

17

6

 

 Strategic South African black partners*

7

7

 

 

24

14

 

* During the financial year ending 31 March 2006, the difference between the fair value of the equity instruments issued in a BEE transaction and the fair value of the cash and other assets received was recognised as an expense (grant date) and this corresponding increase in equity was booked.

 

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

 

GROUP

 

 

2016

£'m

2015

£'m

6.

Other reserves (continued)

 

Foreign currency translation reserve

407

306

 

Opening balance

306

247

 

Currency translation differences

101

59

 

 

 

Hedging reserve

4

2

 

Opening balance

2

7

 

Fair value adjustments of cash flow hedges, net of tax

2

(6)

 

Recycling of fair value adjustments of derecognised cash flow hedge, net of tax

-

1

 

 

 

 

7.

Borrowings

 

 

 

Secured long-term bank loans*

140

166

 

Long-term portion

139

165

 

Short-term portion

1

1

 

Capitalised financing costs - long-term

-

-

 

* The long-term bank loan bears interest at the 3 month Jibar variable rate plus a margin of 1.51% (31 March 2015: 1.51%) compounded quarterly, and is repayable on 2 June 2019.

 

 

 

 

 

Preference shares*

90

111

 

Long-term portion

85

105

 

Short-term portion

5

6

 

* Dividends are payable monthly at a rate of 69% of prime overdraft rate. £5m shares must be redeemed on 1 September 2016 and 1 September 2017 and the balance of £85m on 2 June 2019.

 

 

 

 

 

Secured long-term bank loan*

10

18

 

Long-term portion

5

12

 

Short-term portion

5

6

 

* The long-term bank loan bears interest at the 3 month Jibar variable rate plus a margin of 1.06% (31 March 2015: 1.06%) compounded. £5m must be redeemed on 1 September 2016 and the balance of £5m on 8 October 2017.

 

 

 

 

 

Secured long-term bank loan*

9

11

 

Long-term portion

9

11

 

Short-term portion

-

-

 

* The long-term bank loan bears interest at the 3 month Jibar variable rate plus a margin of 1.51% (31 March 2015: 1.31%) compounded quarterly, and is repayable on 2 June 2019.

 

 

 

 

 

Secured long-term bank loans

5

7

 

Long-term portion

4

6

 

Short-term portion

1

1

 

These loans bear interest at variable rates linked to the prime overdraft rate and are repayable in periods ranging between one and twelve years. Property, equipment and vehicles with a book value of £12m (31 March 2015: £15m) are encumbered as security for these loans. Net trade receivables of £1m (31 March 2015: £1m) has also been ceded as security for these loans.

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

 

GROUP

 

 

2016

£'m

2015

£'m

7.

Borrowings (continued)

 

Borrowings in Southern African operations

254

313

 

* Property and equipment with a book value of £160m (31 March 2015: £150m), cash and cash equivalents of £12m (31 March 2015: £10m) and trade receivables of £41m (31 March 2015: £46m) have been ceded as security for these borrowings.

 

 

 

 

 

Secured long-term bank loans

53

56

 

Long-term portion

50

38

 

Short-term portion

3

19

 

Capitalised financing costs - long-term

-

(1)

 

This loan bears interest at variable rates linked to the 3M LIBOR and a margin of 2.0% (31 March 2015: 2.75%) and is amortising until 31 March 2020 (31 March 2015: June 2017). Properties with a book value of £100m (31 March 2015: £83m) are encumbered as security for this loan.

 

 

 

 

 

Borrowings in Middle East operations

53

56

 

 

 

Secured long-term bank loans

1 098

1 084

 

Long-term portion

1 088

1 079

 

Short-term portion

36

35

 

Capitalised financing costs - long-term

(26)

(30)

 

These loans bear interest at a variable rate linked to the 3M LIBOR plus 1.5% and 2.85% (31 March 2015: 3M LIBOR plus 2.0% and 3.5%) and is repayable by July 2020. The loan is secured by: Swiss properties with a book value of £2 248m (31 March 2015:£2 161m); and Swiss bank accounts with a book value of £128m (31 March 2015: £138m).

 

 

 

 

 

Listed bonds

170

164

 

Long-term portion

170

164

 

Short-term portion

-

-

 

The Swiss operating segment issued CHF145m 1.625% Swiss francs bonds and CHF 90m 2.0% Swiss francs bonds to finance its expansion programme and working capital requirements. The bonds are repayable on 25 February 2021 and 25 February 2025 respectively.

 

 

 

 

 

Secured long-term finance

-

1

 

Long-term portion

-

1

 

Short-term portion

-

-

 

These loans bear interest at interest rates ranging between 3% and 12% (31 March 2015: 3% and 12%) and are repayable in equal monthly payments in periods ranging from one to seven years. Equipment with a book value of £1m (31 March 2015: £1m) is encumbered as security for these loans.

 

 

 

 

 

Borrowings in Swiss operations

1 268

1 249

 

 

 

Secured long-term bank loans

266

-

 

Long-term portion

-

-

 

Short-term portion

266

-

 

Capitalised financing costs - long-term

-

-

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

 

GROUP

 

 

2016

£'m

2015

£'m

7.

Borrowings (continued)

 

 

This loan bears interest at variable rates linked to LIBOR with a minimum base rate of 1% plus 3.75%. The facility is secured in favour or lenders over the shares in Mediclinic International Limited and of Mediclinic CHF Finco Limited, Mediclinic Middle East Holdings Limited and Mediclinic Holdings Netherlands B.V.

 

 

 

 

 

Borrowings in the United Kingdom

266

-

 

 

 

Total borrowings

1 841

1 618

 

Short-term portion transferred to current liabilities

(317)

(68)

 

Non-current borrowings

1 524

1 550

 

 

 

 

8.

SEGMENTAL REPORT

 

 

 

The reportable operating segments are identified as follows: Mediclinic Southern Africa, Mediclinic Switzerland, Mediclinic Middle East, United Kingdom and an additional reporting segment is shown for Corporate. The comparatives have been changed to conform with current presentation. United Kingdom and Corporate is shown as operating segments.

Southern

Africa

£'m

Switzerland

£'m

Middle

East

£'m

United

Kingdom

£'m

Corporate

£'m

Total

£'m

 

Revenue

 649

 1 130

 328

-

-

 2 107

EBITDA

129

229

68

-

(51)

375

 

EBITDA before management fee

133

230

70

-

-

-             

Management fees included in EBITDA

(4)

(1)

(2)

-

7

7

Other gains and losses

-

-

-

-

(1)

(1)

Depreciation and amortisation

(20)

(63)

(10)

-

-

(93)

Operating profit

 109

 166

 58

-

(45)

 288

Income from associate

-

-

-

6

-

6

Finance income

8

1

-

-

-

9

Finance cost

(21)

(46)

(2)

-

(6)

(75)

Taxation

(31)

(24)

-

-

-

(55)

Segment result

65

97

56

6

(51)

173

 

At 31 March 2016

Investments in associates

-

1

-

451

-

452

Investments in joint venture

3

-

-

-

-

3

Capital expenditure

52

98

36

-

-

186

Total segment assets

485

3 809

1 800

451

4

6 549

Segment liabilities

370

2 940

243

-

272

3 825

                       

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

8.

SEGMENTAL REPORT (continued)

 

 

 

Year ended 31 March 2015

Southern

Africa

£'m

Switzerland

£'m

Middle

East

£'m

United

Kingdom

£'m

Corporate

£'m

Total

£'m

 

Revenue

 691

 1 044

 242

-

-

1 977

 

EBITDA

150

203

53

-

(6)

400

 

EBITDA before management fee

154

204

54

-

-

-

Management fees included in EBITDA

(4)

(1)

(1)

-

6

6

Other gains and losses

9

13

-

-

2

24

Depreciation and amortisation

(22)

(55)

(8)

-

-

(85)

Operating profit

137

161

 45

-

2

345

Income from associate

-

-

-

-

-

-

Income from joint venture

-

-

-

-

-

-

Finance income

5

-

-

-

-

5

Finance cost

(23)

(74)

(3)

-

-

(100)

Taxation

(33)

21

-

-

-

(12)

Segment result

86

108

42

-

2

238

 

At 31 March 2015

Investments in associates

-

-

-

-

-

-

Investments in joint venture

4

-

-

-

-

4

Capital expenditure

80

94

17

-

-

191

Total segment assets

527

3 615

252

-

2

4 396

Segment liabilities

436

2 511

127

-

-

3 074

 

Reconciliation of segment result, assets and liabilities

 

 

 

 

2016

£'m

2015

£'m

Segment result

Total profit from reportable segments

 

 

 

 

173

238

Elimination of intersegment loan interest

 

 

 

 

17

15

Profit for the year

 

 

 

 

190

253

 

Liabilities

Total liabilities from reportable segments

 

 

 

 

3 825

3 074

Elimination of intersegment loan

 

 

 

 

(846)

(520)

 

 

 

 

 

2 979

2 554

 

 

                       

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

9.

FINANCE COST

 

 

GROUP

 

 

2016

£'m

2015

£'m

 

Interest expense

44

49

 

Interest rate swaps

11

4

 

Amortisation of capitalised financing costs

5

8

 

Fair value (gains)/losses on ineffective cash flow hedges

(8)

19

 

Preference share dividend

6

7

 

Less: amounts included in the cost of qualifying assets

-

(2)

 

 

58

85

 

10.

Income tax expense

 

Current tax

 

Current year

(41)

(44)

 

Previous year

(1)

44

 

Deferred tax

(13)

(12)

 

Taxation per income statement

(55)

(12)

 

 

 

Composition

 

 

 

UK tax

-

-

 

Foreign tax

(55)

(12)

 

 

(55)

(12)

 

 

 

Reconciliation of rate of taxation:

 

Standard rate for companies (UK)

20.0%

21.0%

 

 

 

Adjusted for:

 

Capital gains tax

0.1%

(0.6)%

 

Non-taxable income

(0.3)%

(0.6)%

 

Non-deductible expenses*

5.6%

2.0%

 

Non-controlling interests' share of profit before tax

(0.3)%

(0.3)%

 

Effect of different tax rates***

(4.3)%

(1.4)%

 

Income tax rate changes

(0.2)%

-

 

Non-recognition of tax losses in current year

1.8%

0.6%

 

Recognition of tax losses relating to prior years

(0.4)%

-

 

Prior year adjustment**

0.4%

(16.4)%

 

Effective tax rate

22.4%

4.3%

 

 

 

*Non-deductible expenses in the current year were impacted by:

 

- Transaction costs in relation to the Al Noor transaction were not deductible for tax purposes as these costs are capital of nature. The tax effect of this amounted £10m which resulted in an increase in the effective tax rate.

 

- Non-deductible accelerated IFRS 2 charges increased the tax charge by £3m.

 

**In the prior year, Swiss income tax liabilities were released in respect of historical uncertain tax positions after settlement with tax authorities.  This reduced the tax charge by £43m.

 

 ***The effect of different tax rates is mainly because of profit earned from South Africa which is subject to income tax rate of 28%, reduced by profit earned from the UAE which is not subject to income tax.

****The statutory income tax rate in the UK reduced from 21% to 20% since 1 April 2015.

 

The income tax liability includes an amount of approximately £8m (2015: £7m) relating to unresolved tax matters.

The range of possible outcomes relating to this liability is not considered to be material.

         

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

 

GROUP

 

 

2016

£'m

(Restated)

2015

£'m

11.

EARNINGS PER ORDINARY SHARE

 

Earnings per ordinary share (pence)

 

Basic (pence)

29.6

44.6

 

Diluted (pence)

29.5

43.8

 

 

 

Number of shares reconciliation

 

 

2016

2015***

 

Weighted average number of ordinary shares in issue for basic earnings per share

 

 

 

Number of ordinary shares in issue at the beginning of the year

542 473 328

516 848 328

 

 

 

Al Noor Hospitals Group plc shares prior to reverse acquisition

14 688 077

-

 

Al Noor Hospitals Group plc shares repurchased

(8 000 842)

-

 

Weighted average number of ordinary shares issued during the year (August 2015)

41 742 562

-

 

Weighted average number of ordinary shares issued during the year (February 2016)

9 063 634

-

 

Weighted average number of ordinary shares issued during the year
(June 2014)

-

19 868 151

 

Adjustment for equity raising - Private placement (June 2014)
(IAS 33 para 26)**

-

378 641

 

Adjustment for equity raising - Rights Offer (2015) (IAS 33 para 26)**

5 239 773

13 135 323

 

 

 

Weighted average number of treasury shares

(6 764 447)

(9 957 753)

 

BEE shareholder

(521 142)

(1 503 618)

 

Mpilo Trusts

(5 995 653)

(8 377 728)

 

Forfeitable Share Plan

(247 652)

(76 407)

 

 

598 442 085

540 272 690

 

 

 

Weighted average number of ordinary shares in issue for diluted earnings per share

 

 

 

Weighted average number of ordinary shares in issue

598 442 085

540 272 690

 

Weighted average number of treasury shares held in terms of the BEE initiative

not yet released from treasury stock

768 793

9 957 753

 

BEE shareholder*

521 141

1 503 618

 

Mpilo Trusts

-

8 377 728

 

Forfeitable Share Plan

247 652

76 407

 

 

599 210 878

550 230 443

 

 

 

The prior year number of shares have been converted using the Mediclinic scheme of arrangement conversion ratio of 0.625 Mediclinic International plc shares for each Mediclinic International Limited share held.

 

 

 

* Represents the equivalent weighted average number of shares for which no value has been received from the BEE shareholder (Mpilo Investment Holdings 2 (RF) (Pty) Ltd) in terms of the Group's black ownership initiative. To date, no value was received for an equivalent of 521 141 (2015: 1 158 198) shares issued to the strategic black partner.

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

11.

Earnings per ordinary share (continued)

 

Mpilo Investment Holdings 1 (RF) (Pty) Ltd and Mpilo Investment Holdings 2 (RF) (Pty) Ltd are structured entities that are not consolidated due to the group not having control. These companies are investment holding companies and were incorporated as part of the Mediclinic BEE transaction. The companies hold ordinary shares in Mediclinic International plc (2015: Mediclinic International Limited) on which it receives dividends. These dividends are used to repay the outstanding debt of the companies. The outstanding debt referred to is provided by third parties with no recourse to the Group.

 

** The shares were issued at a price lower than the fair value of the shares before the equity capital raised in June 2014 and Rights Offer in August 2015. As a result, the weighted average number of shares was adjusted in accordance with IAS 33 paragraph 26.

 

*** The 2015 number of shares has been adjusted with the exchange ratio of 0.625 (1 Mediclinic International Limited share was exchanged for 0.625 AL Noor Hospitals Group plc share in terms of the Mediclinic scheme of arrangement).

 

 

 

Headline earnings per ordinary share

 

The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE Limited (JSE) Listing Requirements, determined by reference to the South African Institute of Chartered Accountants' circular 02/2013 (Revised) 'Headline Earnings'. The table below sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa. The table below reconciles the profit for the financial year attributable to equity holders of the parent to headline earnings and summarises the calculation of basic HEPS:

 

 

 

 

GROUP

 

 

2016

£'m

(Restated)

2015

£'m

 

 

 

 

 

Profit for the financial period attributable to equity holders of the parent

177

241

 

 

 

Adjustments

 

Impairment of property

-

2

 

Insurance proceeds

-

(8)

 

Gain on disposal of subsidiary

-

(2)

 

Profit on disposal of property, equipment and vehicles

-

(4)

 

Headline earnings

177

229

 

 

 

Headline earnings per share (pence)

29.6

42.4

 

Diluted headline earnings per share (pence)

29.5

41.6

 

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (continued)

 

 

 

GROUP

 

 

2016

£'m

(Restated)

2015

£'m

12.

Business combinations

 

 

Cash flow

on

 acquisition

Cash flow

on

acquisition

 

 

 

Al Noor Hospitals Group plc

17

-

 

Clinique La Colline

-

75

 

Swissana Clinic AG Meggen

-

6

 

 

17

81

 

Al Noor Hospitals Group plc

 

 

 

On 15 February 2016, Mediclinic completed the Combination between Al Noor Hospitals Group plc and Mediclinic International Limited. The Combination of Al Noor Hospitals Group plc and Mediclinic International became unconditional on 15 February 2016. The directors recognise the strong strategic merit in the transaction, with an excellent strategic fit between the operations in the UAE and the creation of a leading international private healthcare operator with a well-balanced geographic profile. The Combination is classified as a reverse take-over.

 

 

 

Following implementation of the Combination, it is expected that Al Noor, as enlarged by the acquisition of Mediclinic (the ''Enlarged Group''), will be one of the world's leading international private healthcare groups, with deep operational expertise and a well-balanced geographic profile in Southern Africa, Switzerland, the United Arab Emirates and in the UK through a minority stake in Spire.

 

 

 

The goodwill of £1 189m arising from the acquisition is attributable to the earnings potential of the established Al Noor business with a geographical footprint in Abu Dhabi. None of the goodwill recognised is expected to be deductible for income tax purposes.

 

 

 

The fair value exercise over the opening balance sheet of Al Noor remains provisional at 31 March 2016 as permitted by IFRS 3.  Since the Group is in discussions with UAE medical insurance funders and other third parties about conforming Al Noor's commercial practices with the rest of the Group, there is still a degree of uncertainty about the fair value of certain acquired assets and liabilities.  This is expected to be finalised during the next year. The following table summarises the consideration paid for Al Noor Hospital Group and the provisional fair value of assets acquired and liabilities assumed at the acquisition date.

 

 

 

Purchase consideration at 15 February 2016

 

 

 

Special dividend (£3.28 per share)

383

 

 

Tender offer (limited to £1bn with special dividend, £8.32 per share)

530

 

 

Value of share element*

446

 

 

Total consideration transferred

1 359

 

 

* The value of the share element represents the equivalent fair value of the shares at date of acquisition that the acquirer (Mediclinic International Limited), would have issued to the shareholders of Al Noor Hospitals Group plc if equity instruments of the acquirer had to be issued.

 

 

 

CONDENSED NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

 

12.

Business combinations (continued)

Group

 

 

2016

£'m

(Restated)

2015

£'m

 

 

 

 

Cash flow

on

 acquisition

Cash flow

on

acquisition

 

 

 

Recognised amounts of identifiable assets acquired and liabilities assumed (provisional purchase price allocation)

 

 

 

Assets

 

Property, equipment and vehicles

61

 

 

Intangible assets

65

 

 

Non-current receivable

2

 

 

Inventories

14

 

 

Trade and other receivables

111

 

 

Derivative financial instruments

2

 

 

Investment in money market funds

10

 

 

Cash and cash equivalents

24

 

 

Total assets

289

 

 

 

 

Liabilities

 

Retirement benefit obligations

22

 

 

Trade and other payables

92

 

 

Total liabilities

114

 

 

Total identifiable net assets at fair value

175

 

 

Non-controlling interest

(5)

 

 

Goodwill

1 189

 

 

Total

1 359

 

 

 

 

Acquisition-related costs of £41m have been charged to administrative expenses in the consolidated income statement.

 

 

 

The fair value of trade and other receivables is £111m and includes trade receivables with a fair value of £95m.
The gross contractual amount for trade receivables due is £121m, of which £95m is expected to be collectible.

 

 

 

From the date of acquisition, Al Noor Hospitals Group has contributed £50m of revenue and £4m to the net profit before tax of the Group. If the business combination had taken place at the beginning of the financial year, revenue from continuing operations would have been £333m and the net profit for the Group would have been £56m.

 

 

 

Analysis of cash flow on acquisition

 

 

 

Transaction costs incurred in reverse acquisition

(41)

 

 

Net cash acquired with the subsidiary

24

 

 

Net cash flow on acquisition

(17)

 

 

 

13.

EVENTS AFTER THE REPORTING DATE

 

At the time the financial statements were authorised for issue, the following events had taken place which have not been recognised as at 31 March 2016:

During May 2016 the Group obtained additional bank facilities in the amount of R1.2 billion (approximately £54m). The loans will carry interest at 3 month Jibar plus a margin of 1.69% and is fully repayable in June 2019.

         

 


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