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6
ANNUAL REPORT
AND FINANCIAL
STATEMENTS
for the year ended 31 March 2016
MEDICLINIC INTERNATIONAL PLC
(“Mediclinic” or “the Company”)
CORRECTION TO 2016 ANNUAL REPORT
A typographical error has been identified in the Remuneration Report on page 91 of the Company’s
Annual Report and Financial Statements for the year ended 31 March 2016 (“2016 Annual Report”)
under the heading “Implementation of the Remuneration Policy for the 2016/17 Financial Year” where
the maximum STI opportunity for the CFO was incorrectly stated at 100% of annual salary. The correct
figure is 133% of annual salary. This typographical error was repeated on page 93, regarding the bonus
opportunity for the newly appointed CFO, Jurgens Myburgh, which should also have been 133%. This
typographical error does not have any effect on the total remuneration for the CFO that could result
from the remuneration policy in 2016/2017, as illustrated in the graph set out on page 79, where the
maximum figure for the short-term incentive (“STI”) was calculated based on 133% of annual salary.
There was a further typographical error on page 91 of the Company’s 2016 Annual Report, which
incorrectly stated that the 2017 STI has a three-year holding period. This should have stated a two-year
holding period, as per the approved remuneration policy on page 76, which indicates that “A portion of
the bonus paid (the amount at the discretion of the Committee) may be deferred in shares, which are
released ratably over two years, subject to continued employment.”
The Company sincerely apologises for any inconvenience caused.
17 July 2017
For further information, please contact:
Capita Company Secretarial Services Limited
Victoria Dalby / Caroline Emmet
+44 (0)207 954 9600
CONTENTS
1 Report Profile
STRATEGIC REPORT
2 Highlights
3 At a Glance
6 Chairman’s Statement
8 Chief Executive Officer’s Review
11 About the Al Noor Combination
12 Five-year Summary
13 Investment Case
14 Business Model
16 Market Overview
18 Our Strategy, Progress and Aims
22 Key Performance Indicators
24 Risk Management, Principal Risks
and Uncertainties
30 Clinical Services Overview
34 Divisional Review - Southern Africa
38 Divisional Review - Switzerland
42 Divisional Review - UAE
46 Sustainable Development Highlights
55 Financial Review
GOVERNANCE AND REMUNERATION
60 Board of Directors
62 Senior Management
63 Chairman’s Introduction
64 Corporate Governance Statement
74 Remuneration Report
100 Nomination Committee Report
104 Clinical Performance and Sustainability
Committee Report
107 Audit and Risk Committee Report
116 Directors’ Report
123 Directors’ Responsibility Statement
FINANCIAL STATEMENTS
125 Independent Auditors’ Report
136 Group Financial Statements
210 Company Financial Statements
SHAREHOLDER INFORMATION
221 Shareholder Information
222 Company Information
223 Glossary
This Annual Report is published as part of a set of reports, all
of which are available on the Company’s website at
www.mediclinic.com. The icons next to each of the following
reports are used as a cross-referencing tool to refer to the
relevant pages of these reports or within this report.
Annual Report and Financial Statements 2016
AR
CSR
SDR
AGM
Clinical Services Report 2016
Sustainable Development Report 2016
Notice of Annual General Meeting 2016
These reports were approved by the Company’s Board on
25 May 2016 and will be available on the Company’s website
from the date of distribution of the Company’s Notice of
Annual General Meeting by no later than 21 June 2016.
GLOSSARY
Please refer to the glossary of terms used in this report on
pages 223 to 224.
The Annual Report, including the Strategic Report from
pages 2 to 59, was approved by the Board on 25 May 2016.
For and on behalf of the Board.
AR
AR
Edwin Hertzog
Non-executive Chairman
REPORT PROFILE
SCOPE, BOUNDARY AND
REPORTING CYCLE
This Annual Report and Financial Statements
of Mediclinic International plc (formerly Al Noor
Hospitals Group plc) (“Mediclinic” or “the Company”)
presents the economic, social and environmental
performance, and the financial results of the
Mediclinic Group for the reporting period ended
31 March 2016, and covers all operations in Southern
Africa, Switzerland and the UAE.
SIGNIFICANT EVENTS DURING
REPORTING PERIOD
The successful completion of the Combination of
Mediclinic International Limited and Al Noor Hospitals
Group plc by way of a reverse takeover of Mediclinic
International Limited, resulting in the continued
listing of the enlarged Company on the London Stock
Exchange and the secondary listings of the Company
on the Johannesburg Stock Exchange and the
Namibian Stock Exchange.
Other noteworthy developments during the reporting
period include:
• Acquisition of a 29.9% interest in Spire Healthcare
plc, a UK-based private healthcare group.
• Restructure of the MP1 Investment Holdings
Proprietary Limited black economic empowerment
transaction, initially implemented in 2005.
REPORTING PRINCIPLES
The contents included in the Annual Report
are deemed to be useful and relevant to our
stakeholders, with due regard to our stakeholders’
expectations through continuous engagement,
or that the Board believes may influence the
perception or decision-making of our stakeholders.
The information provided aims to provide our
stakeholders with a good understanding of the
financial, social, environmental and economic
impacts of the Group to enable them to evaluate the
ability of Mediclinic to create and sustain value for
our stakeholders.
This Annual Report was prepared in accordance with
the International Financial Reporting Standards, the
LSE Listing Rules, the JSE Listings Requirements,
the UK Corporate Governance Code, as well as the
UK Companies Act, where relevant. The Company
has applied the majority of the principles contained
in the UK Corporate Governance Code – all the
principles which the Company did not apply
are explained in the Corporate Governance
Statement in this Annual Report. The Company
has also considered and applied many of the
recommendations contained in the International
Integrated Reporting Framework issued by the
International Integrated Reporting Committee
in December 2013. The Company’s reporting
on sustainable development included in the
Annual Report, supplemented by the Sustainable
Development Report available on the Company’s
website at www.mediclinic.com, was done in
accordance with the GRI G4 Sustainability
Reporting Guidelines.
EXTERNAL AUDIT AND
ASSURANCE
The Company’s annual financial statements and the
Group’s consolidated annual financial statements
were audited by the Group’s independent external
auditors, PricewaterhouseCoopers LLP, in
accordance with International Standards of
Auditing (UK and Ireland).
Various other voluntary external accreditation,
certification and assurance initiatives are followed
in the Group, complementing the Group’s combined
assurance model, as reported on in the Risk
Management section of the Annual Report. We
believe that this adds to the transparency and
reliability of information reported to our stakeholders.
MEDICLINIC ANNUAL REPORT 2016
1
STRATEGIC REPORT
HIGHLIGHTS
STRONG PATIENT GROWTH across all
the operating platforms
CONTINUED INVESTMENTS in patient
experience and clinical qualities
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
REVENUE (£’m)*
OPERATING PROFIT (£’m)*
1 853
1 818
1 892
1 977
2 107
317
307
342
345
288
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
UNDERLYING EBITDA (£’m)**
UNDERLYING EARNINGS (£’m)**
393
390
401
403
428
102
143
189
193
219
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
2
1
0
2
3
1
0
2
4
1
0
2
5
1
0
2
6
1
0
2
* IFRS measure
** Non-IFRS measure
AR
See the reconciliations between the statutory and underlying (non-GAAP) measures on pages 55 and 56.
2
MEDICLINIC ANNUAL REPORT 2016
AT A GLANCE
STRATEGIC
REPORT
WHO WE ARE
Mediclinic is an international private healthcare group founded in 1983, with operations in South Africa, Namibia,
Switzerland and the United Arab Emirates. Subsequent to the Combination of Mediclinic International Limited
and Al Noor Hospitals Group plc in February 2015, the Company’s primary listing is on the London Stock
Exchange, with secondary listings on the South African Stock Exchange and the Namibian Stock Exchange.
The Group’s registered offi ce is based in London, United Kingdom.
WHAT WE DO
Mediclinic is focused on providing acute care, specialist-orientated, multi-disciplinary healthcare services.
Our core purpose is to enhance the quality of life of our patients by providing comprehensive, high-quality
healthcare services in such a way that the Group will be regarded as the most respected and trusted provider
of healthcare services by patients, doctors and funders of healthcare in each of its markets.
Following the Combination, the enlarged Mediclinic Group now boasts 73 hospitals and 45 clinics: Mediclinic
Southern Africa operates 49 hospitals and two day clinics throughout South Africa and three hospitals in
Namibia with more than 8 000 inpatient beds in total; Hirslanden operates 16 private acute care facilities
and four clinics in Switzerland with more than 1 600 inpatient beds; and Mediclinic Middle East (including
the Al Noor facilities) operates fi ve hospitals and 39 clinics with more than 700 inpatient beds in the
United Arab Emirates.
Mediclinic also holds a 29.9% interest in Spire Healthcare, a UK-based private healthcare group listed on the
London Stock Exchange.
OUR VISION
To be respected internationally and preferred locally.
DISTRIBUTION OF THE GROUP’S
73 HOSPITALS
DISTRIBUTION OF THE GROUP’S
10 415 BEDS
DISTRIBUTION OF THE GROUP’S
32 884 EMPLOYEES
7%
71%
7%
77%
21%
51%
22%
16%
CONTRIBUTION TO GROUP
UNDERLYING REVENUE (£’m)
TOTAL: £2 100m
CONTRIBUTION TO GROUP
UNDERLYING EBITDA (£’m)
TOTAL: £428m
CONTRIBUTION TO GROUP
UNDERLYING EARNINGS (£’m)
TOTAL: £219m
28%
16%
31%
16%
3% -4%
26%
29%
32%
53%
52%
46%
Southern Africa
Switzerland
UAE
UK
Corporate
MEDICLINIC ANNUAL REPORT 2016
3
HOLDING COMPANY: MEDICLINIC INTERNATIONAL PLC
(formerly Al Noor Hospitals Group plc)
OPERATING PLATFORMS
MEDICLINIC
SOUTHERN AFRICA
HIRSLANDEN
MEDICLINIC
MIDDLE EAST
South Africa and Namibia
Switzerland
United Arab Emirates
COUNTRY OF
OPERATION
BRANDS
BUSINESS
WEBSITES
www.mediclinic.co.za
www.mhr.co.za
www.medicalinnovations.co.za
www.er24.co.za
HOSPITALS
AND
CLINICS IN
OPERATION
Operates 49 acute care private
hospitals and two day clinics
throughout South Africa and
three hospitals in Namibia, with
8 017 beds in total. ER24 offers
emergency transportation services
from their 49 branches throughout
South Africa.
www.hirslanden.ch
www.mediclinic.ae
www.alnoorhospital.com
Operates 16 acute care private
hospitals with 1 677 beds and
four clinics in Switzerland.
NUMBER OF
EMPLOYEES
16 832 (20 645 full-time
equivalents, which includes
3 813 agency staff)
(16 403 permanent and 429 non-
permanent)
9 120 (which includes full-time
and part-time permanent
employees) (6 608 full-time
equivalents)
NATURE OF
OWNERSHIP
Mediclinic Southern Africa (Pty)
Ltd, a company registered in South
Africa, is the holding company of
the Company’s operating platform
in Southern Africa. It is 100%
owned through wholly-owned
subsidiaries (with most group
operating companies partly owned
and doctor shareholding in hospital
investment companies).
Hirslanden AG, a company
registered in Switzerland, is
the holding company of the
Company’s operating platform
in Switzerland. It is 100%
owned through wholly-owned
subsidiaries.
4
MEDICLINIC ANNUAL REPORT 2016
Mediclinic Middle East operates
two acute care private
hospitals and eight clinics in
Dubai, UAE and two clinics in
Abu Dhabi, UAE, with 371 beds
in total.
Al Noor operates three acute
care private hospitals and 29
clinics, mainly in Abu Dhabi,
UAE, with 350 beds in total.
Mediclinic Middle East: 2 507
Al Noor: 4 425
The holding company for the
Mediclinic Middle East operations
is Emirates Healthcare Holdings
Ltd, a company registered in the
British Virgin Islands, which is
100% owned through wholly-
owned subsidiaries.
The holding companies for the
Al Noor operations are Al Noor
Holdings Cayman Limited and
ANMC Management Limited,
companies registered in the
Cayman Islands, which are 100%
owned by the Company.
UNITED KINGDOM
29.9% INVESTMENT IN
SPIRE HEALTHCARE
SWITZERLAND
FIND OUT MORE ABOUT
OUR SWISS OPERATIONS
ON PAGE 38
AR
STRATEGIC
REPORT
UNITED ARAB
EMIRATES
FIND OUT MORE ABOUT
OUR UAE OPERATIONS
ON PAGE 42
AR
SOUTHERN AFRICA
FIND OUT MORE ABOUT
OUR SOUTHERN AFRICAN
OPERATIONS ON PAGE 34
AR
HOW WE GOVERN OUR BUSINESS
Our governance structures are focused on maintaining and building a sustainable business and support our
commitment to be a responsible corporate citizen in every country and community in which the Group does
business. The key elements of our governance structures include:
• ensuring good clinical outcomes and quality healthcare (see the Clinical Services Overview in the Annual
Report, as well as the Clinical Services Report available on the Company’s website for more information);
• maintaining strict principles of corporate governance, integrity and ethics (see the Corporate Governance
Statement in the Annual Report for more information);
• eff ective risk management and internal controls (see the Risk Management Report in the Annual Report for
more information);
• engaging with our stakeholders and responding to their legitimate expectations (see the stakeholder
engagement section in the Sustainable Development Report available on the Company’s website for more
information);
• managing our business in a sustainable manner (see the Sustainable Development Highlights in the Annual
Report, as well as the Sustainable Development Report available on the Company’s website for more
information); and
• off ering our employees competitive remuneration packages based on the principles of fairness and
aff ordability (see the Remuneration Report in the Annual Report for more information).
CSR
SDR
SDR
AR
MEDICLINIC ANNUAL REPORT 2016
5
CHAIRMAN’S STATEMENT
CONTINUING A PATTERN OF
CONSISTENT GROWTH
The period under review was a pivotal one for
Mediclinic as we made significant progress in
expanding our geographical footprint. I am
pleased to report that during this eventful year,
we also maintained our 30-year track record of
consistent growth.
Throughout the Group, we successfully delivered
an increase in bed days sold. To me, this is the most
important measure of success, as it is indicative of
patient choice and shows that we are retaining and
attracting sufficient doctors to support our growth.
This enables us to deliver operating efficiencies.
Furthermore, we made good progress towards our
“One Mediclinic” initiative, through which we are
investing in IT, benchmarking our performance, and
ensuring that best practices are shared across our
operations. This is starting to pay dividends in the
form of increasing operational efficiency and
helping to unlock the benefits of an integrated,
international Group.
Our financial performance also reflects the
robust health of the business. It is in line
with our budget expectations, supporting
continued growth.
INVESTING IN INTERNATIONAL
EXPANSION
Our investments in the Middle East and the UK were
the two key highlights of the year.
The strategic rationale for the Mediclinic and Al Noor
Combination was compelling. Where possible, our
preferred method of growth has always been to add
to existing hospitals and expand into neighbouring
territories. As such, the Al Noor Group was a perfect
fit. Based on our initial experiences in South Africa
and then our experience in Switzerland (which, in
relative terms, was a far larger transaction), we
also understand what it takes to bring disparate
businesses into a single, integrated whole.
An added benefit is the Company’s listing as a
FTSE 100 company on the London Stock Exchange.
This requires us to adapt the manner in which the
business is governed. We are well-positioned to
respond to this, given our long-standing emphasis
on transparency and our strong ethical principles.
The 29.9% investment in Spire Healthcare was a
different type of transaction, giving us exposure
to the expanding UK market, providing the Group
with a further opportunity to diversify into a new
geography.
BOARD CHANGES
The listing of Mediclinic on the London Stock
Exchange necessitated the reconstitution of
the Board to reflect our increased international
presence with effect from the completion date of
the Combination of 15 February 2016. Sadly, we had
to say farewell to two long-standing members of
Mediclinic International Limited Board, Kabs Makaba
and Anton Raath, and I would like to thank them for
their contribution to the Group over many years. We
were delighted that Ian Tyler and Seamus Keating,
previously Chairman and Senior Independent Director
of Al Noor respectively, agreed to continue on the
Board. Ian was appointed as the Senior Independent
Director and Seamus remained as an independent
non-executive director of the reconstituted Board,
bringing considerable insight and experience of the
Middle Eastern healthcare market.
6
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
Dr Edwin de la H Hertzog
Non-executive Chairman
The Group has always had a long-term outlook in an
industry that it knows well, enjoys participating in and
where good opportunities for sensible growth have
always been found. We therefore continue to believe
that Mediclinic will be able to maintain a consistent
growth pattern.
THANK YOU FOR YOUR
CONTINUED SUPPORT
As ever, I want to express my sincere thanks to
everyone who contributed to Mediclinic’s continued
success, including our directors, management,
doctors, nurses and support staff .
In particular, the support of patients and medical
professionals is absolutely vital to the sustainability
of our business, and we deeply appreciate the fact
that they have chosen Mediclinic ahead of alternative
healthcare providers.
Finally, I would like to extend a special thank you to
all our shareholders for the confi dence they have
placed in us.
Dr Edwin de la H Hertzog
Non-executive Chairman
The Mediclinic International Limited board also had
greater executive director representation. To maintain
the right balance of directors on the Board, three
of the previous executive directors (Koert Pretorius,
CEO of Mediclinic Southern Africa; Dr Ronnie van der
Merwe, Chief Clinical Offi cer; and Dr Ole Wiesinger,
CEO of Hirslanden) were also not appointed to the
new enlarged Board. The platform CEOs and other
executive management attend, but not vote at, Board
meetings as necessary. We plan to appoint two
additional independent directors in the year ahead.
To ensure that the Group continues to benefi t from a
strong, stable leadership team, succession planning
will be another priority for the 2016/2017 fi nancial
year. Following the announcement early this year by
our Chief Financial Offi cer, Craig Tingle, of his intention
to retire, the Board appointed Jurgens Myburgh
as his successor. He will take over from Craig on
1 August 2016. Craig has played a key role in building
the Mediclinic Group and on behalf of the Board,
I would like to express my sincere appreciation for
all his exceptional contributions.
OUTLOOK AND PROSPECTS
Whilst we are operating in a growing industry, it is a
competitive one both within the private sector and
often also with public sector facilities. We are very
aware that staying ahead is a continuous challenge.
Having the services available of high-quality doctors,
nurses and support staff is critical to the success
of our business. The leading independent research
company, Gallup, was commissioned during 2015 to
undertake an employee engagement survey across all
three our platforms for us to understand where there
were opportunities to deliver improvements in the
workplace. Although the results were good, we would
still like to see a more positive trend, so more work
will be done in this regard.
MEDICLINIC ANNUAL REPORT 2016
7
CHIEF EXECUTIVE OFFICER’S REVIEW
To this end, we continued to invest heavily in our
people, their training, the facilities in which they work,
and the technology they use.
A particular emphasis at Mediclinic is to really
understand and benchmark our performance. We
therefore extended our investment in data
collection and analytics using Press Ganey, an
internationally renowned external research
group, to measure patient experience. This has
brought new levels of insight into the performance
of our South African and Middle Eastern
operations, and we are now ready to start a pilot
in our Swiss operations.
We continued to pursue a number of projects
which enable us to move towards a better
integrated healthcare delivery model, with improved
collaboration between the various clinical disciplines.
For example, using the clinical expertise of the
well-established and renowned oncology team at
Hirslanden to assist with the establishment of the
new oncology centre at the Mediclinic City Hospital’s
North Wing in Dubai that will open in the second
half of 2016.
Our relentless focus on patient care helps us to
build productive relationships with all stakeholder
groups – where we have built high levels of trust in
the quality of our service and our ethical principles
over the years.
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 Al Noor Hospitals
Group plc, we boosted our presence internationally,
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 private healthcare
markets. At the same time, we continued to grow
volumes and revenues across all our operating
platforms, while maintaining stable margins.
We now enter the 2016/17 financial year in a strong
position and eager to take full advantage of our
newfound scale. Despite the uncertain economic
environment, the healthcare market fundamentals
remain sound and we anticipate continued growth
across all of our operating platforms.
This is indeed an exciting time for the Group,
which promises to bring long-term value to our
shareholders – with a well-balanced portfolio
of operations, a leading position across a mix
of attractive healthcare markets, and a strong
management team at the helm.
IT ALL STARTS WITH THE
PATIENTS
The very bedrock of our business is our “patients
first” ethos.
Across all our operating platforms, we seek to be the
first choice for patient experience, and to provide
superior clinical outcomes. Importantly, we also seek
to deliver a single, standardised quality of service
wherever we operate.
8
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
Danie Meintjes
Chief Executive Offi cer
BUILDING A LARGE, COHESIVE
INTERNATIONAL GROUP
Our growing international scale enables us to unlock
further value.
quality of its people and infrastructure. By stepping
in as a minority investor, with a seat on the Board,
we gain valuable fi rst-hand experience of the UK
market, building relationships with a strong, stable
organisation.
It certainly helps us to share skills and best practice
across the Group, thereby contributing to our focus
on patients. Scale also brings valuable synergies
and cost-effi ciencies. For example, since the
implementation of a central buying department for
the Group, we have already achieved double-digit
cost savings on several of our surgical supplies and
on the purchase of healthcare equipment for our
clinics and hospitals.
Our clear aim is to operate as a well-integrated,
networked group. Following the Combination with
Al Noor, the smooth alignment of operations has
been a priority. By March 2016, we confi rmed the
new senior management team for the Middle East,
and appointed workstream leaders to map-out the
detailed changes. As expected, we now face some
tough integration challenges, specifi cally related to
Information and Communications Technology and
Human Resources. However, I am confi dent that we
have a strong leadership team in our Middle Eastern
operations who has a realistic understanding of the
related complexities and the expertise to overcome
them. We further have a wealth of experience in the
broader Group that can assist where and
when required.
During the period under review, we further extended
our international footprint and geographical
diversifi cation with the acquisition of a 29.9% stake
of Spire Healthcare, a leading private healthcare
provider in the UK. Like others in the industry,
we are attracted by the long-term prospects for
the UK private healthcare market. We were also
impressed by Spire’s patient focus, as well as the
AR
ACCELERATED PROGRESS
TOWARDS OUR STRATEGIC
GOALS
Overall, the developments during the period under
review enabled us to accelerate progress against our
six strategic priorities, as set out in greater detail on
pages 18 to 21, in all our key markets.
In our South African operations, we increased our
capacity by opening two new day clinics, together
adding 52 beds, and added 80 beds to our existing
hospitals. Despite the volatility of the economy and
the uncertainty of the political environment, we see
continued opportunity for growth, albeit at a slightly
lower rate.
For our Swiss operations, the 2015/16 fi nancial year
was very satisfactory. We added several new facilities
to our existing portfolio, including more than 20 new
inpatient beds, outpatient facilities and consulting
rooms, plus a host of technology investments. With
a stable economy, a strong currency, highly trained
medical staff and an aging population, Switzerland
looks set to deliver stable growth and to remain a
source of clinical excellence.
The acquisition of Al Noor, with operations primarily
in Abu Dhabi, has accelerated our progress in this
attractive Middle Eastern market. We are rapidly
extending capability and capacity, with 120 new beds
due to be added in 2016/17 and a further 290 beds
set to follow by 2018/19.
MEDICLINIC ANNUAL REPORT 2016
9
CHIEF EXECUTIVE OFFICER’S REVIEW (continued)
A STRONG FINANCIAL
PERFORMANCE
The Group experienced strong patient growth
across all the operating platforms leading to revenue
growth of 7%, reported in pound sterling, with a
stable underlying EBITDA margin at 20.4%.
I should add that our listing on the London Stock
Exchange, where we entered the FTSE 100 Index
in March 2016, should further strengthen our future
financial position. As well as providing a new source
of lower cost capital, it leaves us less exposed to the
volatility of the South African rand should we raise
new capital for international expansion.
KEY OPPORTUNITIES AND
CHALLENGES
Currently we view the fundamentals as remaining
positive across all of our markets. With, amongst
other factors, an aging population, a growing middle
class, and the ongoing emergence of new, quality-of-
life-enhancing medical procedures, we continue to
anticipate long-term growth.
OUR PRIORITIES FOR 2016/17
AND BEYOND
The 2016/17 financial year is set to be another
exciting year for Mediclinic.
Our number one priority is our continued focus on
our patients and to remain their demonstrable first
choice. Alongside this, the smooth integration of
our Middle Eastern operations is a priority that will
continue to receive significant management attention
and support. We will furthermore seek new ways to
unlock the benefits of an integrated, international
healthcare Group, focused around the seamless
delivery of services with the patient firmly at
the centre.
I would like to thank all of our doctors, nurses,
support staff and management for their dedication
and commitment during the year. This underpins
everything we do and, with this in mind, I am
confident that we will continue to build on the
significant progress made in 2015/16.
Danie Meintjes
Chief Executive Officer
Nonetheless, we do face a number of pressure points:
• The affordability of healthcare is a matter of
pressing public policy concern. This is one reason
why it is so important for us to grow our scale,
optimise our cost base and ensure that we offer
cost-effective quality care to our patients.
• Another challenge is regulatory uncertainty.
During our three-decade history, this is something
we have learnt to manage. We understand the
need to adapt to an ever-changing political
climate; building an internationally diverse
portfolio strengthens our position.
• The availability of high-quality clinical staff is an
issue for the healthcare industry worldwide. We
work hard to be an employer of choice and to
ensure that our hospitals are regarded as the best
facility for independent medical practitioners to
treat their patients. We continue to invest in the
training and development of our people to ensure
that we attract and retain the necessary talent.
• We are aware of a growing move towards
consumerism in the healthcare market, with the
advent of more demanding, better-informed
patients. Our “patients first” ethos is critical to
creating the confidence in our patients to believe
in our Company slogan of Expertise You Can Trust.
We do not underestimate these challenges, and
we work hard in order to ensure that we have the
necessary plans and strategies in place to
mitigate them.
10
MEDICLINIC ANNUAL REPORT 2016
ABOUT THE AL NOOR COMBINATION
STRATEGIC
REPORT
The Combination of Al Noor Hospitals Group plc and Mediclinic International Limited was completed in
February 2016 creating the largest private healthcare provider in the United Arab Emirates.
Al Noor provides primary, secondary and tertiary healthcare to over two million outpatients per annum
through three hospitals, 29 clinics and an oncology centre, mainly in Abu Dhabi. Al Noor brings more than
4 000 experienced employees into the Mediclinic Group, including 684 physicians.
“The combined business represents a unique platform from which to pursue numerous expansion
opportunities in the high-growth UAE and wider Middle East healthcare market, reinforcing our commitment
to drive the delivery of world class healthcare services in the region. The combination also further diversifi es
Mediclinic’s geographic profi le internationally, gives us additional exposure to USD-based high-growth
earnings, and generates incremental fi nancial and trading benefi ts through a listing on the LSE.”
Danie Meintjes, CEO Mediclinic International
KEY BENEFITS
COMPELLING STRATEGIC FIT
The combined organisation is a signifi cant step
forward for Mediclinic in the delivery of its strategic
objective to create a leading international healthcare
Group, underpinned by the complementary
geographies of the two businesses and shared
commitment to outstanding patient care.
ATTRACTIVE GROWTH
OPPORTUNITIES
There are substantial unmet medical needs in the
Middle East, with private healthcare growing fast
in response to the needs of a rapidly expanding
and ageing population, an increasing incidence of
lifestyle-related medical conditions and service gaps
in the current healthcare market.
SIGNIFICANT COST SYNERGIES
The close proximity of Mediclinic’s operations in Dubai
and the complementary nature of the two operations
off er economies of scale through increased
purchasing power, combining corporate functions
and sharing operation teams, in addition to sharing
knowledge and best practice across the Group.
GEOGRAPHIC DIVERSIFICATION
The Combination enhanced Mediclinic’s well-
balanced geographic portfolio across Southern
Africa, Switzerland and the UAE, with exposure to
the UK market through its minority stake in Spire
Healthcare Group plc. The enlarged Mediclinic Middle
East contributed 26% of the Group’s underlying
earnings for the period ended 31 March 2016.
FINANCIAL FLEXIBILITY
The Combination brings a primary listing on the Main
Market of the London Stock Exchange and has been
followed by inclusion in the FSTE 100 index. This will
give Mediclinic access to a broader global investor
base and new sources of capital at a lower cost.
3
350
HOSPITALS
BEDS
684
PHYSICIANS
29
CLINICS
2.0
MILLION
OUTPATIENTS
MEDICLINIC ANNUAL REPORT 2016
11
FIVE-YEAR SUMMARY
INCOME STATEMENT
Revenue
Operating profit
Profit after tax
Underlying revenue
Underlying EBITDA
Underlying earnings
EARNINGS PER SHARE
Basic earnings basis
Diluted earnings basis
Basic underlying earnings basis
Diluted underlying earnings basis
DIVIDENDS DECLARED PER SHARE
STATEMENTS OF FINANCIAL POSITION
ASSETS
Non-current assets
Current assets
Total assets
EQUITY
Owners of the parent
Non-controlling interest
Total equity
LIABILITIES
Non-current liabilities
Current liabilities
Total liabilities
Total equity and liabilities
2016
£'m
2 107
288
190
2 100
428
219
2015
£'m
2014
£'m
2013
£'m
2012
£'m
1 977
1 892
1 818
1 853
345
254
342
223
307
(63)
317
125
1 977
1 892
1 829
1 853
403
193
401
189
390
143
393
102
2016
pence
2015
pence
2014
pence
2013
pence
2012
pence
29.6
29.5
36.7
36.7
7.90
44.6
43.8
35.8
35.1
9.33
41.4
40.5
37.3
36.5
8.90
(17.7)
(17.2)
30.9
30.0
9.62
26.3
25.3
26.0
25.0
9.64
2016
£'m
2015
£'m
2014
£'m
2013
£'m
2012
£'m
5 604
945
6 549
3 509
61
3 570
2 192
787
2 979
6 549
3 654
742
4 396
1 779
61
1 840
2 114
442
2 556
3 369
638
4 006
1 390
52
1 442
2 096
468
2 564
3 405
630
4 034
1 223
57
1 280
2 324
430
2 754
3 397
656
4 054
824
104
928
2 656
469
3 126
4 396
4 006
4 034
4 054
The Five-year Summary is presented in pound sterling, rounded to the nearest million. Financial information in
the past was reported in South African rand and has been translated to pound 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.
12
MEDICLINIC ANNUAL REPORT 2016
INVESTMENT CASE
STRATEGIC
REPORT
DEFENSIVE INDUSTRY WITH POTENTIAL FOR LONG-TERM GROWTH
• Operating in a strongly defensive sector with demand relatively unaff ected by economic cycles.
• Continued growth expected in demand for healthcare due to population growth, ageing population,
consumerism, technological advancement, the burden of disease and government funding limitations.
STRONG TRACK RECORD
• Led by an experienced and proven Board and Management team with an average corporate level tenure of
20 years.
• Delivered stable and strong operational growth for almost three decades.
• Strong track record in selecting earnings-enhancing capital projects and ability to integrate and extract value
from acquisitions.
• Long-term commitment since inception from Remgro, Mediclinic’s largest shareholder.
INTERNATIONAL PRESENCE
• Well positioned as a trusted provider of hospital services in developing and developed markets: Southern
Africa, Europe and Middle East.
• Signifi cantly expanded presence in UAE through the Combination with Al Noor, providing leading operations
in both Dubai and Abu Dhabi.
• Leading position in all the markets in which it operates (which excludes the UK).
• Geographic diversifi cation mitigates country-specifi c risk.
PURE SERVICES PLAYER
• Long-term investor and manager of mostly acute care, specialist-orientated, multi-disciplinary hospitals and
related outpatient facilities.
• Extensive property portfolio in prime real estate provides valuable operational fl exibility and strong assets to
underpin the business.
FURTHER GROWTH OPPORTUNITIES
• Signifi cant experience in integrating and growing acquired assets.
• Committed to establishing centres of excellence and co-ordinated care initiatives, and expanding capacity
via identifi ed Greenfi eld projects.
COMMITMENT TO QUALITY CARE
• Sustainable, competitive advantage underpinned by continuous focus on patient safety, excellence in clinical
performance and delivery of measurable, cost-eff ective care.
SUSTAINABILITY
• Commitment to manage business in a sustainable way, upholding the highest standards of ethics and
corporate governance practices; value and respect of employees, communities and the environment.
• Focus on integrity to maintain and improve confi dence, trust and respect of all stakeholders.
MEDICLINIC ANNUAL REPORT 2016
13
BUSINESS MODEL
STRATEGIC
REPORT
Our business model has resulted in consistent earnings growth,
quality service delivery, manageable risks, and generally a business
that sustains growth and value to all our stakeholders.
BUSINESS
INPUTS/RESOURCES
HOW WE
GENERATE VALUE
BUSINESS
OUTCOMES
Our business model varies slightly in the three operating platforms.
In Southern Africa our operations are supported by specialists who
are not employed by the Group, but operate independently. This is
a regulatory limitation in terms of the Health Professions Council
of South Africa, which prohibits the employment of doctors by
private hospitals, although permission has been obtained to
appoint doctors in our emergency units. In Switzerland some
of the supporting doctors are employed, while in the UAE the
majority of the supporting doctors are employed.
OUR VISION
In line with our vision to be respected internationally and
preferred locally, we are focused on creating long-term value for
our stakeholders and establishing Mediclinic as a leader in the
international healthcare industry.
We will be respected internationally for:
• delivering measurable quality clinical outcomes
• continuing to grow as a successful international
healthcare Group
• enforcing good corporate governance
• acting as a responsible corporate citizen
We will be preferred locally for:
• delivering excellent patient care
• ensuring aligned relationships with doctor communities
• being an employer of choice, appointing and retaining
competent staff
• building constructive relationships with
all stakeholders
• being a valued member of the community
DISTRIBUTION OF VALUE
2016
67.7%
2015
66.6%
12.4%
4.3%
3.5%
0.9%
4.6%
6.7%
11.1%
6.5%
3.6%
1%
4.7%
6.5%
Employees
Future Growth
Finance Cost
Distribution to Shareholders
Non-controlling Interests
Tax
Maintain and Replace Assets
Financial3
Mediclinic has a strong financial profile,
underpinned by an extensive property
portfolio. The Group has good access to
capital and invests for growth, generating
positive cash flow and a track record of
good returns on its capital investments.
Manufactured2
Mediclinic has a leading position in the key
markets in which it operates. The Group
owns, develops and operates 73 high-quality
hospitals and 45 clinics, providing over
10 400 beds across three regions, utilising
technology of an international standard.
Human1
The Group employs over 32 800 permanent
staff across its three platforms. During
the year, the Group invested 3.6% of
Mediclinic Southern Africa’s payroll, 5.0% of
Hirslanden’s payroll and 0.3% of Mediclinic
Middle East’s payroll in training across all
platforms, including extensive formal nurse
training in Southern Africa.
Intellectual2
Mediclinic has an experienced Board and
management team with deep industry
knowledge. The continued growth of
Mediclinic is testament to the strong
management team and their ability to
execute the Group’s strategy. The expertise
of our clinical staff is a critical element of
our business, allowing us to provide quality
healthcare services.
Social and relationships1
Mediclinic has excellent relationships with
key stakeholders, regularly engaging with
employees, funders, patients, supporting
doctors, suppliers, governments and
communities. It has a proven commitment
to ensure a high standard of ethics, social
responsibility, accountability, cooperation
and transparency.
Natural1
The Group is committed to efficient energy
use in all its hospitals and continuously strives
to reduce its water consumption and carbon
emissions, with an increasing number of its
hospitals certified to ISO 14001 standard.
1
2
3
Please see the Sustainable Development
Report available on the Company’s website for
further information.
Please see the Clinical Services Overview
on pages 30 to 33 and the Clinical Services
Report available on the Company’s website for
further information.
Please see the Financial Review on pages 55 to
59 of the Annual Report for further information.
SDR
AR
CSR
AR
INVESTING IN
Growth and expansion of the Group’s world class facilities
The Group has a track record of investing in carefully selected capital
projects that deliver satisfactory returns and has demonstrated
the ability to integrate and extract value from acquisitions and
expansions. Mediclinic builds and continuously improves its
facilities across its platforms, investing in medical technology of an
international standard to offer the best care possible.
Highly qualified staff
Continuous investment in the training and development of staff
creates a highly trained workforce and talent pipeline. Our Global
Reward Centre of Excellence ensures optimal remuneration practices
across the Group. Integrated talent strategies are deployed to ensure
proactive attraction and retention of scarce skills.
Improving efficiencies
A relentless focus on extracting efficiencies from key business
processes, using resources as effectively as possible and driving
cost savings and synergies across the Group, are critical to ensure
that we deliver value for money.
PROVIDING
Care
The Group’s main business activity is caring
for patients. Deep operational expertise
delivers a seamless patient experience,
underpinned by high-quality nursing care.
DELIVERING VALUE TO
Patients
Through high-quality clinical
outcomes, patient safety and
integrated services.
Shareholders
Through growth in
capitalisation and
shareholders returns, with the
balance of funds retained for
investment in expansion.
AR
Shareholder value
A focus on disciplined cost management
and improving efficiencies has delivered a
strong track record of growth in revenue
and EBITDA with a final dividend to
shareholders of 5.24 pence per share
(refer to the Directors’ Report on page 121
for a record of dividends for the year by
the Company and Mediclinic International
Limited prior to the Combination).
Quality healthcare services
All three platforms have seen an increase in
inpatient admissions, benefiting from high
quality clinical outcomes through the skill
of Mediclinic’s staff and supporting doctors
and the standard of its facilities, generating
high levels of patient satisfaction.
During the year, £264m (2015: £230m)
was retained for future growth and to
maintain and replace assets.
Highly skilled workforce
Over £934m (2015: £870m) was paid to
employees as remuneration and other
benefits, alongside investment in the
training and well-being of staff, creating a
motivated and engaged workforce, both in
clinical and business services.
Government
The Mediclinic Group contributed over
£63m (2015: £61m) in taxes and other state
and local authority levies to the economies
where it operates during the year.
Society
Mediclinic makes an economic and
social contribution to the communities
where it operates with a corporate
social investment of R11.8m by Mediclinic
Southern Africa, CHF2.5m by Hirslanden
and AED0.8m by Mediclinic Middle East
during the year. The Company was ranked
joint first position in the 2015 Climate
Performance Leadership Index, focusing
mainly on Mediclinic Southern Africa’s
environmental management.
14
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
15
MARKET OVERVIEW
The global healthcare market is facing both
challenges and opportunities. Spend is forecast
to grow by 5.2% per annum to US$9.3 trillion by
2018¹, with growing populations and rising incomes
increasing demand for healthcare services, whilst
increasing longevity and chronic diseases are
creating pressure on funding.
Cost is the biggest healthcare issue facing most
countries as they try to align supply to demand.
Targeted therapies, personalised medicine, genetic-
based medicine, medical devices and other
technology advances are delivering significant
advances in patient care but driving up costs at
the same time.
Healthcare providers are scaling up to address these
opportunities and challenges, with consolidation
becoming a key feature of the market to ensure
access to technology and attract resources in an
increasingly competitive market for highly qualified
staff – especially doctors and nurses.
The global healthcare regulatory landscape is
complex and evolving. The primary driver is patient
health and safety, with government scrutiny
varying widely from country to country. Patients
are becoming more cost conscious and involved
in healthcare decisions, with concerns about data
security rising.
SOUTHERN AFRICA
MARKET SIZE
There are around 215 private hospitals in South Africa,
with three major hospital groups accounting for 63%
of private sector beds. The total number of private
sector beds has increased steadily from 32 130 in
2010 to approximately 35 217 in 2014, constituting
approximately 30% of the total number of beds in
the country.
PRIVATE HOSPITAL BED MARKET SHARE
(SOUTH AFRICA)
16%
22%
11%
23%
28%
Mediclinic Southern Africa
Netcare
Life Healthcare
National Hospital Network
Independent
Source: Econex estimate number of beds in 2014
16
MEDICLINIC ANNUAL REPORT 2016
Private health expenditure covers approximately
16.3% of the national population, representing around
4.2% of GDP. Around 8 785 048 people were insured
by medical schemes in 20152.
MARKET STRUCTURE AND KEY
DRIVERS OF GROWTH
Despite strong growth in the middle class, high levels
of inequality remain a feature of South African society.
Access and affordability of healthcare is the key
challenge in a country characterised by slow economic
growth, a low tax base, low levels of employment,
high levels of poverty, a high burden of disease and
an increased prevalence of chronic diseases.
Private healthcare funding in South Africa is
principally provided through medical schemes and
a consolidation in the medical schemes market
over time has led to an increase in their bargaining
power. Growth in the medical scheme market has
slowed down in recent years with the number of
new lives joining medical schemes decreasing from
approximately 250 000 in 2010 (growth rate of 3.1%)
to approximately 31 000 in 2014 (growth rate of
0.4 %3), and based on the latest quarterly report of
the South African Council for Medical Schemes the
total beneficiaries decreased by 0.3% from
31 December 2014 to 29 000 at 30 September 2015.
Care is fragmented with private hospitals providing
patients with facilities such as wards, theatres and
nursing care while doctors and allied healthcare
professionals provide services to patients within the
hospitals but are financially independent, making
co-ordination of care sub-optimal.
There is a shortage of skilled resources in South
Africa, where there are only 77.6 doctors per
100 000 lives, around half the world average
of 152 per 100 000 lives4 and approximately
403 nurses per 100 000 lives, which is lower than
other developing countries. This is exacerbated
by the high regard for South African medical
professionals internationally; so, in addition to
addressing the local skills shortage, South Africa has
to compete with global demand for its medical staff.
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
¹ Source: Deloitte 2015 Global healthcare outlook report
2
Source: Council for Medical Schemes Quarterly Report for the
period ending 30 September 2015
3 Source: Council for Medical Schemes Annual Reports
4 Source: Econex calculations 2014
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.
SWITZERLAND
MARKET SIZE
In 2014 the Swiss healthcare market comprised
289 registered hospitals with about 1.4 million
hospital visits and an average length of stay of nine
days. About 40% of hospitals are in the private
sector, providing about one-fi fth of hospital services
and employing approximately 20 000 people.
Switzerland spends around 11% of its GDP on
healthcare costs, lying at second place in the ranking
of OECD countries, with costs of healthcare rising to
CHF71 billion in 2014. Approximately 32% of this is
funded by the private sector.
MARKET STRUCTURE AND
REGULATORY ENVIRONMENT
Switzerland is characterised by its federal structure
with the federal government, the cantons and
municipalities having diff erent responsibilities.
The healthcare sector is mainly regulated by the
26 cantons. They manage and supervise hospitals
and ensure their funding in collaboration with the
mandatory health insurance. Several experts criticise
the multiple roles of the cantons stating that this
makes it impossible for private and public hospitals
to have equal opportunities and that private hospitals
are at a competitive disadvantage. Hirslanden
maintains a good dialogue with all relevant public
authorities and is keen on having fair competition in
the Swiss healthcare market.
KEY DRIVERS OF GROWTH
Switzerland has a very high life expectancy of around
83 years. The number of people over 65 years has
been increasing in the last decades and will reach
approximately 26% of the population by 2045.
Parallel to that, the number of births has also shown
a constant increase. In 2014 child births increased by
3% compared to 2013.
STRATEGIC
REPORT
Diseases of the circulatory system and cancer are the
most common causes of death in Switzerland at 33%
and 25% respectively. In general, non-transferable
chronic diseases, such as high blood pressure,
diabetes and arthritis, are becoming more common.
UAE
MARKET SIZE
The market for private healthcare in the UAE reached
US$10.7bn in 2015, with predicted growth rates of
12.7% CAGR to 2020 and the number of beds
forecast to rise from 12 007 to 13 881 over the
same period.
MARKET DRIVERS
The key drivers of growth are favourable
demographic trends such as a continually growing
population, with those aged over 65 years projected
to increase by a CAGR of 19.6% from 2014–20
(Euromonitor International); a signifi cant incidence
of lifestyle diseases such as diabetes and heart
disease; heightened levels of government spending
on healthcare services; and broad penetration of
private healthcare coverage. Although the UAE
currently accounts for 26% of government spending
on healthcare in the Gulf Cooperation Council (Alpen
Capital), investment in healthcare could decline as
a result of the lower oil price. However, this could
benefi t the private healthcare industry in the
future as the government increasingly looks to the
private sector for assistance to build a world-class
healthcare system.
OPPORTUNITIES FOR MEDICLINIC
Mediclinic is well-positioned to respond to the market
opportunities, with a strong presence in Africa and
the Middle East – the regions that are expected to
experience the highest growth levels of 8.7%¹ over
2014 to 2018. Its reputation for clinical excellence,
combined with its size and scale allows the Group
to attract and retain the talent that it needs to fuel
its growth, to invest in the latest technology and to
share best practice across its three platforms. High
standards of compliance, ethics and transparency have
been cornerstones of the way the Group operates over
the last 30 years, underpinning its relationships with
regulators, insurers and governments.
HEALTHCARE MARKET SIZE FORECAST (UAE)
FORECAST OF DEMAND FOR HOSPITAL BEDS (UAE)
C A G R : 1 2 . 7 %
15.3
5.8
9.4
10.7
4.1
6.6
12.1
4.6
7.5
19.5
7.5
12.1
C A G R : 2 . 9 %
12 007
12 351
13 071
13 881
2015E
2016F
2018F
2020F
2015E
2016F
2018F
2020F
Outpatient market size
Inpatient market size
Number of beds
E – Estimated
F – Forecasted
Source: Alpen Capital GCC Healthcare Industry Report 2016
MEDICLINIC ANNUAL REPORT 2016
17
OUR STRATEGY, PROGRESS AND AIMS
OUR OBJECTIVE/GOAL
To provide superior clinical outcomes in a safe clinical environment, while continuously improving the general
service experience for patients, in order to help maintain Mediclinic’s leading positions in the markets in which
it operates.
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS 2016
AIMS 2017
STRATEGIC
REPORT
IMPROVE SAFE, QUALITY
CLINICAL CARE AND PATIENT
EXPERIENCE
Focus on providing consistently high-
quality care and an optimal patient
experience across the Group
We provide a wide range of hospital-related clinical services throughout
our operating platforms, and strive to ensure that the clinical services we
provide are efficient, effective, appropriate, evidence-based and in line
with modern technological advances. We will continue to focus on various
initiatives across all three platforms (as adopted by the Mediclinic Group)
with the aim of further improving the patient experience and to deliver
integrated and co-ordinated patient-centred care in all facilities.
More information on this priority is
included in the Sustainable Development
Report (material issue 1) available on the
Company’s website.
SDR
INVEST IN EMPLOYEES
Invest in Mediclinic’s employee base to
continue to develop clinical competencies
and address scarce skills
More information on this priority is
included in the Sustainable Development
Report (material issue 2) available on the
Company’s website.
SDR
We continue to focus on identifying, attracting and retaining leading
specialists and talented healthcare professionals at our facilities as the
market competition for talent increases. We also deploy integrated talent
strategies to ensure the proactive attraction of scarce skills in the areas
of need as well as the retention of scarce skills in areas that have been
identified as higher risk.
LEVERAGE INTERNATIONAL
GROUP BENEFITS
Continue to seek opportunities to
leverage benefits of an international
group
More information on this priority is
included in the Chief Executive
Officer’s Report.
AR
We continuously look for opportunities to leverage our combined
international capacity and resources to unlock synergies: namely
procurement benefits from greater scale, the creation of a shared
operations team in the Middle East and the combination of certain
corporate functions. We promote collaboration, shared intellectual capital
and resources between our platforms.
IMPROVE SAFE, QUALITY CLINICAL CARE
• Adopted a centrally integrated clinical management
structure thereby improving teamwork, implemented a
clinical key performance indicator dashboard to enable
improvement and appointed nursing specialists in
Southern Africa
• Reaffirmed the utilisation of the critical incident
reporting system and adherence to policies and
progressed with changing the approach from
functional nursing to patient-centred nursing in
Switzerland
• Appointed a group patient safety officer, established
a quality department, updated the patient safety
strategy and implemented new clinical indicators and
created a central repository in Middle East
IMPROVE PATIENT EXPERIENCE
• Introduced a standardised Patient Experience Index
successfully in Southern Africa and Middle East and
commenced a pilot phase in Switzerland
• Established a Global Reward Centre of Excellence to
optimise reward practices across the Group
• Introduced a standardised Employee Engagement
Index successfully across the Group
• Commenced with doubling training capacity by
changing the nurse training funding model and
expanding training capacity in Southern Africa
• Increased training expenditure, in particular relating
to specialist nurses, with approximately 980
apprenticeships and students, 85% of whom work in
healthcare professions in Switzerland
• Progressed with extensive Continuing Medical
Education programme for clinical staff and established
a new relationship with Mohamed Bin Rashid University
of Medicine and Health Sciences, which will give direct
access to a new pool of medical students and newly-
qualified doctors in Middle East
• Shared clinical skills across the Group
• Commenced with harmonisation of systems through
the introduction of SAP ERP across the Group
• Generated savings on the procurement of major capital
items and surgical and consumable products across
the Group
• Implemented initial master data management and
international data warehouse projects across the Group
• Continued collaboration between Switzerland and
Middle East on centres of excellence such as Oncology
and Obesity and with the inter-platform transfer of
senior staff members to Middle East
IMPROVE SAFE, QUALITY CLINICAL CARE
• Continue to focus on various patient safety and clinical
quality initiatives across the Group
• Implement standardised clinical performance reports
against targets and benchmarks across the Group
IMPROVE PATIENT EXPERIENCE
• Implement targeted improvement plans based on
the Patient Experience Index in Southern Africa and
Middle East
• Implement the standardised Patient Experience Index
in Switzerland
• Implement targeted improvement plans based on the
Employee Engagement Index across the Group
• Integrate results of Patient Experience and Employee
Engagement surveys to evaluate the impact of
employee engagement improvement plans on patient
experience across the Group
• Continue to generate savings on the procurement
of major capital items and surgical and consumable
products where possible across the Group
• Continue to standardise and centralise selective
support processes across the Group
• Continue with “Hirslanden 2020” project to improve
operational efficiency in Switzerland
18
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
19
OUR STRATEGY, PROGRESS AND AIMS (continued)
STRATEGIC
REPORT
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS 2016
AIMS 2017
CONTINUE TO GROW
Grow via capacity and footprint
expansion across the portfolio at
attractive returns
More information on this priority is
included in the Sustainable Development
Report (material issue 3) available on the
Company’s website.
SDR
We will continue to evaluate investment opportunities to grow our
footprint beyond the existing operating platforms and regions that will
add long-term value to shareholders; and will continue to make significant
investments to grow capacity at each of the operating platforms. We are
also pursuing opportunities and initiatives to improve occupancies of
existing premises, expand existing facilities and acquire or create
new facilities.
• Acquired a 29.9% interest in UK-based Spire Healthcare in
August 2015 – growing the Group
• Combined Al Noor Hospitals Group plc and Mediclinic
International Limited in February 2016 – growing the
Group
• Commissioned two new day clinics, obtained six new day
clinic licenses, commissioned 132 new beds (including
the new day clinics) and acquired a controlling share in
three hospitals with 256 beds in Klerksdorp (subject to
conditions precedent) in Southern Africa
• Commissioned an outpatient clinic with an integrated
radiology institute in Düdingen in Switzerland
• Acquired land to build a 188-bed hospital in Dubai,
opened Mediclinic Al Hili in Al Ain and secured additional
capacity at Mediclinic City Hospital in Dubai in Middle East
IMPROVE EFFICIENCIES
Improve efficiencies through
standardisation, utilisation of group scale
and use of data analytics
More information on this priority is
included in the Sustainable Development
Report (material issue 3) available on the
Company’s website.
SDR
Due to the geographic spread of our operations, the potential of possible
cost savings, less administration and improved efficiency, we have initiated
international procurement initiatives with the aim of unlocking synergies
and implementing standardisation for the greater benefit of the Group.
• Achieved significant savings on several surgical
supplies and capital equipment following
implementation of central procurement
• Introduced direct importing and distribution of more
cost-effective surgical and consumable products
DELIVER INTEGRATED AND
CO-ORDINATED CARE
Further develop structures to encourage
integrated and co-ordinated care across
the Group
With the aim of ensuring that we deliver consistent cost-effective care
and superior clinical outcomes at every facility, we have embarked on a
number of projects to gradually move towards a better integrated clinical
healthcare delivery model. The key focus area is to put the patient first
through improved collaboration and co-ordination between the various
clinical care providers in the clinical care process.
CSR
More information on this priority is
included in the Clinical Services Report
available on the Company’s website.
• Focused on closer collaboration with doctors, transparent
sharing of information with funders and doctors and the
appointment of Hospital Clinical Managers at a number of
larger hospitals as well as collaborative pilot ventures with
small groups of orthopaedic surgeons and obstetricians in
Southern Africa
• Published the conceptual model of a system provider
in the national journal of doctors, and received positive
feedback in Switzerland
• Further developed the Breast and Metabolic Centres at
Mediclinic City Hospital to streamline clinical processes
and concluded clinical services planning for the new
comprehensive Cancer Centre in Middle East
• Continue with expansion projects which should add 97
additional beds during 2016/17 in Southern Africa
• Continue with several expansion projects, including
more operating theatre capacity for both Hirslanden
Klinik Stephanshorn and Hirslanden Klinik St. Anna, and
an expanded emergency department for Hirslanden
Klinik Im Park in Switzerland
• Continue with several projects, including the opening
of the Al Jowhara Hospital, the North Wing extension
of Mediclinic City Hospital, plus the opening of the
Khalifa A, Al Yaher, Ghayathi and Look Wow clinics in
Middle East
• Enable growth with select key partners to strengthen
our negotiating power
• Identify further saving opportunities with
international consolidated data comparisons and
spend pattern analysis
• Further integrate services where appropriate in
local markets
• Develop a wider range of clinical performance indicators
• Continue to develop structures to encourage
integrated, collaborative and
co-ordinated care across the Group
• Continue with operational initiatives to integrate,
collaborate and co-ordinate where possible and
continue to pursue a multi-disciplinary approach to
treatment across the Group
20
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
21
KEY PERFORMANCE INDICATORS
FINANCIAL
Revenue
EBITDA1
Underlying EBITDA1
Operating profit
Earnings2
Underlying earnings1
Basic earnings per share
Underlying basic earnings per share1
Dividend per share
Net debt at the year end
Capital expenditure on projects, new equipment and
replacement of equipment
Southern Africa
Switzerland
United Arab Emirates
2016
2015
%
change
2 107
1 977
382
428
288
177
219
29.6
36.7
7.90
406
403
345
241
193
44.6
35.8
9.33
1 536
1 353
186
192
52
98
36
80
95
17
7%
(6%)
6%
(17%)
(27%)
13%
(34%)
3%
(15%)
14%
(3%)
(35%)
3%
112%
£'m
£'m
£'m
£'m
£'m
£'m
pence
pence
pence
£'m
£'m
£'m
£'m
£'m
AR
Notes:
1 See the reconciliations between the statutory and the non-GAAP earning measures on pages 55 to 56.
2 Earnings refer to profit attributable to equity holders.
The Al Noor acquisition has been classified as a reverse takeover in terms of IFRS 3. 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).
AR
Group results are subject to movements in foreign currency exchange rates. Refer to page 57 for exchange rates
used to convert the operating platforms’ results to pound sterling.
OPERATIONAL
Number of hospitals in operation
Southern Africa
Switzerland
United Arab Emirates
Number of clinics in operation
Southern Africa
Switzerland
United Arab Emirates (including Al Noor)
Number of licensed/registered beds (including day facility beds)
Southern Africa
Switzerland
United Arab Emirates (including Al Noor)
Number of licensed/registered theatres (including day facility theatres)
Southern Africa
Switzerland
United Arab Emirates (including Al Noor)
2016
2015
73
52
16
5
45
2
4
39
10 415
8 017
1 677
721
387
270
92
25
70
52
16
2
13
0
3
10
9 922
7 885
1 655
382
367
269
88
10
22
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
2016
2015
SOCIAL, ENVIRONMENTAL AND OTHER
Included in RobecoSam Dow Jones Sustainability Index
Yes
Yes
Number of employees
Southern Africa
Switzerland
United Arab Emirates (including Al Noor)
Staff turnover rate
Southern Africa
Switzerland
United Arab Emirates
Training spend as approximate percentage of payroll
Southern Africa
Switzerland
United Arab Emirates
Spent on corporate social investment
Southern Africa
Switzerland
United Arab Emirates
Transformation (South Africa only)
BBBEE scorecard contributor level
Percentage black employees
Percentage black management employees
32 884
16 832
9 120
6 932
6.8%
5.2%
12.4%
3.6%
5.0%
0.3%
11.8
2.5
0.8
4
70.5%
25.7%
27 696
16 522
8 749
2 425
7.2%
6.9%
11.7%
3.0%
5.0%
0.2%
10.4
2.1
0.7
4
69.1%
25.8%
R'm
CHF'm
AED'm
Ranking in CDP Climate Disclosure Leadership Index
joint 1st
joint 2nd
Total energy usage (gigajoules/bed day)
Southern Africa
Switzerland (per calendar year)
United Arab Emirates (hospitals only)
1.652
0.333
0.477
0.842
1.754
0.331
0.533
0.890
MEDICLINIC ANNUAL REPORT 2016
23
RISK MANAGEMENT, PRINCIPAL RISKS
AND UNCERTAINTIES
The Board is ultimately accountable for the Group’s
risk management process and system of internal
control. In terms of a mandate by the Board, the
Audit and Risk Committee monitors the risk
management process and systems of internal
control of the Group, the Group’s internal and
external auditors and the Group’s risk management
function. The Board oversees the activities of the
Audit and Risk Committee and receive regular
feedback on the responsibilities delegated to the
Audit and Risk Committee.
RISK MANAGEMENT
The Group’s Enterprise-wide Risk Management
(“ERM”) policy follows the international COSO
(Committee of Sponsoring Organisations of the
Treadway Commission) framework and defines
the risk management objectives, methodology,
risk appetite, risk identification, assessment and
KEY
treatment processes and the responsibilities of the
various risk management role-players in the Group.
The ERM policy is subject to annual review and any
amendments are submitted to the Audit and Risk
Committee for approval.
The objective of risk management in the Group
is to establish an integrated and effective risk
management framework where important and
emerging risks are identified, quantified and
managed. An ERM software application supports
the Group’s risk management process in all three
operating platforms. A robust assessment of the key
risks in the Group culminates in the identification
of the Group’s principal risks, which are presented
via the Audit and Risk Committee to the Board for
consideration and approval.
The Group’s principal risk items (grouped by COSO
category and business process), the movement in
risk during the financial year, together with key
measures taken to mitigate these risks, are listed in
the table on pages 24 to 26.
AR
REFERENCE
COSO CATEGORY
BUSINESS PROCESSES
➊
➋
➌
➍
Strategic and Market
Strategy Management; Strategic investments
Operational effectiveness and quality
Financial and reporting risks
Compliance risks
Human resources; Information communication and
technology; Clinical; Infrastructure; Marketing and
corporate communication; Operations
Revenue cycle; Procure to pay cycle; Payroll cycle;
Cost control; Assets management; Treasury
Legal and secretarial; Governance risk and
compliance; Environmental management
Risk exposure has increased due to change in business environment, increased investments,
increased dependency of operations on information technology, information sensitivity and
cost involved.
Proactive and continuous monitoring, favourable results of negotiations, effective treasury and risk
management processes have resulted in lowering of risk exposure.
Risk exposure has not changed much as the operating and regulatory environment has more or less
remained the same and enhanced risk mitigation measures have kept the risk at same level.
PRINCIPAL
RISK
MOVEMENT
IN 2016
DESCRIPTION
OF RISK
MITIGATION
OF RISK
REGULATORY
RISK
➊ ➍
Adverse changes in laws and
regulations impacting on the Group
or the failure to comply with laws and
regulations which may result in losses,
fines, prosecution or damage
to reputation.
The risk also includes ethical and
governance risks that refer to
unexpected negative consequences of
unethical actions or the
failure of the control and oversight
mechanisms which were designed and
implemented to uphold the ethical
standards and controls of the Group.
24
MEDICLINIC ANNUAL REPORT 2016
• Proactive engagement strategies
• Health policy units created to conduct
with stakeholders
research and provide strategic input into
reform processes
• Active industry participation across
• Company secretarial and/or
all platforms
legal departments 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 departmental risk registers
• Visible ethical leadership
• Monitoring and investigation of incidents
• Board-level oversight
reported on the Ethics Line
STRATEGIC
REPORT
PRINCIPAL
RISK
MOVEMENT
IN 2016
DESCRIPTION
OF RISK
MITIGATION
OF RISK
The risk relating to the uncertainty
created by the existence of
competitors or the emergence of new
competitors with their own strategies.
• Proactive monitoring
• Strategic planning processes
• Quality and value of care processes
COMPETITION
➊
BUSINESS
INVESTMENT AND
ACQUISITION
RISKS
➊
ECONOMIC
AND BUSINESS
ENVIRONMENT
➊
OPERATIONAL
AND CREDIT
RISKS
➋ ➌
The increased fi nancial exposure
relating to major strategic business
investments and acquisitions. During
the last fi nancial year, Mediclinic
made strategic investments in Spire
Healthcare, as well as acquired the
Al Noor Hospitals Group.
The downturn in the general economic
and business environment, including
all those factors that aff ect a
Company's operations, customers,
competitors, stakeholders, suppliers
and industry trends.
The business environment risk
includes the power of funders and the
potential negative impact on tariff s
and fees resulting from the shift of the
relative negotiating power towards
funders, away from healthcare
service providers.
Operational risk refers to various types
of operational events with a potential
for fi nancial loss.
Credit risk is the risk of 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
the patient.
• Strategic planning processes
• Due diligence processes
• Investment mandates
• Board oversight
• Post-acquisition management processes
• Systems to monitor developments in the
economic and business environment of
trends and early warning indicators
• Proactive monitoring and negotiation by
Group’s Funder Relations Departments
• Focus on quality and continuum of care
to reinforce Company position
through KPIs
control environment
• Preservation of a sound internal fi nancial
• Eff ective risk management processes
• Extensive combined
assurance processes
• Monitoring of operations
• Continuous enhancement of operational
effi ciency and cost reduction
• Regulated minimum solvency
requirements for funders
• Monitoring of approved funders
• Treasury policy
• Board-level oversight
• Long-term planning of
capital requirements and
cash-fl ow forecasting
• Scrutiny of cash-generating capacity
• Proactive and long-term agreements
within the Group
with banks and other funders relating to
funding facilities
• Monitoring of compliance with
requirements of debt covenants
• Further details on capital risk
management and the Group’s
borrowings are contained in the annual
fi nancial statements
MEDICLINIC ANNUAL REPORT 2016
25
AVAILABILITY
AND COST OF
CAPITAL
(Including fi nancing and
liquidity risk)
➌
The cost, terms and availability of
capital to fi nance strategic expansion
opportunities and/or the refi nancing
or restructuring of existing debt which
has been aff ected by prevailing capital
market conditions.
The impact of negative interest rates
currently prevalent in Switzerland.
RISK MANAGEMENT, PRINCIPAL RISKS
AND UNCERTAINTIES (continued)
PRINCIPAL
RISK
MOVEMENT
IN 2016
DESCRIPTION
OF RISK
MITIGATION
OF RISK
CLINICAL RISKS
➊ ➋
INFORMATION
SYSTEMS SECURITY
AND AVAILABILITY
RISK
➋
QUALITY AND
STABILITY OF
OPERATIONAL
SERVICES
➋ ➌
All clinical risks associated with the
provision of clinical care resulting in
undesirable clinical care or
clinical outcomes.
The risks include a pandemic and
disease outbreak: a pandemic is an
epidemic of infectious disease that is
spreading through human populations
across a large region. Disease outbreak
involves highly infectious diseases with
a high mortality rate.
Such risks may also result in damage
to the Mediclinic brand equity. Brand
equity refers to the value of the
Group’s brand names.
Information systems security risk
(including cyber risk) relates to the
unauthorised access to information
systems, failure of data integrity and
confidentiality. Availability risk relates
to the instances where systems are not
available for use by its intended users.
A risk which is closely associated with
Information Systems risk is project
delivery. Project Delivery risk refers
to issues or occurrences that may
potentially interfere with successful
completion of projects, including its
scope, timeliness and appropriateness
of delivery.
The risk refers to the quality of service
and the stability of the operations. It
includes but is not limited to:
• Incidents of poor service or
incidents 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 power or water
supply.
• Fire and allied perils causing
damage or business interruption.
AVAILABILITY,
RECRUITMENT AND
RETENTION OF
SKILLED RESOURCES
AND MEDICAL
PRACTITIONERS
➋ ➌
The availability and support of
admitting doctors, whether
independent or employed, are critical
to the services the Group provides.
There is a shortage of skilled labour,
particularly a shortage of qualified and
experienced nursing staff in Southern
Africa.
26
MEDICLINIC ANNUAL REPORT 2016
• Refer to the Clinical Services
Report for a detailed analysis
of the strategies to manage and
monitor clinical risks
implemented per platform
• A Group-wide clinical risk register
• Accreditation processes
• Clinical governance processes
• Monitoring of clinical
performance indicators
• Implementation of comprehensive
processes for infection control
and prevention
• Marketing and
• Focus on quality
management processes
• Stakeholder engagement and
communication strategies
disclosure strategies
• Comprehensive IT logical
access, change and physical
access controls
• Disaster recovery planning
• System design and architecture
• Group ICT Security Committee
• Experienced project
management team
• Proactive monitoring
• Reallocation of tasks
and oversight
and resources
• Patient satisfaction surveys (both
internal and external)
• Complaints monitoring
• Training programmes
• Supervision of service levels
• Emergency backup
power generation
• Emergency planning
• Plans to deal with disasters
• Extensive fire-fighting
and detection systems,
including comprehensive
maintenance processes
• Comprehensive insurance to
deal with financial impact of
potential disasters
• Monitoring of doctor satisfaction,
movement and doctors’ profiles
• Details on the relationship
with doctors provided in the
Sustainable Development Report.
• The employment, recruitment and
retention strategies explained in
the Sustainable Development
Report.
• Extensive training and skills
development programme, and
foreign recruitment programme,
further explained in the
Sustainable Development Report.
CSR
SDR
SDR
SDR
INTERNAL CONTROL
The Group upholds an eff ective control environment,
including a comprehensive system of internal
controls. These are designed to ensure that risks
are mitigated and that the Group’s objectives
are attained. The system includes monitoring
mechanisms and ensures that appropriate actions are
taken to correct defi ciencies when they are identifi ed.
Also included is a comprehensive system of fi nancial
reporting and forecasting. The Chief Financial
Offi cer and Group Financial Manager oversee the
internal controls relating to fi nancial information and
reporting, tax and treasury.
The Al Noor business operated its own system of
internal controls which was being monitored for
its eff ectiveness by the previous Al Noor Board’s
Audit and Risk Committee. Their system of internal
control included a risk management function, a set
of defi ned fi nancial controls and an internal audit
function. Formal integration projects are underway
to fully integrate the Al Noor business with Mediclinic
under the guidance of the Mediclinic Middle East
leadership. The fi rst phase, which included the
implementation of new organisational structures and
the implementation of Mediclinic policies, has been
successfully completed. The next phases will include
the development and integration of IT systems and
related processes.
Each operating platform executed its assurance
plans. These plans comprise various assurance
processes, including internal and external audit
processes, which are in place to evaluate the
eff ectiveness of key controls designed to mitigate the
principal risks identifi ed in each operating platform.
STRATEGIC
REPORT
The Group makes use of an outsourced internal audit
function which is closely aligned with the Group Risk
Management function and reports independently
to the Audit and Risk Committee of the Board. At
each operating platform the eff ectiveness of the
system of internal fi nancial control is independently
evaluated through the internal and external audit
programmes. In addition to these audits, the
eff ectiveness of operational procedures is examined
internally through various peer review and control
self-assessment processes. The results of these
assurance processes are monitored by the Group’s
risk management function and reported to each
operating platform’s management teams.
Each of the operating platforms has, in addition
to the abovementioned assurance processes,
implemented further independent assurance
processes with professional organisations which are
summarised in the table on page 28.
AR
The Company Secretaries at Group and operating
platform level, as well as the internal legal advisors,
are responsible for providing guidance in respect of
compliance with applicable laws and regulations.
EFFECTIVENESS OF RISK
MANAGEMENT PROCESS AND
SYSTEM OF INTERNAL CONTROL
The Board, via the Audit and Risk Committee,
regularly receives reports on and considers the
activities of the internal and external auditors of
Mediclinic Southern Africa, Hirslanden and Mediclinic
Middle East and the Group’s risk management
function. The Board, via the Audit and Risk
Committee, is satisfi ed that there is an eff ective risk
management process in place and that there were
no signifi cant failings or weaknesses identifi ed in the
system of internal control during the period under
review within the Group.
MEDICLINIC ANNUAL REPORT 2016
27
RISK MANAGEMENT, PRINCIPAL RISKS
AND UNCERTAINTIES (continued)
ASSURANCE OUTPUT*
BUSINESS PROCESSES
ASSURED
PROVIDER
External calculation of carbon footprint based
on carbon emissions data of Mediclinic
Southern Africa
Carbon footprint calculation
Carbon Calculated
ISO 14001:2004 certification of 41 of Mediclinic
Southern Africa’s 52 hospitals
Environmental management system British Standard Institute, as
accredited by UKAS (United
Kingdom Accreditation Service)
COHSASA accreditation of 30 of Mediclinic
Southern Africa’s 36 participating hospitals, with
the remaining eight hospitals undergoing the
renewal process
Quality standards of
healthcare facilities
COHSASA (Council for Health
Services Accreditation of Southern
Africa), which is accredited by ISQua
(the International Society for Quality
in Health Care)
BBBEE Level 4 contributor verification
Broad-based black
economic empowerment
Empowerdex
ISO 9001:2008 certification of 15 out of 16
Hirslanden hospitals and Hirslanden
Corporate Office
Process and Quality management
Swiss Association for Quality and
Management Systems (SQS)
Self-assessment against EFQM (European
Foundation for Quality Management) Excellence
Model by 15 out of 16 Hirslanden hospitals and
Hirslanden Corporate Office
Assessment against the EFQM
Excellence Model, a framework for
organisational management systems
aimed at promoting sustainable
excellence within organisations
EFQM Excellence Model
ISO 14001:2015 certification of Hirslanden
Klinik Belair
Environmental management system Swiss Association for Quality and
Management Systems (SQS)
JCI accreditation of both Mediclinic Middle East
hospitals and accreditation of eight clinics in
Dubai as well as accreditation of all three Al
Noor hospitals
Quality and safety of patient care
Joint Commission International
Accreditation (JCIA)
ISO 15189:2009 certification of the pathology
laboratories of both Mediclinic Middle East
hospitals and all five clinics with
in-house laboratories
Pathology laboratories of both
Mediclinic Middle East hospitals and
five clinics
International Organization
for Standardization (ISO)
College of American Pathologists (CAP) re-
accreditation of the pathology laboratory of
Mediclinic City Hospital
Pathology laboratory of Mediclinic
City Hospital
College of American Pathologists
* The flags indicate the operating platform where the assurance process is in place.
Key:
Mediclinic Southern Africa
Hirslanden
Mediclinic Middle East
28
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
VIABILITY STATEMENT
In accordance with provision C.2.2 of the 2014 revision of the Code, the Board
has made an assessment of the prospects of the Group over a period extending
beyond the 12 months which is the focus of the ‘Going Concern’ basis of
accounting.
The Board has adopted a three-year time frame for the assessment, as this is in line with the Group’s
loan facilities’ refi nancing period and the business planning period, including the fi nancial forecasts.
The assessment is consequently based on each of the operating platforms’ business plans, which
refl ect the current Group strategies and their associated risks and the directors’ best estimations
of their future prospects. The Al Noor business, which is in the process of being integrated into the
Mediclinic Middle East platform, was included in the sensitivity analysis and stress tested in the same
manner as the other platforms as discussed further in this statement.
The Audit and Risk Committee monitors the Group’s risk management process and system of internal
control via a mandate from the Board (see page 109). The principal risks, as detailed on pages 24
to 26, were identifi ed by these systems and, for the purposes of the viability assessment, severe but
plausible scenarios refl ecting these risks were identifi ed for each of the Group’s operating platforms
to form the basis for stress testing.
AR
The potential impact of each scenario was modelled on each operating platform’s EBITDA, profi t after
tax, net debt and debt covenants over the three-year forecast period.
The key assumptions underlying the operating platforms’ business plans that were fl exed in the stress
testing included:
• reductions in tariff s and fees;
• reductions in number of bed days sold;
• increased competition;
• the macro-economic and business environment;
• the shortage and availability of qualifi ed and experienced nursing staff ;
• the investment in Group initiatives not being successfully implemented;
• expansion projects not achieving projections and expectations;
• a larger increase in accounts receivable (debtor days) than expected; and
• a delay in the opening of new branches.
The Board considered the viability of the Group both in the context of the individual risks listed above
and in combination.
This analysis showed that the business would be able to withstand any of the severe but plausible
scenarios by taking management action in the normal course of business. The Directors therefore
have a reasonable expectation that the Group will be able to continue in operation and meet its
liabilities as they fall due over the three-year period of their detailed assessment, ending on
31 March 2019.
Having considered the principal risks and the viability assessment, the directors also consider it
appropriate to adopt the going concern basis of accounting in preparing the fi nancial statements.
MEDICLINIC ANNUAL REPORT 2016
29
CLINICAL SERVICES OVERVIEW
CSR
INTRODUCTION
Mediclinic provides a wide range of hospital-
related clinical services throughout its operating
platforms. This includes outpatient consultation
services and pre-hospital emergency services,
hospital-based emergency centres, day case
surgery, acute care inpatient services, and highly
specialised services. Support services include
laboratory, radiology and nuclear medicine.
Mediclinic strives to ensure that the clinical
services provided throughout the Group are
efficient, effective, appropriate, evidence-based
and in line with modern technological advances.
To give our stakeholders some insight into our
efforts in this regard, we have been publishing
this report for many years. To get a better view
of more of the information that we have available
regarding this topic, we recommend that the full
Clinical Services Report on our website should
also be read. Interpreting and acting on this
clinical information are regarded as essential for
the Company to live its slogan of "Expertise you
can trust." as well as for growing the Company.
During the year under review, the focus at
Mediclinic Clinical Services has mainly been on
improving safety and quality of care in support of
the Mediclinic goal of “Patients First”, and clinical
services development in support of the Mediclinic
goal of “Transforming from a facility to healthcare
systems provider”. Satisfactory progress has been
made, and many of the initiatives will be continued
in the new financial year.
All indicators included in this Clinical Services
Overview are reported per calendar year to ensure
completeness and consistency, as a significant
time lag needs to be provided for in the collection
of clinical data.
CLINICAL PERFORMANCE
HIGHLIGHTS AND CHALLENGES
• Mediclinic Southern Africa has improved its clinical
outcomes in a number of areas. The APACHE®IV
mortality index, measuring performance of critical
care units, reduced from 1.45 in 2014 to 1.35 in
2015. Healthcare-associated infections (“HAIs”)
still remain one of the highest risks to patients
and the rate of HAI reduced from 2.70 per 1 000
patient days in 2013 to 2.21 per 1 000 patient days
in 2015 (Figure 1). Hand hygiene compliance is an
important measure in the prevention of HAIs and
has increased steadily over the last three years
from 67% to 76% in 2015.
FIGURE 1: HEALTHCARE ASSOCIATED INFECTIONS –
MEDICLINIC SOUTHERN AFRICA (2013 – 2015)
0
7
2
.
2
7
2
.
1
2
2
.
s
y
a
D
t
n
e
i
t
a
P
0
0
0
1
r
e
p
e
t
a
R
3
1
0
2
4
1
0
2
5
1
0
2
Calendar Year
FIGURE 2: ADVERSE EVENTS – MEDICLINIC
SOUTHERN AFRICA (2013 – 2015)
0
8
0
.
0
7
0
.
6
8
0
.
0
2
.
1
0
1
.
1
4
1
.
1
0
3
0
.
0
3
0
.
6
2
0
.
s
y
a
D
t
n
e
i
t
a
P
0
0
0
1
r
e
p
e
t
a
R
s
r
o
r
r
E
n
o
i
t
a
c
d
e
M
i
s
l
l
a
F
s
r
e
c
U
l
e
r
u
s
s
e
r
P
l
a
t
i
p
s
o
h
-
n
I
Adverse Event Type
2013
2014
2015
2015'
2014'
2013'
30
MEDICLINIC ANNUAL REPORT 2016
• An increase was seen in the rate of medication
errors (0.70 per 1 000 patient days in 2014 to 0.86
per 1 000 patient days in 2015) and falls (1.10 per
1 000 patient days in 2014 to 1.14 per 1 000
patient days in 2015) (Figure 2). These measures
are regarded as nursing-sensitive indicators and
correlate with the general concerns regarding the
number and skill of available nursing staff . The
readmission rate and the extended length of stay
rate have also shown an increasing trend over the
last three years, from 7.3% to 7.7% and 10.28% to
10.81% respectively and are receiving attention.
• Hirslanden has the highest case mix in the Group
refl ecting the complexity of cases treated.
However, clinical outcomes remain excellent as
is demonstrated by low infection rates and other
outcome measures. The fall rate decreased from
2.5 per 1 000 patient days in 2014 to 2.1 per
1 000 patient days in 2015. Pressure ulcers also
decreased from 1.1 per 1 000 patient days to 1.0
per 1 000 patient days. Over the last three years
the ventilator-associated pneumonia (“VAP”)
decreased from 5.6 per 1 000 device days to 4.3
per 1 000 device days (Figure 3). The Simplifi ed
Acute Physiology Score (SAPS) II mortality index
remains well below the benchmark of 0.44 at 0.20.
The unscheduled readmission rate also decreased
from 1.44% in 2014 to 1.28% in 2015.
• The catheter-associated urinary tract infections
(“CAUTI”) showed a slight decrease when
compared to 2014. Ventilator-associated
pneumonias decreased slightly in 2015. However,
the central line-associated bloodstream infections
(“CLABSI”) increased signifi cantly in 2015. The
trend was visible during the fi rst half of the year.
Action plans were implemented and the rate
decreased in the second half of the year with
further improvements expected. The measures
that are reported for United Arab Emirates refer
to the outcomes of the Dubai operations only. Al
Noor indicators are in the process of being re-
evaluated as part of a process to standardise all
indicators in the combined group. Falls decreased
from 0.5 per 1 000 patient days in 2014 to
0.3 per 1 000 patient days in 2015. Pressure
ulcers also reduced from 0.6 per 1 000 patient
days to 0.5 per 1 000 patient days while
medication errors remained the same at 0.6
per 1 000 patient days (Figure 4). The HAI rate
increased slightly from 1.5 per 1000 patient days
in 2014 to 1.6 per 1 000 patient days in 2015. The
rate of catheter-associated urinary tract infections
decreased over the last three years from 0.9 per
1 000 device days to 0.3 per 1 000 device days.
The rate of CLABSI remained the same as 2014 at
2.4 per 1 000 device days. The overall mortality
rate remains low at 0.18%. The APACHE®IV
mortality index is 0.42 and well below 1. The VAP
rate has increased signifi cantly from 3.8 per
1 000 device days to 7.6 per 1 000 device days.
This is due to a marked increase at Mediclinic
Welcare Hospital caring for more complex cases.
2015'
2014'
2013'
STRATEGIC
REPORT
FIGURE 3: DEVICE–ASSOCIATED AND SURGICAL
SITE INFECTIONS – HIRSLANDEN (2013 – 2015)
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Device–associated Infection Type
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2014
2015
FIGURE 4: ADVERSE EVENTS – MEDICLINIC
MIDDLE EAST (2013 – 2015)
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Adverse Event Type
2013
2014
2015
MEDICLINIC ANNUAL REPORT 2016
31
CLINICAL SERVICES OVERVIEW (continued)
TRANSFORM FROM AN
INFRASTRUCTURE PROVIDER TO A
HEALTHCARE SYSTEMS PROVIDER
Mediclinic Southern Africa focused on closer
collaboration with doctors, transparent sharing of
information with funders and doctors, and patient-
centred care. Clinical managers were appointed at
four larger hospitals, and early indications are that
these positions contribute to improved patient safety
and quality of care. Collaborative ventures with small
groups of orthopaedic surgeons and obstetricians
have been launched as pilot projects to improve
clinical care and efficiency.
In 2015, Hirslanden published its conceptual model of
a system provider in “Schweizerische Ärztezeitung”,
the national journal of doctors, and received
positive feedback. Based on this model, the existing
structures of anaesthesia, general internal medicine
and accident & emergency are going to be improved
and aligned.
An academic collaboration with Mohamed Bin Rashid
University of Health Sciences has been signed to
accredit Mediclinic Middle East as an external training
facility for medical students. The current Breast
and Metabolic centres at Mediclinic City Hospital
underwent further development to streamline clinical
processes, and clinical services planning for the new
comprehensive cancer centre has been concluded.
PROGRESS AGAINST CURRENT
OBJECTIVES
“PATIENTS FIRST” AT MEDICLINIC
Mediclinic Southern Africa adopted a centrally
integrated clinical management structure which
resulted in improving teamwork. A clinical Key
Performance Indicator (“KPI”) dashboard, that
visually displays statistical information to hospitals
to enable management of performance and
quality improvement initiatives, was developed
and implemented. Nursing specialists have been
appointed in critical care, theatre management,
obstetrics and neonatology to centrally coordinate
a number of projects aimed at improving clinical
care in these areas.
Hirslanden reaffirmed the utilisation of its critical
incident reporting system and adherence to policies.
Audits on a number of indicators showed that data
was accurate and appropriate action taken when
areas in need of improvement were identified. A
change in approach from functional nursing to
patient-centred nursing has made good progress,
which resulted in a new nursing skill and grade-mix
pilot project.
Mediclinic Middle East appointed a group patient
safety officer, established a quality department
and updated its patient safety strategy. New
clinical indicators were implemented, and a central
repository created. Standardisation and improvement
of clinical information and documentation made
good progress, and the development of clinical KPIs
for doctors is well underway. The clinical services
departments of Mediclinic Middle East and Al Noor
have been combined and initial steps were taken to
integrate all activities.
32
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
CLINICAL INFORMATION SYSTEMS
Mediclinic Southern Africa embarked on a multi-year
programme to transform from a paper-based system
of clinical documentation to a clinical information
system. The strategic objective is to add functionality
incrementally, add business value continuously and
limit expenses and risk to the business while allowing
an agile approach. The fi rst phase, which aims to
collate information currently in disparate systems and
ultimately deliver an Electronic Medical Record at
point of care to view information, has been making
satisfactory progress.
Hirslanden has been making good progress with its
clinical information system project and maintains
an emphasis on the importance of standardised
processes in ensuring successful implementation.
Mediclinic Middle East has postponed its selection
and implementation process of a new clinical health
information system, as Al Noor has a similar need. A
new combined process will be followed to select and
implement a single solution for both businesses.
FUTURE OBJECTIVES
PATIENTS FIRST
Mediclinic Southern Africa will update its patient
safety strategy, upscale nursing skills training in the
areas of theatre, obstetrics and infection control,
revise the current nursing management model,
improve the measurement of clinical performance
through various initiatives, share clinical information
with doctors, and further reduce infection rates
through various initiatives.
Hirslanden will review compliance with its patient
safety strategy, audit patient safety at all hospitals,
implement additional clinical indicators, and develop
positive outcomes indicators.
Mediclinic Middle East will focus on the full
integration of clinical services of the combined group,
formulate a clinical strategy for the combined group,
implement clinical KPIs for doctors, implement new
clinical indicators, and implement a clinical
indicator dashboard.
TRANSFORM FROM AN
INFRASTRUCTURE PROVIDER TO A
HEALTHCARE SYSTEMS PROVIDER
Mediclinic Southern Africa will appoint clinical
managers at 10 additional hospitals and also
implement selective clinical pathways led by doctors,
and a new emergency medicine services model.
Hirslanden will start to defi ne and evaluate the
quality of treatment plans, develop a process to
enable early recovery after orthopaedic surgery, and
develop a common structure and model for all highly
specialised medicine services.
Mediclinic Middle East will implement the new
comprehensive cancer centre services and processes
in the Mediclinic City Hospital North Wing, and
develop clinical pathways as part of preparing for the
implementation of Diagnosis Related Groups.
CLINICAL INFORMATION SYSTEMS
Mediclinic Southern Africa will conclude Phase 1 of its
clinical information system project.
Hirslanden will defi ne electronic documentation
in its catheter laboratories and A&E departments,
re-evaluate its radiology information system, and
introduce medication source data in its clinical
information system.
Mediclinic Middle East will follow a combined
selection process in identifying an appropriate clinical
information system for the combined group.
MEDICLINIC ANNUAL REPORT 2016
33
DIVISIONAL REVIEW – SOUTHERN AFRICA
Koert Pretorius
Chief Executive Offi cer: Mediclinic Southern Africa
CEO’s statement
“We are pleased to report that Mediclinic Southern Africa achieved good operational and fi nancial
results for the period under review. We made signifi cant progress towards improving patient
safety, the quality of clinical care, and the quality of the patient experience. We further embedded
our new operational structure and continued to focus on operational effi ciency, whilst, at the same
time, growing the business at existing hospitals as well as through an acquisition. The operating
platform (the platform) also continued to address a number of matters in the wider business
environment. For example, the South African Competition Commission’s market inquiry into the
private healthcare sector.”
Koert Pretorius
Chief Executive Offi cer, Mediclinic Southern Africa
KEY STATISTICS
52
NUMBER OF
HOSPITALS
270
NUMBER OF
THEATRES
2
NUMBER OF
DAY CLINICS
16 832
NUMBER OF
EMPLOYEES
8 017
NUMBER OF
LICENSED
BEDS
34
34
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
KEY FINANCIAL HIGHLIGHTS
During the period under review, Mediclinic Southern
Africa delivered revenue growth of 9%. This was
achieved through a 2.9% increase in bed days sold
and a 6.3% increase in the average revenue per bed
day. The number of patients admitted increased by
1.3%, while the average length of stay increased by
1.6%. Underlying EBITDA margin increased to 21.4%.
Mediclinic Southern Africa continued to invest
in the business. During the period under review,
the Southern African operations spent R758m
(2015: R1 131m) on expansion capital projects and
new equipment and R317m (2015: R306m) on the
replacement of existing equipment.
KEY OPERATIONAL HIGHLIGHTS
The number of licensed hospital and day clinic beds
increased from 7 885 to 8 017 during the period
under review.
ACQUISITIONS
During the period under review, Mediclinic
Southern Africa commenced with the acquisition
of a controlling share in Matlosana Medical Health
Services Proprietary Limited (“MMHS”), based in
Klerksdorp in the North-West Province. Although
substantially completed, this transaction remains
subject to a number of conditions precedent.
MMHS owns two multi-disciplinary hospitals, Wilmed
Park Hospital (144 licensed beds) and Sunningdale
Hospital (62 licensed beds), as well as a 51% share in
Parkmed Neuro Clinic, a psychiatric hospital with
50 licensed beds. This proposed acquisition, pending
fi nal approval by the MMHS shareholders and the
Competition Commission, supports Mediclinic’s core
focus of providing acute care, multi-disciplinary
specialist hospital services.
BUILDING PROJECTS
Other highlights during the year include the
completion of building projects at several hospitals
and the commissioning of two day clinics in
Polokwane and Durbanville. Altogether, this added
132 new beds. A new training centre was also
commissioned in Polokwane during January 2016.
Other building projects included various expansion
and upgrade projects.
Building projects in progress, which should be
completed during 2016/17, should add 97 additional
beds. The number of licensed beds across the
platform is therefore set to increase from 8 017 to
8 114 during the coming fi nancial year.
R13 450m
+9%
REVENUE
R2 877m
+10%
UNDERLYING EBITDA
1 954 365
+2.9%
BED DAYS SOLD
+6.3%
AVERAGE REVENUE PER BED DAY
81.9%
PATIENT EXPERIENCE INDEX
Finally, several additional building projects are due for
completion in 2017/18, which are set to add a further
402 beds.
3.67
EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
MEDICLINIC ANNUAL REPORT 2016
35
DIVISIONAL REVIEW – SOUTHERN AFRICA (continued)
EFFICIENCY AND PATIENT CARE
DEVELOPMENTS
Mediclinic Southern Africa progressed with several
improvements to its core processes during the period
under review.
For example, a new SAP solution for financial and
central procurement processes was successfully
embedded at the corporate offices, and the rollout to
all Mediclinic Southern Africa hospitals will commence
during 2016/17. In addition, a new Workforce
Management solution was rolled out throughout
Mediclinic Southern Africa, which is intended
to improve employee time and attendance and
scheduling processes, and is fully integrated with the
platform’s payroll and nursing forecasting systems.
The Press Ganey patient experience measurement
index was also implemented across the platform,
which allows us to objectively survey, evaluate and
manage the improvement of the patient experience
at all Mediclinic Southern Africa facilities. During
the period under review, targeted action plans for
improvement, specific to each of the facilities, were
successful in improving the patient experience index
steadily from 81.1% for 2014/15 to 81.9%.
In addition, the platform commenced with the
implementation of the Gallup employee engagement
management system. Based on the results of the first
survey, Mediclinic Southern Africa is in the process
of developing detailed plans to improve employee
engagement at all levels throughout the Group.
MARKET OVERVIEW
The South African private healthcare market is well-
established, well-equipped and has been growing
steadily, although recently at a declining rate. The
market offers incremental growth opportunities
to expand existing hospitals, and establish new
hospitals and day clinics. Challenges include
lowering healthcare costs across the value chain
in a fragmented market, whilst at the same time
improving outcomes for patients, attracting and
retaining qualified staff and investing in infrastructure
and medical technology. Furthermore, the
government is seeking to address the shortcomings
of the public health system through the phased
introduction of a National Health Insurance system.
Refer to the Market Overview section on pages 16
to 17 for more details.
AR
SUSTAINABILITY
PEOPLE
The attraction and retention of high-quality medical
professionals is fundamental to Mediclinic Southern
Africa’s sustainability. The platform therefore deploys
integrated talent strategies to ensure that scarce
skills can be attracted and retained, particularly in
those areas with the highest demand and/or risk.
Mediclinic Southern Africa and the industry as a
whole faces a shortage of trained nurses and, as
a short-term measure, has been recruiting nurses
from India. The longer-term solution is to increase
local training; to this end, the platform plans to
significantly increase its training capacity over the
coming few years. Related achievements during the
year include the relocation to a bigger site for the
Learning Centre Limpopo, and the commissioning
of a satellite campus in Pietermaritzburg for the
Learning Centre Central Region.
Our training and development function is registered
as a Private Higher Education Institution. It offers a
Diploma in General Nursing Science and a Diploma in
Operating Department Assistance (to deliver training
of skilled healthcare personnel and sustain quality
outcomes), and an Advanced Diploma in Health
Services Management and Leadership (to equip
managers with the relevant skills). More recently,
we have obtained registration to offer a Diploma
in Emergency Medical Care (aimed at providing
skilled healthcare personnel for Emergency Medical
Services), and the first cohort of learners commenced
training in January 2016. Mediclinic Southern
Africa also provides Enrolled Nursing programmes
accredited by the South African Nursing Council.
A total of 776 learners completed undergraduate
programmes and 34 learners completed
postgraduate programmes during the 2015 academic
year. A further 799 learners completed in-house
structured training programmes.
We introduced a Mediclinic Leadership Academy
in 2013, which focuses on the Group’s culture and
values to ensure sustainability. During the 2015
academic year, this academy has already been
attended by 750 delegates.
Formal succession planning is a well-established
process for Mediclinic Southern Africa, and the Talent
Review Committee has established talent pools for
relevant key positions. This provides an important
foundation for development initiatives that will
continue during the year ahead to ensure tailored
development of our talent pools.
36
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
OUTLOOK
As in the past, there remain many incremental growth
opportunities in Southern Africa. Opportunities
include the expansion of Mediclinic Southern Africa’s
existing hospitals, and the establishment of new
hospitals and day clinics, as well as potential services
relating to mental health.
At the same time, we are continuing to focus
strategically on the value that we deliver to
patients, by continuing to improve the safety and
quality of its clinical care, the quality of the patient
experience, and opportunities to improve operational
effi ciency. The platform will also continue to focus
on opportunities to develop an integrated Southern
African private healthcare delivery model for
the future.
We believe that we are well-positioned to address
various other challenges in the business environment,
for example those relating to the regulatory
environment and the continuing skills shortages.
Overall, the platform remains optimistic about the
future of Mediclinic Southern Africa.
SOCIETY
To demonstrate its commitment to local society,
the platform supports South Africa’s National
Department of Health with its Public Health
Enhancement Fund. This joint initiative between
the public and private sectors, aims to increase the
availability and the skills of public sector medical
personnel for the benefi t of the people of South
Africa. Mediclinic Southern Africa contributes 0.75%
of its net profi t after tax to this fund annually, which
helps the country’s government to expand the intake
of medical students, support postgraduate students
pursuing health-related studies, build additional
capacity in the management of tuberculosis, HIV and
AIDS, and provide support to the Leadership and
Management Academy for Health.
The signifi cant contribution made to this fund during
the year (amounting to £0.5m) has, to a large extent,
replaced the platform’s funding of other corporate
social investment contributions.
ENVIRONMENT
Mediclinic Southern Africa is committed to
minimising its environmental impact and ensuring
that its environmental management systems
and practices are aligned with international best
practice, based on the ISO 14001:2015 Specifi cation
for Environmental Management Systems. Its
performance is assessed by the British Standards
Institute.
As of the end of the period under review, 41 of
Mediclinic Southern Africa’s 52 hospitals were
ISO 14001 certifi ed. At the same time, all 52 hospitals
had been ISO 14001-trained to follow consistent
environmental management practices and were
subject to annual internal audits. The new Mediclinic
Midstream will be externally certifi ed during the
course of 2016/17.
In 2015, Mediclinic Southern Africa achieved joint
fi rst place ranking in the most recent Climate
Disclosure Project’s Leadership Index of the Top 100
companies on the JSE. This index focuses on climate
change governance, risk management, performance,
transparency, and data management.
MEDICLINIC ANNUAL REPORT 2016
37
DIVISIONAL REVIEW – SWITZERLAND
Ole Wiesinger
Ole Wiesinger
Chief Executive Offi cer: Hirslanden
Chief Executive Offi cer: Hirslanden
CEO’s statement
“For Hirslanden, the 2015/16 fi nancial year was characterised by further growth of the core
business alongside the continued implementation of standardised, platform-wide structures and
processes. The opening of our fourth outpatient clinic in Düdingen (in the canton of Fribourg)
alongside our new radiology institutes, reinforce Hirslanden’s role as the largest medical network
in Switzerland. With an unconditional focus on medical quality and patient satisfaction, as well as
an improved effi ciency through consistent structures and processes, patient benefi ts are at the
core of Hirslanden’s approach.
Looking forward, the public policy environment creates a number of uncertainties. For example,
any changes to immigration policy could have an impact on our employment practices and we
continue to engage with the authorities on matters such as the planning of highly specialised
medicine (HSM). We are conscious that the rate of growth in patients with basic insurance has
slowed; however, we are confi dent of achieving stable growth and will remain a source of clinical
excellence for the wider Mediclinic Group.”
Dr Ole Wiesinger
Chief Executive Offi cer, Hirslanden
KEY STATISTICS
16
4
NUMBER OF
HOSPITALS
NUMBER OF
CLINICS
1 677
NUMBER OF
BEDS
92
NUMBER OF
THEATRES
9 120
NUMBER OF
EMPLOYEES
38
38
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
KEY FINANCIAL HIGHLIGHTS
Hirslanden delivered revenue growth of 6% to
CHF1 657m during the period under review. This
resulted in an underlying EBITDA of CHF325m
compared to CHF303m in the previous year, with
the underlying EBITDA margin increasing from
19.4% to 19.7%.
This strong performance was driven by 5.4% growth
in inpatient admissions. Although the average length
of stay reduced slightly, the average revenue per
case nonetheless increased by 0.5%. In addition, a
number of productivity measures and cost savings
implemented during the year contributed to the
improved EBITDA margin.
Importantly, Hirslanden continued to invest in the
business. This included CHF68m (2015: CHF72m)
on capital projects and new equipment, CHF76m
(2015: CHF70m) on replacing existing equipment,
and CHF38m (2015: CHF38m) on repairing and
maintaining property and equipment, which was
accounted for in the fi nancial year.
KEY OPERATIONAL HIGHLIGHTS
The number of inpatient beds increased from 1 655
to 1 677 during the period under review, mainly due
to the opening of new bed wards at Hirslanden Klinik
Stephanshorn and Hirslanden Klinik Aarau.
NEW SITES AND FACILITIES
During the year, Hirslanden did not acquire any new
hospitals but did open several signifi cant new sites.
In August 2015, for example, Hirslanden Lausanne
inaugurated its new 600m2 radiology institute, the
Institut de radiologie de l’ouest lausannois (IROL),
enabling patients to benefi t from new state-of-
the-art medical equipment like a 3T MRI scanner
and a 128-layer computed tomography machine.
In November 2015, Hirslanden Clinique Cecil in
Lausanne opened a new hybrid operating theatre
and an outpatient surgery unit. Combined with the
January 2016 opening of the new Praxiszentrum
Düdingen (outpatient clinic) with an integrated
radiology institute in the canton of Fribourg,
Hirslanden now operates four outpatient clinics and
13 radiology institutes, and is represented in
12 cantons.
Alongside these major new sites, Hirslanden also
completed a number of other important development
projects, including:
• a new doctors offi ces’ and a new radiology
department for Hirslanden Klinik Birshof in
June 2015;
• a new ophthalmology operating theatre for
Hirslanden Clinique Bois-Cerf in August 2015;
• a new maternity ward for Hirslanden Andreas
Klinik in November 2015; and
• an enlarged emergency department, intensive care
unit and heart catheter laboratory for Hirslanden
Klinik Aarau in January 2016.
STRATEGIC
REPORT
CHF1 657m
+6%
REVENUE
CHF325m
+7%
UNDERLYING EBITDA
469 167
+3.4%
BED DAYS SOLD
+0.5%
AVERAGE INCOME PER BED DAY
94%
PATIENT SATISFACTION
3.85
EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
MEDICLINIC ANNUAL REPORT 2016
39
DIVISIONAL REVIEW – SWITZERLAND (continued)
Throughout 2015/16, Hirslanden made a number of
notable investments in new medical equipment and
technology. Highlights include: two new state-of-
the-art linear accelerators at Hirslanden Klinik Aarau
and Klinik Hirslanden; a new O-arm® Surgical Imaging
system at Hirslanden Clinique La Colline; further
MRI scanners at Hirslanden Clinique Bois-Cerf and
Hirslanden Klinik St. Anna; and an additional
CT scanner at Klinik Hirslanden.
Meanwhile, building work commenced on several
ongoing expansion projects, including more
operating theatre capacity for both Hirslanden Klinik
Stephanshorn and Hirslanden Klinik St. Anna, and
an expanded emergency department for Hirslanden
Klinik Im Park.
EFFICIENCY IMPROVEMENTS
The ongoing strategic programme, Hirslanden 2020,
is intended to increase the efficiency of all Hirslanden
hospitals and establish consistent processes
throughout the platform. This focuses on various
critical paths or journeys, such as patient registration
through to payment, or employee recruitment
through to resignation, and seeks to introduce related
process improvements.
During 2015/16, various IT process improvements
were identified, which are due for implementation
within the corporate headquarters and at Hirslanden
hospitals. The aim is to establish a consistent, group-
wide business model with streamlined IT systems and
organisational structures.
MARKET OVERVIEW
The Swiss private healthcare market is one of the
best-funded in the developed world and continues
to grow steadily. Hirslanden is the largest medical
network and the largest private hospital group
in Switzerland, and works effectively within a
high-quality healthcare system where the population
enjoys freedom of choice and high-quality services
in both the public and private sector. Challenges
include working within an environment regulated
by 26 cantons that supervise and manage hospitals
and ensure their funding in collaboration with
the mandatory health insurance (see the Market
Overview section on page 17 for more details).
AR
SUSTAINABILITY
QUALITY MANAGEMENT
The quality management system followed at
Hirslanden is based on the ISO 9001:2008 standard,
against which 15 of the platform’s 16 hospitals are
certified (the remaining hospital, Hirslanden Clinique
La Colline, is due to be certified in 2016). Through
this process, all Hirslanden hospitals and operations
follow the “Business Excellence” model set out by the
European Foundation for Quality Management.
Hirslanden’s hospitals are also participating in an
international Quality Medicine Initiative (Austria,
Germany and Switzerland). Through this initiative,
each participating hospital publishes a series of
quality performance indicators, which may be
supplemented by external peer reviews. Hirslanden
also participates in the National Association for
Quality Development in Clinics and Hospitals. In
combination, these initiatives demonstrate that
Hirslanden works to the highest quality standards.
PEOPLE
The recruitment of nursing staff, especially in
specialised nursing, is a major challenge for all Swiss
hospitals. For this reason, Hirslanden is committed
to the further training and education of specialist
nurses, implements professional recruitment
practices and offers attractive working conditions
and career opportunities.
Hirslanden also provides a range of training
programmes for all types and levels of
employment. For example: during 2015/16 more
than 1 000 apprentices received formal training
(federal certificate, higher college, college or
graduate students) across 30 professions, mainly
as healthcare professionals. Hirslanden’s leadership
talent management process aims to improve the
identification of leadership potential and develop
leadership skills; and the platform’s in-house
leadership and management courses were
attended by 385 management employees
(up from 326 in 2014/15).
40
MEDICLINIC ANNUAL REPORT 2016
ENVIRONMENT
The continuous improvement of Hirslanden’s
environmental performance is evidence of the
platform’s commitment to responsible and
sustainable business. For example, all Hirslanden
hospitals have been supplied with 100% sustainable
electricity since the start of 2014. And, in order to be
even more disciplined in environmental management,
the Hirslanden Executive Committee has defi ned
guidelines that cover issues ranging from training and
construction measures to the choice of suppliers.
During 2015/16, a structured environmental
management pilot project was conducted at
Hirslanden Klinik Belair, and has been successfully
integrated into the hospital’s ISO 14001:2015 quality
management certifi cation. Lessons learnt from this
initiative will be applied to other Hirslanden hospitals.
OUTLOOK
One of the most signifi cant trends in the Swiss
healthcare market is the ongoing shift of basic
medical treatments from the inpatient to the
outpatient sector. As a result, total costs in the
outpatient sector are seeing a signifi cant increase
and currently stand at around CHF24.9 billion. It is
important for Hirslanden to continue to respond
to this trend, with the opening of new outpatient
clinics and the creation of an integrated medical
network that facilitates the access to healthcare
for patients – especially because outpatient clinics
are a well-established route for the subsequent
allocation of patients to hospitals and specialists.
In response to this, the establishment of outpatient
clinics as well as outpatient surgery units is now part
of the Hirslanden 2020 strategic programme. This
programme, which came into full force in 2015/16,
has two main goals: to increase the effi ciency of the
existing business by implementing consistent systems
and processes, and to develop new areas of business,
such as outpatient facilities. In a fast-changing
environment it is important for Hirslanden to realise
potential synergies by integrating all hospitals and
clinics within an overarching system of standardised
structures with a consistent business model.
Given the external environment, the investment
programme within Hirslanden and the potential for
increased synergies, the platform is well-positioned
to maintain its status as the largest medical network
in Switzerland while continuing to improve patient
satisfaction and clinical outcomes.
STRATEGIC
REPORT
MEDICLINIC ANNUAL REPORT 2016
41
DIVISIONAL REVIEW – UAE
David Hadley
David Hadley
Chief Executive Offi cer, Mediclinic Middle East
Chief Executive Offi cer, Mediclinic Middle East
CEO’s statement
“Mediclinic Middle East continued to perform in line with expectations, despite the weaker
economic conditions brought about by the continued decline in oil prices. We are satisfi ed with
the performance of the hospitals in particular, which have produced good results irrespective
of signifi cant new direct competitive activity and increased regulatory reform. Going forward,
the Combination with the Al Noor Hospitals Group off ers signifi cant new opportunities. The
integration process is well underway, and we look forward to this exciting next phase of
development for Mediclinic Middle East.”
David Hadley
Chief Executive Offi cer, Mediclinic Middle East
KEY STATISTICS
MCME:
AL NOOR:
2
10
371
NUMBER OF
HOSPITALS
NUMBER OF
CLINICS
NUMBER OF
INPATIENT BEDS
12
NUMBER OF
THEATRES
2 507
NUMBER OF
EMPLOYEES
3
29
350
NUMBER OF
HOSPITALS
NUMBER OF
CLINICS
NUMBER OF
INPATIENT BEDS
13
NUMBER OF
THEATRES
4 425
NUMBER OF
EMPLOYEES
42
42
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
KEY FINANCIAL HIGHLIGHTS
Mediclinic Middle East achieved an 8% growth
in revenue to AED1 544m in 2015/16 (excluding
AED258.7m which was contributed by Al Noor
for the 46 trading days since the Combination),
compared to AED1 430m in the previous year. This
resulted in an 11% increase in EBITDA of AED345m
(2015: AED312m) (excluding AED40m which was
contributed by Al Noor), and an underlying EBITDA
margin of 22.3% (2015: 21.8%).
This strong performance was driven through
6% growth in clinic outpatient attendance and
2% growth in hospital outpatient attendance,
backed up by 3% growth in hospital inpatient
admissions, and 6% growth in bed days sold. At the
same time, the average hospital inpatient revenue
per bed day grew by 2.3%. All of this is a direct
refl ection of the more acute and specialised inpatient
procedures being performed across the platform.
KEY OPERATIONAL HIGHLIGHTS
The main operational highlight of 2015/16 was the
successful Combination of Mediclinic International
with the Abu Dhabi-based Al Noor Hospitals Group.
This positions Mediclinic as a clear leader in the
UAE private healthcare sector with complementary
coverage across Dubai and Abu Dhabi, enhancing
the platform’s geographic presence in this attractive
growth market.
Following the completion of the Combination in mid-
February 2016, a senior leadership team was selected
to take the combined company forward.
Another key highlight was the opening of the new
Mediclinic Al Hili facility in Al Ain, as well as progress
towards the completion of several new projects
scheduled for 2016/17, all of which will further
increase Mediclinic’s presence in the UAE. These
include the opening of the Al Jowhara Hospital, the
North Wing extension of Mediclinic City Hospital,
plus the opening of the Khalifa A, Al Yaher, Ghayathi
and Look Wow clinics. Work is also underway on
the second hospital at Airport Road as well as the
Mediclinic Parkview Hospital, both of which are due
to be completed in 2019.
Effi ciency savings were another clear theme. For
example, our status as an international Group
brought many procurement savings, the planned
centralisation of laboratory services will bring further
effi ciencies and, over time, we believe the
integration of Mediclinic and Al Noor will bring
considerable synergies.
STRATEGIC
REPORT
AED1 544m
+8%
REVENUE
AED345m
+11%
EBITDA
76 021
+6%
BED DAYS SOLD
+2.3%
AVERAGE INCOME PER BED DAY
80.3%
PATIENT EXPERIENCE INDEX
3.75
EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
MEDICLINIC ANNUAL REPORT 2016
43
DIVISIONAL REVIEW – UAE (continued)
COMBINED PLATFORM CREATES A CLEAR LEADER, WITH UNRIVALLED COVERAGE ACROSS THE UAE
Persian Gulf
Qatar
Mediclinic Mirdif
Mediclinic Al Qusais
Mediclinic Welcare Hospital
Sharjah
Mediclinic City Hospital
Mediclinic Beach Road
Manchester
Al Aqua Medical Centre
Mediclinic Al Sufouh
Dubai
Other Emirates of UAE
Al Fardan
Al Madar Medical Centre (Ajman)
Gulf of Oman
Mediclinic Dubai Mall
Mediclinic Arabian Ranches
Mediclinic IBN Battuta
Mediclinic Meadows
Khalifa Street Hospital
Al Marnoura
Airport Road Hospital
Mediclinic Corniche
Abu Dhabi
Al Bateen
ENEC(2)
ICAD
Al Mirfa
Madinat Zayed(3)
Al Yahar
Zakher Healthcare Centre
Emirate of Abu Dhabi
GICC(1)
Baniyas
Mussafah(3)
Al Madar Medical Centre
Mediclinic Al Hili
Muscat
Al Sanaya
Al Ain Hospital
Oman
Diagnostic Centre
Al Noor Family Centre
Notes:
1. Gulf International Cancer Centre
2. Emirates Nuclear Energy Corporation
3. Mussafah and Madinat Zayed include two clinics each.
Al Noor Clinics
Al Noor Hospitals
Mediclinic Clinics
Mediclinic Hospitals
MARKET OVERVIEW
Although the region faces a low oil price environment
and softening of consumer sentiment, the
Middle East remains a growth market, where the
Combination of Mediclinic International and the Al
Noor Hospitals Group has created a clear leader in
the UAE private healthcare sector.
Opportunities include the provision of services
for a growing and ageing population, which is
facing an increased incidence of lifestyle-related
medical conditions, in a region where governments
are seeking to diversify their economies away
from dependence on oil revenues. Meanwhile,
key challenges include any further softening of
the region’s economy, changes to the regulatory
environment, the rising cost of healthcare, and
increased competition with the arrival of new
international entrants (see the Market Overview
section on page 17 for more details).
AR
SUSTAINABILITY
PATIENT EXPERIENCE
Delivering a seamless, high-quality patient experience
is key to the success of Mediclinic Middle East’s
business. The increase in inpatient admissions and
outpatient attendance is an indication that the
platform has secured patient trust. Meanwhile, the
first full-year results of the Press Ganey patient
survey show that Mediclinic Middle East is delivering
a good patient experience, with inpatient satisfaction
at 80.3% and outpatient satisfaction at 79.9%.
Significant opportunities for improvement do exist,
however, and strategies for improvement of the
patient experience are a focus for 2016/17. The
Press Ganey survey will also be extended to all
Al Noor facilities.
The platform seeks to communicate with patients
through many channels to ensure that information
is relayed quickly, accurately and at the convenience
of the patient or prospective patient. These channels
include free health checks, seminars and talks, and
the positioning of Mediclinic Middle East doctors
as figures of authority through media appearances
and social media. Mediclinic Middle East’s Facebook
pages also achieved 86% growth in follower numbers
during 2015/16.
PEOPLE
The UAE remains an attractive employment
destination, although high inflation does put
pressure on salaries. During 2015/16, Mediclinic
Middle East again secured an increase in employee
numbers in Dubai, with 3% growth. Meanwhile the
Combination with Al Noor brought an additional
4 425 employees to the platform, taking total staff
numbers to 6 932. We look to attract and retain the
very best professionals with market-related salaries
and benefits, including life insurance and permanent
disability benefits, comprehensive training, open
communication and sound management practices.
Mediclinic Middle East continued to organise medical
education sessions, both at an individual facility
level and at a corporate level, for its employed and
community-based doctors. This scheme is extremely
popular with our doctors and is a key component of
our retention strategy.
44
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
OUTLOOK
The economic outlook for the UAE is mixed, with
its fortunes linked fundamentally to issues such
as the oil price and US economic policy, which
aff ects the strength of the dollar to which the UAE
dirham is linked. Despite this, the next fi nancial
year for Mediclinic Middle East promises to be
both challenging and rewarding as the integration
with the Al Noor Hospital Group continues. Key
focus areas are the implementation of an inclusive
and eff ective business strategy for the combined
group, fi nalisation of a comprehensive ICT strategy,
further improvement of the patient experience,
standardisation of doctor remuneration and rewards,
identifi cation of further operational effi ciencies, the
development of a tariff strategy in Abu Dhabi, and
the delivery of new projects already underway.
Mediclinic City Hospital’s North Wing project is due
to open in the second half of 2016/17 and, with it, the
comprehensive cancer centre that is being developed
in association with Hirslanden. The possibility of
expansion in Abu Dhabi’s Western region will also
be explored.
Meanwhile, preparations will continue for the
introduction of DRGs (diagnostic-related groupings),
and the platform will maintain dialogue with
government authorities on regulatory changes within
the UAE healthcare sector.
COMMUNITY
Mediclinic Middle East is involved in various social
and charitable community activities, which support
healthcare, welfare, education and sport. The
platform contributed AED814 000 (AED740 000
in 2014/5) on event sponsorship and charitable
activities during 2015/16, including AED427 000
on medical services for the Al Jalila Foundation
(an initiative set up by the Ruler of Dubai to
support underprivileged children). Corporate social
investment initiatives run by the platform included
charity campaigns using Facebook, free health
screenings, health talks and awareness campaigns on
particular health topics.
Whilst individual units work at a local level to support
their chosen causes, at a corporate level Mediclinic
Middle East takes part in major community events
such as World Health Day, World Heart Day and
World Diabetes Day, with free health check-ups for
the general public at locations across Dubai.
Mediclinic has budgeted AED445 000 for
community initiatives in 2016/17, with an additional
AED750 000 in services as part of its partnership
with the Al Jalila Foundation.
ENVIRONMENT
Mediclinic Middle East is aware of its environmental
responsibilities and undertakes signifi cant eff orts
to minimise the eff ects of its operations on the
environment. New projects have been designed to
incorporate the latest environmental technology,
making use of solar panels for the heating of water
and electricity generation and sustainable materials,
which have minimal impact on the environment, are
being used wherever possible.
MEDICLINIC ANNUAL REPORT 2016
45
SUSTAINABLE DEVELOPMENT HIGHLIGHTS
INTRODUCTION
Mediclinic takes a sustainable, long-term
approach to business, putting patients at the
heart of its operations and delivering consistently
high-quality healthcare services. In order to
deliver on these priorities, we uphold the highest
standards of clinical governance and ethical
behaviour across our platforms, invest significant
time and resources in recruiting and retaining
skilled staff, make considerable investment into
our facilities and equipment, and respect the
communities and environment in the areas in
which we operate.
STAKEHOLDER ENGAGEMENT
AND MATERIAL ISSUES
Mediclinic recognises its accountability to its
stakeholders and is committed to effective and
regular engagement with them, and to publicly report
on its sustainability performance. Mediclinic’s key
stakeholders are those groups that have a material
impact on, or are materially impacted by, Mediclinic
and our operations.
As a result of its operations, Mediclinic has many
economic, social and environmental impacts,
including creating employment opportunities,
training and developing employees, black economic
empowerment in South Africa, investing in local
communities, and using natural resources.
In order to focus our reporting on material issues,
the Group undertook a materiality assessment
in 2014, which is reviewed annually to identify
FIGURE 1: MATERIALITY ASSESSMENT MATRIX
those sustainable development issues which are
most significant for the business, and directly
affect the Group’s ability to create value for our
key stakeholders. The guidance on determining
materiality contained in the GRI G4 Sustainability
Reporting Guidelines and the International
Integrated Reporting Framework was used during
the materiality assessment. The process was also
informed by the views, concerns and expectations of
our key stakeholders: patients, doctors, employees
and trade unions, suppliers, healthcare funders,
government and authorities, industry associations,
investors, community and the media.
We then categorised these issues and the associated
performance indicators according to the six capitals
(financial, manufactured, intellectual, human, social
and relationship, and natural) included in the
International Integrated Reporting Framework, as
illustrated in Figure 1.
Our five material issues, as identified in our
materiality assessment process, are:
• Provide quality healthcare services
• Address shortage of healthcare practitioners
• Creating and sustaining shareholder value
• Responsible use of natural resources
• Governance and corporate social responsibility
This report provides an overview of each of the
five material issues. More detailed information
on our stakeholder engagement, material issues
and sustainability performance is included in the
Sustainable Development Report and the GRI G4
Disclosure Index available on the Company’s website
at www.mediclinic.com.
SDR
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A c c r e d i t a t i o n
46
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
MATERIAL ISSUE 1: PROVIDE QUALITY HEALTHCARE SERVICES
KPIs
MORTALITY* (per calendar year)
Southern Africa 1.02
Switzerland
UAE
inpatient mortality index
(2014: 1.04)
1.01%
inpatient mortality rate
(2014: 0.93%)
0.18%
inpatient mortality rate
(2014: 0.16%)
*
Whilst Mediclinic Southern Africa reports a mortality index,
Hirslanden and Mediclinic Middle East report on the unadjusted
mortality rate and not the standardised mortality Index. Further,
the results of the platforms are not directly comparable as the
platforms differ significantly on the scope of services provided,
burden of disease, units of measurement and definition of
indicators.
FALL RATE* (per 1 000 patient days)
(per calendar year)
Southern Africa 1.14
Switzerland
UAE
(2014: 1.10)
2.1
(2014: 2.5)
0.3
(2014: 0.5)
*
The results of the platforms are not directly comparable as
the platforms differ significantly on the scope of services
provided, burden of disease, units of measurement and
definition of indicators.
RE-ADMISSION RATES* (per calendar year)
Southern Africa 7.7
Switzerland
UAE
30-day re-admission rate (all
causes) (2014: 7.5)
1.28
15-day unscheduled re-
admission rate (2014: 1.44)
1.3
30-day related re-admission
rate (2014: 1.7)
*
The results of the platforms are not directly comparable as the
platforms differ significantly on the scope of services provided,
burden of disease, units of measurement and definition of
indicators.
HIGHLIGHTS
• Strong clinical governance programme in place
to measure clinical performance
• New Patient Experience Index rolled out to
improve the patient experience
• Continued with signifi cant capital investments
across all platforms
• Centralised procurement initiatives gaining
momentum to achieve cost savings
PATIENT SAFETY, QUALITY CARE
AND CLINICAL OUTCOMES
Across all our operating platforms, we are focused
on providing superior clinical outcomes, delivering a
standardised quality of service and improving patient
safety. To meet these objectives, we have adopted a
Group-wide clinical quality programme which
focuses on:
• clinical governance to ensure patient safety and
quality improvement;
• clinical information management to enable clinical
performance measurement and deal with systems
to support the clinical care process, including
electronic patient records; and
• clinical services development dealing with the
development of new coordinated care models,
investigating new service lines, and keeping
abreast of technological developments.
Key patient safety indicators are monitored across
our operations. Patient safety surveys are regularly
undertaken to measure and identify areas for
improvement. All management members are trained
in the basic principles of patient safety and quality
improvement. Patient safety offi cers have been
appointed on all platforms to lead the patient
safety initiative.
Multi-disciplinary clinical committees at hospital level
have been established throughout the Group to drive
quality and safety and promote cooperation between
doctors, nursing staff and management.
For more information on the Company’s approach
and clinical performance, please refer to the Clinical
Services Report available on the Company’s website
at www.mediclinic.com.
CSR
MEDICLINIC ANNUAL REPORT 2016
47
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (continued)
PATIENT SATISFACTION AND EXPERIENCE*
Southern Africa
Switzerland*
UAE
82%
(2015: 81%)
94%
(2015: 92%)
80%
(2015: 81%)
*
The results of Hirslanden are not comparable with the results
of Mediclinic Southern Africa and Mediclinic Middle East as the
standardised Patient Experience Index has not been rolled out
to Hirslanden. The results of Hirslanden are based on the ANQ
(the Swiss National Association for Quality Development
satisfaction survey.
CAPITAL INVESTMENTS ON PROJECTS, NEW
EQUIPMENT AND REPLACEMENT OF EQUIPMENT
Southern Africa R1 075m
Switzerland*
UAE
(2015: R1 437m)
CHF144m
(2015: CHF142m)
AED203m
(2015: AED100m)
PATIENT SATISFACTION AND
EXPERIENCE
In line with our “patients first” ethos, and to ensure
operational excellence across all platforms, we
monitor our patients’ experience across the Group.
In 2014, the Group created a single, standardised
Patient Experience Index (“PEI”) with the objective of
achieving incremental and sustainable improvement
in patient experience over time. This is managed by
Press Ganey, an internationally recognised patient
experience measurement and management agency.
The index has been implemented in Mediclinic
Southern Africa and Mediclinic Middle East since
October 2014, and will be rolled out across Hirslanden
and Al Noor in the course of the year ahead. Since
implementation of the PEI, we have improved our
survey response rates and implementation of follow-
up actions as follows:
• More than 30 000 surveys received to date
• More than 450 training interventions
• 80% of e-surveys are completed within the
first week
• Average e-survey response rate is 21%
• Average e-mail capturing rate on admission is
64%. This has doubled in a year.
• Ten improvement opportunities have been
designated for every hospital
Corporate initiatives as a result of feedback from the
surveys include: the critical re-evaluation of hospital
food services with a strong clinical link, providing all
staff within the Group with enhanced skills for dealing
with patients, and a focus on patient engagement
by involving the patient and family members in the
treatment process. Noise reduction and effective
medication counselling also remain a focus, with
continued reinforcement around the service elements
designed to reduce anxiety and instil feelings of
safety in all our patients.
Refer to the graph on this page for the patient
satisfaction level of Hirslanden based on the ANQ
(Swiss National Association for Quality Development),
and the Patient Experience Index of Mediclinic
Southern Africa and Mediclinic Middle East.
AR
FACILITIES AND EQUIPMENT
To ensure a safe and user-friendly environment
for both our patients and employees, we strive
to provide high-quality healthcare facilities and
technology, focusing on capital investments,
maintenance of facilities, and optimal use of facilities.
As a result, the Group continuously invests in capital
projects and new equipment to expand and refurbish
our facilities and the replacement of existing
equipment, as well as on the repair and maintenance
of existing property and equipment.
COST OF HEALTHCARE
The Group contributes in various ways to a
sustainable healthcare system by, inter alia, focusing
on efficiency and cost-effectiveness, conducting
tariff negotiations in a fair and transparent manner,
expanding facilities based on need, and actively
participating in healthcare reform.
ACCREDITATION
Hospitals are high-risk environments in which
complex treatment processes are executed using
sophisticated equipment and techniques. The process
of external accreditation ensures that international
standards are adhered to in all aspects of hospital
operations, as also included in the combined
assurance table on page 28 of the Annual Report.
For more details on accreditation, please refer to
the Clinical Services Report available on the
Company’s website.
AR
CSR
48
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
MATERIAL ISSUE 2: ADDRESS SHORTAGE OF HEALTHCARE
PRACTITIONERS
KPIs
STAFF TURNOVER RATE
Southern Africa 6.8%
Switzerland
UAE
(2015: 7.2%)
5.2%
(2015: 6.9%)
12.4%
(2015: 11.7%)
PERCENTAGE OF PAYROLL INVESTED IN TRAINING
AND SKILLS DEVELOPMENT
Southern Africa 3.6%
Switzerland
UAE
(2015: 3.0%)
5.0%
(2015: 5.0%)
0.3%
(2015: 0.2%)
-
REMUNERATION AND RECOGNITION
OF STAFF
The Group remunerates employees in a manner
that supports the achievement of the Group’s
vision and strategic objectives, while attracting and
retaining scarce skills and rewarding high levels of
performance. This is achieved through establishing
remuneration practices that are fair, reasonable and
market-related, while at the same time maintaining
an appropriate balance between employee and
shareholder interest. To encourage a performance-
driven organisation, the Group rewards employees
for achieving strategic objectives as well as individual
personal performance targets. Benefi ts for all
employees include a retirement fund, medical aid
scheme, performance-related incentives and bonuses,
and liability insurance for medical staff . Those
managers who receive variable remuneration have
a combination of short- and long-term incentives. A
year ago, the Group introduced a Reward Centre of
Expertise, specialising in the design and delivery of
global reward initiatives.
HIGHLIGHTS
• Increased investment in training and skills
development by Mediclinic Southern Africa
• Designed and implemented inter-platform
development programme to provide cross-
platform exposure to high-performing
individuals
• Introduced standardised employee engagement
survey across the Group
EMPLOYEE RECRUITMENT AND
RETENTION
Recruiting suitably qualifi ed personnel is vital for
delivering a high-quality healthcare service. For this
reason, we invest signifi cant time and resources
in supporting hospitals in recruiting and retaining
staff and promoting the Group as an employer of
choice. We off er market-related salaries based on
the principles of internal equity, external equity and
aff ordability.
We have sound performance management
procedures in place to recognise good performance
and off er extensive opportunities for career
development and training, all of which contribute to
a contented and engaged workforce.
Some examples of the Group’s initiatives to retain
current employees include:
• maintaining a pleasant working environment, with
leadership that acts with honesty and integrity;
• providing training and development opportunities
for both clinical and non-clinical staff ;
• following fair management practices;
• remunerating employees competitively, off ering
family-friendly benefi ts and incentivising
performance through bonus schemes; and
• communicating with staff and involving them in
the day-to-day business decisions.
With the increased shortage of qualifi ed staff , there
is increased competition in the market place for
quality staff , and as a result, a greater emphasis is
being placed on retention and employee training and
development. An employee discharge management
process is in place to monitor the reasons for
staff turnover.
MEDICLINIC ANNUAL REPORT 2016
49
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (continued)
TRAINING AND SKILLS
DEVELOPMENT
The Group continues to invest significantly in training
and skills development to maintain and improve
quality service delivery. The percentage of payroll
invested in training and skills development by each
of the Group’s operating platforms is provided on
page 23 of the Annual Report.
AR
Our commitment to providing quality care for
our patients can only be ensured if our staff has
appropriate, evolving skill sets, which is reflected
in the number of learning initiatives undertaken
each year. A consistent performance management
system is applied throughout the Group, which
allows us to identify and manage training needs
of individual employees, and to discuss career
development. Succession planning is standardised
on an organisational level in all three operating
platforms and a Group Talent Review is performed
annually. Critical talent (such as nurses and
pharmacists), as well as high-performing individuals
with potential, are identified and supported through
tailored development initiatives. An inter-platform
development programme, which offers a series of
secondments across platforms, has been designed
to help these individuals excel at Mediclinic.
SUPPORT OF EXTERNAL TRAINING
INSTITUTIONS
The Group is committed to educational development
in all three of its operating platforms and provides
financial and other support towards healthcare
education. Financial support of R8.0m (2015: R4.5m)
was provided to academic institutions in Southern
Africa, mainly through sponsorships to medical
schools and bursaries to external students that
applied for financial assistance.
SDR
EMPLOYEE HEALTH AND SAFETY
Health and safety policies and procedures are in
place across the Group to ensure a safe working
environment for the Group’s employees, patients
and its visitors. The health and safety of the
Group’s employees are essential and contribute to
the sustainability of quality care to patients. The
programmes and procedures implemented by the
various business units to mitigate health and
safety risks are outlined in the Sustainable
Development Report.
During the year, there were no incidents of material
non-compliance with any laws, regulations, accepted
standards or codes applicable to the Group, with
no significant fines being imposed, concerning the
health and safety impact of the Group’s services.
EMPLOYEE SATISFACTION AND
ENGAGEMENT
During the year, Mediclinic, in partnership with
Gallup, introduced the Your Voice employee
engagement survey across all operating platforms
to measure levels of engagement, identify gaps at
a departmental level and support line managers to
implement action plans to address concerns. Overall,
the Group achieved a 65% participation rate in the
Your Voice survey and 32% of employees showed
high levels of engagement.
Strengths that the survey highlighted include
employees knowing what is expected of them, and
having the appropriate materials and equipment to
perform at work. Areas for improvement that the
survey highlighted are recognition or praise for good
work, and valuing the opinions of employees.
50
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
MATERIAL ISSUE 3: CREATING AND SUSTAINING SHAREHOLDER VALUE
KPIs
DIVIDEND PER SHARE* (in pence)
7.90
(2015: 9.33)
*
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.
REVENUE
£2 107m
(2015: £1 977m)
EBITDA
£382m
(2015: £406m)
UNDERLYING EBITDA
£428m
(2015: £403m)
UNDERLYING EBITDA MARGINS (PLATFORMS)
Group
20.4%
(2015: 20.4%)
-
Southern Africa 21.4%
Hirslanden
(2015: 21.3%)
19.7%
(2015: 19.4%)
UAE*
(excluding Al Noor)
22.3%
(2015: 21.8%)
*
Following the Al Noor acquisition on 15 February 2016
(46 trading days up to year end), Al Noor contributed AED258.7m
to revenue and AED46.1m to EBITDA to MCME, resulting in a margin
of 17.8%.
INVESTMENT IN CAPITAL PROJECTS AND NEW
EQUIPMENT (PLATFORMS)
Southern Africa R758m
Hirslanden
UAE
(2015: R1 131m)
CHF68m
(2015: CHF72m)
AED171m
(2015: AED75m)
INVESTMENT IN REPLACEMENT OF EQUIPMENT
(PLATFORMS)
Southern Africa R317m
Hirslanden
UAE
(2015: R306m)
CHF76m
(2015: CHF70m)
AED32m
(2015: AED25m)
HIGHLIGHTS
• Successful completion of the combination of
Mediclinic International Limited and Al Noor
Hospitals Group in February 2016
• Successful rights issue and acquisition of a
29.9% interest in LSE-listed Spire Healthcare
Group plc during 2015
• Underlying EBITDA margin stable at 20.4% for
the Group
EXPENDITURE ON REPAIRS AND MAINTENANCE
(PLATFORMS)
Southern Africa R275m
Hirslanden
UAE
(2015: R305m)
CHF38m
(2015: CHF38m)
AED24m
(2015: AED20m)
-
ACCEPTABLE SHAREHOLDER
RETURNS
The total dividend per share for the period under
review is 7.90 pence (2015: 9.33 pence).
The Group’s dividend policy is set out in the Financial
Review on page 59.
AR
PROFITABILITY
The Group’s strong focus on effi ciencies has ensured
that the underlying EBITDA margin remained stable
at 20.4%.
For more information please refer to the Divisional
Reviews and the Financial Review included in the
Annual Report.
AR
GROWING THE BUSINESS
During 2015, Mediclinic acquired a 29.9% stake in
Spire Healthcare, our fi rst investment in the UK
private healthcare market. We then completed the
combination of Mediclinic International Limited and
Al Noor Hospitals Group plc in February 2016 to
become the largest private healthcare operator in
the UAE. This merger will create tangible value for
the Group over the longer term. As a healthcare
group of this size, quality and reputation, Mediclinic
has a signifi cant opportunity to increase revenues
and drive profi tability in this market. Moreover, our
move into the FTSE 100 index on the London Stock
Exchange in March 2016 increased our exposure to
international investment.
For further details on the Al Noor Combination and the
acquisitions and expansions by the Group’s operating
platforms, please refer to the Chief Executive Offi cer's
Review and the Divisional Reviews included in the
Annual Report.
AR
MEDICLINIC ANNUAL REPORT 2016
51
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (continued)
MATERIAL ISSUE 4: RESPONSIBLE USE OF NATURAL RESOURCES
HIGHLIGHTS
• Southern Africa was ranked joint 1st in the
Climate Disclosure Leadership Index in 2015
for consistent high levels of disclosure on our
emissions over the past eight years
• Three Hirslanden hospitals recognised as
CO2-reduced businesses by the Swiss Energy
Agency for the Economy on behalf of the Swiss
Federal Office of Energy
• Total energy consumption per bed day have
reduced across Hirslanden and Mediclinic
Middle East, with Mediclinic Southern Africa's
consumption remaining stable
Our main environmental impacts are the utilisation
of resources, predominantly energy, through
electricity consumption and water, and the disposal
of hazardous waste. We are fully aware of the need
to use resources responsibly and recognise the risks
that regulatory changes, environmental constraints
and climate change present to our operations and
we are committed to minimising our environmental
impacts to the extent possible.
However, we also believe that using resources
responsibly can be a source of strategic advantage
for the Group, allowing us to manage and contain
our operating costs and to ensure ongoing access to
water and energy supplies.
CARBON EMISSIONS
The Group’s platforms measure, with the assistance
of external consultants, its carbon footprint using the
GHG Protocol and includes, still in varying degrees:
• direct emissions, which in the healthcare
industry will refer mainly to the emissions from
anaesthetics gases (scope 1 emissions);
• indirect emissions from the consumption of
electricity (scope 2 emissions);
• indirect emissions from suppliers, which in
the healthcare industry will refer mainly to
pharmaceutical, bulk oxygen and waste-removal
suppliers (scope 3 emissions); and
• non-Kyoto Protocol greenhouse gas emissions
such as Freon, which is used in air-conditioning
and refrigerant equipment. With the assistance
of external consultants, these emissions data
were converted into a carbon dioxide equivalent
(“CO2e”) using recognised calculation methods,
emission factors, and stating assumptions made,
where relevant.
The carbon emissions per platform, for the periods
as specified therein, are reported in the Sustainable
Development Report.
SDR
KPIs
TOTAL CO2 EMISSIONS PER BED DAY
Southern Africa 111 kg (per CDP 2015)
(CDP 2014: 115 kg)
Switzerland
(per calendar year)
13 kg
(2014: 14 kg)
UAE*
246 kg (per CDP 2015)
(CDP 2014: 239 kg)
WATER USAGE (KL/BED DAY)
Southern Africa 0.694 kl
(2015: 0.664 kl)
Switzerland
(per calendar year)
0.664 kl
(2014: 0.664 kl)
-
UAE*
1.125 kl
(2015: 1.165 kl)
ENERGY CONSUMPTION (GJ/BED DAY)
Southern Africa 0.333 gj
(2015: 0.331 gj/bed day)
Switzerland
(per calendar year)
0.477 gj (2015 calendar year)
(2014: 0.533 gj/bed day)
UAE*
0.842 gj
(2015: 0.890 gj/bed day)
WASTE RECYCLED
Southern Africa 1 197 tonnes
(2015: 800.8 tonnes)
Switzerland
(per calendar year)
630 tonnes
(2014: 400 tonnes)
UAE
87 tonnes
(2015: 86 tonnes)
*
The intensity measures of CO2 emissions, water usage and energy
consumption per day are not appropriate for the UAE, and not
comparable with that of Southern Africa and Switzerland, as the
total emissions, water usage and energy consumption include only
two hospitals, with outpatient consultations, and 10 clinics with
only outpatient consultation (i.e. no bed days). During the year
ahead a more appropriate intensity measure will be determined for
the Group.
ENVIRONMENTAL MANAGEMENT
The Group Environmental Policy, available on the
Company’s website, aims to minimise Mediclinic’s
environmental impacts, and guides the identification
and management of all risks and opportunities
relating to water use and recycling, energy use and
conservation, emissions and climate change, and
waste management and recycling.
52
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
ENERGY EFFICIENCY
Electricity is the main contributor to our carbon
footprint and all our platforms are taking steps
to reduce their electricity consumption intensity
through the adoption of ISO 14001 management
standards, leading to improved operational effi ciency
of technical installations, introduction of various new
energy-effi cient and renewable technologies, and
changes in staff behaviour regarding energy use.
The total energy consumption per bed day has
remained stable, with a slight increase in Mediclinic
Southern Africa, and has decreased in Hirslanden
and Mediclinic Middle East. The direct and indirect
energy consumption per platform, for the periods
as specifi ed therein, is reported in the Sustainable
Development Report.
SDR
WATER USAGE
Our platforms in Southern Africa and UAE can suff er
from signifi cant water shortages, so it is critical for
the Group to monitor water consumption closely.
We also have various measures in place to minimise
water consumption, including reclaiming water,
monitoring hot water consumption and installing
water meters and control sensors.
The total water usage has increased ever so slightly
at Mediclinic Southern Africa and Hirslanden, but
decreased at Mediclinic East. The total volume of
water withdrawn from water utilities throughout
the Group, for the periods as specifi ed therein, is
reported in the Sustainable Development Report.
SDR
WASTE MANAGEMENT
Stringent protocols are followed to ensure that refuse
removal within the Group complies with all legislation,
regulations and by-laws. The Group regards the
handling of waste in an environmentally sound, legal
and safe manner as its ethical, moral and professional
duty. During the reporting period, there were no
incidents at the Group’s facilities or offi ces leading to
signifi cant spills.
MATERIAL ISSUE 5: GOVERNANCE AND CORPORATE SOCIAL
RESPONSIBILITY
KPIs
CALLS TO ETHICS LINES
Southern Africa
Switzerland
UAE
104
(2015: 148)
17
(2015: 8)
1
(2015: 1)
NO INCIDENTS OF MATERIAL NON-COMPLIANCE
WITH LAWS
CONTRIBUTION TO CSI INITIATIVES
Southern Africa R11.8m
Switzerland
(2015: R10.4m)
CHF2.5m
(2015: CHF2.1m)
UAE
AED814 000
(2015: AED740 000)
HIGHLIGHTS
• Total complaints to Ethics Line declined
• Mediclinic Southern Africa maintained level 4
BBBEE contributor status
• No incidents of material non-compliance with
laws or regulations
• Group-wide Code of Business Ethics has been
rolled out to Al Noor’s employees
• Contributed R10.5m to the South African
Department of Health’s Public Health
Enhancement Fund
ETHICS AND GOVERNANCE
Our commitment to ethical standards is set out in the
Group’s values and is supported by the Group Code
of Business Conduct and Ethics, which provides a
framework for the standards of business conduct
and ethics that are required of all business divisions,
directors and employees. The Code is available to all
staff and is included in new employee inductions. We
have also put in place a range of policies, processes
and standards to support the Group’s governance
and corporate social investment programmes.
Good progress was made to defi ne and integrate
relevant laws and potential risks in the risk registers
of the various platforms and departments during the
year. As in previous years, there were no incidents of
material non-compliance with any laws, regulations,
accepted standards or codes applicable to the
Group or fi nes against the Group during the period
under review.
MEDICLINIC ANNUAL REPORT 2016
53
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (continued)
EFFECTIVE RISK MANAGEMENT
The Group’s Enterprise-wide Risk Management
(“ERM”) policy follows the international COSO
(Committee of Sponsoring Organisations of the
Treadway Commission) framework and defines
the risk management objectives, methodology,
risk appetite, risk identification, assessment and
treatment processes, and the responsibilities of the
various risk management role-players in the Group.
The ERM policy is subject to annual review and any
amendments are submitted to the Audit and Risk
Committee for approval.
The objective of risk management in the Group
is to establish an integrated and effective risk
management framework where important and
emerging risks are identified, quantified and
managed. An ERM software application supports
the Group’s risk management process in all three
operating platforms.
Further details on the Group’s risk management
approach, as well as principal risks and uncertainties
are included in the report on Risk Management,
Principal Risks and Uncertainties in the
Annual Report.
AR
COMPLIANCE WITH LAWS AND
REGULATION
Compliance with all relevant laws, regulations,
accepted standards or codes is integral to the
Group’s risk management process and is monitored.
Good progress was made to define and integrate
relevant laws and potential risks in the risk registers
of the various platforms and departments during the
year. As in previous years, there were no incidents of
material non-compliance with any laws, regulations,
accepted standards or codes applicable to the Group
or fines against the Group during the period
under review.
BROAD-BASED BLACK ECONOMIC
EMPOWERMENT (“BBBEE”)
(SOUTH AFRICA ONLY)
Mediclinic Southern Africa is assessed annually
by an accredited verification agency against the
generic scorecard criteria set by the Department
of Trade and Industry (“dti”), the latest results of
which are available on Mediclinic Southern Africa’s
website at www.mediclinic.co.za. During the
year, the Group maintained its status as a Level 4
contributor status on the generic BBBEE scorecard,
reflecting its commitment to promoting BBBEE with
regard to procurement, ownership, socio-economic
development and enterprise development. The
score achieved during the most recent assessment
increased from 68.93 to 73.06.
CORPORATE SOCIAL INVESTMENT
(“CSI”)
The Group contributes to the well-being of the
communities within which it operates by investing
in ongoing initiatives that address socio-economic
problems or risks, and it has established Mediclinic as
an integral member of these communities, enriching
the lives of many communities throughout Southern
Africa, Switzerland and the UAE.
The Group’s corporate social investment activities
are structured around the improvement of healthcare
through training and education, sponsorships,
donations, staff volunteerism, public private initiatives
and joint ventures. Many of the Group’s initiatives
relate to providing training and to financial support
of training. Due to the socio-economic conditions in
Southern Africa, the majority of our CSI contributions
are by Mediclinic Southern Africa.
The CSI spend per platform is provided on
page 53.
AR
54
MEDICLINIC ANNUAL REPORT 2016
FINANCIAL REVIEW
STRATEGIC
REPORT
Group revenue increased by 7% to £2 107m (2015: £1 977m) for the period under review.
Underlying operating profi t 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).
Eff ective from 24 August 2015, the Group acquired a 29.9% shareholding in Spire. As Spire’s fi nancial year
end is 31 December, the income from associate was not recognised for the three months from January 2016
to March 2016. Underlying pro forma earnings were 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
£'m
£'m
£'m
Southern
Africa
£'m
Middle
East
£'m
United
Kingdom
£'m
2016 STATUTORY RESULTS
Revenue
Operating profi t
Profi t attributable to equity
holders
RECONCILIATIONS
Operating profi t
Add back:
- Other gains and losses
- Depreciation
EBITDA
One-off and exceptional items:
Transaction cost (Al Noor
acquisition)
Accelerated share-based
payment charges
Pre-acquisition Swiss tariff
provision release
Restructuring cost
Underlying EBITDA
Profi t attributable to equity
holders
One-off and exceptional items:
Transaction cost (Al Noor
acquisition)
Tax
Accelerated share-based
payment charges
Tax
Pre-acquisition Swiss tariff
provision release
Tax
Restructuring cost
Tax
Fair value gains on ineff ective
cash fl ow hedges
Tax
Other gains and losses
Tax
Underlying earnings
Weighted average number of
shares (millions)
Underlying earnings per share
(pence)
2 107
288
177
288
1
93
382
41
10
(7)
2
428
–
(44)
(50)
(44)
1
–
(43)
41
–
–
–
(2)
1 130
165
113
165
–
63
228
–
–
(7)
–
221
177
(50)
113
41
–
–
–
–
–
–
–
–
–
1
–
(8)
–
–
–
–
(7)
2
–
–
(8)
1
–
–
101
41
–
10
–
(7)
2
2
–
(8)
1
1
–
219
598.4
36.7
649
109
53
109
–
20
129
–
10
–
–
139
53
–
–
10
–
–
–
–
–
–
–
–
–
63
328
58
55
58
–
10
68
–
–
–
2
70
55
–
–
–
–
–
–
2
–
–
–
–
–
57
–
–
6
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
6
MEDICLINIC ANNUAL REPORT 2016
55
FINANCIAL REVIEW (continued)
Total
Corporate
Switzerland
£'m
£'m
£'m
Southern
Africa
£'m
Middle
East
£'m
United
Kingdom
£'m
–
2
2
2
(2)
–
–
–
–
–
2
–
–
–
–
–
–
–
–
(2)
–
–
–
–
–
–
–
–
1 044
161
124
161
(13)
55
203
–
–
203
124
–
–
–
–
(2)
–
–
–
–
–
19
(4)
(40)
–
(11)
2
88
691
137
73
137
(9)
22
150
2
(5)
147
73
2
–
(9)
1
–
–
(5)
1
–
–
–
–
–
–
–
–
63
242
45
42
45
–
8
53
–
–
53
42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
42
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
2015 STATUTORY RESULTS
Revenue
Operating profit
Profit attributable to equity
holders
RECONCILIATIONS
Operating profit
Add back:
- Other gains and losses
- Depreciation
EBITDA
One-off and exceptional items:
Impairment of property and
equipment
Profit on sale of property,
equipment and vehicles
Underlying EBITDA
Profit attributable to equity
holders
One-off and exceptional items:
Impairment of property
Tax
Insurance proceeds
Tax
Gain on disposal of subsidiary
Tax
Profit on disposal of property,
equipment and vehicles
Tax
Realised gain on foreign
currency forward contract
Tax
Ineffective cash flow hedges
Tax
Swiss tax rate charges relating
to prior years
Tax
Discount on loan repayment
Tax
Underlying earnings
Weighted average number of
shares (millions)
Underlying earnings per share
(pence)
1 977
345
241
345
(24)
85
406
2
(5)
403
241
2
–
(9)
1
(2)
–
(5)
1
(2)
–
19
(4)
(40)
–
(11)
2
193
540.3
35.8
56
MEDICLINIC ANNUAL REPORT 2016
STRATEGIC
REPORT
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 benefi ciaries 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 specifi c tariff
dispute was included in the opening accounts.
After lengthy judicial processes and a court
ruling in the 2013 fi nancial year an increased
provision was made which was excluded in the
measurement of underlying performance for the
year. The dispute has now been fi nally 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 ineff ective Swiss interest
rate swaps. The Group uses fl oating-to-fi xed
interest rate swaps on certain loan agreements
to hedge against interest movements which have
the economic eff ect of converting fl oating rate
borrowings to fi xed 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 ineff ective once
Libor is below zero as bank funding at Libor plus
relevant margins is subject to a zero rate Libor
fl oor. Eff ective from 1 October 2014, the mark-to
–market movements are charged to the income
statement. As these are non-cash fl ow items and
to provide balanced operational reporting the
Group excluded the charge in the measurement of
underlying performance in the 2015 fi nancial 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 aff ected the reported earnings and
reported balances in the statement of fi nancial
position. The impact of a 10% change in the GBP/
South African rand exchange rates for a sustained
period of one year is: profi t for the year would
increase/decrease by £7m (2015: increase/decrease
by £10m) due to exposure to the GBP/South African
rand exchange rate.
The following exchange rates were applicable during
the period:
Average rates:
Swiss franc
UAE dirham
South African rand
Period-end rates:
Swiss franc
UAE dirham
South African rand
2016
Variance
2015
1.47
5.54
20.73
1.38
5.28
21.21
(2.0%)
(6.4%)
16.3%
(4.2%)
(2.8%)
17.7%
1.50
5.92
17.82
1.44
5.43
18.02
MEDICLINIC ANNUAL REPORT 2016
57
FINANCIAL REVIEW (continued)
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.
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 ongoing 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.
Interest-bearing
Less: cash and cash
equivalents
Net debt
Total equity
Debt-to-equity capital
ratio
2016
£'m
1 841
(305)
1 536
3 570
0.4
2015
£'m
1 618
(265)
1 353
1 840
0.7
58
MEDICLINIC ANNUAL REPORT 2016
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;
• profi t/loss on sale of signifi cant assets;
• past service cost charges/credits in relation to
pension fund conversion rate changes;
• signifi cant prior year tax and deferred tax
adjustments;
• accelerated IFRS 2 charges;
• signifi cant tariff provision charges/releases;
• mark-to-market fair value gains/losses, relating to
ineff ective interest rate swaps;
• signifi cant impairment charges;
• signifi cant insurance proceeds; and
• signifi cant transaction costs incurred during
acquisitions.
The Group has consistently applied this defi nition of
underlying measures as it has reported on its fi nancial
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 defi nition 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
fi nance charges in respect of the bridge facility.
STRATEGIC
REPORT
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 fi nal 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 fi nal proposed
dividend refl ects 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 119.5244 cents
(101.5957 cents net of dividend withholding tax) per
share. The ZAR cash equivalent has been calculated
using the following exchange rate: £1:ZAR22.81, being
the 5 day average ZAR/GBP exchange rate on Friday,
20 May 2016 at 3:00pm GMT Bloomberg.
The Strategic Report, comprising pages 2 to 59, was
approved by the Board and signed on its behalf by:
AR
Edwin Hertzog
Non-executive Chairman
MEDICLINIC ANNUAL REPORT 2016
59
GOVERNANCE AND REMUNERATION
BOARD OF DIRECTORS
Dr Edwin Hertzog
Ian Tyler
Seamus Keating
Danie Meintjes
Craig Tingle
Desmond Smith
Dr Edwin Hertzog
Non-executive director and
Chairman of the Board
Appointed
15 February 2016
As a specialist anaesthetist,
Dr Edwin Hertzog was invited to
join the then Rembrandt Group
(now Remgro) in 1983 and became
the fi rst Managing Director of
Mediclinic International Limited at
its establishment during that year. In
1992 he became executive Chairman
of the Company until August 2012
when he retired from his executive
role, but remained on the Board
as non-executive Chairman. He
continues as the Chairman of
the Company subsequent to the
reverse takeover by the Company of
Mediclinic International Limited. He
continues to serve as non-executive
Deputy Chairman of Remgro and
is a past non-executive director of
the Distell, Total (SA) and Transhex
groups. He is also a past Chairman
of the Hospital Association of South
Africa as well as the Council of
Stellenbosch University and holds
the following qualifi cations:
M.B. Ch.B., M.Med., F.F.A. (SA) and
Ph.D. (honoris causa).
Dr Edwin Hertzog’s non-executive
directorships listed above qualify as
his other signifi cant commitments,
for the purposes of Provision B.3.1 of
the UK Corporate Governance Code.
Committee memberships: Investment
Committee (Chairman), Nomination
Committee, Clinical Performance and
Sustainability Committee (Chairman)
Danie Meintjes
Chief Executive Offi cer
Appointed
15 February 2016
Danie Meintjes has been the Chief
Executive Offi cer of Mediclinic
International Limited since
May 2010 and continues as the Chief
Executive Offi cer of the Company
subsequent to the reverse takeover
by the Company of Mediclinic
International Limited. He served in
various management positions in
the Remgro group, before joining
the Mediclinic Group in 1985 as
the Hospital Manager of Mediclinic
Sandton. Mr Meintjes was appointed
as a member of Mediclinic’s
Executive Committee in 1995 and
as a director in 1996. He holds
an Honours degree in Industrial
Psychology from the University of
the Free State and completed the
Advanced Management Program at
Harvard Business School.
Committee memberships:
Disclosure Committee, Investment
Committee, Clinical Performance and
Sustainability Committee
Ian Tyler
Senior Independent Director
Appointed
5 June 2013
Ian Tyler undertakes the role of
Senior Independent Director
for the Company. He served as
Chief Executive Offi cer of Balfour
Beatty plc from January 2005 to
March 2013, having been the Chief
Operating Offi cer since August 2002
and prior to that, Finance Director.
He is currently the Chairman of
Bovis Homes Group plc and Cairn
Energy plc and is a non-executive
director of BAE Systems plc. Until
14 February 2016 he was Chairman
of Al Noor Hospital Group plc
and he continues to serve as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company
of Mediclinic International Limited.
He is also Chairman of AWE
Management Limited, a joint venture
between Lockheed Martin, Jacobs
and Serco. Mr Tyler is qualifi ed as a
Chartered Accountant.
Committee memberships:
Nomination Committee (Chairman),
Audit and Risk Committee,
Disclosure Committee (Chairman),
Remuneration Committee
and Clinical Performance and
Sustainability Committee
60
MEDICLINIC ANNUAL REPORT 2016
Craig Tingle
Chief Financial Offi cer
Appointed
15 February 2016
Craig Tingle joined the Mediclinic
Group in 1990 and has a career
spanning over 25 years in the
healthcare industry in executive and
non-executive capacities. He was
appointed as the Financial Director
of Mediclinic International Limited
in 1992 and continues as the Chief
Financial Offi cer of the Company
subsequent to the reverse takeover
by the Company of Mediclinic
International Limited. After his
resignation from the position of
Financial Director in 1999, he stayed
on as a non-executive director until
2005, when he was appointed Chief
Financial Offi cer of Mediclinic’s
operations in Dubai. Mr Tingle was
appointed Chief Financial Offi cer of
Mediclinic in September 2010. He
holds a B.Sc. (Forestry) degree from
the University of Stellenbosch and
an Honours degree in Accounting
Science from the University of
South Africa. He is also a qualifi ed
Chartered Accountant with the
South African Institute of
Chartered Accountants.
As previously announced, Mr Tingle
will retire on 15 June 2016.
Committee memberships: Disclosure
Committee, Investment Committee
Seamus Keating
Independent non-executive director
Appointed
5 June 2013
Seamus Keating has over
20 years’ experience in the global
technology sector in both fi nance
and operational roles and was a
main board director of Logica plc
from 2002 until April 2012 having
joined Logica as Group Finance
Director in 1999. He was Logica plc
Chief Financial Offi cer from 2002
until 2010 when he became Chief
Operating Offi cer and head of its
Benelux operations. Prior to his role
at Logica plc, he worked for the
Olivetti Group from 1989 until 1999
in senior fi nance roles in the UK and
Italy. Mr Keating was non-executive
director and chairman of the audit
committee of Mouchel plc from
November 2010 to September 2012.
He is currently Chairman of First
Derivatives plc and a non-executive
director of BGL Group. He has been
Chairman of Mi-pay Group plc since
April 2014. He continues to serve
as an independent non-executive
director of the Company subsequent
to the reverse takeover by the
Company of Mediclinic International
Limited. He is a fellow of the
Chartered Institute of Management
Accountants.
Committee memberships:
Audit and Risk Committee,
Investment Committee
Desmond Smith
Independent non-executive director
Appointed
15 February 2016
Desmond Smith was the Chief
Executive Offi cer of the Sanlam
Group from April 1993 to December
1997 and of the Reinsurance Group
of America (South Africa) from
March 1999 to March 2005. He
is the present Chairman of both
companies. During his career he has
served on various boards. Mr Smith
was appointed as an independent
non-executive director of the
Mediclinic International Limited
in 2008 and also as the Lead
Independent Director of Mediclinic
in 2010. Mr Smith continues as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company of
Mediclinic International Limited. He
is an actuary by profession having
qualifi ed as a Fellow of the Institute
of Actuaries (London) and is a
past-president of both the Actuarial
Society of South Africa (1996)
and the International Actuarial
Association (2012).
Committee memberships:
Audit and Risk Committee
(Chairman), Nomination Committee
GOVERNANCE
AND
REMUNERATION
Alan Grieve
Nandi Mandela
Jannie Durand
Alan Grieve
Independent non-executive director
Appointed
15 February 2016
Alan Grieve worked with
Price Waterhouse & Co (now
PricewaterhouseCoopers) and Arthur
Young (now Ernst & Young) prior
to joining Compagnie Financière
Richemont S.A.’s predecessor
companies in 1986. He is a former
Director of Corporate Aff airs of
Compagnie Financière Richemont
SA, as well as non-executive director
of Reinet Investments Manager SA.
Mr Grieve holds a degree in business
administration from Heriot-Watt
University and is a member of the
Institute of Chartered Accountants.
Mr Grieve was appointed as an
independent non-executive director
of Mediclinic International Limited in
September 2012 and continues as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company of
Mediclinic International Limited.
Committee memberships:
Audit and Risk Committee,
Investment Committee
Prof Dr Robert Leu
Independent non-executive director
Appointed
15 February 2016
Robert Leu is professor emeritus of
the University of Bern in Switzerland.
Complementary to his academic
career as full professor in economics
at the Universities of St. Gallen
and Bern, Prof Leu has acted as
economic adviser to executive and
legislative bodies on all policy levels
in Switzerland and to international
institutions, in particular to the WHO,
the OECD and the World Bank. Since
1993 he has served on the Board
of Directors of various companies,
in particular Hirslanden, Arcovita
(President) and Visana (Vice
President since 2014). He is also
President of the Alliance for a Free
Health Care System in Switzerland
since 2013. Prof Leu was appointed
as an independent non-executive
director of Mediclinic International
Prof Dr Robert Leu
Trevor Petersen
Limited in 2010 and continues as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company of
Mediclinic International Limited. He
obtained both his master’s degree
and his doctorate in economics from
the University of Basel.
Committee memberships:
Nomination Committee,
Remuneration Committee
Nandi Mandela
Independent non-executive director
Appointed
15 February 2016
Nandi Mandela is a director of
Linda Masinga & Associates, a town
planning and consultancy fi rm
since 2003. Prior to that she was
employed by the Tongaat-Hulett
Group from 1992 to 1997, before
joining BP where she worked in
various sales and public aff airs
positions from 1997 to 2003.
Ms Mandela was appointed as
an independent non-executive
director of Mediclinic International
Limited in 2012 and continues as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company of
Mediclinic International Limited.
Ms Mandela holds a Bachelor’s
degree in Social Science from the
University of Cape Town, completed
the Associate in Management
programme at the University of Cape
Town and obtained a Certifi cate in
Strategic Management from the New
York New School University.
Committee memberships:
Clinical Performance and
Sustainability Committee
Trevor Petersen
Jannie Durand
Non-executive director
Appointed
15 February 2016
Jannie Durand joined the Rembrandt
group on 1 April 1996. He was
appointed as the Chief Executive
Offi cer of Remgro Limited on
7 May 2012. In his current role with
more than 19 years’ experience in
the investment industry, he acts as
non-executive director of various
companies, including, Distell Group
Limited, FirstRand Limited, Grindrod
Limited, RCL Foods Limited and
RMI Holdings Limited. Mr Durand
was appointed as a non-executive
director of Mediclinic International
Limited in June 2012 and continues
as a non-executive director of
the Company subsequent to the
reverse takeover by the Company
of Mediclinic International Limited.
He holds an Honours Degree in
Accountancy from the University
of Stellenbosch and a Masters of
Philosophy in Management Studies
from Oxford University. He is also
a qualifi ed Chartered Accountant
with the South African Institute of
Chartered Accountants.
Committee memberships:
Investment Committee,
Nomination Committee
Independent non-executive director
Appointed
15 February 2016
In 1996 Mr Petersen resigned
from the University of Cape
Town (“UCT”) to take up a
partnership in the merged fi rm of
PricewaterhouseCoopers Inc. He
served as a partner of the national
fi rm from 1997 to 2009 and served
as the Partner-in-Charge of Cape
Town and as Chairman of the
Western Cape Region. Mr Petersen
currently serves as the Chairman of
the Finance Committee of UCT. He
is an independent non-executive
director on the boards of Petmin
Ltd and Media24 (Pty) Ltd (a
subsidiary of Naspers Ltd) and is
currently the Managing Trustee of
the Woodside Village Trust. Trevor
has served professional membership
associations such as the South
African Institute of Chartered
Accountants and was elected the
Chairman of the national body in
2006 and 2007. He was appointed
as an independent non-executive
director of Mediclinic International
Limited in 2012 and continues as an
independent non-executive director
of the Company subsequent to the
reverse takeover by the Company
of Mediclinic International Limited.
He holds an Honours Degree in
Accountancy from the University of
Cape Town and is also a qualifi ed
Chartered Accountant with the
South African Institute of
Chartered Accountants.
Committee memberships:
Remuneration Committee
(Chairman), Audit and Risk
Committee, Nomination Committee
MEDICLINIC ANNUAL REPORT 2016
61
SENIOR MANAGEMENT
AS AT 31 MARCH 2016
Gert Hattingh
Dr Ronnie van der Merwe
Koert Pretorius
Dr Dirk le Roux
David Hadley
Dr Ole Wiesinger
The Group Chief Executive Officer,
Danie Meintjes, is supported
by an experienced and capable
executive management team, with
extensive industry experience and
organisational knowledge. The
continued growth of Mediclinic
is testament to the strong
management team and their
ability to successfully execute
the Group’s strategy.
The biographies of Danie Meintjes,
Chief Executive Officer, and
Craig Tingle, Chief Financial Officer
(retiring on 15 June 2016) are
provided on pages 60 to 61.
AR
Gert Hattingh
Group Services Executive
Gert Hattingh joined the Mediclinic
Group in 1991 as group accountant.
He served in various management
positions in the Mediclinic Group
and was appointed as the
Company Secretary in 2010 and
Group Services Executive in 2011.
He holds an Honours Degree in
Accountancy from the University
of Stellenbosch and completed the
Advanced Management Program at
Harvard Business School. He is also
a qualified Chartered Accountant
with the South African Institute of
Chartered Accountants.
Dr Dirk le Roux
Group ICT Executive
Dr Dirk le Roux joined Mediclinic
in August 2014 as the Group
ICT Executive. Prior to joining
Mediclinic, he served in various
managerial roles including as
Managing Director of ThinkWorx
Consulting, Chief Information
Officer at Media24, General Manager
for IT Strategy and Risk at ABSA
Bank Limited, as well as the Head
of IT at the Development Bank of
Southern Africa. He holds a DCom
(Informatics) degree from the
University of Pretoria, a Master in
Business Administration (cum laude),
a Postgraduate Diploma in Data
Metrics and a Bachelor in
Civil Engineering.
Dr Ronnie van der Merwe
Chief Clinical Officer
Dr Ronnie van der Merwe is a
specialist anaesthetist who worked
in the medical insurance industry
before joining the Group in 1999
as Clinical Manager. He established
the Clinical Information, Advanced
Analytics, Health Information
Management and Clinical Services
functions at Mediclinic, and is
currently appointed as the Mediclinic
Group’s Chief Clinical Officer since
2007. He was appointed as a director
of Mediclinic International Limited
in 2010 up to the Combination. He
holds the medical degree M.B.Ch.B
from the University of Stellenbosch,
a diploma in Anaesthetics from the
College of Anaesthetists of South
Africa (DA (SA)) and completed
the Fellowship of the College of
Anaesthetists of South Africa
(FCA (SA)). He also completed the
Advanced Management Programme
at Harvard Business School.
David Hadley
Dr Ole Wiesinger
Chief Executive Officer: Hirslanden
Dr Ole Wiesinger joined the
Hirslanden group in 2004 as
the Hospital Manager of Klinik
Hirslanden. He was appointed
as the Chief Executive Officer of
the Hirslanden group and also
served as a director of Mediclinic
International Limited from 2008 up
to the Combination. Prior to joining
Hirslanden, he served in various
management positions of the MGS-
Euromed Group in Germany from
1995 and was appointed as the Chief
Executive Officer of MGS-Euromed
Group from 2003 to 2004. He holds
a doctorate in medicine from the
University of Erlangen, Germany and
a Postgraduate Diploma in Health
Economics from the European
Business School, Germany.
Chief Executive Officer: Mediclinic
Middle East (including Al Noor)
David Hadley joined the Mediclinic
Group in 1993, and worked in a
variety of administrative roles in
human resources, finance, operations
and hospital management before
being seconded to Dubai in 2007 to
oversee the opening of Mediclinic
City Hospital. He was appointed
as the Chief Executive Officer of
Mediclinic Middle East in 2009 and
has also served as a member of
Mediclinic’s Executive Committee
since 2011. Mr Hadley holds a
Bachelor’s degree in Commerce from
the University of South Africa and
a Master in Business Administration
(with distinction) from the University
of Liverpool.
Koert Pretorius
Chief Executive Officer: Mediclinic
Southern Africa
Koert Pretorius joined the Group
in 1998 as the regional manager of
the central region of Mediclinic’s
operations in South Africa, after
which he was appointed as the Chief
Operating Officer of the Mediclinic
Group in 2003. He was appointed
as the Chief Executive Officer of
Mediclinic Southern Africa in 2008
and also served as a director of
Mediclinic International Limited
in 2006 up to the Combination.
He holds a Bachelor degree in
Accounting Science from the
University of the Free State and
a Master of Business Leadership
degree from the University of
South Africa.
62
MEDICLINIC ANNUAL REPORT 2016
CHAIRMAN’S INTRODUCTION
GOVERNANCE
GOVERNANCE
AND
AND
REMUNERATION
REMUNERATION
Throughout our three-decade history, Mediclinic has always aspired to be a highly disciplined,
well-run company, and this is refl ected in our standards of governance. Since the earliest days,
the Board has set out to lead by example. As a result, I believe that Mediclinic is respected by its
shareholders and its wider stakeholders as a thoroughly ethical and transparent business that is
focused on being the fi rst choice for patient experience and providing superior clinical outcomes.
The Combination and the premium listing on the London Stock Exchange in February 2016
necessitated some governance changes. The Board’s operations are conducted in London.
The Board and Board committees have been reconstituted and a critical review of the Group’s
governance policies has been executed.
In making these changes, we have been following the guidance of our advisors, and are seeking to
embed the highest standards of governance and reporting expected of a FTSE100 listed company.
We have also applied the main principles and complied with the relevant provisions of the UK
Corporate Governance Code, save as otherwise indicated in this report. In doing so, we continue to
focus on the performance of the Board through, for example, a thorough induction process, regular
briefi ngs, and formal evaluation surveys. Overall, I would characterise the directors as a well-
informed group of international business and healthcare experts with a strong team spirit, who
work with responsibility and effi ciency to guide Mediclinic towards its long-term strategic goals.
During 2015/16, the Board’s attention was focused on the Combination and the seamless
integration of the Al Noor operations into the Group. We have also been keen to ensure that our
investment in Spire Healthcare brings two-way benefi ts to the respective organisations. These
topics will continue to be a central focus for us in the year ahead.
At the same time, the disciplined allocation of capital is always a serious responsibility for the
Board as, in this industry, it is vital to continually invest in new facilities and technologies, whilst
maintaining our margins.
Another area of focus will be succession planning, to ensure that we continue to benefi t from a
strong, stable leadership team. In addition, we will continue to strengthen the Board by recruiting
additional independent directors from a diverse range of backgrounds. In turn, this should add to
our collective credentials, and bring more rigour to our governance.
Edwin Hertzog
Non-executive Chairman
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
63
63
CORPORATE GOVERNANCE STATEMENT
Nomination Committee. With the exception of
this appointment in terms of the relationship
agreement, the Nomination Committee considers
and recommends all other appointments to
the Board. On 7 April 2016, the Board appointed,
after consideration by the Nomination
Committee, Mr Pieter Uys as an alternate director
to Mr Jannie Durand.
The Board is currently considering further
appointments to the Board and the recruitment
for any additional appointments will be led by the
Nomination Committee, which will be considering
overall Board composition and how female
representation on the Board and diversity in
general can be increased.
iii) Provision B.6: The Board should undertake a
formal and rigorous annual evaluation of its own
performance and that of its committees and
individual directors.
Due to the timing of the Combination, an
evaluation of the Board, its Committees and
individual directors was not undertaken during
the year as the reconstituted Board and its
Committees had either only met once or not
at all prior to the financial year end. An internal
evaluation is planned for the year ahead, as
further explained on page 71.
AR
In addition to complying with applicable corporate
governance requirements in the UK in accordance
with its primary listing on the LSE, the Board is
also satisfied that the Company meets all relevant
requirements of the JSE Listings Requirements as a
result of its secondary listing on the South African
securities exchange, the JSE Limited (“JSE”).
Prior to the Combination, the Company was also
compliant with the provisions of the UK Corporate
Governance Code, except with regard to the
following, as reported on in the prospectus dated
19 November 2015 issued by the Company in relation
to the Combination:
i)
a majority of the members of the Nomination,
Remuneration and Audit and Risk Committees
were not independent non-executive directors;
ii) Ian Tyler, who was the Chairman of the Board
prior to the Combination, was also the Chairman
of the Remuneration Committee; and
iii) Ian Tyler was also a member of the Audit and
Risk Committee.
INTRODUCTION
The corporate governance disclosures in this
report set out the governance structure of
the Company prior to the Combination, whilst
known as Al Noor Hospitals Group plc; but are
predominantly focused on the Company since
the Combination on 15 February 2016, now
named Mediclinic International plc. Throughout
this report, where ongoing responsibilities and
arrangements are disclosed, it is in respect
of the Company post-Combination. The
governance structure of the Company prior to the
Combination, is materially the same as previously
disclosed in the 2014 Al Noor Annual Report and
Financial Statements.
COMPLIANCE WITH UK
CORPORATE GOVERNANCE
CODE
The Board is committed to maintaining the highest
standards of corporate governance and the highest
standards of integrity and ethics. With the exceptions
as noted below, the Company is compliant with
the provisions of the UK Corporate Governance
Code published in September 2014 by the Financial
Reporting Council (the "UK Corporate Governance
Code" or the “Code”):
i)
Provision A.3.1: the Chairman should on
appointment meet the independence criteria set
out in provision B.1.1.
Under the Code, the Company’s Chairman,
Dr Edwin Hertzog, is not considered to be an
independent director given his involvement
as Chief Executive of Mediclinic International
Limited until his appointment as Chairman, in
1992. Nonetheless, given his in-depth industry
knowledge and experience, the Board considers
it is in the best interests of the Company that he
serves as Chairman.
ii) Provision B.2.1: a Nomination Committee should
lead the process for board appointments and
make recommendations to the Board.
Appointments to the Board are recommended
by the Nomination Committee and further details
on the Committee and the appointment process
can be found on pages 100 to 103. In accordance
with the Company’s relationship agreement
with its principal shareholder, Remgro Limited
(“Remgro”), Remgro is entitled to appoint up to a
maximum of three directors to the Board.
Mr Jannie Durand represents Remgro on the
Board of Directors and was appointed by
Remgro at the time of the Combination. His
appointment was therefore not led by the
AR
64
MEDICLINIC ANNUAL REPORT 2016
BOARD STRUCTURE AND ROLES
The roles of the Chairman, CEO (and the separation
of these two roles), the non-executive directors and
the Company Secretary are outlined below.
CHAIRMAN
The principal role of the Chairman is to lead the
Board eff ectively and provide direction and focus
to its discussions. The Chairman is the guardian of
the Board’s decision-making processes and also
promotes high standards of integrity, probity and
corporate governance throughout the Group and at
Board level. He also facilitates eff ective contributions
by the non-executive directors, promotes a culture of
openness and debate, and, encourages constructive
relations between executive and non-executive
directors. Dr Edwin Hertzog works closely with
Mr Danie Meintjes, the CEO, to ensure that the
actions and strategies proposed and agreed by
the Board are implemented effi ciently.
The Chairman’s other signifi cant commitments are
indicated in his biography on page 60.
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CHIEF EXECUTIVE OFFICER (“CEO”)
Mr Danie Meintjes, as the Group CEO, leads the
management team, manages the business of the
Group, develops and oversees the implementation
of all Board approved actions, the strategic direction
of the Group and its commercial objectives. The
CEO also supports the Chairman to ensure that
appropriate governance standards are spread
throughout the Group. Mr Meintjes also oversees the
executive management team, which assists him in
carrying out management of the business. Further
details on the executive management team can be
found on page 62.
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SEPARATION OF CHAIRMAN AND
CEO ROLES
In compliance with the Code, there is a distinct
division of responsibilities between the Chairman and
the CEO, which has been agreed by the Board. The
roles are separate, and the Company has a policy
which clearly establishes the distinction between the
running of the Board and the executive responsibility
for the running of the Company’s business. The
partnership and relationship of Dr Edwin Hertzog
and Mr Danie Meintjes is based on mutual trust and
is facilitated by regular contact between the two.
The separation of authority enhances independent
oversight of executive management by the Board
and helps to ensure that no one individual on the
Board has unfettered powers or authority.
NON-EXECUTIVE DIRECTORS
The non-executive directors are suitably placed
to constructively challenge Board discussion and
decisions. They provide a strong, independent
element to the Board’s composition and support
management on the development of strategic
GOVERNANCE
AND
REMUNERATION
direction and proposals. As explained in more detail
below, the non-executive directors collectively add
independent judgement and a range of skills and
experience which contribute to Board discussion and
debate. The Board believes that the non-executive
directors bring a wide range and balance of skills and
international business experience to Mediclinic.
SENIOR INDEPENDENT DIRECTOR
(“SID”)
Mr Ian Tyler was appointed as a director and served
as Chairman to the Board of what was known as
Al Noor Hospitals Group plc from 2013, until
completion of the Combination. Following the
Combination, Mr Ian Tyler was appointed as the SID,
and in this role he principally acts as a sounding
board to the Chairman and as an intermediary for
the other directors.
Mr Ian Tyler has extensive experience with investors
and maintains an active understanding of the
Company’s major shareholders and in respect of any
concerns they may have, which he does through
face-to-face meetings. In addition, the SID receives
updates from the Executive Committee which reports
on any issues they have been made aware of by
investors and receives briefi ngs from the Company
Secretary on corporate governance issues which
relate to investors.
The SID has not yet met privately with the non-
executive directors to appraise the performance of
the Chairman, as there have only been three Board
meetings held since the Combination. The SID will
convene a private meeting by February 2017 at the
latest, which will coincide with the evaluation of the
Board and its Committees.
COMPANY SECRETARY
Capita Company Secretarial Services Limited served
as the Company Secretary of the Company prior to
the Combination and continues to do so following the
Combination. The Company Secretary is responsible
for providing guidance to the Board collectively
and to the directors individually with regard to their
duties, responsibilities and powers; and ensuring
the proper administration of the proceedings and
matters relating to the Board, the Company and the
shareholders of the Company in accordance with
applicable legislation and procedures.
The Board has unlimited access to the Company
Secretary, who advises the Board and the Board
Committees on relevant matters, including
compliance with the Group’s policies and procedures,
the Listing Rules, legislation and regulations relevant
to the Company and the UK Corporate Governance
Code and other governance standards. The Board
is of the opinion that the Company Secretary is
competent and has the requisite qualifi cations and
experience to eff ectively execute its duties.
MEDICLINIC ANNUAL REPORT 2016
65
CORPORATE GOVERNANCE STATEMENT (continued)
BOARD COMPOSITION AND
DIVERSITY
A list of the Company’s current directors, including
their biographies, who were in office during the
year and up to the date of signing the financial
statements, can be found on pages 60 to 61.
AR
Following the Combination, the Board comprises
seven independent non-executive directors, two non-
executive directors and two executive directors from
wide-ranging backgrounds and with varying industry
and professional experience. This is compliant with
the Code, which recommends that at least half the
Board should be independent. The Company
regards all of the non-executive directors other
than Dr Edwin Hertzog and Mr Jannie Durand to
be independent in character and judgement, and
therefore free from any business or other relationship
or circumstances that could potentially materially
interfere with the exercise of their respective and
collective independent judgement.
Mediclinic recognises the importance and benefits
of having a diverse Board, and believes diversity at
Board level is an essential element in maintaining a
competitive advantage. Diversity covers various skills,
regional and industry experience, background, race,
gender and other distinctions between directors.
The Board seeks to build an effective, robust,
well balanced and complementary Board, whose
capability is appropriate for the nature, complexity
and strategic demands of the business. The
Nomination Committee leads the process for Board
appointments as further detailed in the Nomination
Committee Report included in this Annual Report.
The Board and the Nomination Committee actively
consider the structure, size and composition when
contemplating succession planning for the year
ahead. They remain cognisant of the need to balance
the composition of the Board and its Committees,
and the need to refresh this progressively over time
so that the experience of existing and longer serving
directors can be complemented by new external
perspectives and insights from new appointees.
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The incumbent non-executive directors come
from a wide range of industries, backgrounds
and geographic locations and have appropriate
experience of organisations with international
reach. Whilst we recognise that the existing skills
and expertise of the current Board are extensive,
the Board intends to recruit two additional non-
executive directors during the year ahead to further
deliver a diverse range of core skills (including
financial, clinical, healthcare industry and operations
expertise) and increase female representation on the
Board. Whilst no quota regarding gender balance
is imposed, the Nomination Committee and Board
remain committed to ensuring that the business
reflects a diverse Board (including from a perspective
of ethnicity and gender), at all levels of seniority,
when considering Board appointments and internal
promotions, whilst always seeking to ensure that
each post is offered strictly on merit to the best
available candidate.
The Board’s diversity policy statement is set out on
page 66. For details on the diversity of the Group,
including a breakdown by gender, age and race
(only for purposes of South Africa) on the Board
and senior management roles see the Directors’
Report on page 120.
BOARD FUNCTIONING
HOW THE BOARD OPERATES
The Board is responsible for the effective oversight
of the Group. It also agrees the strategic direction
and governance structure that helps to achieve
the delivery of long-term success of the Company
and wider Group, and in turn to deliver value to its
investors. The full responsibilities of the Board are
outlined in the matters reserved for the Board. The
Board also delegates authority to its Committees
to carry out certain tasks on its behalf, so that it
can operate efficiently and give the right level of
attention and consideration to relevant matters.
Further information on the Committees of the
Board can be found on pages 69 to 70, and, in the
Committee reports on pages 74 and 100 to 115.
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AR
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BOARD COMPOSITION
GENDER
INDUSTRY SECTOR EXPERIENCE
1
1
9%
9%
9%
91%
27%
9%
2
18%
7
Non–executive
Chairman
Non–executive
director
Executive
directors
Independent non–
executive directors
Male
Female
66
MEDICLINIC ANNUAL REPORT 2016
28%
Academia
Finance
Healthcare
Infrastructure
Insurance
Consumer goods
GOVERNANCE
AND
REMUNERATION
BOARD PROGRAMME
The agendas for the Board meetings held since the Combination and prior to the publication of this report are
detailed below. The agendas were shaped to ensure focused consideration of our strategic priorities in the
year ahead.
FEBRUARY
APRIL
MAY
• Update on Combination
• Review of Group policies and procedures
• Review of Board Committees and
• Investor relations update in respect of UK
their composition
and South African shareholders
and budgets
• Review of strategic Group goals, objectives
• Review of fi ve-year forecasts
• Feedback on risk management
• Review of shareholder movements on the
UK and South African shareholder registers
• Review and approval of fi nancial results for
2016, as well as annual report and fi nancial
statements, notice of annual general
meeting, annual clinical services report and
annual sustainable development report
viability statement
payment to shareholders
• Recommendation of fi nal dividend
• Review of going concern and
• Re-appointment of auditor
• Review of principal risks and uncertainties
• Regulatory, legal and governance update
• Review of shareholder movements on the
• In depth clinical governance presentation
UK and South African shareholder registers
BOARD MEETING ATTENDANCE
During the period under review, the directors met face-to-face seven times prior to the Combination, and once
subsequent thereto.
The non-executive directors have the opportunity to meet without the executive directors present after each
Board meeting. Since the Combination, the Chairman met three times with the Board’s non-executive directors
after each of the three Board meetings held, without the executive directors or any executive management
team being present.
For attendance of the Board Committee meetings, please refer to the respective Committee reports which
follow this section, on pages 82, 101, 105 and 108 respectively.
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ATTENDANCE OF BOARD MEETINGS
NAME
Faisal Belhoul1
Seamus Keating
DATE OF
APPOINTMENT
DATE OF
RESIGNATION
5 June 2013
5 June 2013
21 April 2015
–
Sheikh Mansoor Bin Butti Al Hamed1 5 June 2013
15 February 2016
Mubarak Matar Al Hamiri1
5 June 2013
15 February 2016
Ahmad Nimer1
Ian Tyler
William J. Ward1
Dr Kassem Alom1
5 June 2013
5 June 2013
5 June 2013
15 February 2016
–
15 February 2016
20 June 2013
15 February 2016
Khaldoun Haj Hasan1
7 November 2013
21 April 2015
William S. Ward1
Ronald Lavater1
Jannie Durand2
Alan Grieve2
Dr Edwin Herzog2
Prof Dr Robert Leu2
Nandi Mandela2
Danie Meintjes2
Trevor Petersen2
Desmond Smith2
Craig Tingle2, 3
7 November 2013
15 February 2016
1 October 2014
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
15 February 2016
–
–
–
–
–
–
–
–
–
NUMBER OF
BOARD MEETINGS
ATTENDED PRIOR
TO COMBINATION
NUMBER OF
BOARD MEETINGS
ATTENDED AFTER
COMBINATION4
5 of 5
7 of 7
0 of 7
5 of 7
6 of 7
7 of 7
7 of 7
7 of 7
5 of 5
7 of 7
7 of 7
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1 of 1
n/a
n/a
n/a
1 of 1
n/a
n/a
n/a
n/a
n/a
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
1 of 1
1
2
These directors served during the period under review and were appointed to the entity when it was known as Al Noor Hospitals Group plc,
prior to the Combination. They retired on the date of completion of the Combination on 15 February 2016, unless retired earlier as indicated
in the table above.
These directors were appointed following completion of the Combination on 15 February 2016, all of whom are previous directors of Mediclinic
International Limited.
Craig Tingle will retire on 15 June 2016. His successor, Jurgens Myburgh, will be appointed to the Board with effect from 1 August 2016.
3
4 Two Board meetings were held since the Company’s financial year end.
MEDICLINIC ANNUAL REPORT 2016
67
CORPORATE GOVERNANCE STATEMENT (continued)
GOVERNANCE FRAMEWORK
The Board has adopted a robust corporate governance framework with clearly defined responsibilities in order
to support the Group’s strategic direction and continue to facilitate long-term shareholder value. Subsequent to
the Combination, the Board and its Committees paid focus to evaluating and assessing the policies governing
the Board and its Committees. A diagram outlining the governance framework is shown below.
BOARD
CEO
Responsible for the effective oversight of
the Company, agrees to strategic direction
of the Group, establishes the governance
structure of the Group, which help achieve
long-term success and value to shareholders
and stakeholders.
Responsible for the day-to-day management
of the Group and the implementation of the
strategies and policies adopted by the Board.
DISCLOSURE COMMITTEE
EXECUTIVE COMMITTEE
Assesses price-sensitive
information and its
disclosure. Reviews the
release of financial results
and trading updates to
the market.
Assists the CEO in the
performance of his duties
and performs any other
functions delegated to
management by the Board.
AUDIT AND RISK
COMMITTEE
REMUNERATION
COMMITTEE
Oversees internal
financial reporting,
integrity of financial
statements and
internal controls.
Determines and
agrees with
executive directors'
remuneration
and monitors
remuneration levels
of senior executives.
NOMINATION
COMMITTEE
Reviews Board's
structure, size,
composition and
recommends
appointments of
new directors.
INVESTMENT
COMMITTEE
Reviews and
recommends
proposed
investments and
capital expenditures
of the Group which
exceed set authority
levels.
CLINICAL
PERFORMANCE
AND
SUSTAINABILITY
COMMITTEE
Oversees quality
of patient care
provided by the
Group's facilities,
and monitors
the sustainable
development
performance of
the Group.
68
MEDICLINIC ANNUAL REPORT 2016
EXECUTIVE COMMITTEE
The Executive Committee is established as a
management committee and not a committee
of the Board. It is managed and overseen by the
Group CEO in support of his responsibility for the
overall management of the Company’s business.
The committee meets on a regular basis to consider,
inter alia, investment opportunities, operational
matters and other aspects of strategic importance
to the Group. They are continuously in contact with
the Group’s management teams of Southern Africa,
Switzerland and the United Arab Emirates to ensure
eff ective communication, decision-making and
execution of strategies. The terms of reference of the
Executive Committee are codifi ed setting out their
role and responsibilities, specifi cally with regard to
their authority levels, which are reviewed annually by
management and communicated to the Board. The
biographies of the Executive Committee members
are provided on page 62.
The current composition of the Executive Committee
is as follows:
AR
Danie Meintjes
Chief Executive Offi cer and Chairman of
Executive Committee
Craig Tingle1
Chief Financial Offi cer
David Hadley
Chief Executive Offi cer: Mediclinic Middle
East
Gert Hattingh
Group Services Executive
Dr Dirk le Roux
Group ICT Executive
Koert Pretorius
Chief Executive Offi cer: Mediclinic
Southern Africa
Dr Ronnie van der Merwe Chief Clinical Offi cer
Dr Ole Wiesinger
Chief Executive Offi cer: Hirslanden
(Switzerland)
DISCLOSURE COMMITTEE
The Disclosure Committee is established as a
management committee, to assist and inform the
decisions of the Board concerning the identifi cation
of price sensitive information and is responsible for
making recommendations about how and when
the Company should disclose such information.
The Committee comprises two executive directors,
one independent non-executive director and one
Executive Committee member. The Disclosure
Committee is chaired by Mr Ian Tyler. The
membership of the Committee is set out below:
Ian Tyler
Senior Independent Director and
Chairman of the Committee
Danie Meintjes
Chief Executive Offi cer
Craig Tingle1
Chief Financial Offi cer
Gert Hattingh
Group Services Executive
1
Craig Tingle will retire on 15 June 2016. His successor, Jurgens Myburgh, will be
appointed to the Board with effect from 1 August 2016.
GOVERNANCE
AND
REMUNERATION
COMMITTEES OF THE BOARD
The Board has established fi ve Committees, so that it
can delegate matters and operate eff ectively giving
full consideration to some key matters which should
be considered by and dealt with by the Board only.
The full terms of reference of each Committee of
the Board are available in the corporate governance
section of the Company’s website at
www.mediclinic.com. Reports on the role,
composition and activities undertaken during the
year of the Audit and Risk Committee, Remuneration
Committee, Nomination Committee and the Clinical
Performance and Sustainability Committee are
detailed on pages 74 to 115.
AUDIT AND RISK COMMITTEE
The Audit and Risk Committee assists the Board in
discharging its responsibilities with regard to fi nancial
reporting, external and internal audits and controls,
including reviewing and monitoring the integrity of
the Group’s annual and interim fi nancial statements.
It also reviews and monitors the Group’s relationship
with its external auditors, reviews the eff ectiveness
of the external audit process, and reviews the
eff ectiveness of the Group’s internal control review
function. The Committee comprises fi ve independent
non-executive directors and the Committee has
suffi cient relevant and fi nancial experience, in
accordance with the requirements of the Code. The
Committee is chaired by Mr Desmond Smith and
more detail on the functioning of the Committee can
be found in the Committee report on pages 107 to 115.
NOMINATION COMMITTEE
The Nomination Committee assists the Board
in discharging its responsibilities relating to the
composition and make-up of the Board and any
committees of the Board. It is also responsible for
periodically reviewing the Board’s structure and
identifying potential candidates to be appointed as
directors or committee members as the need may
arise. The Committee comprises four independent
non-executive directors and two non-executive
directors, and is in full compliance with the Code
as the majority of the Committee’s members are
deemed to be independent. The Committee is
chaired by Mr Ian Tyler and more detail on the
functioning of the Committee can be found in the
Committee report on pages 100 to 103.
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AR
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MEDICLINIC ANNUAL REPORT 2016
69
CORPORATE GOVERNANCE STATEMENT (continued)
DIRECTORATE MATTERS
APPOINTMENT AND TENURE
All non-executive directors serve on the basis of
letters of appointment which are available for
inspection at the Company’s registered office. The
letters of appointment set out the time commitment
expected of non-executive directors who, on
appointment, undertake that they will have sufficient
time to meet what is required of them.
The non-executive directors are appointed for a
term of three years, subject to earlier termination,
including provision for early termination by either
the Company or the non-executive director on three
months’ notice. In accordance with the Company’s
Articles of Association, all directors must retire by
rotation and seek re-election by shareholders every
three years. However, it is intended that the directors
will each retire and submit themselves for re-election
by shareholders annually.
DIRECTORS’ INDUCTION AND
TRAINING
The Chairman, with the support of the Company
Secretary, is responsible for the induction of new
directors and ongoing development of all directors.
The training needs of the directors are periodically
discussed at Board meetings and briefings are
arranged on issues relating to corporate governance
and other areas of importance.
Following appointment to the Board, directors
receive a comprehensive induction tailored to their
individual needs and requirements. The induction
includes face-to-face meetings with executive
management and operational site visits to provide an
understanding of the business, strategy, commercial
objectives and key risks.
The Board is kept up to date on legal, regulatory
and governance matters by the Company Secretary
who prepares papers for Board meetings, and
also by presentations from internal and external
advisers. Additional training is available on request,
where appropriate, so that Directors can update
their skills and knowledge as applicable. As part
of the Combination the directors were provided
with training in respect of their legal, regulatory
and governance responsibilities and obligations in
accordance with the UK regulatory regime.
REMUNERATION COMMITTEE
The Remuneration Committee assists the Board
in determining its responsibilities in relation to
remuneration, including making recommendations
to the Board on the Company’s policy on executive
remuneration. The Committee is responsible for
establishing the parameters and governance
framework of the Group’s remuneration policy
and determining the individual remuneration
and benefits package of each of the Company’s
executive directors and other members of executive
management. The Committee comprises three
independent non-executive directors, which is fully
compliant with the Code. The Committee is chaired
by Mr Trevor Petersen and more details on the
functioning of the Committee can be found in the
Remuneration Report on pages 74 to 99.
CLINICAL PERFORMANCE AND
SUSTAINABILITY COMMITTEE
The Board has established a Clinical Performance
and Sustainability Committee, which although not a
requirement of the Code, assists the Board in:
(i) promoting a culture of excellence in patient
safety, quality of care and patient experience, by
inter alia, monitoring the clinical performance of
the Group;
(ii) ensuring that the Group is, and remains, a good
and responsible corporate citizen by monitoring
the sustainable development performance of
the Group.
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The Committee is chaired by Dr Edwin Hertzog and
comprises two independent non-executive directors,
one non-executive director and one executive
director. More detail on the functioning of the
Committee can be found in its report on pages
104 to 106.
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INVESTMENT COMMITTEE
The Board has established an Investment Committee,
which is primarily responsible for reviewing and
making recommendations to the Board regarding
proposed investments and capital expenditures
of the Group that exceed set authority levels. The
Committee is chaired by Dr Edwin Hertzog and
meets on an ad hoc basis. The membership of the
Committee is set out below:
Dr Edwin Hertzog
Non-executive director and
Chairman of Committee
Jannie Durand
Non-executive director
Alan Grieve
Independent non-executive director
Seamus Keating
Independent non-executive director
Danie Meintjes
Chief Executive Officer
Craig Tingle1
Chief Financial Officer
1
Craig Tingle will retire on 15 June 2016. His successor, Jurgens Myburgh, will be
appointed to the Board with effect from 1 August 2016.
70
MEDICLINIC ANNUAL REPORT 2016
INDEPENDENT PROFESSIONAL
ADVICE
All directors may seek independent professional
advice in connection with their roles as directors.
All directors have access to the advice and services
of the Company Secretary. The Company has
provided for both indemnities and directors offi cers’
insurance to the directors in connection with their
duties and responsibilities.
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DIRECTOR ELECTION/RE-ELECTION
Following recommendations from the Nomination
Committee, the Board considers that all directors
continue to be eff ective, committed to their roles
and have suffi cient time available to perform their
duties. As set out in the Nomination Committee
report on page 103, and in accordance with the Code,
all of the directors appointed during the year will
be submitting themselves for election at the 2016
annual general meeting, this being their fi rst annual
general meeting since appointment. Mr Ian Tyler
and Mr Seamus Keating, who, this being their third
annual general meeting since appointment, will be
submitting themselves for re-election in accordance
with the Articles of Association, and the Code.
DIRECTORS’ CONFLICTS OF
INTEREST
In accordance with the Companies Act 2006 (the
“Act”) and the Company’s Articles of Association
(the “Articles”), the Board may authorise any matter
that otherwise may involve any of the directors
breaching his or her duty to avoid confl icts of
interest. The Board has adopted a procedure to
address these requirements, which includes the
directors completing detailed confl ict of interest
questionnaires on appointment. The matters
disclosed in the questionnaires are reviewed by
the Board following the directors appointment and
annually thereafter and, if considered appropriate,
authorised in accordance with the Act and
the Articles.
Confl icts of interest as well as any gifts and
hospitality received by and provided by directors are
kept under review by the Board.
BOARD, COMMITTEE AND
INDIVIDUAL DIRECTOR EVALUATION
The Board intends to undertake an internal
performance evaluation in order to address
the performance and eff ectiveness of it and its
Committees. Due to the timing of the Combination,
an evaluation of the Board, its Committees and
individual directors was not undertaken during the
year as the reconstituted Board and Committees
had either only met once or not at all prior to the
fi nancial year end. An internal evaluation by way of
questionnaire will be conducted next year and an
GOVERNANCE
AND
REMUNERATION
externally facilitated performance evaluation will
be conducted every three years thereafter. The SID,
who is responsible for conducting the performance
appraisal of the Chairman, intends on convening a
meeting with the non-executive directors, without
the Chairman being present, by February 2017, which
will coincide with the annual evaluation of the Board
and its Committees.
SHAREHOLDER ENGAGEMENT
Responsibility for shareholder relations rests with
the Chairman, the CEO, CFO and SID. Collectively,
they ensure that there is eff ective, regular and clear
communication with shareholders on matters such
as governance and strategy. In addition, they are
responsible for ensuring that the Board understands
the views of shareholders on matters such as
governance and strategy. The Board is supported by
the Company’s corporate brokers with whom we are
in constant dialogue. It is intended that an investor
relations programme be formally established and
which will include formal meetings with investors
to discuss the Group’s interim and fi nal results. It is
also intended that, during intervening periods, the
Company will continue its dialogue with the investor
community by meeting key investor representatives
and holding investor roadshows. The directors will
also be available at the Company’s annual general
meeting and look forward to meeting shareholders
then. Further details on how the SID engages with
shareholders are detailed on page 65. The Company
is in the process of recruiting an investor relations
specialist, who will be responsible for leading the
Company’s annual investor relations programme
which will include roadshows.
ANNUAL GENERAL MEETING (“AGM”)
The Company’s fi rst AGM since the Combination
will take place at 15:00 (UK time) on 20 July 2016
at the Rosewood London Hotel, 252 High Holborn,
London, WC1V 7EN, United Kingdom. All ordinary
shareholders have the opportunity to attend and
vote, in person or by proxy. The Notice of AGM,
can be found on the investor relations section of
the Company’s website www.mediclinic.com, and
is being posted in a separate booklet at the same
time as this report. The Notice of AGM sets out the
business of the meeting and provides explanatory
notes on all resolutions. Separate resolutions are
proposed in respect of each substantive issue.
The AGM is the Company’s principal forum for
communication with private shareholders. The
Chairman of the Board and the Chairmen of
the Board Committees, together with senior
management will be available to answer
shareholders’ questions at the AGM.
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MEDICLINIC ANNUAL REPORT 2016
71
CORPORATE GOVERNANCE STATEMENT (continued)
Compliance with all relevant laws, regulations,
accepted standards or codes is integral to the
Group's risk management process and is monitored.
The Group’s governance structure of risk
management is illustrated below.
GOVERNANCE STRUCTURE OF RISK MANAGEMENT
g
n
i
r
o
t
i
n
o
m
r
o
f
y
t
i
l
i
b
a
t
n
u
o
c
c
A
g
n
i
t
n
e
m
e
p
m
l
i
r
o
f
y
t
i
l
i
b
i
s
n
o
p
s
e
R
Board of
Directors
Responsible for our system
of corporate governance,
strategy, risk management
and financial performance
Audit
and Risk
Committee
Responsible for reviewing
and approving the adequacy
and effectiveness of our risk
management and internal
controls
Corporate
Executive
Team
Supports the CEO in
managing our business and
activities
Operating
platforms
Responsible for identifying,
assessing, implementing and
managing risks within their
businesses
ETHICS AND COMPLIANCE
Conducting business in an honest, fair and legal
manner is a fundamental guiding principle in
Mediclinic, which is actively endorsed by the Board
and management, ensuring that the highest ethical
standards are maintained in all our dealings with
stakeholders. The Group’s commitment to ethical
standards is set out in the Group’s values, and is
supported by the Company’s Code of Business
Conduct and Ethics (the “Ethics Code”) which is
available on the website at www.mediclinic.com.
The Code provides a framework of the standards of
business conduct and ethics that are required of all
business divisions, directors and employees within
the Group in order to promote and enforce ethical
business practices and standards throughout the
Group. The Code is available to all staff and also
communicated to new employees as part of the
on-boarding process.
ACCOUNTABILITY
INTERNAL CONTROLS AND
PROCEDURES
The Group has in place a comprehensive system
of internal controls, designed to ensure that risks
are mitigated and that the Group's objectives are
attained. The Board recognises its responsibilities
to present a fair, balanced and understandable
assessment of the Group’s position and prospects.
It is accountable for reviewing and approving the
effectiveness of internal controls operated by
the Group, including financial, operational and
compliance controls, and risk management. The
Board also recognises its responsibility in respect of
the Group’s risk management process and system
of internal control, and, oversees the activities of
the Group's external auditors and the Group's risk
management function which have been delegated to
the Audit and Risk Committee.
The Audit and Risk Committee assists the Board
in keeping under review the effectiveness of the
Company’s internal controls and risk management
systems, reviewing and approving the internal
controls and risk management disclosures made
by the Group and matters relating to compliance,
whistleblowing and fraud. The Board has a process in
place which, with assistance from the Audit and Risk
Committee, includes the review of internal controls
systems and risk management arrangements. This
follows the Financial Reporting Council’s Guidance
on Risk Management, Internal Control and Related
Financial and Business Reporting. A review of
the Group’s risk management approach is further
discussed in the Strategic Report on pages 24 to
29. For detail on the management and mitigation of
each principal risk see pages 24 to 26. The Group’s
viability statement is detailed on page 29 of the
Strategic Report. Please also refer to pages 107 to
115, for further detail in relation to the Audit and Risk
Committee’s role.
The Company’s Enterprise-Wide Risk Management
Policy is benchmarked against the international
Committee of Sponsoring Organisations of the
Treadway Commission framework, which defines
the risk management objectives, methodology,
process and the responsibilities of the various
risk management role-players for the Group. The
objective of risk management within the Group
is to establish an integrated and effective risk
management framework where important risks
are identified, quantified and managed in order to
achieve an optimal risk/reward profile. The use of an
integrated approach ensures that risk management
is incorporated into daily operational management
processes and therefore allows management to focus
on core activities.
AR
72
MEDICLINIC ANNUAL REPORT 2016
AR
GOVERNANCE
AND
REMUNERATION
INFORMATION SECURITY AND
CUSTOMER PRIVACY
Information security policies and controls are in
place throughout the Group regulating, inter alia, the
processing, use and protection of own and third-
party information. There were no substantiated
complaints regarding a breach of customer privacy
or loss of customer data against the Group during
the reporting period.
COMPLIANCE
Compliance with all relevant laws, regulations,
accepted standards or codes is integral to the
Group’s risk management process and is monitored.
As in previous years, there were no incidents of
material non-compliance with any laws, regulations,
accepted standards or codes applicable to the
Group or fi nes against the Group during the
reporting period.
The Corporate Governance Statement, comprising
pages 64 to 73 was approved by the Board on
25 May 2016 and signed on its behalf by:
AR
Edwin Hertzog
Non-executive Chairman
SLAVERY AND HUMAN TRAFFICKING
The Board has considered the Modern Slavery Act
2015, which aims to address slavery, servitude, forced
or compulsory labour and human traffi cking; and
introduced a new disclosure obligation requiring
the Company to publish a slavery and human
traffi cking statement for each fi nancial year of the
Company reporting on the steps the Group has taken
during the fi nancial year to ensure that slavery and
human traffi cking is not taking place. A link to the
Company’s slavery and human traffi cking statement
can be found on the home page of the Company’s
website at www.mediclinic.com.
FRAUD AND CORRUPTION
The Group adopts a no-tolerance policy with regard
to unethical business conduct, in particular also fraud
and corruption, which is addressed in the Ethics
Code and the Company’s Anti-bribery Policy. Strict
policies relating to any invitations, gifts or donations
received from suppliers or any other party, in terms
of which personnel are compelled to declare these to
management for approval, apply throughout the Group.
The Audit and Risk Committee assesses incidents of
attempted fraud or corruption throughout the Group
at each committee meeting. Depending on the nature
of an incident, the incident is investigated either
by contracted forensic investigators or by internal
audit or by management. These investigations will
determine the nature of the corrective action taken,
which may include formal criminal action against the
perpetrator and/or disciplinary action or possible
dismissal in case of employee involvement as well
as a review of the controls of the aff ected business
process area.
No new material incidents of fraud or corruption
were reported throughout the Group during the
reporting period.
COMPETITION LAWS
The Group supports and adheres to the relevant
competition and anti-trust laws applicable in the
various countries in which the Group operates. These
laws are complex and the Group has therefore issued
guidelines to its employees on competition law
compliance within their relevant jurisdiction, which
are reviewed and updated at least annually.
The South African Competition Commission is
currently undertaking a market inquiry into the
private healthcare sector in South Africa. Mediclinic
is participating in the inquiry, with the assistance of
expert competition attorneys and advocates who
guide Mediclinic through the process.
No legal action for anti-competitive, anti-trust or
similar conduct was instituted against the Group
during the reporting period.
MEDICLINIC ANNUAL REPORT 2016
73
DIRECTORS' REMUNERATION REPORT
LETTER FROM THE REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder,
In February 2016, the Combination of Mediclinic International Limited and Al Noor Hospitals Group plc by
way of a reverse takeover of Mediclinic International Limited was completed, resulting in the continued listing
of the enlarged Company, renamed to Mediclinic International plc, on the LSE and the secondary listing of
the Company on the JSE and NSX (the “Combination”). Shortly before the Combination of the businesses, a
new Directors' Remuneration Policy was put to shareholders, which was intended to serve the needs of the
combined Group, recognising the structures and governance expected of a FTSE-100 listed company. This
policy remains in place and the Remuneration Committee considers it fit for purpose. No changes are therefore
proposed to the policy, which is presented for information in the first half of this report.
The second half of this report contains information on payments and awards made, and cover the 15-month
period up to 31 March 2016 for the Company. In addition, pro forma information relating to Mediclinic
International Limited has been included in a separate section at the end.
Comment on the overall performance in the year and resulting variable pay awards are dealt with extensively in
the Remuneration Policy document that follows.
The Combination triggered the vesting of ANHG's long-term incentives (“LTI”) and the way in which these were
treated (including the performance against targets) is reported below. Vesting in respect of the Mediclinic's
incentives was also accelerated with performance being tested on 30 September 2015 as reported herein. The
vesting date of the incentive remains unchanged subject to service conditions being met. A special bonus was
also awarded to the CEO of Al Noor in connection with the transaction and the details of this are set out herein.
Following the Combination, we announced that our CFO, Craig Tingle, was to retire in June 2016. The
Committee has yet to make a final determination on how the outstanding awards held by Craig Tingle
will be treated, and will announce this at the time and in next year's Remuneration Report. Shortly before
the production of this report, we announced that Jurgens Myburgh would replace Mr Tingle. Details of his
remuneration are set out in the section dealing with the coming year.
Remuneration for 2016
In reviewing remuneration for executive directors for 2016, the Committee has adopted the following structure:
• The base compensation for the executive directors has been reviewed against the market for UK-listed
company executives operating in similar international companies. As a result, we have decided to make an
exceptional and significant increase in base compensation levels.
• The structure and quantum of the annual bonus for the executive directors is set in line with market practice,
with performance measures selected to drive alignment with shareholders’ interests. Deferral of half of
annual bonus into equity is now required, with shares held for three years.
• Performance shares will be granted annually under LTI, with vesting after three years based on earnings
per share (“EPS”) growth and relative total shareholder return (“TSR”) conditions, which we believe provide
strong alignment between the executives and shareholders. This alignment is further strengthened by share
ownership guidelines.
The Committee believes these structures are appropriate for the Company and are in the best interests of
shareholders. We look forward to your support for the Remuneration Report.
Trevor D Petersen
Chairman of the Remuneration Committee
25 May 2016
74
74
MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
The approach to disclosure in this Remuneration
Report is to show results for the period
1 January 2015 to 31 March 2016 for the entity
Mediclinic International plc ("MIP"), including
the period it was formerly known as Al Noor
Hospitals Group plc ("ANHG"). ANHG became
known as MIP from 15 February 2016 as a result
of the Combination.
Additionally, appended are the remuneration
of the former directors of Mediclinic International
Limited ("MIL") who are now directors of MIP for
the period 1 April 2015 to 15 February 2016 for
the entity MIL together with results for the period
15 February 2016 to 31 March 2016 for MIP to
show a 12-month pro forma period for MIL and
the combined entity MIP.
Benefi ts and
pension
Service contracts
GOVERNANCE
AND
REMUNERATION
Previously ANHG had no Group-
wide pension scheme, but did allow
for an end-of-service gratuity as
required by UAE Labour Law. The
new policy allows for a defi ned
pension contribution scheme, under
which whereby directors can receive
a Company contribution up to 10%
of salary.
Some changes were made to the
benefi ts provided under the policy.
Previously the ANHG policy allowed
for private medical insurance, use
of a company car and driver, car
insurance, private fuel card, airfare
tickets and housing and utility
expenses. See policy table
on pages 76 to 78 for benefi ts
provided for under the new policy.
The executive directors'
notice periods may be up to
12 months (previously no more than
six months).
AR
DIRECTORS’ REMUNERATION
POLICY
At the ANHG general meeting held in
December 2015, 98.6% of shareholders approved
a revised Remuneration Policy. The policy was
developed taking into account the principles of the
UK Corporate Governance Code and takes account
of the views of major shareholders and proxy
agencies, as expressed during previous engagement
on remuneration matters.
There is no requirement to hold a vote on the policy
in 2016, since no changes are proposed to that
previously approved. The policy is set out below for
information only. The remuneration scenarios on
page 79 have been updated, as have details of the
executives' service contracts.
AR
POLICY CHANGES APPROVED IN
DECEMBER 2015 COMPARED TO THE
ANHG 2014 APPROVED POLICY
Annual short-term
incentive (“STI”)
The portion of the STI which is
deferred is at the discretion of
the Committee (previously 50%
was specifi ed).
Long-term incentive
plan (“LTIP”)
Flexibility was introduced to vary
the weightings of the EPS and TSR
components (previously the policy
specifi ed 50% of the awards to be
subject to EPS and 50% subject to
TSR). The new policy allows for the
introduction of a broader range of
companies in the TSR comparator
group(s). Weighting of EPS and TSR
measures has not been specifi ed
(previously the policy allowed only
for 50% of the awards to be subject
to EPS and 50% subject to TSR).
The new policy allows for more
fl exibility with regards to the TSR
comparator groups.
The changes made to the policy provide increased
fl exibility in a number of areas; however, in general
the Committee has not sought to use this fl exibility
in practice, as will be seen from the proposed
remuneration for 2016/17.
POLICY OVERVIEW
The Committee is responsible, on behalf of the
Board, for establishing appropriate remuneration
arrangements for the executive directors and other
senior management in the Group.
In setting the Remuneration Policy for the executive
directors, the Committee will ensure that the
structures are in the best interest of both the Group
and its shareholders, by taking into account the
following general principles:
• To lead our chosen markets in medical quality
by attracting, retaining and motivating the best
person for each position, without paying more
than is necessary.
• To ensure total remuneration packages are simple
and fair in design so that they are valued by
participants.
• To ensure that the fi xed element of remuneration
is determined in line with local market rates, taking
account of individual performance, responsibilities
and experience; and that a signifi cant proportion
of the total remuneration package is linked to
fi nancial rewards.
• To balance performance pay between the
achievement of fi nancial performance objectives
and delivering sustainable stock market out-
performance; creating a clear line of sight
between performance and reward and providing
a focus on sustained improvements in profi tability
and returns.
• To provide a signifi cant proportion of performance-
linked pay in shares allowing senior management
to build shareholding in the business and therefore,
aligning management with shareholders’ interests
and the Group's performance, without encouraging
excessive risk taking.
MEDICLINIC ANNUAL REPORT 2016
75
DIRECTORS' REMUNERATION REPORT (continued)
CONSIDERATION OF SHAREHOLDER VIEWS
The Company is committed to maintaining good communications with investors. The Committee considers the
annual general meeting to be an opportunity to meet and communicate with shareholders, giving investors
the opportunity to raise any issues or concerns they may have. In addition, the Committee will seek to engage
directly with major shareholders and their representative bodies should any material changes be made to the
Directors' Remuneration Policy.
SUMMARY OF THE DIRECTORS' REMUNERATION POLICY
The following table sets out the key aspects of the Directors' Remuneration Policy.
ELEMENT
OF PAY
BASE
COMPENSATION1
PURPOSE
AND LINK TO
STRATEGY
• To attract, retain
and motivate
talented
individuals who
are critical to the
Group's success
ANNUAL STI3
• To encourage
and reward
delivery of the
Group's annual
financial and
operational
objectives
• To encourage
share ownership
and provide
further
alignment with
shareholders
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• There is no
• Not applicable
prescribed maximum
annual increase.
The Committee
takes into account
remuneration levels
in comparable
organisations in
the geographies in
which the Company
operates and in
which it competes for
talent. It is guided by
the increase for the
workforce generally.
• On occasion, it
may also recognise
other factors
such as additional
responsibility, or an
increase in the scale
or scope of the role
• Maximum
opportunity of
150% of base
compensation
• At least 75% of the
STI will be based
on Group financial
performance2
• Performance below
threshold results
in zero payment.
Payments increase
from 0% to 100%
of the maximum
opportunity for levels
of performance
between threshold
and maximum
performance targets
• Reviewed annually
by the Committee
or, if appropriate,
in the event of
a change in an
individual's position
or responsibilities
• Base compensation
levels set to reflect
the experience and
capabilities of the
individual as well as
the scope and scale
of the role
• Increases to base
compensation may
reflect individual
performance as
well as the pay and
conditions in
the workforce
• Performance targets
are reviewed annually
by the Committee
and are set to ensure
they are linked to
strategic objectives
and are appropriately
demanding, taking
into account
economic conditions
and risk factors
• A portion of the
bonus paid (the
amount at the
discretion of the
Committee) may
be deferred in
shares, which are
released ratably
over two years,
subject to continued
employment
• Dividends that accrue
on the deferred
shares during the
vesting period may
be paid in cash or
shares at the time of
vesting
• Clawback2 provisions
will apply for
overpayments due
to misstatement
or error and other
circumstances in
respect of future
bonus payments
and also apply to
previous payments
made under the
ANHG bonus scheme
76
MEDICLINIC ANNUAL REPORT 2016
ELEMENT
OF PAY
LTIP4
PURPOSE
AND LINK TO
STRATEGY
• To balance
performance
pay between
the achievement
of fi nancial
performance
objectives
and delivering
sustainable stock
market out-
performance
• To encourage
share ownership
and provide
further
alignment with
shareholders
PENSION/
RETIREMENT
BENEFITS
BENEFITS
• To help recruit
and retain
high-performing
executives
• To provide
employees
with long-
term savings
via pension
provisions
• To provide
a market-
competitive
level of benefi ts
to ensure the
executive
directors' well-
being
GOVERNANCE
AND
REMUNERATION
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• Annual awards
of conditional
shares with vesting
dependent on
the achievement
of performance
conditions over a
three-year period
• Performance
targets are reviewed
annually by the
Committee and are
set appropriate to
the economic outlook
and risk factors
prevailing at the
time, ensuring that
such targets remain
challenging in the
circumstances, whilst
remaining realistic
enough to motivate
and incentivise
management
• Dividends that accrue
during the vesting
period may be paid in
cash or shares at the
time of vesting, to
the extent that
shares vest
• Clawback2
provisions apply for
overpayments due
to misstatement
or error and other
circumstances
• Participation into a
defi ned contribution
pension scheme
• Benefi ts may include
but are not limited to:
– private medical
insurance
– death and
disability
insurance
– leave and long
service awards
• Other ancillary
benefi ts, including
relocation and
travel expenses,
may be off ered, as
required, including
an allowance towards
reasonable fees for
professional services
such as legal, tax and
fi nancial advice
• Maximum
opportunity of
200% of base
compensation
• Performance is
assessed against
EPS growth and
relative TSR metrics,
which are measured
independently4
• No more than 25% of
an award will vest for
achieving threshold
performance,
increasing pro
rata to full vesting
for achievement
of maximum
performance targets
• Directors can
receive a Company
contribution (of up to
10% of salary)
• Not applicable
• Actual value of
benefi ts provided
• Not applicable
MEDICLINIC ANNUAL REPORT 2016
77
DIRECTORS' REMUNERATION REPORT (continued)
ELEMENT
OF PAY
NON-EXECUTIVE
DIRECTORS' FEE
PURPOSE
AND LINK TO
STRATEGY
• Set to attract,
retain and
motivate
talented
individuals
through the
provision
of market
competitive
fees
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• Reviewed periodically
by the Committee
or, if appropriate,
in the event of
a change in an
individual's position
or responsibilities
• Fee levels are
set by reference
to market rates,
responsibility and
time commitments
and the pay and
conditions in the
workplace
• N/A
• As for the executive
directors there is no
prescribed maximum
annual increase. The
Committee is guided
by the general
increase for the
broader workforce,
but on occasion
may recognise an
increase in certain
circumstances,
such as assumed
additional
responsibility or an
increase in the scale
or scope of the role
Notes:
1
2
3
Base compensation may include base salary plus fixed cash allowances, which are a normal part of the fixed remuneration package for
employees in some countries in which the Company operates.
There are no malus provisions as the Company believes that the current clawback provisions appropriately address the risk of non-payment.
The Annual STI is focused predominantly on key financial performance indicators, to reflect how successful the Group has been in managing
its operations. The balance is determined on how well the executive directors performed against annual Group operational targets including
measures of clinical excellence.
The current executive directors STI is calculated on the combined financial EBITDA performance of the three Platforms, weighted relative to their
respective EBITDA contribution. The threshold and stretch targets are based on a percentage of the respected approved budgeted EBITDA.
4 The LTIP incentive rewards significant long-term returns to shareholders and long-term financial growth.
Targets are set on sliding scales that take account of internal strategic planning and external market expectations for the Company. Only modest
rewards are available for achieving threshold performance with maximum rewards requiring substantial out-performance of challenging strategic
plans approved at the start of each year or on the date of award, as the case may be.
The Committee operates LTI arrangements for the executive directors in accordance with their respective rules, the Listing Rules and the rules of
relevant tax authorities where relevant. The Committee, consistent with market practice, retains discretion over a number of areas relating to the
operation and administration of the plans. These include (but are not limited to) the following:
• Who participates;
• The timing of the grant of award and/or payment;
• The size of an award (up to plan limits) and/or a payment;
• Discretion relating to the measurement of performance in the event of a change of control or reconstruction;
• Determination of a good leaver (in addition to any specified categories) for incentive plan purposes;
• Adjustments required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); and
• The ability to adjust existing performance conditions for exceptional events so that they can still fulfil their original purpose.
The relative weights between TSR and EPS are determined annually by the Remuneration Committee. For the current reporting period TSR and
EPS carried a weight of 50% respectively. For the 2016/2017 allocations EPS weight is 60% and TSR 40%.
PREVIOUS AWARDS
Authority was given to the Company to honour any commitments entered into with current or former directors
before they became a director (such as, the vesting or exercise of past share awards) or before this policy
came into effect, including those granted by companies in the Group prior to that company becoming part of
the Group. For example, certain directors continue to hold awards granted under the terms of the Mediclinic
Forfeitable Share Plan.
THE COMMITTEE CONSIDERS PAY AND EMPLOYMENT CONDITIONS OF
EMPLOYEES IN THE GROUP WHEN DETERMINING EXECUTIVE DIRECTORS’
REMUNERATION POLICY
When considering the executive directors' remuneration structure and levels, the Committee reviews base
compensation and STI arrangements for the management team, to ensure that there is a coherent approach
across the Group. The STI arrangements operate on a similar basis across the senior management team. The
key difference in the policy for executive directors is that remuneration is more heavily weighted towards long-
term variable pay than other employees. This ensures that there is a clear link between the value created for
shareholders and the remuneration received by the executive directors.
The Committee does not formally consult with employees in respect of the design of the executive director
Remuneration Policy, although the Committee will keep this under review.
78
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
REMUNERATION SCENARIOS FOR THE EXECUTIVE DIRECTORS
The total remuneration for each of the executive directors that could result from the remuneration policy in
2016/2017 is shown below under three diff erent performance levels – below threshold (when only fi xed pay
is receivable), on target and maximum. The chart highlights that the performance-related elements of the
package comprise a signifi cant portion of total remuneration at on-target and maximum performance.
Remuneration is earned in pounds sterling (GBP) and South African rand (ZAR). The ZAR portion of the
remuneration package is translated into GBP at a rate of £1: ZAR20.73.
EXECUTIVE DIRECTOR REMUNERATION (£’000)
£2 157
44%
33%
£1 545
40%
27%
£510
100%
33%
27%
£343
Fixed Pay
STI
LTIP
£1 243
38%
£1 243
38%
£906
34%
28%
£906
34%
34%
34%
£343
28%
100%
38%
28%
100%
38%
28%
Maximum
Target
Minimum
Danie Meintjes, Chief Executive Officer
Target
Minimum
Craig Tingle, Chief Financial Officer
Maximum
Minimum
Maximum
Target
Jurgens Myburgh, Chief Financial Officer
Assumptions:
1 Salary levels applying as at 1 April 2016.
2 The value of taxable benefi ts is based on the expected cost in the year ended 31 March 2017 of benefi ts and
cash allowances.
3 The value of pension contribution is based on a Company contribution of 9% of salary.
4 Minimum performance assumes no award is earned under the STI plan and no vesting is achieved under the
LTIP; at on-target, 60% of a maximum bonus is earned under the STI plan and 65% of a maximum bonus is
achieved under the LTIP; and at maximum full vesting under both plans.
5 Share price movement and dividend accrual have been excluded from the above analysis.
MEDICLINIC ANNUAL REPORT 2016
79
DIRECTORS' REMUNERATION REPORT (continued)
DIRECTORS' RECRUITMENT AND
PROMOTIONS
The policy on the recruitment or promotion of an
executive director takes into account the need to
attract, retain and motivate the best person for each
position, while at the same time ensuring a close
alignment between the interests of shareholders
and management.
If a new executive director were appointed, the
Committee would seek to align the remuneration
package with the Remuneration Policy approved by
shareholders, save that there would be discretion
to award a combined STI and LTIP of up to 400%
of base compensation inclusive of potential buyout
rewards. Flexibility would be retained to set base
compensation at the level necessary to facilitate
the hiring of candidates of appropriate calibre in
external markets and make awards or payments
in respect of deferred remuneration arrangements
forfeited on leaving a previous employer. In terms of
remuneration to compensate for forfeited awards, the
Committee would look to replicate the arrangements
being forfeited as closely as possible and in doing so,
would take account of relevant factors including the
nature of the deferred remuneration, performance
conditions and the time over which they would have
vested or been paid. The face and/or expected values
of the award(s) offered will not materially exceed the
value ascribed to the award(s) foregone.
For an internal appointment, any incentive amount
awarded in respect of a prior role may be allowed
to vest on its original terms, or adjusted as relevant
to take into account the appointment. Any other
ongoing remuneration obligations existing prior to
appointment may continue.
The Committee may also agree that the Company
will meet certain relocation and incidental expenses
as appropriate.
For the appointment of a new Chairman or non-
executive director, the fee arrangement would be
set in accordance with the approved Remuneration
Policy at that time.
DIRECTORS' SERVICE AGREEMENTS
AND PAYMENTS FOR LOSS OF
OFFICE
The Committee seeks to ensure that contractual
terms of the executive director's service agreement
reflect best practice. It is the Company’s policy that
all executive directors have rolling contracts that can
be terminated by the employee in line with his
service agreement.
The revised service agreements of the current and
future executive directors are terminable on six
months' notice, a change effective from the date of
the Combination.
In circumstances of termination on notice, the
Committee will determine an equitable compensation
package, having regard to the particular
circumstances of the case. The Committee may
require notice to be worked or to make payment
in lieu of notice or to place the director on garden
leave for the notice period. Such a decision would be
made to ensure the protection of the Company’s and
shareholders’ interests.
In case of payment in lieu or garden leave, salary,
benefits and end of service gratuity will be paid
for the period of notice served on garden leave or
paid in lieu. If the Committee believes it would be in
shareholders’ interests, payments would be made in
phased instalments and in the case of payment
in lieu will be subject to be offset against
earnings elsewhere.
An STI payment may be made in respect of the
period of the incentive year worked by the director;
there is no provision for an amount in lieu of bonus
to be payable for any part of the notice period not
worked. The bonus payment will be scaled back pro
rata for the period of the incentive year worked by
the director and would remain payable at the normal
payment date.
Shares under the deferred STI and LTI arrangements
are subject to the rules which contain discretionary
provisions setting out the treatment of awards
80
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
NON-EXECUTIVE DIRECTORS’ TERMS
OF ENGAGEMENT
Non-executive directors are appointed by letter of
appointment for an initial period of three years, which
are terminable by three months' notice on either
side. However, the Company intends on complying
provision B.7.1 of the UK Corporate Governance Code
and accordingly all directors will stand for annual
re-election by shareholders at future annual general
meetings until the Board determines otherwise.
All non-executive directors, except for
Dr Edwin Hertzog and Mr Jannie Durand were
considered to be independent of the Company.
The dates of the terms of engagement of the non-
executive directors are:
Dr Edwin Hertzog
15 February 2016
Desmond Smith
15 February 2016
Ian Tyler
15 February 2016
Seamus Keating
Trevor Petersen
Nandi Mandela
15 February 2016
15 February 2016
15 February 2016
Prof Dr Robert Leu
15 February 2016
Alan Grieve
15 February 2016
Jannie Durand
15 February 2016
All the non-executive directors listed above,
excluding Ian Tyler and Seamus Keating, previously
served on the Board of MIL. At the time of the
Combination they resigned from the Board of MIL
and were appointed as directors of MIP pursuant to
letters of appointment on terms in line with those
above. Ian Tyler and Seamus Keating previously
served on the Board of ANHG and also signed
new letters of appointment at the time of
the Combination.
where a participant leaves for designated reasons
(i.e. participants who leave early on account of
injury, disability or ill health, death, a sale of their
employer or business in which they were employed,
statutory redundancy, retirement or any other
reason at the discretion of the Committee). In these
circumstances a participant's awards will not be
forfeited on cessation of employment and instead
will continue to vest on the normal vesting date or
earlier at the discretion of the Committee, subject to
the performance conditions attached to the relevant
awards. The awards will, other than in exceptional
circumstances, be scaled back pro rata for the period
of the incentive year worked by the director.
In addition to the above payments, the Committee
may make any other payments determined by
a court of law in respect of the termination of a
director's contract. The Company may, however
terminate the contract of any executive director
summarily in accordance with the terms of their
service agreement.
In the event of a change of control, all unvested
awards under the deferred STI and LTI arrangements
would vest, to the extent that any performance
conditions attached to the relevant awards have been
achieved. The awards will, where the Committee
dictates, be scaled back pro rata for the period of the
incentive year worked by the director.
Executive directors may, on nomination from
Mediclinic, take on outside appointments, however all
fees will be retained by the Company.
The dates of the executive directors' service
contracts are:
Danie Meintjes
01 April 2016 – Joined Group 01/08/1981
Craig Tingle
01 April 2016 – Joined Group 01/02/2006
The service contracts are available for inspection
during normal business hours at the Company's
registered offi ce, and available for inspection at the
annual general meeting.
MEDICLINIC ANNUAL REPORT 2016
81
DIRECTORS' REMUNERATION REPORT (continued)
DIRECTORS’ ANNUAL
REMUNERATION REPORT
This part of the report has been prepared in
accordance with Part 4 of The Large and Medium-
sized Companies and Groups (Financial Statements
and Reports) (Amendment) Regulations 2013 and
9.8.6R of the Listing Rules. The Annual Report on
Remuneration will be put to an advisory shareholder
vote at the 2016 annual general meeting. Certain
specified information on pages 84 to 89 has
been audited.
AR
Information contained in this section relates to
ANHG for the period from 1 January 2015 up to the
date of the Combination (15 February 2016), and
to MIP from the Combination to 31 March 2016. A
separate section which follows this report describes
the arrangements for MIL for the period from
1 April 2015 to 31 March 2016. This additional
disclosure is provided for information only and does
not form part of this report for the purposes of the
reporting regulations. Furthermore, due to an overlap
in the reporting periods; it includes some payments
which are also disclosed in this main section of this
report. Providing this pro forma this information
is intended to provide shareholders with clear
information about the remuneration of MIL directors
appointed to the MIP Board for the financial year
ended 31 March 2016.
RESPONSIBILITIES OF THE
COMMITTEE
The Committee is responsible for determining and
agreeing with the Board the policy on executive
REMUNERATION COMMITTEE MEETING ATTENDANCE
directors' remuneration, including setting the over-
arching principles, parameters and governance
framework and determining the initial remuneration
package of each executive director. In addition,
the Committee monitors the structure and level
of remuneration for the senior management
team and is aware of pay and conditions in the
workforce generally. The Committee also ensures full
compliance with the UK Corporate Governance Code
in relation to remuneration.
MEMBERS AND ACTIVITIES OF THE
COMMITTEE
The Committee members prior to the Combination
(ANHG) were Ian Tyler (Chairman), Seamus Keating
and, up to his resignation on 22 April 2015,
Faisal Belhoul. Following the Combination, the
Committee members were Trevor Petersen
(Chairman), Robert Leu and Ian Tyler. All members
were independent non-executive directors, save
Ian Tyler, who was non-executive Chairman before
the Combination but considered independent
thereafter. Following the Combination, Jannie Durand
attends Committee meetings at the invitation of the
Committee, but is not a voting member.
None of the Committee members have day-to-day
involvement with the business, nor do they have any
personal financial interest, except as shareholders,
in the matters to be recommended. The Company
Secretary acts as Secretary to the Committee. The
number of formal meetings held during the period
under review and the attendance by each member is
shown in the table below. The Committee also held
informal discussions as required.
NAME
ROLE
NUMBER OF ANHG
COMMITTEE MEETINGS
ATTENDED PRIOR TO THE
COMBINATION (01/01/2015 –
15/02/2016)
NUMBER OF MIP COMMITTEE
MEETINGS ATTENDED
AFTER THE COMBINATION
(15/02/2016 – 31/03/2016)4
Ian Tyler
Senior Independent Director
2 of 2
Trevor Petersen1
(Committee Chairman)
Independent non-executive
director
Seamus Keating2
Independent non-executive
director
Faisal Belhoul3
Non-executive director
Prof Dr Robert Leu1
Independent non-executive
director
n/a
2 of 2
2 of 2
n/a
1 of 1
1 of 1
n/a
n/a
1 of 1
AR
1 Appointed following the Combination on 15 February 2016. Their biographies can be found on page 61 of the report.
2
Following the Combination, Seamus Keating continued to serve as a director of the Company, but no longer as a member of the
Remuneration Committee.
3 Faisal Belhoul resigned as a director and a member of the Committee on 21 April 2015.
4 One Committee meeting was held since the Company’s financial year end.
82
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
EXTERNAL ADVICE RECEIVED
During the 15-month period to 31 March 2016, the ANHG and MIP Committees received independent advice on
remuneration matters from New Bridge Street (“NBS”), a trading name of Aon plc. NBS was selected through
a competitive tendering process at the time of the initial public off ering of ANHG and their appointment has
been reviewed annually by the ANHG Committee and again following the Combination. The Committee remains
of the opinion that NBS remains independent and provides robust and objective advice. NBS is a member of
the Remuneration Consultants Group and adheres to the Voluntary Code of Conduct in relation to executive
remuneration consulting in the UK. The fees paid to NBS for advice to the Committees for the 15-month period
to 31 March 2016, based on time charges for work completed, were £222 538. No additional fees were paid by
the Company to NBS in respect of other services.
SHAREHOLDER VOTING AT AGM
The Policy Report was put to a binding shareholder vote at the ANHG general meeting held on 15 December 2015.
At the same meeting, a resolution was approved to pay a special bonus to the CEO. At the previous AGM, the
2014 Annual Report on Remuneration was put to an advisory shareholder vote.
At last year’s ANHG annual general meeting held on 12 May 2015, the following votes were received from shareholders:
FOR
%
AGAINST
%
WITHHELD
TOTAL
Remuneration Report
95 193 433
99.63
348 867
0.37
496 231
95 542 300
At the ANHG general meeting held on 15 December 2015, the following votes were received from shareholders:
FOR
%
AGAINST
%
WITHHELD
TOTAL
Remuneration Policy
85 445 949
98.62
1 194 996
1.38
0
86 640 945
CEO special bonus
54 533 333
63.61
31 192 548
36.39
915 064
86 640 945
MEDICLINIC ANNUAL REPORT 2016
83
DIRECTORS' REMUNERATION REPORT (continued)
DIRECTORS' REMUNERATION EARNED IN THE 15-MONTH PERIOD TO
31 MARCH 2016 AT MEDICLINIC INTERNATIONAL PLC (FORMERLY AL NOOR
HOSPITALS GROUP PLC) (AUDITED)
The table below summarises the directors' remuneration received in the 15-month period to 31 March 2016 for
directors serving on the Boards of ANHG and MIP. The comparative figures for the previous financial year are
the 12-month period to 31 December 2014, as disclosed in the 2014 Directors’ Remuneration Report for ANHG.
SALARY
AND
FEES
£000
BENEFITS
£000
ANNUAL
BONUS
£000
LONG-TERM
INCENTIVES
£000
PENSION
£000
OTHER
£000
TOTAL
REMUNERATION
£000
42
12
0
0
0
0
155
22
38
0
22
0
EXECUTIVE DIRECTORS
Ronald Lavater1
2015/16
583
2014
129
Danie Meintjes2
2015/16
2014
37
0
Craig Tingle2
2015/16
28
2014
0
NON-EXECUTIVE CHAIRMAN
Ian Tyler3
2015/16
239
2014
200
Edwin Hertzog3
2015/16
2014
NON-EXECUTIVE DIRECTORS
Dr Kassem Alom4
2015/16
2014
Seamus Keating3
2015/16
2014
William J. Ward5
2015/16
Mubarak Matar Al
Hamiri5
2014
2015/16
2014
William S. Ward5
2015/16
Sheikh Mansoor
Bin Butti5
Ahmad Nimer5
Faisal Belhoul5
Khaldoun Haj
Hasan5
2014
2015/16
2014
2015/16
2014
2015/16
2014
2015/16
2014
31
0
101
318
100
80
84
75
73
65
73
65
0
0
0
0
0
0
0
0
84
MEDICLINIC ANNUAL REPORT 2016
960
57
1 070
2 867
0
0
0
0
0
0
3
0
3
0
7
0
0
0
0
170
79
0
53
0
239
200
31
0
101
318
100
80
84
75
73
65
73
65
0
0
0
0
0
0
0
0
GOVERNANCE
AND
REMUNERATION
SALARY
AND
FEES
£000
BENEFITS
£000
ANNUAL
BONUS
£000
LONG-TERM
INCENTIVES
£000
PENSION
£000
OTHER
£000
TOTAL
REMUNERATION
£000
Desmond Smith3
2015/16
2014
Trevor D Petersen3
2015/16
2014
Nandi Mandela3
2015/16
Robert Leu3
Alan Grieve3
Jannie Durand3
2014
2015/16
2014
2015/16
2014
2015/16
2014
9
0
11
0
8
0
9
0
10
0
8
0
Non-Executive
Director Total
2015/16
755
2014
803
9
0
11
0
8
0
9
0
10
0
8
0
755
803
1
2
3
4
5
Ronald Lavater's remuneration includes payments for the period 1 January 2015 – 15 February 2016 when he held the role
of CEO of ANHG. His remuneration was set in US dollars (USD) and is reported in pound sterling (GBP) using an exchange
rate of £1: USD1.45. Mr Lavater's reported bonus payment includes his 2015 annual bonus; a special bonus relating to the
Combination, which is described in this report included under "other" payments.
Danie Meintjes and Craig Tingle's remuneration includes payments for the period 15 February – 31 March 2016 when they
held the roles of CEO and CFO of MIP. Their remuneration is paid in South African rand (ZAR) and reported in GBP using
an exchange rate of £1: ZAR20.73. The annual bonus if a pro rated amount of 46 days for the period 15 February 2016 to
31 March 2016. Full details of their annual bonuses are disclosed as part of the pro forma statement of Directors’ remuneration.
Ian Tyler and Seamus Keating's remuneration consists of the period 1 January 2015 – 31 March 2016 and relates to their roles
at both ANHG and MIP. Edwin Hertzog, Desmond Smith, Trevor D Petersen, Nandi Mandela, Robert Leu, Alan Grieve and
Jannie Durand's remuneration consists of the period after Combination and until 31 March 2016. They are paid in GBP.
Dr Kassem Alom's remuneration includes payments for the period 1 January 2014 – 1 October 2014 when he held the role of
CEO of ANHG as well as the period 1 January 2015 – 15 February 2016, when he held the role of Vice Chairman of ANHG. His
remuneration is paid in UAE dirhams (AED) and reported in GBP using an exchange rate of £1: AED5.95 for 2014 and
£1: AED5.32 for 2016.
William J. Ward, Mubarak Hamiri, William S. Ward served as non-executive Directors at ANHG for the period 1 January 2015
to 15 February 2016 . Sheikh Mansoor Bin Butti, Ahmad Nimer, Khaldoun Haj Hasan and Faisal Belhoul (all of whom were
shareholder representatives) received no payment from the Company for their services as a director in the period
1 January 2015 – 15 February 2016. Faisal Belhoul stepped down from his position on 22 April 2015.
MEDICLINIC ANNUAL REPORT 2016
85
DIRECTORS' REMUNERATION REPORT (continued)
The sections below provide further detail of the
remuneration shown in the table on pages 84 to 85.
AR
SALARIES FOR 2015/16 (AUDITED)
Ronald Lavater's salary during the period up to the
Combination was USD750 000 per annum.
AR
Danie Meintjes and Craig Tingle's salary in the table
on pages 84 to 85 reflects a pro rated amount for
their salaries in the period from the Combination to
31 March 2016. Their salaries for the period were
R762 000 and R570 847 respectively. All numbers
have been converted to pounds sterling.
BENEFITS FOR 2015/16 (AUDITED)
Ronald Lavater's benefits included private medical
insurance, the use of a company car and a driver, car
insurance, private fuel card, airfare tickets, housing
and utility expenses.
Danie Meintjes and Craig Tingle's benefits include
private medical insurance.
DIRECTORS' PENSION ENTITLEMENT
(AUDITED)
ANHG did not operate a pension scheme and
accordingly no element of remuneration was
pensionable. Retirement benefits were, however,
provided in accordance with the local labour law
of the UAE. The value of statutory end-of-service
benefits payable to Ronald Lavater as an employee
based in the UAE is included in the table.
Mediclinic offers membership of a defined
contribution fund for its Mediclinic Southern
Africa employees and a defined benefit fund for
its Hirslanden employees. Retirement benefits are
provided to employees of Mediclinic Middle East
according to the local labour laws of the UAE.
The executive directors participate in the Mediclinic
Southern Africa defined contribution fund and are
eligible for a 9% Company pension contribution,
in line with the policy. No executive director has a
prospective entitlement to a defined benefit pension.
ANHG ANNUAL BONUS FOR 2015
(AUDITED)
The maximum bonus payable for 2015 for the ANHG
CEO was 150% of salary. The annual bonus was
assessed at 80% against financial and 20% against
operational objectives, including measures of clinical
excellence, to provide a rounded assessment of the
Group’s and the individual’s performance.
The measures, targets and performance against them
are set out in the table below.
The resulting bonus was paid in February 2016 and, in
light of the vesting of all share awards at the time of
the Combination, was paid in cash and not required
to be deferred. Clawback provisions apply to
the payment.
ANHG SPECIAL BONUS (AUDITED)
In light of the proposed combination with Mediclinic,
the Remuneration Committee of ANHG determined
that a special bonus should be offered to the CEO,
Ronald Lavater in order to incentivise performance
up to the Combination and promote stability among
the senior population at this time. The amount of the
special bonus was to be up to USD1.5m (i.e. two times
annual salary) paid in cash, and would be contingent
on the Committee's assessment of the execution of
the transaction and the organisational stability and
continued strong performance of the Company in the
period up to the Combination. In order to promote
the retention of Mr Lavater in the period immediately
following the Combination, the payment was to be
paid in two equal instalments three and nine months
after the Combination completed.
MEASURE
WEIGHTING
SUMMARY OF TARGETS
RESULT
% OF MAXIMUM % OF SALARY
Adjusted
EBITDA1
70%
Cash conversion
10%
Operational and quality
measures
20%
Threshold: USD106.4m
Target: USD112.0m
Maximum: USD123.2m
Threshold: 84.0%
Target: 87.5%
Maximum: 89.0%
Achievement of key
strategic milestones,
including those
relating to medical quality,
patient satisfaction and
corporate development.
Threshold not
achieved
Threshold not
achieved
0%
0%
0%
0%
All milestones
were fully
achieved
100%
30%
TOTAL
100%
30%
1
The bonus amounts are audited, however, the adjusted EBITDA, cash conversion, and operational and quality measures all
relate to the legacy Al Noor Hospitals Group plc and have not been audited as part of the financial statements.
86
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
Since this proposed payment fell outside the ANHG Remuneration Policy at the time it was required to be put
to shareholders. It was approved at the ANHG general meeting on 15 December 2015.
Shortly prior to the Combination, the ANHG Remuneration Committee confi rmed that the performance
conditions attaching to the special bonus had been fully achieved.
At the ANHG general meeting on 15 December 2015, shareholders approved a payment to Ronald Lavater of a
retention bonus of USD1.5m.
ANHG LTI AWARDS GRANTED IN 2015/16 (AUDITED)
A conditional share award under the LTIP was made to Ronald Lavater on 28 April 2015 with a value at grant of
175% of salary.
DATE OF
GRANT
NUMBER OF
SHARES1
FACE VALUE
FACE
VALUE AS A
PERCENTAGE
OF SALARY
END OF
PERFORMANCE
PERIOD
PERFORMANCE
CONDITIONS
Ronald Lavater
28 April 2015
97 398
USD1 312 500
175%
31 December 2017
See table below
1
The number of shares to be granted was determined based on the average share price over the five dealing days prior to grant,
which was £8.87 and translated at the exchange rate at grant £1: USD1.52.
At grant, vesting of 50% of the award was based on EPS growth and the remaining 50% would be determined
by TSR, with half of that amount measured relative to the FTSE World Healthcare Index and the other half
against a tailored group of healthcare companies operating in markets similar to the Company.
PERFORMANCE CONDITION
WEIGHTING
THRESHOLD TARGET
(25% VESTING)
STRETCH TARGET
(100% VESTING)
EPS growth
TSR vs Healthcare sector peers
TSR vs Healthcare sector peers
50%
25%
25%
6% per annum
In line with index
Median of peers
15% per annum
8.5% per annum above the index
Upper quartile of peers
EPS and relative TSR are considered to be the most appropriate measures of long-term performance, in that
they ensure the CEO is incentivised and rewarded for the underlying fi nancial performance of the Group as well
as creating value for shareholders. The award was subject to clawback provisions.
The treatment of this award as a result of the Combination is set out in a separate section below.
ANHG LTI AWARDS VESTING IN 2015/16 – RONALD LAVATER (AUDITED)
Under the rules of the LTIP, the Committee had discretion as to the treatment of outstanding awards as a result
of the fi nancial events which followed the Combination. The Committee judged that it was appropriate that
awards should vest subject to the extent that the relevant performance conditions had been achieved.
For all awards, the fi nal value has been calculated using £11.68 (the mid-market closing price on
10 February 2016, being the last relevant trading day before the shares went ex-dividend) and, where relevant,
the impact of dividends foregone in the vesting periods elapsed has been taken into consideration.
2014 ANHG Deferred Annual Bonus (audited)
Ronald Lavater held an award of 1 231 shares under the 2014 deferred bonus plan whose vesting was subject
only to continued service. This award vested in full and the value of the award on 15 February 2016 was £14 585.
MEDICLINIC ANNUAL REPORT 2016
87
DIRECTORS' REMUNERATION REPORT (continued)
2014 ANHG LTIP (audited)
Conditional share awards granted under the 2014 LTIP were subject to an EPS condition and TSR conditions
relative to a sector-specific group and an index:
PERFORMANCE
CONDITION
THRESHOLD
TARGET
(25% VESTING)
STRETCH TARGET
(100% VESTING)
ACTUAL
% VESTING
EPS growth (50%)
6% per annum
15% per annum
12.38% per annum
39.1%
(50% of 78.15% vesting)
TSR vs World Healthcare
Index (25%)
In line with index
8.5% per annum above
the index
4.9% per annum above
the index
16.8%
(25% of 67.36% vesting)
TSR vs Healthcare sector
peers (25%)
TOTAL VESTING
Median of peers
Upper quartile of peers
Between median and
upper quartile
9.5%
(25% of 37.91% vesting)
65.4%
EPS performance was measured over the two financial years from grant. The TSR performance condition was
tested based upon performance to 10 February 2016.
At the time of the Combination, Ronald Lavater held an award of shares under the 2014 cycle of the ANHG LTIP,
which was treated as shown in the table below, and settled in cash.
DATE OF GRANT
NUMBER OF
SHARES
% VESTING
NUMBER
OF SHARES
VESTING
VALUE OF
VESTING SHARES
NUMBER OF
SHARES LAPSING
Ronald Lavater
25 November 2014 20 978
65.4%
13 719
£162 024
7 259
2015 ANHG LTIP (audited)
The 2015 awards were granted subject to conditions similar to the 2014 awards. However, as only one financial
year had elapsed since grant, the Committee understood that the EPS performance period could not be tested
robustly and therefore exercised its discretion under the plan rules to exclude this element and test the award
based wholly on the TSR performance conditions.
PERFORMANCE
CONDITION
THRESHOLD
TARGET
(25% VESTING)
STRETCH TARGET
(100% VESTING)
ACTUAL
% VESTING
TSR vs World Healthcare
Index (50%)
TSR vs Healthcare sector
peers (50%)
TOTAL VESTING
In line with index
8.5% per annum above
the index
13.6% per annum above
the index
50%
(50% of 100% vesting)
Median of peers
Upper quartile of peers
Between median and
upper quartile
19.9%
(50% of 39.75% vesting)
69.9%
The TSR vesting outcomes are based upon performance to 10 February 2016.
At the time of the Combination, Ronald Lavater held an award of shares under the 2015 cycle of the ANHG LTIP,
which was treated as shown in the table below, and settled in cash.
DATE OF
GRANT
NUMBER OF
SHARES
% VESTING
NUMBER
OF SHARES
VESTING
VALUE OF
SHARES VESTING
NUMBER OF
SHARES LAPSING
Ronald Lavater
28 April 2015
97 398
69.9%
68 081
£797 711
29 317
88
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
TERMINATION ARRANGEMENTS FOR
RONALD LAVATER
Ronald Lavater stepped down from the role of Chief
Executive Offi cer on the date of the Combination.
He received normal pay and benefi ts up to this date
and six months’ salary in lieu of notice. He received a
bonus of £155 000 in February 2016 which, in light of
the Combination, was not required to be deferred. He
also received a special bonus, approved at the ANHG
general meeting on 15 December 2015 of USD1.5m.
There are conditions attached to the bonus whereby
he would lose his entitlement to the bonus if he does
not meet the required service conditions.
Upon the date of the Combination, Ronald Lavater's
outstanding LTIP awards vested and he received
£162 024 for the 2014 LTIP and £797 711 for the 2015
LTIP, in cash. He also received awards vesting under
the deferred bonus plan on 15 February 2016 with a
value of £14 585.
PAYMENTS TO FORMER DIRECTORS
(AUDITED)
In addition to the amounts disclosed above, no
further payments were made to former directors of
MIP or ANHG in the 15-month period to
31 March 2016.
PAYMENTS FOR LOSS OF OFFICE
(AUDITED)
No payments were made in respect of loss of offi ce
during the 15-month period to 31 March 2016.
DIRECTORS’ SHAREHOLDING AND
SHARE INTERESTS (AUDITED)
The following table sets out the directors’ benefi cial
shareholding, whether held directly or indirectly, and
share interests.
BENEFICIALLY OWNED
AT 31 MARCH 20161
OUTSTANDING LTIP
AWARDS
OUTSTANDING
DEFERRED ANNUAL
BONUS AWARDS2
SHAREHOLDING
REQUIREMENT MET3
EXECUTIVE DIRECTORS
Danie Meintjes
118 215
Craig Tingle
68 969
Ronald Lavater4
0
NON-EXECUTIVE DIRECTORS
Dr Edwin Hertzog
3 754 855
Desmond Smith
Ian Tyler5
Seamus Keating
Trevor Petersen
Nandi Mandela
Prof Dr Robert Leu
Alan Grieve
Jannie Durand
–
–
–
–
–
–
–
–
0
0
0
–
–
–
–
–
–
–
–
–
83 372
47 516
0
–
–
12 090
–
–
–
–
–
–
Yes
Yes
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
1
2
There were no changes to the interests of the directors in the ordinary shares of the Company in the period from 31 March 2016 to 25 May 2016.
Full details of the Directors’ shareholdings and share allocations are given in the Company’s Register of Directors’ Interests, which is open to
inspection at the Company’s registered office during business hours.
The DAB awards above includes conditional and forfeitable share awards where the performance has been tested but shares have not yet been
released and are subject to service conditions only.
3 The shareholding requirements for directors of MIP are 225% (CEO) and 200% (CFO) of salary respectively.
4 All conditional share options allocated to Ronald Lavater was settled in cash.
5
On 20 June 2013, the Board granted Ian Tyler £50 000 (8 695) ordinary shares at a share price of £5.75. To preserve his position after the
Combination of Al Noor and Mediclinic, and the subsequent expected drop in share price, the Company has increased the number of shares
allocated to 12 090. The shares will vest net of any tax on the third anniversary of grant subject to Ian’s continued service to the Group as a
non-executive director on the Board.
MEDICLINIC ANNUAL REPORT 2016
89
DIRECTORS' REMUNERATION REPORT (continued)
PERCENTAGE CHANGE IN
REMUNERATION LEVELS
The table below shows salary, benefits and annual
bonus for the CEO Ronald Lavater in the 12-month
period to 31 December 2015 versus the prior
12 months, compared to the change over the same
period for the other ANHG employees:
Chief Executive Officer
Salary
Benefits
Bonus
All employees
Salary
Benefits
Bonus
% CHANGE
0%
(22.9%)
76%
13.8%
(0.6%)
(32.8%)
RELATIVE IMPORTANCE OF THE
SPEND ON PAY
The table below shows the spend on staff costs in the
12-month period to 31 December 2015, compared to
returns to shareholders over the same period:
2015/16
£000
2014/15
£000
% CHANGE
Staff costs
150 044
136 790
9.7%
All employees
14 8781
15 702
(5.2%)
1
Excludes the special dividend of £383.3 million paid
on Combination.
PERFORMANCE GRAPH AND CEO
PAY
This graph shows the value, at 31 March 2016, of £100
invested in MIP (and previously Al Noor Hospitals
Group) since inception compared with the value of
£100 invested in the FTSE 100 Index on the same
date. The intervening points are the financial year
ends prior to the data of Combination and the date
of the Combination.
TOTAL SHAREHOLDER RETURN
£250
£200
£150
£100
£50
£0
21
June
2013
31
Dec
2013
31
Dec
2014
31
Dec
2015
15
Feb
2016
31
Mar
2016
Mediclinic International plc
FTSE 100 Index
Source: Thomson Reuters
The table below shows the total remuneration for
the CEO over the same period. Consistent with the
calculation methodology for the single figure for total
remuneration, the total remuneration figure includes
the total annual bonus award based on that year's
performance and the LTIP award based on the three-
year performance period ending in the relevant year.
The annual bonus payout and LTIP award vesting
level as a percentage of the maximum opportunity
are also shown for this year for both Ronald Lavater
and Danie Meintjes for the period in which they
served as CEO.
YEAR ENDING 31 DECEMBER
2012
2013
2014
2014
2015
1 JAN 2016 –
15 FEB 2016
15 FEB 2016 –
31 MARCH 2016
Chief Executive
Officer
Dr Kassem
Alom
Dr Kassem
Alom
Dr Kassem
Alom
Ronald
Lavater
Ronald
Lavater
Ronald
Lavater
Danie Meintjes
Total remuneration
£000
326
361
290
Annual bonus %
DAB
LTIP vesting %
170
11.8%
100%
65.4%
702
20.0%
2 165
n/a
69.9%
n/a
79
78%
0%
90
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
IMPLEMENTATION OF THE REMUNERATION POLICY FOR THE
2016/2017 FINANCIAL YEAR
SALARY
Following the Combination, the salaries of the CEO and CFO were reviewed. The Committee considered their
remuneration packages in the context of other London-listed companies of similar size and international
footprint. The incumbents' pay in their previous roles at MIL had been set with reference to both local South
African pay levels and a broader international comparison, but given the widening geographic footprint of the
Group, the Committee was minded to place greater weight on the international comparators going forward.
As a result the salaries for Danie Meintjes and Craig Tingle have been increased by 40% and 22% respectively.
SALARY FROM 1 APRIL 2016
£000
SALARY FROM 1 APRIL 2015
£000
% INCREASE
Danie Meintjes
Craig Tingle
471
319
337
261
40%
22%
Translated into GBP at a rate of £1: ZAR20.73 at 1 April 2016 and £1: ZAR17.82 at 1 April 2015.
STI 2017
The executive directors have a maximum STI opportunity of 150% (CEO) and 100% (CFO) of annual salary.
Of the achieved award, 50% will be deferred in equity with a three-year holding period subject to continued
employment.
The performance measure for the executive directors’ STI is calculated on a weighted average of the Company's
three operating platforms.
Southern Africa (24.8%)
Switzerland (46.6%)
Middle East (28.6%)
FINANCIAL
CLINICAL AND PATIENT QUALITY
EBITDA
Hospital EBITDA margin
Employment costs
Debtor days
EBITDA
Regional EBITDA margin
Cash conversion
EBITDA
Employment costs
Debtor days
Clinical care quality indicator
Patient expenses indicator
Employment Equity
Patient satisfaction
Safe surgery rate
Patient mix
Inpatient and outpatient satisfaction
For each platform, EBITDA outcome determines the total amount of available bonus, with the other fi nancial
and clinical/patient measures used to adjust this number.
We do not publish details of the fi nancial targets in advance since these are commercially confi dential. We
will publish achievement against these targets at the same time as we disclose bonus payments in the annual
report, so that shareholders can evaluate performance against those targets.
MEDICLINIC ANNUAL REPORT 2016
91
DIRECTORS' REMUNERATION REPORT (continued)
In light of the Combination, a review of non-executive
and Chairman fees has been undertaken and a
summary of the current fees and those for 2016/17
are set out below:
FEE FROM
15 FEBRUARY
2016
FEE
FROM
1 APRIL
2015
%
INCREASE
BASE FEES
Chairman
£250 000
£200 000 25%
Base Board Fee £60 000
£15 000
£65 000
£10 000
(8%)
50%
Audit and Risk
Committee Chair
Remuneration
Committee Chair
£15 000
£10 000
50%
Nomination
Committee Chair
£0
£0
–
Clinical
Performance and
Sustainability3
Committee Chair
Investment
Committee Chair
Senior
Independent
Director
COMMITTEE
MEMBER FEES
Audit and Risk
Committee
Remuneration
Committee
Nomination
Committee
Clinical
Performance and
Sustainability3
Committee
Investment
Committee
£10 000
£10 000
0%
£10 000
n/a
–
£25 000
£5 0001
400%
£10 000
£10 000
£0
£6 600
n/a2
n/a2
n/a2
n/a2
£6 600
n/a2
–
–
–
–
–
1
2
3
Ian Tyler, previously the ANHG Chairman, has been appointed
as the Senior Independent Director for MIP subsequent to
the Combination.
The Committee member fees were previously included in the
fixed base Board fee.
The Quality Committee was reconstituted as the Clinical
Performance and Sustainability Committee in May 2016.
LTIP TO BE GRANTED IN 2016
The Committee intends to grant an LTIP conditional
award to the executive directors in 2016 over shares
with a value of 200% (CEO) and 150% (CFO) of
salary. Upon vesting, awards will be settled in shares,
dependent on the achievement of performance
conditions over a three-year period. Vesting of 60%
of the award will be based on EPS growth and the
remaining 40% will be determined by TSR measured
relative to the FTSE 100.
Vested shares are subject to a holding period of two
years following the vesting date and dividends that
accrue during the vesting period may be paid in cash
or shares at the time of vesting, to the extent that
shares vest.
EPS and relative TSR are considered to be the most
appropriate measures of long-term, in that they
ensure the directors are incentivised and rewarded
for underlying the financial performance of the Group
as well as creating value for shareholders.
The award will be subject to clawback provisions.
PERFORMANCE
CONDITION
THRESHOLD
TARGET
(25% VESTING)
STRETCH TARGET
(100% VESTING)
EPS growth (60%)
TSR vs FTSE 100
(40%)
5% per annum
Median of peers
12% per annum
Upper quartile of
peers
PENSION ENTITLEMENT
Mediclinic offers membership of a defined
contribution fund for its Mediclinic Southern
Africa and a defined benefit fund for its Hirslanden
employees. Retirement benefits are provided to
employees of Mediclinic Middle East according to the
local labour laws of the UAE.
The executive directors partake in the Mediclinic
Southern Africa defined contribution fund and will
be eligible for a 9% Company pension contribution,
in line with the policy.
FEES FOR THE CHAIRMAN AND
NON-EXECUTIVE DIRECTORS
The Chairman and non-executive directors
remuneration is determined by the Board, based
on the responsibility and time committed to the
Group's affairs and appropriate market comparisons.
Individual non-executive directors do not take part in
decisions regarding their own fees. The Chairman and
non-executive directors receive no other benefits and
do not participate in short-term or long-term
reward schemes.
92
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
TERMINATION ARRANGEMENTS FOR
CRAIG TINGLE
Craig Tingle will step down from the role of Chief
Financial Offi cer on 15 June 2016.
He will receive normal pay and benefi ts up to this
time. No further payments have been agreed at
this time. Any such payments, if made, would be
disclosed shortly after his departure.
PACKAGE FOR JURGENS MYBURGH
Jurgens Myburgh takes on the role of Chief Financial
Offi cer from 1 August 2016. He will receive a base
salary of £319 000 per annum and receive benefi ts
including private medical insurance. The Company
will provide pension contributions of 9% of salary.
His bonus opportunity will be up to 100% of base
salary (pro rata in the fi rst year of appointment)
and he will be eligible for awards under the 2016
LTIP grant, with his fi rst award granted as soon as is
practicable post joining and on similar terms to the
2016 awards granted to other executive directors.
Signed on behalf of the Remuneration Committee.
Trevor D Petersen
Chairman of the Remuneration Committee
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
93
DIRECTORS' REMUNERATION REPORT (continued)
PRO FORMA STATEMENT OF DIRECTORS' REMUNERATION AT
MEDICLINIC INTERNATIONAL LIMITED FOR THE FINANCIAL YEAR
ENDING 31 MARCH 2016 (including Mediclinic International plc
(formerly Al Noor Hospitals Group plc) in respect of the period from
15 February 2016 to 31 March 2016)
This part of the report is not required under the reporting regulations. It is provided for information only
and does not form part of the Directors' Remuneration Report that will be subject to a vote at the annual
general meeting.
The table below summarises Directors' remuneration received in the financial year ended 31 March 2016
for all MIL directors’ appointed to the MIP Board. For the period from 1 April 2015 up to the Combination
(15 February 2016) payments in respect of MIL are captured. From the date of the Combination until
31 March 2016, payments in respect of MIP are captured. The comparative figures for the previous financial
year are the 12-month period to 31 March 2015, as disclosed in the 2015 Directors’ Remuneration Report
for MIL.
SALARY
£000
PENSION
£000
ANNUAL
BONUS
£000
LONG-TERM
INCENTIVES
£000
OTHER
BENEFITS
£000
TOTAL
REMUNERATION
£000
EXECUTIVE DIRECTORS
Danie Meintjes
2015/16
286
2014/15
314
Craig Tingle
2015/16
215
2014/15
245
26
28
20
22
395
208
249
162
439
0
250
0
1
4
2
2
NON-EXECUTIVE CHAIRMAN
Edwin Hertzog
2015/16
2014/15
72
37
1 146
554
736
431
72
37
94
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
SALARY
£000
PENSION
£000
ANNUAL
BONUS
£000
LONG-TERM
INCENTIVES
£000
OTHER
BENEFITS
£000
TOTAL
REMUNERATION
£000
NON-EXECUTIVE DIRECTORS
Alan Grieve
Robert Leu
Nandi Mandela
Trevor D Petersen
Desmond Smith
JJ Durand
2015/16
2014/15
2015/16
2014/15
2015/16
2014/15
2015/16
2014/15
2015/16
2014/15
2015/16
2014/15
124
78
123
78
35
16
48
27
58
31
30
22
NON-EXECUTIVE
DIRECTOR TOTAL
2015/16
490
2014/15
289
124
78
123
78
35
16
48
27
58
31
30
22
490
289
The sections below provide further detail of the remuneration shown in the table above.
SALARIES FOR 2015/16
Danie Meintjes' and Craig Tingle's salary in the table above refl ects their salaries in the period from 1 April 2015
to 31 March 2016. Their salaries for the year were R14 780 167 and R10 118 970 respectively, translated into GBP
at a rate of £1:ZAR20.73 at 31 March 2016.
BENEFITS FOR 2015/16
Danie Meintjes' and Craig Tingle's benefi ts include private medical insurance.
The executive directors participated in the Mediclinic Southern Africa defi ned contribution fund and received a
9% Company pension contribution, in line with the policy.
MEDICLINIC ANNUAL REPORT 2016
95
DIRECTORS' REMUNERATION REPORT (continued)
MIL ANNUAL BONUS FOR 2015/16
For 2015/16, the annual bonus opportunity for the CEO and CFO was 133% and 100% of salary respectively.
The bonuses of Mediclinic International management are determined by a weighted average of the platform
bonuses achieved.
The full annual bonus payable in the 2015/16 financial year will be paid in cash, subject to employment.
Clawback provisions will apply.
The measures, targets and performance against them are set out below:
DANIE MEINTJES
MEASURE
WEIGHTING
ACHIEVED % OF
MAXIMUM
WEIGHTED ACHIEVED
% OF MAXIMUM
% OF SALARY
MCSA Bonus achieved
36%
MCCH Bonus achieved 50%
MCME Bonus achieved
14%
TOTAL
100%
58%
94%
75%
21%
47%
10%
78%
28%
63%
14%
105%
Consequently, the annual bonus achieved was 78% of a maximum bonus, therefore the amount awarded to
Danie Meintjes was £236 163 (105% of salary, i.e. 78% of his 133% of salary). Translated into GBP at an exchange
rate of £1: ZAR22.81 at 15 February 2016.
CRAIG TINGLE
MEASURE
WEIGHTING
ACHIEVED % OF
MAXIMUM
WEIGHTED ACHIEVED
% OF MAXIMUM
% OF SALARY
MCSA Bonus achieved
36%
MCCH Bonus achieved 50%
MCME Bonus achieved
14%
TOTAL
100%
58%
94%
75%
21%
47%
10%
78%
21%
47%
11%
80%
Consequently, the annual bonus achieved was 78% of a maximum bonus, therefore the amount awarded to
Craig Tingle was £137 544 (78% of salary, i.e. 78% of his 100% of salary). Translated into GBP at a rate of
£1: ZAR22.81 at 15 February 2016.
MIL LTI AWARDS VESTING IN 2015/16 – DANIE MEINTJES AND CRAIG TINGLE
Mediclinic International executives participate in a LTIP, namely a Forfeitable Share Plan (“FSP”). Awards in
terms of the FSP to executives are dependent upon achievement of challenging pre-determined Company
performance conditions and remain subject to the final discretionary approval of the Board. The purpose of
the FSP is to provide executives with the opportunity to acquire shares in Mediclinic, ensuring that participant’s
interests are strategically aligned with shareholder interests. It further serves as a retention mechanism for
strategic talent and a tool to attract prospective employees.
Participation in the scheme is at the discretion of the Remuneration Committee and is generally limited to
employees whose role or contribution could directly influence the performance of the Group.
The performance conditions constitute a combination of absolute total shareholder return (“TSR”) and
normalised diluted headline earnings per share (“HEPS”).
96
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
2014 MIL LTIP
PERFORMANCE SHARES
Award Date
31 July 2014
Employment Period
1 August 2014 – 31 May 2017
Performance Period
1 April 2014 – 31 March 2017
Vesting Date
The later of 31 May 2017 or the date upon which the Remuneration Committee has satisfi ed themselves
that the Performance Condition has been met
DATE OF
GRANT
NUMBER OF
SHARES 1
FACE VALUE
£000
END OF
PERFORMANCE
PERIOD
PERFORMANCE
CONDITIONS
Danie Meintjes
31 July 2014
49 423
Craig Tingle
31 July 2014
27 700
294
165
31 March 2017
See table below
31 March 2017
See table below
1
The number of shares to be granted was determined based on the volume weighted average share price over one month
prior to grant, which was £5.95 and translated at the exchange rate at grant of £1: ZAR18.02.
PERFORMANCE
CONDITION
THRESHOLD TARGET
(30% VESTING)
STRETCH TARGET
(100% VESTING)
Absolute TSR (40%)
11%
18%
ACTUAL
33.97%
HEPS (60%)
Compounded South African
Consumer Price Index (“CPI”)
growth plus 2%
Compounded CPI growth
plus 6%
Growth above compounded
CPI of 6.57%
TOTAL VESTING
% VESTING
40%
60%
100%
Due to the change of control of the Company occurring before the vesting date the performance period was
brought forward to 30 September 2015 and accordingly tested. Final vesting will take place on the original
vesting date, subject to service conditions being met.
Absolute TSR (40%) – was measured by taking the average TSR for 20 trading days preceding and including
the start of the performance period (1 April 2014) and the average TSR for 20 trading days preceding and
including the end of the performance period (30 September 2015). Absolute TSR performance was calculated
with reference to the compounded annual growth rate in TSR.
HEPS (60%) – The growth in HEPS for the period 1 April 2014 to date must be greater than or equal to the
growth in the South African Consumer Price Index (“CPI”) for the same period plus a fi xed percentage per
annum. Given that the performance period is shorter, the actual 2014 HEPS and the estimate 2016 HEPS
were used.
The value of these awards at the end of the performance period, being 30 September 2015, was calculated as
£259 965 for Danie Meintjes and £145 702 for the Craig Tingle, calculated at a share price of £5.26 per share.
MEDICLINIC ANNUAL REPORT 2016
97
DIRECTORS' REMUNERATION REPORT (continued)
2015 MIL LTIP
PERFORMANCE SHARES
Award Date
23 June 2015
Employment Period
1 June 2015 – 31 May 2018
Performance Period
1 April 2015 – 31 March 2018
Vesting Date
The later of 31 May 2018 or the date upon which the Remuneration Committee has satisfied themselves
that the Performance Condition has been met
DATE OF
GRANT
NUMBER OF
SHARES1
FACE VALUE
£000
END OF
PERFORMANCE
PERIOD
PERFORMANCE
CONDITIONS
Danie Meintjes
Craig Tingle
23 June 2015
43 524
23 June 2015
25 405
196
114
31 March 2018
See table below
31 March 2018
See table below
1
The number of shares to be granted was determined based on the volume weighted average share price over one month
prior to grant, which was £4.50 and translated at the exchange rate at grant of £1: ZAR19.22.
PERFORMANCE
CONDITION
THRESHOLD TARGET
(30% VESTING)
STRETCH TARGET
(100% VESTING)
ACTUAL
% VESTING
Absolute TSR (40%)
8.5%
15.5%
Implied TSR growth 10.11%
18%
HEPS (60%)
Compounded South African
Consumer Price Index (“CPI”)
growth plus 2%
Compounded CPI growth
plus 6%
Growth above compounded
CPI of 7.72%
60%
TOTAL VESTING
78%
98
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
Due to the change of control of the Company occurring before the vesting date, the performance period was
brought forward to 30 September 2015 and accordingly tested. Final vesting will take place on the original
vesting date subject to service conditions being met.
Absolute TSR (40%) – Given that the period to measure TSR is too short, the fair value (or expected value)
valuation of the FSP instruments used for IFRS 2 to book the P&L charge for the three years of the grant, as
determined by PWC actuarial service line, was used as basis.
The fair value (or expected value) of the FSP instrument for IFRS 2 purposes was calculated as 46.1 cents in
the rand (or 46.1%). This fair value calculation is an indication of the vesting probability of the FSP instruments
(i.e. 46.1%) and results in an implied TSR growth of 10.11% (see table on page 98).
HEPS (60%) – The estimate growth in HEPS from 1 April 2015 to 31 March 2016 must be greater than or equal
to: The growth in the South African Consumer Price Index (“CPI”) between 1 April 2015 and 31 March 2016 plus
a fi xed percentage per annum for the performance period.
The value of these awards at the end of the performance period, being 30 September 2015, was calculated as
£178 572 for Danie Meintjes and £104 232 for the Craig Tingle, calculated at a share price of £5.26 per share.
MEDICLINIC ANNUAL REPORT 2016
99
NOMINATION COMMITTEE REPORT
Ian Tyler
Chairman of the Nomination Committee
Dear Shareholder,
Following the completion of the Combination of Al Noor Hospitals Group plc (“Al Noor”) and
Mediclinic International Limited (the “Combination”) on 15 February 2016, it is my pleasure to
report on the activities of the Nomination Committee (the “Committee”) for the year to
31 March 2016. As part of the completion process, the membership of the Board and its
Committees was refreshed. The Committee believes that these appointments and the inclusion
of independent non-executive directors have provided additional fi nancial, strategic, clinical
and industry skills and expertise to both the Board and its Committees. The Committee has,
following the Combination, been predominantly focused on succession planning, diversity and the
composition of the Board and its Committees, which is explained in more detail in this report.
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The current composition of the Committee meets the requirements of the UK Corporate Governance Code 2014
(the “Code”), with the majority of members being independent non-executive directors. The appointments of
all the directors to the Board (other than myself and Seamus Keating, who were appointed in 2013) took place
on 15 February 2016, following the Combination. Biographical details of all Committee members are included on
pages 60 to 61.
AR
The composition and attendance of Committee meetings are set out in the table on page 101.
COMMITTEE EXPERIENCE
COMMITTEE COMPOSITION
17%
Healthcare
Finance and
Accounting
17%
17%
Chairman of
the Board
Independent
non-executive
directors
Non-executive
directors
83%
100 MEDICLINIC ANNUAL REPORT 2016
66%
GOVERNANCE
AND
REMUNERATION
NOMINATION COMMITTEE MEETING ATTENDANCE
NAME
ROLE
NUMBER OF COMMITTEE
MEETINGS ATTENDED PRIOR
TO COMBINATION
NUMBER OF COMMITTEE
MEETINGS ATTENDED
AFTER COMBINATION2
Mubarak Matar Al Hamiri1
Independent non–executive
director
Dr. Kassem Alom1
Non–executive director
William S. Ward1
Independent non–executive
director
1 of 1
1 of 1
1 of 1
Ian Tyler
(Committee Chairman)
Senior Independent Director
1 of 1
Jannie Durand
Non–executive director
Dr Edwin Hertzog
Non–executive director
Prof Dr Robert Leu
Trevor Petersen
Desmond Smith
Independent non–executive
director
Independent non–executive
director
Independent non–executive
director
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
–
–
–
–
–
–
1
These Committee members served during the year and were appointed in 2013 to the entity when it was known as Al Noor Hospitals Group plc,
prior to the Combination. They retired on the date of completion of the Combination on 15 February 2016.
2 Two ad hoc Committee meetings were held since the Company’s financial year end.
The Board welcomes the recommendations of the
Davies Review of Women on Boards. The Board not
only supports the principles of boardroom diversity,
it also takes boardroom skills diversity seriously and
actively considers this matter regularly at Board
and Nomination Committee meetings. The Board
believes that maintaining an appropriate balance of
skills, knowledge, experience and backgrounds is
imperative and is related to it being able to perform
its role eff ectively. A Board skills diversity policy has
been adopted and as part of the Committee’s role
in identifying and nominating suitable candidates
for the Board’s approval in the course of succession
planning, the Committee will continue to review
candidates from a variety of backgrounds with the
objective of the Board becoming more diverse.
Further detail on the Board and Company’s
commitment to diversity can be found on page 66
of the Annual Report.
In accordance with the Code, each director will be
subject to annual re-election at the annual general
meeting (“AGM”). To this end, the Committee
evaluates the best interests of the Company as a
whole and recommends the elections or re-elections
to the Board, where considered appropriate.
AR
The Company Secretary is Secretary to the
Committee and attends all meetings. Other
attendees at Committee meetings may, from time
to time, and upon invitation from the Committee,
include the Chief Executive Offi cer, Danie Meintjes
and Karin Walters, Talent and Organisational
Development General Manager.
ROLE AND RESPONSIBILITIES
The Committee is responsible for evaluating the
structure, size and composition of the Board and its
Committees, and gives consideration to the skills,
knowledge, experience and diversity within each. The
Committee also considers succession planning of
executive and non-executive directors, including
the Chairman.
Leadership, strategic issues and commercial changes
aff ecting the Company and the market in which it
operates are kept under review by the Committee: to
ensure the needs of the Group (both executive and
non-executive) are met, with a view to providing the
continued ability of the Group to compete eff ectively
in the marketplace. In addition, the Committee makes
recommendations regarding the appointments of
Chairmen of the Audit and Risk Committee and
Remuneration Committee respectively, and, in
consultation with the relevant chairmen, also makes
recommendations regarding other appointments
to these Board Committees. When considering
appointments to the Board, the Committee
considered each candidate’s time commitments
and any potential confl icts of interest.
MEDICLINIC ANNUAL REPORT 2016
101
NOMINATION COMMITTEE REPORT (continued)
MAIN ACTIVITIES
The Committee, in its current form, met twice in
the period following the Combination and up to the
Last Practicable Date. The attendance of Committee
meetings attendance is shown on page 101 of this
report. The Committee’s activities during the financial
year are detailed herein and include the position prior
to and following the Combination.
AR
PRIOR TO COMBINATION:
AL NOOR HOSPITALS GROUP PLC
During the year, (and prior to the Combination),
the areas of focus for the Nomination Committee
of the entity formerly known as Al Noor Hospitals
Group plc, the UK entity, included a review of the
composition, balance, skills and diversity of the
Board as a whole. Following this review, a search
for an additional non-executive director to enhance
the independence, clinical experience and female
representation on the Board was undertaken.
Heidrick & Struggles (UK) Limited, a leading
executive search firm who assisted Al Noor with the
recruitment of a non-executive director in 2013 and
Chief Executive Officer in 2014, was appointed to
assist with the search of a potential non-executive
director. However, the recruitment process was
postponed as a result of the reverse takeover of
Mediclinic International Limited and subsequent
Combination.
The Board and Committee evaluation process for
Al Noor was scheduled to take place in March of this
year and thus was not completed for the year to
31 March 2016 as the Combination was effective on
15 February 2016.
MEDICLINIC INTERNATIONAL
LIMITED
In the run up to the Combination, the predominant
focus of the Nomination Committee of Mediclinic
International Limited, being the South African entity,
was focused on preparation and appointments
for the Board of the combined entities. The
Committee considered the composition of the
Board upon completion of the Combination and
made recommendations to the Board accordingly.
Particular consideration was given to ensure the
Board was collectively independent, had balance and
a range of suitable skills, expertise and experience.
Prior to the Combination, the Nomination Committee
of Mediclinic International Limited completed self-
evaluation feedback. The results were considered and
discussed and the Committee was satisfied that it
had carried out its duties effectively throughout
the year.
AFTER THE COMBINATION:
MEDICLINIC INTERNATIONAL PLC
(FORMERLY AL NOOR HOSPITALS
GROUP PLC)
Since the Combination, the Committee has reviewed
and updated its terms of reference and Board
policy on Diversity. The Committee’s main focus
since the Combination has been the appointment of
an alternate director to Mr Jannie Durand and the
recruitment of Mr Jurgens Myburgh as successor for
the current Chief Financial Officer, Mr Craig Tingle,
who in February 2016 announced he would be
retiring later in the year.
In accordance with the Company’s relationship
agreement with its principal shareholder, Remgro
Limited (“Remgro”), Remgro is entitled to appoint
up to a maximum of three directors to the Board
(provided that the right to appoint a third director
is subject to the requirement that the Board will,
following such appointment, comprise a majority of
independent directors). Mr Jannie Durand
represents Remgro on the Board of directors and
was appointed at the time of the Combination.
Mr Pieter Uys was appointed as an alternate director
to Jannie Durand on 7 April 2016. Mr Pieter Uys is
the Head of Strategic Investment at Remgro and
provides the Board with additional knowledge and
experience in global investment, strategy and finance.
Shareholder approval will be sought for all directors
appointed at the time of the Combination, excluding
the alternate director Pieter Uys. The Articles of
Association of the Company permit any director to
appoint any person to be their alternate and each
director may at their discretion remove an alternate
director so appointed.
Over the course of the search for a successor for
Mr Craig Tingle, the Committee considered both
internal and external candidates. Following an
extensive appointment process against set criteria,
Jurgens Myburgh was identified as the successful
candidate due to his extensive financial background,
in-depth knowledge of the Company and experience
of working for a geographically diverse and dual
listed company. Accordingly, the Committee
recommended the appointment to the Board, which
was approved on 10 May 2016.
The Committee actively considers the structure, size
and composition of the Board when contemplating
succession planning for the year ahead. Whilst it
recognises that the existing skills and expertise of
the current Board is extensive, it intends to appoint
two additional non-executive directors during 2016
and 2017 to further deliver a diverse range of core
skills (including financial, clinical, healthcare industry
and operations expertise) and increase female
representation on the Board.
102
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
BOARD AND COMMITTEE
EVALUATION
As detailed above, due to the timing of the
Combination, an evaluation of the Board and its
Committees was not recently undertaken as the
Board and its Committees had met once prior to the
fi nancial year end. An internal evaluation by way of
questionnaire will be conducted next year and an
externally facilitated performance evaluation will be
conducted every three years thereafter.
DIRECTORS ELECTION AND
RE-ELECTION
The directors (other than myself and
Mr Seamus Keating) will all stand for election as it
is the fi rst AGM since our respective appointments.
In accordance with the recommendation for
FTSE 350 companies set out in the Code,
Mr Seamus Keating and I will stand for annual
re-election as we were appointed in 2013. All of
the Company’s directors will stand for re-election
at the 2017 AGM. The biographical details of the
current directors can be found on pages 60 to 61.
The terms and conditions of appointment of non-
executive directors, which includes their expected
time commitment, are available for inspection at the
Company’s registered offi ce.
Signed on behalf of the Nomination Committee
AR
Ian Tyler
Chairman of the Nomination Committee
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
103
CLINICAL PERFORMANCE AND
SUSTAINABILITY COMMITTEE REPORT
Edwin Hertzog
Chairman of the Clinical Performance
and Sustainability Committee
Dear Shareholder,
Following the completion of the Combination of Al Noor Hospitals Group plc (“Al Noor”) and
Mediclinic International Limited on 15 February 2016, a Quality Committee was established by
the Board, with materially the same terms of reference as the Al Noor Quality Committee prior to
the Combination. The Quality Committee was subsequently renamed to the Clinical Performance
and Sustainability Committee (the “Committee”) and its role was expanded to also include the
monitoring of the Group’s sustainable development and to fulfi l the statutory duties of a social
and ethics committee in terms of the SA Companies Act, which role was fulfi lled by the Social and
Ethics Committee of Mediclinic International Limited prior to the Combination. It is my pleasure to
report on the activities of the Committee for the reporting period ended 31 March 2016, as further
detailed herein.
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The Committee is chaired by Dr Edwin Hertzog and comprises two independent non-executive directors, one
non-executive director and one executive director, who are suitably skilled and experienced. The Chief Clinical
Offi cer, Dr Ronnie van der Merwe, and the Group Services Executive (who is also responsible for the Group’s
sustainable development management), Gert Hattingh, are invited on a permanent basis to attend and speak
at all Committee meetings. Other relevant members of management are invited to attend Committee meetings
from time to time. The Company Secretary is Secretary to the Committee and attends all meetings.
The composition and attendance of Committee meetings during the period under review are set out in the
table on page 105.
AR
As referred to on page 64, the Board is considering making further appointments to the Board. The
composition of the Committee will be reviewed thereafter to consider the appointment of a further Committee
member with suitable clinical background.
104 MEDICLINIC ANNUAL REPORT 2016
CLINICAL PERFORMANCE AND SUSTAINABILITY COMMITTEE MEETING ATTENDANCE
GOVERNANCE
AND
REMUNERATION
NUMBER OF COMMITTEE
MEETINGS ATTENDED PRIOR
TO COMBINATION
NUMBER OF COMMITTEE
MEETINGS ATTENDED
AFTER COMBINATION2
NAME
ROLE
Dr Kassem Alom1
Non-executive director
Ahmad Nimer1
Non-executive director
William J. Ward1
William S. Ward1
Dr Edwin Hertzog
(Committee Chairman)
Nandi Mandela
Independent non-executive
director
Independent non-executive
director
Non–executive director
Independent non-executive
director
Danie Meintjes
Chief Executive Offi cer
3 of 3
3 of 3
3 of 3
3 of 3
n/a
n/a
n/a
Ian Tyler
Independent non-executive
director and Senior Independent
Director
3 of 3
n/a
n/a
n/a
n/a
–
–
–
–
1
These Committee members served during the year and were appointed in 2013 to the entity when it was known as Al Noor Hospitals Group plc,
prior to the Combination. They retired on the date of completion of the Combination on 15 February 2016.
2 One Committee meeting was held since the Company’s financial year end.
ROLE AND RESPONSIBILITIES
The responsibilities and functioning of the Committee
are governed by a formal terms of reference
approved by the Board, which is subject to regular
review, but at least annually.
The Committee is responsible for (a) promoting a
culture of excellence in patient safety, quality of care
and patient experience, by inter alia, monitoring the
clinical performance of the Group; and (b) ensuring
that the Group is and remain a good and responsible
corporate citizen by monitoring the sustainable
development performance of the Group.
CLINICAL PERFORMANCE
In relation to its clinical performance functions, the
Committee is responsible for, inter alia:
• monitoring the clinical performance of the Group;
• evaluating patient safety, infection prevention and
control performance and quality improvement
performance;
• evaluating compliance with the Company’s patient
safety and quality clinical care standards, policies
and procedure and regulation and accreditation
standards at the operating platforms; and
• evaluating the annual Clinical Services Report and
other publicly reported clinical content.
SUSTAINABILITY
In relation to its sustainability functions, the
Committee is responsible for, inter alia:
• developing and reviewing the Group’s policies
with regard to the commitment, governance and
reporting of the Group’s sustainable development
performance, including the Group Sustainable
Development Policy, Group Environmental Policy
and Code of Business Conduct and Ethics, which
are available on the Company’s website at
www.mediclinic.com;
• monitoring the sustainable development
performance of the Group, with specifi c regard to
stakeholder engagement, health and public safety,
broad-based black economic empowerment (in
South Africa only), labour relations and working
conditions, training and skills development of
our employees, management of the Group’s
environmental impacts, ethics and compliance and
corporate social investment;
• annually revising, in conjunction with
management, the material sustainability issues;
• reviewing and approving the annual sustainability
content included in the Annual Report and the
Sustainable Development Report published on
the Company’s website; and
• determining and making recommendations to
the Board on the need for external assurance
of the Group’s public reporting in sustainable
development performance.
SDR
MEDICLINIC ANNUAL REPORT 2016
105
CLINICAL PERFORMANCE AND SUSTAINABILITY
COMMITTEE REPORT (continued)
COMMITTEE EVALUATION
Due to the timing of the Combination, a formal
evaluation of the Committee was not possible this
year. An internal evaluation will be conducted during
the year ahead and annually thereafter.
The Committee is satisfied with the Group’s
performance in each of the areas listed above, as
further reported on in the Annual Report on pages
30 to 33 and 46 to 54, as well as in the Clinical
Services Report and the Sustainable Development
Report published on the Company’s website.
AR
CSR
SDR
Signed on behalf of the Clinical Performance and
Sustainability Committee
Edwin Hertzog
Chairman of the Clinical Performance and
Sustainability Committee
25 May 2016
As referred to above, certain South African
subsidiaries of the Company are required to
appoint a social and ethics committee in terms
of the SA Companies Act, unless such companies
are subsidiaries of another company that has a
social and ethics committee, and the social and
ethics committee of that company will perform the
functions required by this regulation on behalf of that
subsidiary company. The Committee also performs
the statutory functions required of a social and ethics
committee in terms of the SA Companies Act.
The Committee is satisfied that the current level
of combined assurance provides the necessary
independent assurance over the quality and reliability
of the information presented. The Committee will
continue to monitor whether additional forms of
assurance are required in future.
ANNUAL GENERAL MEETING
In terms of the SA Companies Act, a social and ethics
committee must, through one of its members, report
to the shareholders at the company’s annual general
meeting on the matters within its mandate. As the
Committee is performing the role and function of
a social and ethics committee in terms of the SA
Companies Act, the Committee will fulfil this function
by referring shareholders to this report by the
Committee, read with the Sustainable Development
Report, at the Company’s annual general meeting
on 20 July 2016. Any specific questions to the
Committee may be sent to the Company Secretary
prior to the meeting.
MAIN ACTIVITIES
The Committee, in its current form, has only met
once since the Combination and up to the reporting
period ended 31 March 2016, at which meeting the
main focus was on:
• refining the Committee’s terms of reference;
• reviewing and approving the annual Clinical
Services Report and clinical performance
information included in the Annual Report;
• reviewing and approving the annual Sustainable
Development Report and the sustainability
information included in the Annual Report;
• confirming the key sustainability priorities
reported on pages 47 to 54 and the Sustainable
Development Report published on the Company’s
website; and
• reviewing the Company’s first slavery and human
trafficking statement in terms of the Modern
Slavery Act 2015.
SDR
CSR
SDR
AR
SDR
106 MEDICLINIC ANNUAL REPORT 2016
AUDIT AND RISK COMMITTEE REPORT
GOVERNANCE
AND
REMUNERATION
Desmond Smith
Chairman of the Audit
and Risk Committee
Dear Shareholder,
Following the completion of the Combination of Al Noor Hospitals Group plc (“Al Noor”) and
Mediclinic International Limited on 15 February 2016, it is my pleasure to report on the activities of
the Audit and Risk Committee (the “Committee”) for the reporting period ended 31 March 2016.
The Committee has remained focused on routine items such as its review of the fi nancial r esults
and ensuring the ongoing eff ectiv eness of the Company’s internal control and risk management
arrangements. The Committee’s main focus up to 15 February 2016 was the Combination. In
the time following the Combination, the Committee has undertaken fi nancial r eviews of each
Mediclinic platform, discussed accounting, tax and audit issues, the viability statement and
conferred on the integration of the Al Noor Hospitals Group with the Group, as a result of the
Combination. Other activities and areas of focus of the Committee for the year are explained in
more detail in the remainder of this report.
During the year, the Committee has been focused on meeting the viability statement requirements
of the Financial Reporting Council’s (“FRC”) UK Corporate Governance Code (the “Code”). The
Committee has, in conjunction with this, reviewed the stress testing undertaken by management
of the Group’s principal risks and uncertainties which support the viability statement.
The Committee has accordingly recommended to the Board a viability statement, which seeks
to examine the Company’s longer term solvency and viability, and which is detailed on
page 29. It was agreed that three years would be an appropriate timeframe to base the long-term
viability statement as it takes into account the strategy, principal risks and uncertainties of the
wider Group. The Committee has reviewed the stress testing undertaken by management and
recommended that the Board confi rm they can reasonably expect the Group to continue to be in
operation and meet its liabilities as they fall due, over the course of the three-year assessment
period. The Committee will remain focused on evaluating the internal control, risk management
and internal audit arrangements for the Group and the integration of Al Noor Hospitals Group.
The internal audit function was historically outsourced to Remgro Internal Audit. The Committee
benchmarked itself against best practice of the FTSE 100 companies, and concluded that the
Group will exit the outsourced Remgro Internal Audit arrangement and will bring more internal
audit resource in-house, including a Head of Internal Audit.
Finally, the Committee has considered the UK implementation of the EU Audit Directive and
Regulation and has considered and updated its non-audit services policy. This is explained in
more detail on page 114.
AR
AR
MEDICLINIC ANNUAL REPORT 2016
107
AUDIT AND RISK COMMITTEE REPORT (continued)
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The composition of the Committee remains in compliance with the Code, which provides that all members
should be independent non-executive Directors. Details on the composition of the Committee are explained
and shown in the table and charts below. The appointments of all the Directors to the Board and this
Committee (other than Ian Tyler and Seamus Keating, who were appointed in 2013) took place on
15 February 2016, following the Combination.
The Directors consider that each member of the Committee has recent and relevant financial experience for
the purposes of the Code and the FRC’s Guidance on Audit Committees. The Board is also satisfied that the
combined knowledge and experience of its members is such that the Committee exercises its duties in an
effective, informed and responsible manner.
The composition and attendance of Committee meetings during the period under review are set out in the
table below.
AUDIT AND RISK COMMITTEE MEETING ATTENDANCE
NUMBER OF COMMITTEE
MEETINGS ATTENDED PRIOR
TO THE COMBINATION
NUMBER OF COMMITTEE
MEETINGS ATTENDED AFTER
THE COMBINATION3
NAME
QUALIFICATIONS
Desmond Smith1
(Committee Chairman)
B.Sc., FASSA
Alan Grieve1
B.A. (Hons), CA
Seamus Keating1
FCMA
n/a
n/a
2 of 2
Trevor Petersen1
B.Comm. (Hons), CA(SA)
n/a
Ian Tyler
ACA, B.Comm
William Ward2
B.A., M.B.A.
2 of 2
2 of 2
–
–
–
–
–
n/a
AR
1 Appointed following the Combination on 15 February 2016. Their biographies can be found on pages 60 to 61 of the report.
2 Retired as a member of the Board and the Committee on 15 February 2016, being the completion date of the Combination.
3 Two Committee meetings were held since the Company’s financial year end.
The Company Secretary is Secretary to the Committee and attends all meetings. Other attendees at
Committee meetings may differ from time to time, and upon invitation from the Committee include
Danie Meintjes (Chief Executive Officer), Craig Tingle (Chief Financial Officer), Edwin Hertzog (Company
Chairman), Pieter Uys (alternate Director to Jannie Durand), and relevant management members. The
Committee may also invite representatives from the internal auditors (Remgro Internal Audit) and the
external auditors (PricewaterhouseCoopers LLP and PricewaterhouseCoopers Inc.).
The composition and professional experience of the Committee is shown below.
COMMITTEE EXPERIENCE
COMMITTEE COMPOSITION
20%
Actuarial
Finance and
Accounting
20%
Senior Independent
Director (“SID”)
Independent non-
executive
directors
(excluding SID)
80%
80%
108 MEDICLINIC ANNUAL REPORT 2016
ROLE AND RESPONSIBILITIES
The Committee assists the Board with its
responsibility regarding fi nancial reporting, internal
controls and risk management systems, compliance,
whistleblowing and fraud, as well as internal audit
and external audit. The Committee’s responsibilities
include but are not limited to:
• reviewing and monitoring the integrity of
the Company’s fi nancial statements and
announcements including: a review of the
signifi cant fi nancial reporting judgements
contained therein, assessing the basis on which
the Company has been determined a going
concern, ensuring a robust assessment of the
principal risks facing the Company and the
prospects of the Company when considering the
viability statement reported to shareholders, and
a judgement on whether the fi nancial reports are
fair, balanced and understandable;
• reviewing accounting policies, accounting
treatments and disclosures in fi nancial reports;
• assessing the Group’s systems of internal fi nancial
and accounting control;
• assessing and reviewing the eff ectiveness
of the Company’s internal fi nancial and
accounting control;
• overseeing and assessing the Group’s
management of all principal risks including:
fi nancial reporting risks, internal fi nancial controls,
fraud risks as they relate to fi nancial reporting and
ICT risks as they relate to fi nancial reporting;
• ensuring Group-wide standards are set for
achieving compliance with relevant laws
and regulations;
• reviewing the adequacy and security of the
Company’s arrangements for its employees
regarding possible wrongdoing in fi nancial
reporting or other matters, fraud detecting
procedures and bribery prevention systems
and controls;
• monitoring and reviewing the eff ectiveness of the
Group’s internal audit function in the context of
the Group’s overall risk management system;
• overseeing the Company’s relationship with its
external auditors;
• making recommendations to the Board as to the
appointment or reappointment of the external
auditors, reviewing their terms of engagement
and engagement for non-audit services, and
monitoring the external auditors’ independence,
objectivity and eff ectiveness;
• reviewing the scope of the external audit, its
fi ndings and the eff ectiveness of the audit process;
• reviewing the overall relationship with the external
audit fi rm including the provision of non-audit
services to ensure that independence and
objectivity are maintained;
GOVERNANCE
AND
REMUNERATION
• ensuring and confi rming compliance with the
CMA order;
• reviewing, monitoring and approving the
Company’s policy in respect of tax planning; and
• reviewing, monitoring and approving the
Company’s policy in respect of the fi nancing of
the Company.
Further details on the Committee’s duties can be
found in its terms of reference which are available on
the Company’s website www.mediclinic.com.
MAIN ACTIVITIES
The Committee, in its current form, met twice in
the period following the Combination and up to
the publication of this report. A summary of the
Committee’s principal activities during the fi nancial
year are detailed below and include the position prior
to and following the Combination.
PRIOR TO COMBINATION:
AL NOOR HOSPITALS GROUP PLC
(“Al Noor”)
During the year, (and prior to the Combination),
the Committee was predominantly focused on the
Combination. Other areas of the Committee’s focus
included a review of the Group’s half yearly fi nancial
statements, the considerations in respect of the
viability statement, principal risks and uncertainties,
risk management and internal controls framework,
goodwill and impairment, non-audit services policy,
Committee terms of reference, business ethics, Code
of Conduct, internal audit plan and key priorities.
The Committee also instructed management to
implement the SAP accounting system and discussed
rejection provisions in respect of payer relations.
MEDICLINIC INTERNATIONAL
LIMITED
The predominant focus of the Audit and Risk
Committee of the South African entity known
as Mediclinic International Limited, was on the
Combination. Other areas of the Committee’s focus
included reviewing the categories and thresholds of
non-audit services that the external auditors may
provide, assessing the eff ectiveness of the Group’s
internal control, accounting function and policies, and
evaluating the risk and control procedures, reviewing
the interim fi nancial statements and going concern
status of Mediclinic International Limited and its
three operating platform companies. The Committee
also considered matters relating to the external and
internal audit, tax issues and fraud and ethics.
MEDICLINIC ANNUAL REPORT 2016
109
AUDIT AND RISK COMMITTEE REPORT (continued)
FOLLOWING THE COMBINATION:
MEDICLINIC INTERNATIONAL PLC
(FORMERLY AL NOOR HOSPITALS
GROUP PLC)
Since the Combination, the Committee has been
principally focused on the following: i) monitoring
the risk management process and systems of
internal control for the Group through the review of
the activities of its operating platforms in Southern
Africa, Switzerland and the Middle East, the Group’s
internal and external auditors, and the Group’s risk
management function; ii) approval of the external
audit engagement and fees; iii) review of the internal
audit reports and approval of the internal audit
engagement and fees for the 2016/17 financial year;
iv) considering and making recommendations to
the Board relating to the Group’s Annual Report,
the financial statements and any other reports
(with reference to the financial affairs of the Group)
for external distribution or publication, including
those required by any regulatory or statutory body;
v) review of the Committee’s terms of reference,
as well as policies regarding Enterprise-wide Risk
management, external auditor independence and
non-audit services.
The Committee has continued to monitor and
keep abreast of regulatory developments across
all jurisdictions throughout the year. Amongst
those considered, it has discussed its additional
responsibilities in respect of the Code and EU
Audit reform.
SIGNIFICANT ISSUES
The Committee, through a process of consultation
with both management and the external auditor,
considered the following significant issues relating to
the presentation of the Group’s financial statements.
The principal accounting policies applied in the
preparation of the annual financial statements are
detailed on pages 141 to 152. If applicable, further
detail in the notes to the financial statements relating
to the below issues are referenced as indicated.
AR
SIGNIFICANT ISSUES CONSIDERED
STEPS TAKEN BY THE COMMITTEE
The disclosure and accounting of the Al Noor
reverse acquisition in the financial statements
The disclosure and accounting of a 29.9% associate
interest in Spire in the financial statements
The Committee reviewed the purchase price allocation including:
• determining of the acquisition date;
• identifying the acquirer and acquiree;
• the allocation of tangible and intangible assets at fair value; and
• the recognition of goodwill.
The Committee considered the alignment of Al Noor's accounting policies and
the reasonableness of the adjustments made to the opening balance sheet and
considered legal and any other contingent liabilities.
The Committee was satisfied with the disclosure of the reverse acquisition in the
financial statements.
The acquisition of Al Noor for a total consideration of £1.3bn led to the recognition
of goodwill to the value of £1 189m and intangible assets of £57m. Refer to notes 6
and 28 to the financial statements on pages 159 and 191 to 195.
AR
The Committee also reviewed management’s approach to the full retrospective
application of the Group’s change in its presentation currency from rand (ZAR) to
pound sterling (GBP) following the transaction.
The Committee was satisfied that the Group is able to exert sufficient influence
over the financial and operating decisions of Spire to support management’s
judgement that the investment should be equity accounted, with Spire being
treated as an associate of the Group.
The Committee considered the carrying value of the Group’s investment at
31 March 2016, including an assessment of share price movements since year
end, concurring with management’s judgement that there is no indication of
a significant or prolonged decline in value which might require an impairment
charge. In addition, the Committee reviewed the disclosures relating to the
Group’s acquisition of its stake in Spire, determining these disclosures to be
balanced and understandable.
The Investment in Associate balance as at 31 March 2016 amounted to £451m, and
the Income from Associate for the period under review amounted to £6m.
Please also refer to note 7 to the financial statements on pages 161 to 162.
AR
110
MEDICLINIC ANNUAL REPORT 2016
GOVERNANCE
AND
REMUNERATION
SIGNIFICANT ISSUES CONSIDERED
STEPS TAKEN BY THE COMMITTEE
Revenue recognition and provisions impacting on
accounts receivable
Impairment of intangible assets, goodwill and
certain Swiss properties
Capital expenditure relating to buildings
The Committee reviewed the Group’s accounting policies as well as the basis
for the calculations in respect of revenue recognition and provisions impacting
accounts receivable, specifi cally the following:
• tariff risk provisions relating to billing in accordance with provisional health
insurance base rates, where these rates have not yet been fi nalised between
providers and funders, and also to historical tariff disputes at certain of the
Group’s Swiss hospitals. The Committee considered and was satisfi ed with
management’s judgement and best estimate based on available information;
and
• insurance claim rejections by the health insurance companies and the resulting
provision for unrecoverable sales. The Committee assessed and was satisfi ed
with management’s judgement, which was based on historic events, to
determine the rejection provision.
Please also refer to note 2.20 to the fi nancial statements on page 151.
AR
The Committee reviewed the annual impairment testing of recognised
goodwill and the indefi nite life intangible asset. The Committee considered the
reasonableness of the cash fl ow projections which were based on the most
recent budget approved by the Board and refl ected management’s expectations
of revenue growth, operating costs and margins based on past experience and
knowledge of the industry. Long-term growth rates for periods not covered by the
annual budget were challenged to ensure they were appropriate in the countries
in which the relevant operating platforms operate. The Committee also reviewed
and challenged the key assumptions made in deriving these projections: discount
rates, growth rates, and expected changes in tariff s, admissions and patient mix.
The Committee also considered the adequacy of the disclosures in respect of the
key assumptions and sensitivities. Refer to note 6 to the fi nancial statements for
more details of these assumptions.
The Committee was satisfi ed that the discount rates assumptions appropriately
refl ected current market assessments of the time value of money and the
risks associated with the particular assets. The other key assumptions were all
considered to be reasonable.
The external auditor explained the results of their own review of the estimate
of value in use, including their challenge of management’s underlying cash fl ow
projections, as well as the long-term growth assumptions and discount rates.
On the basis of their audit work, and their challenge of the key assumptions and
associated sensitivities, they concurred with management’s conclusion that no
impairments were required.
Please also refer to note 6 to the fi nancial statements on pages 159 to 160.
AR
The Committee considered the appropriateness of the capitalisation of capital
expenditure incurred in respect of hospital buildings as well as the depreciation
thereof. The Committee evaluated management’s judgement applied in respect
of the residual value and useful lives of buildings and also considered whether
management’s estimate for deprecation rates were appropriate.
The Committee was satisfi ed with the capitalisation and depreciation policies of
buildings that were applied.
AR
Please also refer to note 5 to the fi nancial statements on page 157.
Viability assessment
The Committee has reviewed the Company's new viability statement and, in
particular, understanding the analysis which was prepared by management and
supports the Board's view that the Company will be able to continue in operation
and meet its liabilities as they fall due over the longer period assessed.
MEDICLINIC ANNUAL REPORT 2016
111
AUDIT AND RISK COMMITTEE REPORT (continued)
INTERNAL CONTROLS AND RISK
MANAGEMENT
The Board believes that effective risk management
underpins the running of a successful business and
is integral to the objective of constantly adding
value to the Group. It has adopted an integrated
and effective risk management framework, at both
an operational and strategic level; identifying,
quantifying and managing principal risks in order to
achieve an optimal risk/reward profile. This has been
incorporated into the daily operational management
processes, allowing management to focus on
core activities. The Board has a clear process for
identifying, evaluating and managing the principal
risks faced by the Group for the period under review
and up to the date of the report. The process is
reviewed annually by the Board and is in accordance
with the FRC’s Guidance on Risk Management,
Internal Control and Related Financial and Business
Reporting and the requirements of the Code.
The Group’s Enterprise-wide Risk Management Policy
is benchmarked against the international Committee
of Sponsoring Organisations of the Treadway
Commission framework, which defines the risk
management objectives, methodology, process and
the responsibilities of the various risk management
role-players for the Group. This policy provides
structure within which directors and management
can operate in order to reinforce a strong risk
management culture throughout the Group. It sets
the tone and acts as a starting point for all other
components of risk management and control in
providing the necessary discipline and structure.
The Board retains full and effective control over
the Company and is responsible for monitoring
management’s implementation of board decisions
and strategies. The Board ensures that the Group
complies with all the relevant laws, regulations and
codes of business practice. The Committee assists
the Board, by routinely reviewing and monitoring
the risk management process and Group internal
control systems.
INTERNAL AUDIT
The Board is ultimately responsible for overseeing the
establishment of effective internal control systems
which are reviewed by the Committee, and which
facilitate the delivery of and sustain the Group’s
financial, operational and strategic objectives.
During the year, the Committee of Al Noor received
regular reports on the control environment from its
Internal Audit Director who was supported by
an internal audit team, as well as outsourcing certain
internal audit reviews to Deloitte LLP. This Committee
reviewed and considered the key improvement
themes and areas for focus, and assessed the
responsiveness of management in addressing internal
audit actions.
The internal audit function in relation to Mediclinic
International Limited was outsourced to Remgro
Internal Audit who regularly attended Committee
meetings and reported on the findings of their
investigations. They were responsible for measuring
the effectiveness of the system of internal financial
control in respect of each operating platform within
the Group.
Since the Combination, the Committee has
considered and discussed with Remgro Internal
Audit, the effectiveness and efficiency of operations,
reliability of financial reporting and compliance with
applicable laws and regulations.
While the Committee continues to believe that
Remgro Internal Audit is effective in its provision of
internal audit and compliance services to the Group,
it has taken the opportunity, following the completion
of the Al Noor transaction and the Group's entry
into the FTSE 100, to consider what internal audit
arrangement would be most appropriate for the
Group going forward. As part of this consideration,
the Committee has evaluated the various internal
audit arrangements in place across the FTSE 100.
As a result of this exercise, the Committee has
concluded that the Group will exit the outsourced
Remgro Internal Audit arrangement and will bring
more internal audit resource in-house, including a
Head of Internal Audit. This change in the Group's
internal audit arrangements will be made in a phased
manner to avoid any disruption to the Group's
internal audit and compliance activities during the
hand-over process. The Committee will provide an
update about the progress being made in effecting
this change in its future reports to shareholders.
112
MEDICLINIC ANNUAL REPORT 2016
EXTERNAL AUDIT
During the year, KPMG LLP resigned and
PricewaterhouseCoopers LLP (“PwC UK”)
was appointed auditor of the Company,
following shareholder approval granted at the
15 December 2015 general meeting in respect
of the change of auditor.
The Committee is responsible for overseeing the
external auditors on behalf of the Board, including
approving the annual audit work plan and approving
the audit fee.
EXTERNAL AUDITOR
INDEPENDENCE, EFFECTIVENESS
AND RE-APPOINTMENT
The Committee is committed to ensuring
that the Group receives a high-quality and
eff ective statutory audit. It is responsible for
monitoring the performance, objectivity and
independence of the external auditor (PwC) and
undertakes a formal evaluation process each year.
This process involves an examination of fi ve main
performance criteria including robustness of the
audit process, independence and objectivity, quality
of delivery, quality of people and service, and
value-added advice.
The Committee has evaluated the eff ectiveness
of PwC South Africa as auditors of Mediclinic
International Limited for the period up to the
Combination, 15 February 2016, and PwC UK as
auditors post-Combination of the newly formed
Group, Mediclinic International plc (formerly Al Noor
Hospitals Group plc).
As this is PwC UK’s fi rst year with the Group, the
Committee was only able to assess their work as
from the Combination up to the fi nancial year-
end. The assessment resulted in the following
observations:
• PwC UK demonstrated a good understanding of
the business and its values;
• The team was challenging, but supportive on
technical matters; and
• The establishment of a combined approach
towards the signifi cant issues debated.
The external auditor receives copies of all relevant
Committee papers and minutes of all Committee
meetings. As part of the Committee’s assessment of
the external auditor, separate meetings have been
held between the non-executive directors and the
external auditor, without management being present.
The Committee is satisfi ed that the services provided
by the auditor have been of high quality and has
concluded that the auditor remains objective and
independent. Accordingly, it has recommended
to the Board the re-appointment of PwC UK as
the Company’s external auditor is proposed to
shareholders at the 2016 AGM.
GOVERNANCE
AND
REMUNERATION
AUDIT TENDER
This is the fi rst year that the UK current lead audit
partner, Giles Hannam, has been involved in the audit
of the Group. As a result of the UK’s implementation
of the EU’s mandatory fi rm rotation requirements,
and in accordance with the Committee’s terms of
reference, the Company is required to ensure that
the external auditor’s contract is put out to tender at
least every 10 years, with the proviso that no single
fi rm may serve as the Company’s auditor for a period
exceeding 20 years. Under these arrangements, the
external audit must be put out to tender no later than
for the fi nancial year commencing 1 April 2023.
NON-AUDIT SERVICES
The Committee believes that it may be appropriate
in certain circumstances for the Company to engage
its external auditor to provide non-audit services. It
has established a policy which seeks to ensure the
independence and objectivity of the external auditor
is not compromised.
Examples of prohibited non-audit services are
bookkeeping services, valuation services, payroll
services, legal services, designing risk management
systems or management in the audited entity.
For other services, it can be more effi cient or
prudent to engage the external auditor rather than
another party, on the basis that the service will not
compromise independence or objectivity, is a natural
extension of the audit or if there are overriding
business, effi ciency or confi dentiality reasons which
make the external auditors most suited to provide
the service.
The Committee determines the pre-approved
monetary thresholds for each category of non-audit
services in the beginning of each fi nancial year. When
determining this, the nature of the non-audit services,
the individual fee levels of each category and the
aggregate fee amount relative to the external audit
fee are taken into account. Feedback on non-audit
services performed is given at each meeting and
when necessary further approvals for increased fees
are discussed.
During the year, fees for the non-audit service
work carried out by PwC were abnormally high.
This exceptional level refl ects the considerable
services PwC has provided relating to the Al Noor
Combination, particularly in relation to the Class 1
Circular. The Committee considered that hiring PwC
to undertake these non-audit services was in the best
interests of shareholders because:
• PwC possessed the type of expertise, experience,
size and international scope to handle such a
complex transaction.
• The Company benefi ted specifi cally from PwC's
in-depth knowledge and understanding of our
business.
MEDICLINIC ANNUAL REPORT 2016
113
AUDIT AND RISK COMMITTEE REPORT (continued)
COMPETITION AND MARKETS
AUTHORITY STATUTORY AUDIT
SERVICES ORDER 2014
(“CMA Order”)
During the year, the Company has complied with the
mandatory audit processes and the Committee has
complied with the responsibility provisions required
by it in connection with the CMA Order. The work of
the Committee in discharging its responsibilities is
explained in more detail in this report on page 113.
AR
FAIR, BALANCED AND
UNDERSTANDABLE
The Committee is satisfied that one of the key
compliance requirements of the Group’s financial
statements, for the Annual Report to be fair, balanced
and understandable has been met, having reviewed
a summary of the approach taken by management
in the preparation of the report to ensure that it
met the requirements of the Code. Accordingly, the
Committee has recommended that the Board confirm
the Annual Report and Financial Statements taken as
a whole is fair, balanced and understandable.
To maintain the external auditor's independence
and objectivity, the Committee requires that an
independent partner is appointed to lead any non-
audit services. We anticipate that non-audit fees
payable to PwC will return to more normalised levels
in 2017 following the completion of any services
related to the Al Noor Combination.
Looking forward, the Committee has considered
the UK implementation of the EU Audit Directive
including the introduction of prohibitions for certain
types of non-audit service. In response to these new
requirements, the Committee has asked management
to update the Group's non-audit services policy in
order to ensure compliance from the application date
for the Group, namely 1 April 2017. The Committee
will provide an update about the new non-audit
services policy in its future reports to shareholders,
including an overview of the additional non-audit
services, which will be prohibited in 2017, and the cap
which will be imposed on the level of non-audit fees
payable to PwC by comparison to its audit fees.
FEES
Refer to note 21 to the Consolidated Financial
Statements on page 186 for detail on the
remuneration of the auditor.
AR
In addition to the non-audit services described
above, PwC South Africa also provided audit and
non-audit services to Remgro Limited and tax
services to two directors on the Board during the
year. The Committee is satisfied and comfortable that
the tax services provided to the directors did not
compromise the independence of the auditor, as the
directors (Dr Edwin Hertzog and Mr Jannie Durand)
were not involved in financial reporting oversight,
nor did they sit on the Committee. In addition,
the services which were provided to them are not
prohibited under regulations.
114
MEDICLINIC ANNUAL REPORT 2016
ETHICAL CONDUCT
The Group remains focused on conducting its
business in an honest, fair and ethical manner, a
principle which is actively endorsed by the Board and
management. The Committee oversees the Group’s
processes for handling the business ethics code and
anti-bribery policy. This includes receiving regular
feedback from the risk manager regarding incidents
reported on the ethics lines and the eff ectiveness of
the lines. The Board has also established a Clinical
Performance and Sustainability Committee, the
details of which can be found on page 70 of the
Corporate Governance Statement.
AR
The Group’s Code of Business Conduct and Ethics
provides a framework for directors and employees
within the Group of the standards of business
conduct and ethics that is required of them, and
which applies to all business divisions within the
Group. It serves to ensure that the highest ethical
standards are maintained in all dealings with the
Group’s stakeholders. It is available to all staff
and communicated to new employees during
their induction. The code contains the Group’s
whisteblowing arrangements, setting out the details
of the Group’s ethics lines. Any employee or external
stakeholder is able to report any wrongdoing
throughout the Group on a confi dential and
anonymous basis to the ethics lines. All complaints
are investigated in accordance with the code.
GOVERNANCE
AND
REMUNERATION
The Group adopts a no-tolerance policy with regard
to unethical business conduct, in particular also fraud
and corruption, which is addressed in the Code of
Business Conduct and Ethics. Also in place is an
Anti-bribery Policy which supports its commitment
to ensure compliance with all anti-bribery and
corruption laws and regulations. The Group has strict
policies relating to any invitations, gifts or donations
received from suppliers or any other party, and
employees throughout the Group are compelled to
declare these to management for approval. Staff
members involved in the contracting, negotiating and
purchasing of equipment or consumables are also
bound to strict ethical principles, ensuring that an
impeccable standard of integrity is maintained in the
Group’s business relationships.
Copies of the Code of Business Conduct and Ethics
and the Anti-bribery Policy can be found on the
governance section of the Company’s website at
www.mediclinic.com.
Signed on behalf of the Audit and Risk Committee.
Desmond Smith
Chairman of the Audit and Risk Committee
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
115
Prof Dr Robert Leu, Nandi Mandela, Danie Meintjes,
Trevor Petersen, Craig Tingle and Desmond Smith
were appointed by the Board following completion of
the Combination of the Company (then named
Al Noor Hospitals Group plc) and Mediclinic
International Limited with effect from
15 February 2016. These directors will retire and
seek election by the shareholders at the annual
general meeting to be held on 20 July 2016.
Remgro Limited, through wholly-owned subsidiaries,
(“Remgro”) holds 44.56% of the issued ordinary
shares of the Company and is therefore regarded
as a controlling shareholder of the Company, for
the purposes of the Listing Rules. The Listing Rules
require that independent non-executive directors of
a company with a controlling shareholder must be
elected by a majority of votes cast by independent
shareholders, in addition to a majority of votes cast
by all shareholders in the company. The resolutions
proposed at the annual general meeting for the
election of the independent non-executive directors
of the Company will therefore be taken on a poll
and the votes cast by (i) independent shareholders
and (ii) all shareholders will be calculated separately.
Such resolutions will be passed only if a majority
of votes cast by independent shareholders are in
favour, in addition to a majority of votes cast by all
shareholders being in favour.
All directors’ biographies can be found on
pages 60 to 61.
AR
APPOINTMENT AND REMOVAL
OF DIRECTORS
The rules relating to the appointment and removal of
the Directors are contained in the Company’s Articles
of Association.
POWERS OF DIRECTORS
The general powers of the directors are contained
within relevant UK legislation and the Company’s
Articles of Association. The directors are entitled to
exercise all powers of the Company, subject to any
limitations imposed by the Articles of Association or
applicable legislation.
DIRECTORS’ INTERESTS
The interests of the directors of the Company at
31 March 2016 in the issued shares of the Company
disclosed in accordance with the FCA’s Listing Rules
are given in the Remuneration Report on page 89.
The Remuneration Report also sets out details of any
changes in those interests between the year end and
25 May 2016.
AR
DIRECTORS’ REPORT
The directors of Mediclinic International plc
(formerly Al Noor Hospitals Group plc) are
pleased to present the Company’s Directors’
Report for the period to 31 March 2016. The
information contained in this report provides
details of Mediclinic International plc following
the completion of the Combination of
Al Noor Hospitals Group plc and Mediclinic
International Limited.
AR
SDR
DISCLOSURES INCORPORATED
BY REFERENCE
The following disclosures required to be included
in this Directors’ Report have been incorporated
by way of reference to other sections of this report
or the Sustainable Development Report available
on the Company’s website, and should be read in
conjunction with this report:
• Corporate Governance Statement – refer to
pages 64 to 73 of the report;
• strategy and relevant future developments – refer
to pages 18 to 21 of the Strategic Report;
• financial risk management objectives and policies
– refer to the Risk Management Report included in
the Strategic Report on pages 24 to 29 and note 3
to the financial statements on pages 152 to 155;
• research and development activities – various
activities, such as the standardised patient
experience index, the standardised employee
engagement initiatives, research by health policy
units, referred to on pages 7, 8, 19, 24, 48 and 50,
respectively, of the Strategic Report;
• greenhouse gas emissions – refer to page 52
of the Strategic Report and the Sustainable
Development Report;
• corporate social responsibility and corporate social
investment – refer to page 54 of the Strategic
Report and the Sustainable Development Report.
DIRECTORS
All the directors who served during the reporting
period are listed in the Corporate Governance
Statement on pages 67. Biographies of all the
current directors of the Company are provided
on pages 60 to 61.
AR
In accordance with the provisions of the UK
Corporate Governance Code, all members of the
Board wishing to continue their appointments seek
re-election by the shareholders. Accordingly, Ian Tyler
and Seamus Keating will retire and seek re-election at
the annual general meeting to be held on
20 July 2016.
In terms of the Company’s Articles of Association,
any director appointed as such by the Board of
directors shall retire at the following annual
general meeting and shall be eligible for election.
Jannie Durand, Alan Grieve, Dr Edwin Hertzog,
116
MEDICLINIC ANNUAL REPORT 2016
INDEMNIFICATION OF
DIRECTORS
The Company has entered into a deed of indemnity
with each director who served during the year under
identical terms. The deeds indemnify the directors
in accordance with the applicable laws of England
against all liability incurred as a director or employee
of the Company or of certain other entities. In
addition, the Company has put into place directors'
and offi cers' indemnity insurance.
COMPENSATION FOR LOSS
OF OFFICE
There are no agreements in place with any director
that would provide compensation for loss of offi ce
or employment resulting from a takeover, except that
provisions of the Company’s share plans may cause
options and awards granted under such plans to
vest on a takeover. Further information on directors’
service contracts and their notice periods and any
vested awards to previous directors made following
the Combination can be found in the Remuneration
Report on pages 80 to 81.
AR
ARTICLES OF ASSOCIATION
The Articles of Association may be amended by way
of a special resolution of the members. At the general
meeting held on 15 December 2015, shareholders
approved by special resolution that the amended
Articles of Association would take eff ect at the date
of completion of the Combination, which occurred on
15 February 2016.
RELATED-PARTY TRANSACTIONS
Following the announcement made on 7 August 2015
and the general meeting held on 24 August 2015,
the Company undertook a related-party transaction
to lease premises from United Al Saqr Group LLC.
Sheikh Mohammed Bin Butti Al Hamed, a Director
and principal shareholder of the pre-Combination
entity Al Noor Hospitals Group plc, had a controlling
interest in United Al Saqr Group. At the general
meeting, 99.34% of the shares voted approved the
related-party transaction. Sheikh Mohammed Bin
Butti Al Hamed is no longer a shareholder of the
Company, as the entire shareholding held through
Sapor Business Corp, was tendered to Al Noor
Hospitals Group plc for cancellation, as announced
on 8 February 2016.
Details on all related-party transactions are contained
within note 33 of the consolidated fi nancial
statements on page 200.
AR
SHARE CAPITAL AND CONTROL
The Company’s ordinary issued share capital as
at 31 March 2016 was 737 243 810 ordinary shares
of £0.10 each which have a primary listing on the
London Stock Exchange and secondary listings on
the Johannesburg and Namibian stock exchanges.
The ordinary share class represent over 99.9% of the
Company’s total issued share capital.
GOVERNANCE
AND
REMUNERATION
AR
In addition to the ordinary shares, the Company also
has a class of 10 subscriber shares of £0.10 each
which are not admitted to trading on a regulated
market. The subscriber shares carry no rights to
receive any of the profi ts of the Company available
for distribution by way of dividend or otherwise.
If there is a return of capital on a winding-up or
otherwise, the assets of the Company available for
distribution among the members shall be applied
fi rst in repaying in full to the holder of the subscriber
shares the amount paid up on such shares. Except as
provided above, the subscriber shares shall not carry
any right to participate in profi ts or assets of the
Company. The holders of the subscriber shares shall
not be entitled to receive notice of or attend and
vote at any general meeting of the Company unless
a resolution is proposed which varies, modifi es,
alters or abrogates any of the rights attaching to the
subscriber shares.
The subscriber shares represent less than 0.01% of
the Company’s total issued share capital. Further
information on the Company’s issued share capital
can be found on pages 168 to 171 in the Notes to the
fi nancial statements. As outlined in the Company’s
prospectus dated 19 November 2015, the Company
intends to purchase and cancel the 10 subscriber
shares and a resolution to this eff ect has been
included in the notice of annual general meeting
(“AGM”) for consideration by shareholders.
There are no known arrangements under which
fi nancial rights are held by a person other than the
holder of the shares. The Company has no intention
to complete a market purchase of its shares and will
not seek this authority at the 2016 AGM.
Shares acquired through the Company’s share
schemes and plans rank equally with the other shares
in issue and have no special rights.
RESTRICTION ON VOTING RIGHTS
Mediclinic International Limited, implemented a
black ownership initiative in 2015, which had the
eff ect of introducing Phodiso Holdings Limited and
MP1 Investment Holdings (Pty) Ltd as shareholders
of Mediclinic through two special purpose vehicle
companies, Mpilo Investment Holdings 1 (RF) (Pty)
Ltd (subsequently restructured in 2015 with the
Mediclinic shares currently held by Mpilo 1 Newco
(RF) (Pty) Ltd) (“Mpilo 1”) and Mpilo Investment
Holdings 2 (RF) (Pty) Ltd (“Mpilo 2”). As at
25 May 2016, Mpilo 1 held 1.49% of the issued share
capital of the Company and Mpilo 2 held 3.33%.
10 958 198 (representing 1.49% of the issued shares
of the Company) of the Mediclinic shares held by
Mpilo 1 are restricted and subject to a lock-in period
restricting the disposal of its shareholding before
31 December 2019. Similarly, all the Mediclinic shares
held by Mpilo 2 are restricted and subject to a lock-in
period expiring on 31 December 2018.
MEDICLINIC ANNUAL REPORT 2016
117
DIRECTORS’ REPORT (continued)
The Company’s Articles of Association provide
that, unless the directors determine otherwise, a
shareholder shall not be entitled to vote, either
personally or by proxy, at any general meeting or to
exercise any other right conferred by membership if:
• any call or other sum payable to the Company in
respectin respect of that share remains unpaid; or
• such shareholder, having been duly served with a
notice to provide the Company with information
under section 793 of the UK Companies Act, has
failed to do so within 14 days, for so long as the
default continues.
ACQUISITION OF OWN SHARES
In connection with the Combination of Mediclinic
International Limited and Al Noor Hospitals Group
plc concluded in February 2016, a total of 63 658 876
ordinary shares of 10 pence each were successfully
tendered at a price of £8.32 per ordinary share and
were cancelled on 17 February 2016 pursuant to a
court-approved reduction of capital approved by
shareholders at the General Meeting held on
15 December 2015. Following the reduction of capital,
the Company has a total of 737 243 810 ordinary
shares of £0.10 each in issue.
SUBSTANTIAL SHAREHOLDERS
As at year end and as at 25 May 2016, being the Last
Practicable Date, the following shareholders have
notified the Company, in accordance with Disclosure
and Transparency Rule 5, of their interest of 3% or
more in the Company’s issued share capital.
ORDINARY
SHARES
% VOTING
RIGHTS
Remgro Limited (through
wholly-owned subsidiaries)
Public Investment Corporation
Soc Limited
Mpilo Investment Holdings 2
(RF) (Pty) Ltd
328 497 888
44.56%
55 482 294
7.53%
24 582 960
3.33%
PRINCIPAL SHAREHOLDER AND
RELATIONSHIP AGREEMENT
In accordance with Listing Rule 9.8.4(14), the
Company has set out below a statement describing
the relationship agreement entered into between
the Company and its principal shareholder, Remgro
Limited. As at 25 May 2016, Remgro Limited, through
wholly-owned subsidiaries, held 44.56% of the issued
ordinary share capital of the Company.
Prior to the Combination, the Company entered into
a Relationship Agreement with Remgro Limited on
14 October 2015, which entity was also the principal
shareholder of Mediclinic International Limited. That
agreement came into effect on 15 February 2016, on
completion of the Combination.
Under the Relationship Agreement, Remgro
Limited undertakes to comply with the following
independence provisions set out in the agreement, as
required under the Listing Rules:
• transactions and arrangements between the
Company and itself (and/or its associates) are,
and will be, at arm’s length and on normal
commercial terms;
• neither it nor any of its associates will take any
action that would have the effect of preventing
the Company from complying with its obligations
under the Listing Rules; and
• neither it nor any of its associates will propose, or
procure the proposal of, a shareholder resolution
that is intended or appears to be intended to
circumvent the proper application of the
Listing Rules.
The Company has complied with the above
independence provisions and, in so far as it is aware,
the Principal Shareholder has complied with the
independence provisions and the procurement
obligation set out in the Relationship Agreement
from the date of the agreement. In accordance
with the terms of the Relationship Agreement, for
every 10% of the issued ordinary share capital of the
Company (or an interest which carries 10% or more
of the aggregate voting rights in the Company from
time to time) held by a Principal Shareholder Group,
the relevant Principal Shareholder shall be entitled to
appoint one Director to the Board, up to a maximum
of three Directors, provided that the right to appoint
a third director is subject to the requirement that the
Board will, following such appointment, comprise a
majority of independent directors.
If a Principal Shareholder ceases to hold 10% of the
Company’s share capital (or 10% of the aggregate
voting rights in the Company), the rights and
obligations of that Principal Shareholder Relationship
Agreement shall terminate. The ordinary shares
owned by the Principal Shareholders rank pari passu
with the other ordinary shares in all respects.
118
MEDICLINIC ANNUAL REPORT 2016
SIGNIFICANT AGREEMENTS
The following agreements are considered signifi cant
in terms of their potential impact on the business
of the Group as a whole and that could alter or
terminate on the change of control of the Company:
• The Relationship Agreement entered into between
the Company and its principal shareholder,
Remgro Limited, as referred to on page 118:
the agreement does not include a change of
control provision, but does terminate if (i) the
Company’s ordinary shares cease to be listed and
admitted to trading on the LSE's main market for
listed securities; or (ii) the Remgro Group, taken
together, ceases to hold the minimum interest of
10% in the Company.
• The various facilities and fi nance agreements
-
throughout the Group are regarded as signifi cant
and contain change of control provisions:
the Company’s £400m senior facility
-
agreement concluded in 2015 with FirstRand
Bank Limited (acting through its Rand
Merchant Bank division) and Morgan Stanley,
which is in the process of being refi nanced;
Hirslanden’s CHF1.65bn term and revolving
credit facilities agreements concluded in 2008
with, among others, Barclays Bank plc;
Hirslanden’s CHF90m bonds and the CHF145m
bonds concluded in 2015;
Mediclinic Southern Africa’s R7.4bn
amended and restated facility concluded in
2016 with, among others, Rand Merchant Bank,
Standard Bank and Absa Capital;
Mediclinic Middle East’s AED33m and
US$140.5m amended and restated facility
agreement concluded in 2015 with Standard
Chartered Bank.
-
-
-
GOVERNANCE
AND
REMUNERATION
POLITICAL PAYMENTS
During the year, the Company, through its Hirslanden
subsidiary, made payments to a number of political
parties, institutions and associations in Switzerland
which totalled CHF36 000 (2015: CHF14 571).
Contributing to political campaigns through third-
party contributions is an offi cial and standard
practice in Switzerland. In line with best practice, a
resolution to authorise the Company to make political
payments up to £100 000 has been included for
shareholder consideration in the Notice of AGM. It
is not the policy of the Company to make donations
to EU or any other political organisations or to incur
other political expenditure and the directors have
no intention of changing that policy. However, as a
result of broad defi nitions used in the UK Companies
Act, normal business activities of the Company,
which might not be considered political donations or
expenditure in the normal sense, may be construed
as political expenditure or as a donation to a
political party or other political organisation and fall
within the restrictions of the Companies Act 2006.
Sponsorship, subscriptions, payment of expenses,
paid leave for employees fulfi lling public duties,
and support for bodies representing the business
community in policy review or reform, may fall within
the scope of these matters. The Board has therefore
decided to propose the resolution.
MEDICLINIC ANNUAL REPORT 2016
119
DIRECTORS’ REPORT (continued)
EMPLOYEES
The Company operates an equal opportunities policy
which endeavours to treat individuals fairly and not
to discriminate on the basis of sex, race, ethnic origin
or disability or on any other basis. Applications for
employment are fully considered on their merits, and
employees are given appropriate training and equal
opportunities for career development and promotion.
The Company is committed to ensuring that
adequate policies and procedures are in place
to enable disabled applicants to receive training
to perform safely and effectively and to provide
development opportunities to ensure they reach
their full potential. Where an individual becomes
disabled during the course of their employment
with the Company, Mediclinic will seek to provide
wherever possible, continued employment on normal
terms and conditions. Adjustments will be made to
the environment and duties or alternatively suitable
new roles within the Company will be secured with
additional training where necessary.
A breakdown by gender, age and race (only for
purposes of South Africa) on the Board and senior
management roles as at year end is included is
illustrated in Figure 1. The proportion of female
employees throughout the Group as at year end is
illustrated in Figure 2.
The Group’s employees are a highly valued asset. The
employees’ trust and respect are vital to Mediclinic’s
success. Listening and responding to the Group’s
employee needs through effective communication
and sound relations are important components in
being regarded as an employer of choice among
existing and prospective employees and vital to
maintain an engaged, loyal workforce. Engagement
with employees is conducted through various
communication methods, including leadership
video conferences, intranet, periodic employee
surveys, performance reviews, staff magazines,
and staff wellness and recognition programmes.
FIGURE 1: RACE, GENDER AND AGE REPRESENTATION ON GOVERNANCE BODIES
RACE
GENDER
AGE
TOTAL
NO OF
MEMBERS
BLACK
WHITE
MALE
FEMALE
30–50 YRS
> 50 YRS
NO
%
NO
%
NO
%
NO
%
NO
%
NO
%
Mediclinic International
Board
Mediclinic International
Executive Committee
11
8
Mediclinic Southern Africa
Executive Committee
10
Hirslanden Executive
Committee
Mediclinic Middle East
Executive Committee
5
9
n/a
n/a
n/a
n/a
10
91%
1
9%
n/a
n/a
n/a
n/a
3
30%
7
70%
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
8
9
5
6
100% –
–
90%
1
10%
100% –
–
2
1
6
4
18%
9
82%
12.5% 7
87.5%
60%
4
40%
80%
1
20%
67%
3
33%
5
56%
4
44%
FIGURE 2: WORKFORCE COMPOSITION BY GENDER
Southern Africa*
Female
Male
Switzerland
Female
Male
UAE – MCME*
Female
Male
NUMBER
2015
%
NUMBER
2016
%
13 455
3 067
6 749
2 000
1 442
983
81.44%
18.56%
77.14%
22.86%
59.46%
40.54%
13 654
3 178
7 011
2 109
1 504
1 003
81.12%
18.88%
76.88%
23.12%
59.99%
40.01%
* The gender split of Mediclinic Middle East as at 31 March 2016 excludes the Al Noor employees.
120
MEDICLINIC ANNUAL REPORT 2016
During the year, the leading independent research
company, Gallup, was commissioned to undertake
an annual employee engagement survey across
all three our platforms for us to understand where
there are opportunities to deliver improvements
in the workplace. Further details regarding the
Group’s employee engagement are included in the
Sustainable Development Report available on the
Company’s website.
Continuous training and development of the
Group’s employees across all three platforms
ensures retention of staff , in particular where
the skills shortage is most critical, and proper
succession planning. Further details on the Group’s
training initiatives can be found in the Sustainable
Development Highlights on pages 49 to 50 and the
Sustainable Development Report available on the
Company’s website.
SDR
AR
SDR
DISCLOSURE OF INFORMATION
TO AUDITOR
Each of the directors confi rms that:
• to the best of their knowledge and belief, there
is no relevant audit information of which the
Company’s auditor is unaware; and
• they have taken all the steps a director might
reasonably be expected to have taken to be aware
of relevant audit information and to establish that
the Company’s auditor is aware of that information.
EVENTS AFTER THE REPORTING
PERIOD
Since year-end, the following material events have
taken place:
During May 2016 the Group obtained additional bank
facilities in the amount of R1.2 billion (approximately
£54m). The loans will carry interest at three month Jibar
plus a margin of 1.69% and is fully repayable in June 2019.
GOVERNANCE
AND
REMUNERATION
GOING CONCERN STATUS
Having considered the principal risks and the viability
assessment, the directors consider it appropriate
to adopt the going concern basis of accounting in
preparing the fi nancial statements, further details of
which are included in the Audit and Risk Committee
Report from pages 107 to 115, and the Viability
Assessment on page 29.
AR
DIVIDEND
The Directors are recommending a fi nal dividend
of 5.24 pence per ordinary share to be paid on
25 July 2016 to all ordinary shareholders who were
on the register of members at the close of business
on 17 June 2016.
Prior to the Combination, the Company adopted
a dividend policy which looked to maximise
shareholder value and refl ect its strong earnings
potential and cash fl ow characteristics, while
allowing it to retain suffi cient capital to fund
ongoing operating requirements and to invest in the
Company’s long-term growth. Following Completion,
the Company adopted a dividend policy to refl ect
the underlying earnings and growth of the business,
while retaining suffi cient capital to fund ongoing
operations and to invest in the Company’s long-term
growth. The Company aims to pay a dividend of
between 25% and 30% of underlying earnings.
The Board may revise the dividend policy from
time to time.
The ability of the Company to pay dividends is
dependent on a number of factors and there is no
assurance that the Company will pay dividends, or if
a dividend is paid, what the amount of such dividend
will be.
Information on the Company’s dividend access
scheme can be found in the Notice of Annual
General Meeting.
AGM
Figure 3 below details the dividends declared by the
Company and Mediclinic International Limited (pre-
Combination) to its holders of ordinary shares during
the reporting period.
FIGURE 3: DIVIDENDS
Interim dividend
Special dividend*
Final dividend
Total dividend
2015
4.1
328.0
5.24
337.34
COMPANY
2014
UK PENCE
3.7
–
9.0
12.7
MEDICLINIC INTERNATIONAL LIMITED
2015
2014
SA CENTS (GROSS)
36.0
–
n/a
36.0
31.0
–
75.5
106.5
*
A special dividend was approved by shareholders at the general meeting held on 15 December 2015 subject to completion of
the Combination.
MEDICLINIC ANNUAL REPORT 2016
121
DIRECTORS’ REPORT (continued)
EXISTENCE OF OVERSEAS BRANCHES
For the purposes of the UK Listing Rules Disclosure and Transparency Rule 4.1.11(5), the Company has
established an overseas branch in South Africa.
REQUIREMENTS OF THE LISTING RULES
The following table provides references to where the information required by the Listing Rule 9.8.4R is disclosed:
LISTING RULE REQUIREMENT
LOCATION IN ANNUAL REPORT
A statement of the amount of interest capitalised
during the period under review and details of any
related tax relief.
Not applicable
Information required in relation to the publication
of unaudited financial information.
Not applicable
Details of any long-term incentive schemes.
Remuneration Report, pages 74 to 99
AR
Details of any arrangements under which a
Director has waived emoluments, or agreed to
waive any future emoluments, from the Company.
Not applicable
Details of any non-pre-emptive issues of equity
for cash.
As part of the Al Noor Combination, Remgro subscribed for 72 115 384 new shares
in the Company at a cash subscription of £8.32 per shares, as approved in general
meeting by the Company’s shareholders on 15 December 2015.
Details of any non-pre-emptive issues of equity for
cash by any unlisted major subsidiary undertaking.
No such share allotments
Details of parent participation in a placing by a
listed subsidiary.
Not applicable
Details of any contract of significance in which a
Director is or was materially interested.
Not applicable
Details of any contract of significance between
the Company (or any of its subsidiaries) and a
controlling shareholder.
Details of any contract for the provision of services
to the Company (or any of its subsidiaries) by a
controlling shareholder.
None, other than the Relationship Agreement referred to on page 118.
AR
The internal audit function of the Group is outsourced to Remgro Internal Audit,
which forms part of the Remgro group. As referred to in the Audit and Risk
Committee Report, the Committee plans to review the internal audit function,
with a view to bringing this in-house rather than outsourcing this function to a
third party.
Details of waiver of dividends by a shareholder.
Not applicable
Board statement in respect of relationship
agreement with the controlling shareholder.
Directors’ Report, page 118
This Annual Report, including this Directors’ Report, as well as the Strategic Report from pages 2 to 59, and the
Corporate Governance Statement from pages 64 to 73, was approved by the Board and signed on its behalf by:
AR
AR
Edwin Hertzog
Non-executive Chairman
25 May 2016
122
MEDICLINIC ANNUAL REPORT 2016
DIRECTORS' RESPONSIBILITY
STATEMENT
GOVERNANCE
AND
REMUNERATION
The consolidated fi nancial statements are prepared in accordance with International Financial Reporting
Standards as adopted by the European Union and are based on appropriate accounting policies consistently
applied and supported by reasonable and prudent judgements and estimates.
The directors are responsible for preparing the annual fi nancial statements in accordance with applicable law
and regulations.
Company law requires the directors to prepare fi nancial statements for each fi nancial year. Under that law, the
directors have prepared the Group and parent company fi nancial statements in accordance with International
Financial Reporting Standards (IFRSs), as adopted by the European Union. Under company law, the directors
must not approve the fi nancial statements unless they are satisfi ed that they give a true and fair view of the
state of aff airs of the Group and the Company and of the profi t or loss of the Company and Group for that
period. In preparing these fi nancial statements, the directors are required to:
• select suitable accounting policies and then apply them consistently;
• make judgements and accounting estimates that are reasonable and prudent;
• state whether applicable IFRSs, as adopted by the European Union, have been followed, subject to any
material departures disclosed and explained in the fi nancial statements;
• prepare the fi nancial statements on the going concern basis, unless it is inappropriate to presume that the
Company will continue in business.
The directors are responsible for keeping adequate accounting records that are suffi cient to show and
explain the Company’s transactions and disclose with reasonable accuracy at any time the fi nancial position
of the Company and the Group and enable them to ensure that the fi nancial statements and the Directors’
Remuneration Report comply with the Companies Act 2006 and, as regards the Group fi nancial statements,
Article 4 of the IAS Regulation. They are also responsible for safeguarding the assets of the Company and the
Group, and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities.
The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in
the United Kingdom governing the preparation and dissemination of fi nancial statements may diff er from
legislation in other jurisdictions.
The directors consider that the Annual Report, taken as a whole, is fair, balanced and understandable and
provides the information necessary for shareholders to assess the Company’s position, performance, business
model and strategy.
The directors confi rm that, to the best of their knowledge:
• the Group fi nancial statements, which have been prepared in accordance with IFRSs as adopted by the EU,
give a true and fair view of the assets, liabilities, fi nancial position and profi t of the Group; and
• the Directors’ Report, Risk Management Report (including Viability Statement), Financial Review and
Divisional Reviews contained in the Annual Report includes a fair review of the development and
performance of the business and the position of the Group, together with a description of the principal risks
and uncertainties that it faces.
The consolidated fi nancial statements have been prepared on a going concern basis and the directors believe
that the Group will continue to be in operation in the foreseeable future.
The consolidated fi nancial statements as set out on pages 136 to 209, have been approved by the Board of
Directors and are signed on their behalf by:
AR
Danie Meintjes
Chief Executive Offi cer
25 May 2016
Craig Tingle
Chief Financial Offi cer
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
123
FINANCIAL STATEMENTS
CONTENTS
GROUP FINANCIAL STATEMENTS
125 Independent Auditors’ Report
136 Consolidated Statement of Financial Position
137 Consolidated Income Statement
137 Consolidated Statement of Comprehensive Income
138 Consolidated Statement of Changes in Equity
140 Consolidated Statement of Cash Flows
141 Notes to the Consolidated Financial Statements
COMPANY FINANCIAL STATEMENTS
210 Independent Auditors’ Report
212 Company Statement of Financial Position
213 Company Statement of Changes in Equity
214 Company Statement of Cash Flows
215 Notes to the Company Financial Statements
Image to
follow
GROUP FINANCIAL STATEMENTS
GENERAL INFORMATION
These financial statements are the consolidated financial statements for the Group consisting of Mediclinic
International plc and its subsidiaries. A list of subsidiaries is included from page 202 to 208.
AR
Mediclinic International plc (the Company) is a public limited company, which is listed on the London Stock
Exchange and is incorporated and domiciled in England and Wales. The Company has secondary listings on
the Johannesburg Stock Exchange and the Namibian Stock Exchange. A wholly-owned subsidiary, Hirslanden
AG issued bonds on the SIX. The Company changed its name from Al Noor Hospitals Group plc to Mediclinic
International plc on 15 February 2016.
Registered address:
40 Dukes Place
London
EC3A 7NH
United Kingdom
The main business of the Group is to provide comprehensive, high-quality hospital and related services on a
cost-effective basis.
The financial statements were authorised for issue by the directors on 25 May 2016. No authority was given
to anyone to amend the financial statements after the date of issue.
All press releases, financial reports and other information are available on our website: www.mediclinic.com.
124
MEDICLINIC ANNUAL REPORT 2016 INDEPENDENT AUDITORS’ REPORT
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
REPORT ON THE GROUP FINANCIAL STATEMENTS
Our opinion
In our opinion, Mediclinic International plc’s Group financial statements (the “financial statements”):
• give a true and fair view of the state of the Group’s affairs at 31 March 2016 and of its profit and cash flows
for the year then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”) as
adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006 and Article 4 of
the IAS Regulation.
What we have audited
The financial statements, included within the Annual Report and Financial Statements (the “Annual
Report”), comprise:
• the consolidated statement of financial position at 31 March 2016;
• the consolidated income statement for the year then ended;
• the consolidated statement of other comprehensive income for the year then ended;
• the consolidated statement of cash flows for the year then ended;
• the consolidated statement of changes in equity for the year then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to
the financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is IFRSs
as adopted by the European Union and applicable law.
Our audit approach
Overview
• Overall Group materiality: £13 million which is based on 5% of profit before tax after adjustment for one-off
transaction costs incurred relating to the combination between Al Noor Hospitals Group plc and Mediclinic
International Limited.
Materiality
Audit scope
Areas of
focus
• Our audit included full scope audits at three significant reporting units, a full
scope audit of the parent company and specified procedures at two further
reporting units which accounted for 90% of consolidated revenue, 99% of
consolidated profit before tax and 90% of consolidated adjusted profit before tax
and covered all reporting units that individually contributed more than 2% to the
Group’s revenue and 3% to adjusted profit before tax.
• Accounting for the reverse acquisition of Al Noor Hospitals Group plc
• Accounting for the acquisition of a 29.9% associate interest in Spire Healthcare
Group plc (“Spire”)
• Measurement of revenue adjustments
• Impairment of intangible assets and goodwill
• Capital expenditure in respect of buildings
Context
The focus of our audit attention was directed by key developments in the
operations of the Group during the year.
The most significant development in the year was the acquisition of Al Noor Hospitals Group plc (“Al Noor”)
by Mediclinic International Limited in a reverse takeover transaction, with the enlarged Group being re-named
Mediclinic International plc (the “Group” or “Mediclinic”). The Group also acquired a significant associate
interest in Spire Healthcare Group plc during the year.
PricewaterhouseCoopers LLP (“PwC UK”) was appointed as auditors of the enlarged Group on 21 March 2016.
Prior to the merger with Al Noor, PricewaterhouseCoopers Inc. (“PwC South Africa”) had been the auditors of
Mediclinic International Limited and KPMG LLP (“KPMG") had audited Al Noor. In light of this being our first
year audit of the enlarged Group, we performed a review of the prior year audit working papers of Al Noor
(KPMG) and Mediclinic (PwC South Africa) and we considered the key management judgements in the opening
balance sheet of the Group at 1 April 2015.
MEDICLINIC ANNUAL REPORT 2016
125
INDEPENDENT AUDITORS’ REPORT (continued)
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
The scope of our audit and our areas of focus
We conducted our audit in accordance with International Standards on Auditing (UK and Ireland) (“ISAs
(UK & Ireland)”).
We designed our audit by determining materiality and assessing the risks of material misstatement in the
financial statements. In particular, we looked at where the directors made subjective judgements, for example
in respect of significant accounting estimates that involved making assumptions and considering future events
that are inherently uncertain. As in all of our audits, we also addressed the risk of management override of
internal controls, including evaluating whether there was evidence of bias by the directors that represented a
risk of material misstatement due to fraud, and the risk of fraud in revenue recognition. Procedures designed
to address these risks included testing of material journal entries and post-close adjustments, testing and
evaluation of management’s key accounting estimates for reasonableness and consistency, undertaking cut-off
procedures to verify proper cut-off of revenue and expenses and testing the existence and accuracy of revenue
transactions. In addition, we incorporate an element of unpredictability into our audit work each year.
The risks of material misstatement that had the greatest effect on our audit, including the allocation of our
resources and effort, are identified as areas of focus in the table on the opposite page. We have also set out
how we tailored our audit to address these specific areas in order to provide an opinion on the Group financial
statements as a whole. Any comments we make on the results of our procedures should be read in this context.
This is not a complete list of all risks identified by our audit.
126
MEDICLINIC ANNUAL REPORT 2016 Area of focus
How our audit addressed the area of focus
1. Accounting for the reverse acquisition of Al Noor
On 15 February 2016, Mediclinic completed the
reverse acquisition of Al Noor through a scheme of
arrangement. Mediclinic shareholders exchanged
their shares in Mediclinic for shares in Al Noor, which
resulted in Mediclinic becoming the accounting
acquirer in the business combination although Al
Noor is the legal parent. Of the total consideration
of £1 359m, £913m was paid to Al Noor shareholders
in cash in the form of a special dividend and a share
repurchase offer, with the balance of £446m being
the deemed share element in the reverse takeover.
We focused on this transaction because of
judgement involved in the purchase price allocation,
the materiality of the transaction and the complexity
of the associated accounting, tax and disclosures,
directing our attention in particular at the following
areas:
• The acquisition of Al Noor for a total
consideration of £1 359m has led to the
recognition of goodwill of £1 189m and intangible
assets of £65m. Judgement is involved in
allocating the purchase price to the tangible
and intangible assets identified in the business
combination together with the valuation of the
intangible assets requiring specialist skills and
knowledge. In addition, the accounting for the
reverse acquisition involved the quantification of
a deemed element of consideration payable to
Al Noor shareholders for shares that Mediclinic
would have had to issue to Al Noor shareholders
in return for their proportionate equity interest
in the combined entity. This directly impacted
the total amount of goodwill recognised in the
transaction;
• The presentation and disclosure of the business
combination in the financial statements is
unusual because the reverse takeover resulted
in Mediclinic being the accounting acquirer
although Al Noor is the legal parent company of
the Group. The equity and comparative numbers
in the consolidated financial statements relate
to Mediclinic, whereas the legal shareholding
relates to Al Noor;
• The acquisition of Al Noor was effected through
a scheme of arrangement approved by a Court
of Law and was preceded by a number of
internal restructuring steps;
• The effective date of the transaction did not
coincide with a reporting period end and the
opening balance sheet of Al Noor therefore
needed to be prepared at 15 February 2016.
Management has undertaken a fair value
exercise to conform Al Noor’s opening balance
sheet to Mediclinic’s accounting policies
and disclosure practices and to consider the
completeness and accuracy of opening balances,
including provisions for asset recoverability and
contingencies; and
We evaluated management’s assessment that it is the
shareholders of Mediclinic – the legal subsidiary – that
effectively control the combined business following the
transaction, even though Al Noor is the legal parent,
concluding that Mediclinic should be identified as the
accounting acquirer in the business combination. The
transaction has been treated as a reverse acquisition
on this basis.
We obtained the report issued by the external
valuation experts engaged by the Group and used to
perform the provisional purchase price allocation and
to assist with the identification of identifiable assets
in the business combination. Using our own valuation
specialists, we assessed the process and methodology
adopted by management’s experts and the underlying
assumptions, the most important of which were the
discount rate and relief from royalty rates used in their
models, and tested the mathematical accuracy of the
valuation models for each of the significant intangible
assets acquired.
We evaluated the methodology and tested the
mathematical accuracy of the calculations of the
Group for the deemed consideration of £1 359m
paid to Al Noor shareholders. We corroborated the
underlying information inputs, including the share
prices, exchange ratios and foreign exchange rates
with independent data sources and we checked the
contractual agreements.
We obtained the signed contractual agreements
relating to the reverse acquisition and read significant
contract terms relevant to the accounting and
disclosures in the financial statements.
We substantively tested journal entries and supporting
workings and evidence relating to the accounting for
the exchange of shares, special dividend and internal
restructuring steps, agreeing them to the contracts
and to the terms of the scheme of arrangement.
We evaluated the capital and equity movements of
both Al Noor, the legal acquirer, and Mediclinic, the
accounting acquirer, for accuracy by comparison
to the terms of the scheme of arrangement and
whether the Group’s disclosures in respect of the
reverse acquisition were reasonable and reflected the
transaction terms.
Deploying our tax specialists, we evaluated the
external tax opinions obtained by management and
determined that the steps taken by the Group in
effecting the transaction were consistent with the
advice obtained and in compliance with relevant tax
laws and regulations.
MEDICLINIC ANNUAL REPORT 2016
127
INDEPENDENT AUDITORS’ REPORT (continued)
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
Area of focus
• The Group changed its presentation currency
from Rand (ZAR) to Pounds (GBP) following
the transaction. Accounting standards require
full retrospective application of this presentation
resulting in the retrospective adjustment of all
the comparatives in the financial statements
How our audit addressed the area of focus
We instructed our component team in Dubai to
perform specific procedures on the opening balance
sheet of Al Noor prepared at 15 February 2016
directed at cut-off. We have specifically considered
the recoverability of assets and the completeness
of liabilities (including provisions for contractual
commitments and for legal and other contingencies) to
ensure that the opening balance sheet is appropriately
stated at fair value. Recognising that 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,
we have specifically considered whether provisions
for collection of accounts receivable and insurance
rejections are sufficient and whether there is any need
to record additional liabilities for contingencies that
might arise. We have reviewed the assessment of the
comparative accounting policies and practices of
Mediclinic and Al Noor prepared by management and
we have audited the adjustments made to conform
accounting policies.
Following the adoption of a new presentation currency,
we obtained management’s calculations for the revised
presentation of the comparatives and evaluated the
assumptions used by reference to the Group’s stated
accounting policies and the requirements of IAS 21.
We also compared the financial information of each
of the components underpinning the consolidation to
previously audited financial information and checked
the historical exchange rates used to external third
party sources. We tested the restatement calculations
to check mathematical accuracy.
Based on the procedures performed, we did not
identify any material adjustment required to the
position reported by the Group. We were also satisfied
with the adequacy of the disclosures in respect of
the Al Noor acquisition and the related change in
presentation currency.
128
MEDICLINIC ANNUAL REPORT 2016 Area of focus
How our audit addressed the area of focus
2. Accounting for the acquisition of a 29.9% associate
interest in Spire
During August 2015, Mediclinic acquired a 29.9%
interest in Spire Healthcare Group plc (“Spire”)
for consideration of £437m, financed by way of a
rights issue of Mediclinic shares. We focused on
this transaction because of its size, directing our
attention in particular at the following areas:
• The transaction has been treated as an
investment in an associate as a result of the
Group’s judgement that it is able to exert
significant influence over the financial and
operating policy decisions of Spire, meaning that
it equity accounts for its 29.9% interest in Spire’s
results from August 2015;
• The equity accounted earnings of Spire that are
included in the income statement of the Group
represent the four month period from the date
of acquisition to 31 December 2015 consistent
with Spire’s financial year-end which is not
co-terminous with Mediclinic’s 31 March 2016
year-end. In other words, the equity accounting
for Spire lags the Group’s reporting period by
three months as allowed by IAS 28. Application
of this policy means that the Group needs to
consider whether there were any significant
developments at Spire between 1 January 2016
and 31 March 2016, the date to which the Group
draws its consolidated financial statements,
which are not otherwise included in the Group’s
Annual Report but which should be disclosed;
and
• At 31 March 2016, the carrying value of the
investment in Spire exceeded the listed market
value of the investment, which could indicate a
possible impairment. We focused on this area
because judgement is involved in the impairment
assessment. The carrying value of the associate
is contingent on future cash flows and there
is a risk that the investment will be impaired if
these cash flows do not meet expectations. In
addition, significant transactions or events that
occur between the associate’s year-end and the
Group’s reporting date may have an impact on
the carrying value of the associate.
We assessed management’s classification of the
investment as an associate with reference to the
Group’s percentage voting power in the investee and
participation on Spire’s board of directors, concluding
that the Group does have significant influence over
Spire and that equity accounting as an associate is
therefore appropriate.
We substantively tested the equity accounted
results and reserve movements of Spire recorded
by the Group with reference to the audited financial
statements of Spire for the year ended
31 December 2015.
We have reviewed the share performance of Spire
over the period since acquisition with reference to
its reported financial performance. We met with the
Group’s nominated director on the Spire board to
understand whether any indicators of impairment exist
based on the underlying performance of the business
and we reviewed the latest available financial reports
of Spire. We obtained analyst consensus forecasts
of the Spire share price over the next twelve months
to understand third party expectations of future
performance.
We reviewed the recent press reports of Spire and
discussed with the Group’s nominated director any
significant or abnormal transactions that occurred in
the period from 1 January 2016 to 31 March 2016, being
the period not equity accounted by the Group, which
could have had an effect on the results and carrying
value of the associate at 31 March 2016.
As a result of our work, we concluded that there is
no evidence of a significant or prolonged decline in
value that would require impairment of the Group’s
investment in Spire at 31 March 2016 and we have not
identified any significant or abnormal transactions that
affect the period from 1 January 2016 through
31 March 2016. We have found the judgements
made by management to be materially reasonable on
this basis.
MEDICLINIC ANNUAL REPORT 2016
129
INDEPENDENT AUDITORS’ REPORT (continued)
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
Area of focus
How our audit addressed the area of focus
3. Measurement of revenue adjustments
The Group’s accounting policies in respect of
revenue recognition are not considered to present
a significant risk of misstatement due to the simple
nature of the underlying transactions and related
processes. However, different business models
apply in each of the Group’s businesses as a result
of different regulatory environments as well as
different relationship models between the hospitals
and funders. We specifically focused on areas
where management judgement is applied in the
measurement of adjustments to reported revenue
numbers, the most significant of which is the
tariff risk provisions at the Group’s Swiss hospitals
amounting to £26m (2015: £31m). These provisions
relate to tariff risk associated with billing in
accordance with provisional base rates, where these
rates have not yet been finally agreed and approved
between providers and funders, and to historical
tariff disputes at certain of the Group’s Swiss
hospitals. We focused on this area as the eventual
outcome of the tariff negotiations is uncertain and
the positions taken by management are based on
judgement and estimates.
We discussed the status of significant known actual
and potential tariff risk disputes as well as risks relating
to the use of provisional base rates with management
and with third party tariff specialists.
We obtained evidence to support management’s
decision to provide and the rationale for the provisions,
including reading correspondence regarding the
disputes. We also considered external information
sources to support the positions taken. We considered
the range of possible outcomes and considered
whether management’s provisions sits at the
appropriate point within this range.
We evaluated the historical accuracy of tariff risk
provisioning including any significant adjustments to
prior year provisions recorded during the year.
Based on the procedures performed, we did not
identify any material differences from our testing to
the provisions recorded by the Group.
130
MEDICLINIC ANNUAL REPORT 2016 Area of focus
How our audit addressed the area of focus
4. Impairment of intangible assets and goodwill
The Group has £1 927m of intangible assets,
including trade names of £309m and goodwill of
£278m that relate to the acquisition of the Swiss
operations in 2007. Of the remaining balance,
£1 197m relates to goodwill on the Al Noor
transaction.
The Swiss trade names were classified as indefinite
life intangible assets at the time of the acquisition
and the Group carries out annual impairment tests
based on value-in-use calculations. The Al Noor
goodwill was also assessed based on updated cash
flow forecasts taking into account latest projections
and synergies from the acquisition. No impairments
were recorded during the current or prior years in
respect of these assets. However, the carrying values
of goodwill and intangible assets are contingent
on future cash flows and there is a risk if these
cash flows do not meet the Group’s expectations,
or if significant judgements like the discount rates
or growth rates change, that the assets will be
impaired.
We focused on the impairment of goodwill and
indefinite life intangible assets as these have
indefinite lives and the impairment reviews carried
out by the Group contain a number of significant
judgements and estimates including growth rates
and discount rates. Changes in these assumptions
might lead to a significant change in the carrying
values of the related assets.
Deploying our valuation specialists, we obtained
management’s impairment calculations and tested
the reasonableness of key assumptions, including
profit forecasts and the selection of growth rates
and discount rates. We challenged management to
substantiate its assumptions, including comparing
relevant assumptions to industry benchmarks and
economic forecasts.
We substantively tested the integrity of supporting
calculations and corroborated certain information with
third party sources.
We agreed the underlying cash flows to approved
budgets and assessed growth rates and discount
rates by comparison to third party information, the
Group’s cost of capital and relevant risk factors. Future
cash flow assumptions were also challenged through
comparison to current trading performance against
budget and forecasts, considering the historical
accuracy of budgeting and forecasting
and understanding of the reasons for the growth
profiles used.
We evaluated management’s sensitivity analyses to
ascertain the impact of reasonably possible changes to
key assumptions on the available headroom, focusing
in particular on the Swiss cash generating unit (“CGU”)
which is more sensitive to change. We considered
the need for additional sensitivity disclosures for
this CGU as required by IAS 36 and we agree with
management’s decision to provide these additional
disclosures for the Swiss business in note 6 given that
reasonably possible changes in the discount rate and
growth rate would give rise to an impairment. We note
that management has also provided this additional
disclosure for the four Al Noor CGUs as there is limited
headroom given that Al Noor has only recently been
acquired. The purchase price allocation exercise for Al
Noor remains provisional at 31 March 2016, including
the allocation of goodwill to each of the Al Noor CGUs,
and this allocation will be concluded by the Group
within the 12 month hindsight period allowed by IFRS 3
to the extent that new information about conditions at
the acquisition date become available.
Based on our work performed, we concurred with
management that no impairments were required
for the Swiss goodwill and intangible assets and for
the Al Noor goodwill at 31 March 2016. We found
that the judgements were supported by reasonable
assumptions and that the disclosures in respect of the
impairment assessments are a fair reflection of the
judgements made by the Group.
MEDICLINIC ANNUAL REPORT 2016
131
INDEPENDENT AUDITORS’ REPORT (continued)
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
Area of focus
How our audit addressed the area of focus
5. Capital expenditure in respect of buildings
The Group holds property, equipment and vehicles
of £3 199m (2015: £2 985m) of which £2 771m
(2015: £2 647m) relates to land and buildings. The
Group owns most of the hospital properties from
which it operates in Southern Africa and Switzerland
and as a result incurs significant amounts of capital
expenditure annually.
The Group capitalises the cost of major
refurbishment projects and depreciates these
costs over a period of 10 to 20 years. Depreciation
charges on the core elements of buildings are
usually immaterial as a result of the Group’s
substantial maintenance programme, giving rise to
relatively high residual values expected at the end of
their useful lives, unless circumstances indicate that
lower residual values or reduced useful economic
lives are required.
We focused on the capitalisation and depreciation
policies of buildings due to the significant amount of
capital expenditure incurred each year.
In South Africa, the carrying value of buildings is
relatively low compared to their market value as
most of the assets were constructed a long time
ago in a high inflationary environment. However,
the buildings in Switzerland were revalued to their
fair values at the time of the business combination
in 2007 and as a result more closely reflect their
current market value. Accordingly, the Group
monitors these assets more carefully for potential
impairment indicators. Hospitals in the Middle East
are generally leased.
We obtained analyses of significant capital
expenditure projects concluded or in progress
during the year and tested significant additions to
supporting documentation. Based on discussions with
management, surveyors and project accountants,
we assessed the assumptions used in the allocation
of costs to different components of the buildings by
reference to building plans, quantity surveyor reports
and contractor invoices. We confirmed that the Group
applied its capitalisation policies consistently to these
new projects.
We assessed the useful lives and residual values of
components of buildings that depreciate over a shorter
period of time with reference to the actual write-
offs experienced by the Group and to the scheduled
hospital upgrade programme followed by the Group.
Based on our work performed, we did not identify any
material variation from management’s assessment.
We read minutes and management reports and
compared maintenance expenses in the income
statement to the prior year and budgeted amounts as
possible indicators of inconsistent application of the
component approach to capitalisation of assets. We
tested capital additions to ensure that maintenance
expenditure had not been inappropriately capitalised.
We obtained the Group’s analyses for the impairment
assessment of the Swiss properties. Deploying our own
valuation specialists, we tested the reasonableness
of key assumptions used by management’s third
party real estate experts who performed the
property valuations for the Group. We challenged the
assumptions, including the capitalisation rates and
market rentals, by comparing relevant assumptions to
industry norms.
As a result of our work, we were satisfied with
management’s decision not to impair any of the
Group’s properties during the year ended
31 March 2016 and we have found the judgements
to be supported by reasonable assumptions.
How we tailored the audit scope
We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion
on the financial statements as a whole, taking into account the geographical structure of the Group, the
accounting processes and controls and the industry in which the Group operates.
The Group financial statements are a consolidation of 16 reporting units which comprise the parent company,
the Group’s holding company structure and sub-consolidations of the operations in each of the Group’s key
markets. The South Africa, Switzerland and Dubai reporting units required an audit of their complete financial
information due to their size. The parent company is subject to a statutory audit in the UK. Specific audit
procedures over significant balances and transactions were performed at two other reporting units (Abu Dhabi,
being the legacy Al Noor business, and Spire) to give appropriate audit coverage and to focus on specific risks
associated with the acquisition of both businesses during the financial period. None of the reporting units
excluded from our Group audit scope individually contributed more than 2% to consolidated revenue or 3% to
adjusted profit before tax.
In establishing the overall approach to the Group audit, we determined the type of work that needed to be
performed at the reporting units by us, as the Group engagement team, or by component auditors from other
PwC network firms operating under our instruction. Where the work was performed by component auditors,
we determined the level of involvement we needed to have in the audit work at those reporting units to be able
to conclude whether sufficient appropriate audit evidence had been obtained as a basis for our opinion on the
financial statements as a whole.
132
MEDICLINIC ANNUAL REPORT 2016 Recognising that not every business in each of the 16 reporting units which comprise the Group’s consolidated
results and financial position is included in our Group audit scope, we considered as part of our Group audit
oversight responsibility what audit coverage has been obtained in aggregate by our component teams by
reference to business components at which audit work has been undertaken.
In light of this being a first year audit, we visited our component teams in South Africa, Switzerland and Dubai,
which included file reviews, attendance at key audit meetings with local management and participation in audit
clearance meetings at each reporting unit. This included review with the component team in Dubai of the audit
evidence following completion of its specific audit procedures at Al Noor. We also had regular dialogue with
our component audit teams at each key reporting unit.
Further specific audit procedures over the Group consolidation (and review procedures over the Annual Report
disclosures) were directly led by the Group audit team.
Taken together, reporting units where we performed our audit work accounted for 90% of consolidated
revenue, 99% of consolidated profit before tax and 90% of consolidated adjusted profit before tax.
Materiality
The scope of our audit was influenced by our application of materiality. We set certain quantitative thresholds
for materiality. These, together with qualitative considerations, helped us to determine the scope of our audit
and the nature, timing and extent of our audit procedures on the individual financial statement line items and
disclosures and in evaluating the effect of misstatements, both individually and on the financial statements
as a whole.
Based on our professional judgement, we determined materiality for the financial statements as a whole
as follows:
Overall Group materiality
How we determined it
£13 million
Based on 5% of profit before tax after adjustment for one-off transaction
costs incurred relating to the combination between Al Noor Hospitals
Group plc and Mediclinic International Limited.
Rationale for benchmark applied Management uses an adjusted measure of earnings in describing the
Component materiality
Group’s performance (defined as “underlying”) as it believes that it
reflects the underlying trading performance of the Group by eliminating
the volatility inherent in one-off items. We took this measure into account
in determining our materiality by removing the one-off impact of costs
relating to the Al Noor transaction completed during the year as an
adjustment to profit before tax used for our materiality benchmark.
For each component in our audit scope, we allocated a materiality that was
less than overall Group audit materiality. The range of materiality allocated
to each significant reporting unit was between £5.6 million and £6.6 million.
The materiality used for the audit of the parent company was £10 million.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during
our audit above £0.7 million as well as misstatements below that amount that, in our view, warranted reporting
for qualitative reasons.
Going concern
Under the Listing Rules, we are required to review the directors’ statement, set out on page 123, in relation to
going concern. We have nothing to report having performed our review.
Under ISAs (UK & Ireland), we are required to report to you if we have anything material to add or to draw
attention to in relation to the directors’ statement about whether they considered it appropriate to adopt
the going concern basis in preparing the financial statements. We have nothing material to add or to draw
attention to.
As noted in the directors’ statement, the directors have concluded that it is appropriate to adopt the going
concern basis in preparing the financial statements. The going concern basis presumes that the Group has
adequate resources to remain in operation, and that the directors intend it to do so, for at least one year from
the date the financial statements were signed. As part of our audit, we have concluded that the directors’ use
of the going concern basis is appropriate. However, because not all future events or conditions can be
predicted, these statements are not a guarantee as to the Group’s ability to continue as a going concern.
MEDICLINIC ANNUAL REPORT 2016
133
INDEPENDENT AUDITORS’ REPORT (continued)
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the financial period
for which the financial statements are prepared is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under ISAs (UK & Ireland), we are required to report to you if, in
our opinion:
• information in the Annual Report is:
– materially inconsistent with the information in the audited financial
statements; or
– apparently materially incorrect based on, or materially inconsistent
with, our knowledge of the Group acquired in the course of
performing our audit; or
– otherwise misleading.
• the statement given by the directors on page 123, in accordance with
provision C.1.1 of the UK Corporate Governance Code (the “Code”),
that they consider the Annual Report taken as a whole to be fair,
balanced and understandable and provides the information necessary
for members to assess the Group’s position and performance, business
model and strategy is materially inconsistent with our knowledge of
the Group acquired in the course of performing our audit.
• the section of the Annual Report on pages 107 to 115, as required by
provision C.3.8 of the Code, describing the work of the Audit
and Risk Committee does not appropriately address matters
communicated by us to the Audit and Risk Committee.
We have no exceptions to report.
We have no exceptions to report.
We have no exceptions to report.
The directors’ assessment of the prospects of the Group and of the principal risks that would threaten the
solvency or liquidity of the Group
Under ISAs (UK & Ireland), we are required to report to you if we have anything material to add or to draw
attention to in relation to:
• the directors’ confirmation on pages 24 to 29 of the Annual Report, in
accordance with provision C.2.1 of the Code, that they have carried out
a robust assessment of the principal risks facing the Group, including
those that would threaten its business model, future performance,
solvency or liquidity.
We have nothing material to add or
to draw attention to.
• the disclosures in the Annual Report that describe those risks and
explain how they are being managed or mitigated.
• the directors’ explanation on page 29 of the Annual Report, in
accordance with provision C.2.2 of the Code, as to how they have
assessed the prospects of the Group, over what period they have done
so and why they consider that period to be appropriate, and their
statement as to whether they have a reasonable expectation that the
Group will be able to continue in operation and meet its liabilities as
they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications
or assumptions.
We have nothing material to add or
to draw attention to.
We have nothing material to add or
to draw attention to.
Under the Listing Rules, we are required to review the directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and the directors’ statement in relation to the longer-term
viability of the Group. Our review was substantially less in scope than an audit and only consisted of making
inquiries and considering the directors’ process supporting their statements; checking that the statements are
in alignment with the relevant provisions of the Code; and considering whether the statements are consistent
with the knowledge acquired by us in the course of performing our audit. We have nothing to report having
performed our review.
Adequacy of information and explanations received
Under the Companies Act 2006, we are required to report to you if, in our opinion, we have not received
all the information and explanations we require for our audit. We have no exceptions to report arising from
this responsibility.
134
MEDICLINIC ANNUAL REPORT 2016 Directors’ remuneration
Under the Companies Act 2006, we are required to report to you if, in our opinion, certain disclosures
of directors’ remuneration specified by law are not made. We have no exceptions to report arising from
this responsibility.
Corporate governance statement
Under the Listing Rules, we are required to review the part of the Corporate Governance Statement relating to
ten further provisions of the Code. We have nothing to report having performed our review.
RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement, the directors are responsible for the
preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for the parent company’s members as a
body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly agreed by our prior
consent in writing.
What an audit of financial statements involves
An audit involves obtaining evidence about the amounts and disclosures in the financial statements sufficient
to give reasonable assurance that the financial statements are free from material misstatement, whether caused
by fraud or error. This includes an assessment of:
• whether the accounting policies are appropriate to the Group’s circumstances and have been consistently
applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence,
forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we
consider the implications for our report.
OTHER MATTER
We have reported separately on the parent company financial statements of Mediclinic International plc for the
15 month period ended 31 March 2016 and on the information in the Directors’ Remuneration Report that
is described as having been audited.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
135
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION as at 31 March 2016
ASSETS
Non-current assets
Property, equipment and vehicles
Intangible assets
Equity accounted investments
Other investments and loans
Receivables
Derivative financial instruments
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Current income tax assets
Derivative financial instruments
Cash and cash equivalents
Total assets
EQUITY
Capital and reserves
Share capital
Share premium reserve
Treasury shares
Retained earnings
Other reserves
Attributable to equity holders of the Company
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Deferred income tax liabilities
Retirement benefit obligations
Provisions
Derivative financial instruments
Current liabilities
Trade and other payables
Borrowings
Provisions
Retirement benefit obligations
Derivative financial instruments
Current income tax liabilities
Total liabilities
Total equity and liabilities
Notes
5
6
7
8
11
19
9
10
11
19
27.8
12
12
12
13
12, 14
15
16
9
17
18
19
20
16
18
17
19
GROUP
(Restated)
2015
£’m
(Restated)
2014
£’m
3 654
2 985
642
4
5
–
1
17
742
60
415
2
–
265
3 368
2 817
523
4
4
–
3
17
637
51
384
2
–
200
2016
£’m
5 604
3 199
1 927
455
4
2
1
16
945
75
561
2
2
305
6 549
4 396
4 005
74
690
(2)
5 320
(2 573)
3 509
61
3 570
2 192
1 524
446
179
24
19
787
431
317
19
9
1
10
2 979
6 549
994
–
(23)
485
323
1 779
61
1 840
2 114
1 550
429
87
22
26
442
335
68
24
1
1
13
2 556
4 396
821
–
(22)
321
268
1 388
51
1 439
2 096
1 630
412
34
18
2
470
288
95
20
1
–
66
2 566
4 005
These 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
136 MEDICLINIC ANNUAL REPORT 2016
CONSOLIDATED INCOME STATEMENT
for the year ended 31 March 2016
Revenue
Cost of sales
Administration and other operating expenses
Other gains and losses
Operating profit
Finance income
Finance cost
Share of profit of equity accounted investments
Profit before tax
Income tax expense
Profit for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Notes
21
21
22
23
7
24
GROUP
2016
£’m
2 107
(1 264)
(554)
(1)
288
9
(58)
6
245
(55)
190
(Restated)
2015
£’m
1 977
(1 184)
(472)
24
345
6
(85)
–
266
(12)
254
177
13
190
241
13
254
Earnings per ordinary share attributable to the equity holders of the
Company – pence
Basic
Diluted
25
25
29.6
29.5
44.6
43.8
CONSOLIDATED STATEMENT OF
COMPREHENSIVE INCOME
for the year ended 31 March 2016
Profit for the year
Other comprehensive income
Items that may be reclassified to the income statement
Currency translation differences
Fair value adjustment – cash flow hedges
Items that may not be reclassified to the income statement
Actuarial gains and losses
Other comprehensive income, net of tax
Total comprehensive income for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Notes
26
26
26
26
GROUP
(Restated)
2015
£’m
254
2016
£’m
190
92
2
94
(56)
38
228
224
4
228
59
(5)
54
(31)
23
277
264
13
277
MEDICLINIC ANNUAL REPORT 2016
137
CONSOLIDATED STATEMENT OF CHANGES
IN EQUITY for the year ended 31 March 2016
Balance at 31 March 2014 (restated in £)
Profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Shares issued
Share issue costs
Treasury shares purchased (Forfeitable Share Plan)
Share-based payment expense
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2015 (restated in £)
Profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income for the year
Shares issued (August 2015)
Share issue costs (August 2015)
Reverse acquisition
Share subscription (February 2016)
Reduction of share premium
Utilised by the Mpilo Trusts
Treasury shares purchased (Forfeitable Share Plan)
Share-based payment expense
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2016
Share
capital
(note 12)
£’m
821
Capital
redemption
(note 12)
£’m
–
Share
premium
reserve
(note 12)
£’m
–
Reverse
acquisition
reserve
(note 12)
£’m
–
–
–
–
177
(4)
–
–
–
–
994
–
–
–
479
(4)
(1 402)
7
–
–
–
–
–
–
74
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
4 862
593
(4 765)
–
–
–
–
–
690
–
–
(3 014)
–
–
–
–
–
–
–
(3 014)
Share-
based
payment
reserve
(note 14)
£’m
13
Foreign
currency
translation
reserve
(note 14)
£’m
247
Treasury
shares
(note 12)
£’m
(21)
Hedging
reserve
(note 14)
£’m
7
Retained
earnings
(note 13)
£’m
321
GROUP
Share-
holders’
equity
£’m
1 388
Non-
controlling
interests
(note 15)
£’m
51
–
–
–
–
–
(1)
–
–
–
(22)
–
–
–
–
–
–
–
–
21
(1)
–
–
–
(2)
–
–
–
–
–
–
1
–
–
14
–
–
–
–
–
–
–
–
–
–
10
–
–
24
–
59
59
–
–
–
–
–
–
306
–
101
101
–
–
–
–
–
–
–
–
–
–
407
–
(5)
(5)
–
–
–
–
–
–
2
–
2
2
–
–
–
–
–
–
–
–
–
–
4
241
(31)
210
–
–
–
–
1
(47)
485
177
(56)
121
–
–
(6)
–
4 765
–
–
–
3
(48)
5 320
241
23
264
177
(4)
(1)
1
1
(47)
1 779
177
47
224
479
(4)
446
600
–
21
(1)
10
3
(48)
3 509
13
–
13
–
–
–
–
4
(7)
61
13
(9)
4
–
–
–
–
–
–
–
–
3
(7)
61
Total
equity
£’m
1 439
254
23
277
177
(4)
(1)
1
5
(54)
1 840
190
38
228
479
(4)
446
600
–
21
(1)
10
6
(55)
3 570
138 MEDICLINIC ANNUAL REPORT 2016
MEDICLINIC ANNUAL REPORT 2016
139
CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 31 March 2016
CASH FLOW FROM OPERATING ACTIVITIES
Cash received from customers
Cash paid to suppliers and employees
Cash generated from operations
Interest received
Interest paid
Tax paid
Net cash generated from operating activities
CASH FLOW FROM INVESTMENT ACTIVITIES
Investment to maintain operations
Investment to expand operations
Business combinations
Al Noor Hospitals Group plc shares repurchased
Special dividend to existing Al Noor Hospitals Group plc shareholders
Proceeds on disposal of property, equipment and vehicles
Disposal of subsidiary
Acquisition of investment in associate
Dividends received from equity accounted investment
Proceeds from money market fund
Insurance proceeds
Loans advanced
Net cash (utilised)/generated before financing activities
CASH FLOW FROM FINANCING ACTIVITIES
Proceeds of shares issued
Share issue costs
Share subscription (February 2016)
Distributions to non-controlling interests
Distributions to shareholders
Proceeds from borrowings
Repayment of borrowings
Refinancing transaction costs
Settlement of Al Noor Hospitals Group plc share option scheme
Shares purchased (Forfeitable Share Plan)
Proceeds from disposal of treasury shares
Acquisition of non-controlling interest
Proceeds on disposal of non-controlling interest
Net increase in cash and cash equivalents
Opening balance of cash and cash equivalents
Exchange rate fluctuations on foreign cash
Closing balance of cash and cash equivalents
GROUP
2016
£’m
Inflow/
(outflow)
(Restated)
2015
£’m
Inflow/
(outflow)
Notes
2 078
(1 667)
411
9
(55)
(45)
320
(1 549)
(72)
(114)
(17)
(530)
(383)
1
–
(446)
2
10
–
–
(1 229)
1 242
479
(4)
600
(7)
(48)
302
(85)
(6)
(2)
(1)
12
(2)
4
13
265
27
305
1 980
(1 540)
440
6
(57)
(52)
337
(257)
(68)
(124)
(81)
–
–
5
3
–
–
–
9
(1)
80
(23)
177
(4)
–
(7)
(47)
279
(417)
(7)
–
(1)
–
–
4
57
198
10
265
27.1
27.2
27.3
27.4
27.5
28
28
28
27.6
30
29
12
12
12
15
27.7
27.8
140 MEDICLINIC ANNUAL REPORT 2016
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS for the year ended 31 March 2016
1.
2.
2.1
DESCRIPTION OF BUSINESS
Mediclinic International plc is a private hospital Group with three operating platforms in Southern Africa
(South Africa and Namibia), Switzerland and the United Arab Emirates, with an equity investment in the
UK. Its core purpose is to enhance the quality of life of patients by providing cost-effective acute care
specialised hospital services.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The principal accounting policies applied in the preparation of these consolidated financial statements
are set out below. These policies have been consistently applied to all the periods presented, unless
otherwise stated.
Basis of preparation
The consolidated financial statements of the Group are prepared in accordance with International
Financial Reporting Standards (IFRS), as adopted by the European Union, including IFRS Interpretations
Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements
are prepared on the historical cost convention, as modified by the revaluation of certain financial
instruments to fair value.
The preparation of the financial statements in conformity with IFRS requires the use of certain critical
accounting estimates. It also requires management to exercise its judgement in the process of applying
the Group’s accounting policies. The areas involving a higher degree of judgement or complexity, or
areas where assumptions and estimates are significant to the annual financial statements, are disclosed
in note 4.
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 or 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 (refer to note 21) in order to present the
income statement by function in terms of IAS 1.
MEDICLINIC ANNUAL REPORT 2016
141
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 (refer to note 17).
The table below shows the impact on the consolidated income statement and statement of
financial position:
Financial statement line item
Consolidated income statement
Cost of sales
Administration and other operating expenses
Other gains and losses
Depreciation and amortisation
Finance cost
Effect on profit before tax
Consolidated statement of financial position
Retirement benefit obligations
Provisions
Non-current liabilities
Provisions
Current liabilities
Total liabilities
2015
figures as
presented
in prior
year
2015
figures as
presented
in current
year
Reclassi-
fication
(1 116)
(455)
5
(85)
(66)
(1 717)
72
37
109
24
24
133
(68)
(17)
19
85
(19)
–
15
(14)
1
(1)
(1)
–
(1 184)
(472)
24
–
(85)
(1 717)
87
23
110
23
23
133
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.
Implementation of new accounting standards
The adoption of new and revised accounting standards during the year had no impact on the
reported results or financial position of the Group. Refer to note 34 for new accounting standards and
amendments which has been issued but is not yet effective.
2.2
a)
Consolidation and equity accounting
Basis of consolidation
Subsidiaries are all entities (including structured entities) over which the Group has control. The Group
controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement
with the entity and has the ability to affect those returns through its power over the entity.
The results of subsidiaries are included in the consolidated financial statements from the effective date
of acquisition until control is lost.
Adjustments to the financial statements of subsidiaries are made when necessary to bring their
accounting policies in line with those of the Group.
All intra-company transactions, balances, income and expenses are eliminated in full on consolidation.
Non-controlling interests in the net assets of consolidated subsidiaries are identified and recognised
separately from the Group’s interest therein, and are recognised within equity. Losses of subsidiaries
attributable to non-controlling interests are allocated to the non-controlling interest even if this results in
a debit balance being recognised.
142 MEDICLINIC ANNUAL REPORT 2016
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Transactions which result in changes in ownership levels, where the company has control of the
subsidiary both before and after the transaction are regarded as equity transactions and are recognised
directly in the statement of changes in equity.
The difference between the fair value of consideration paid or received and the movement in non-
controlling interest for such transactions is recognised in equity attributable to the owners of the parent.
Where a subsidiary is disposed of and a non-controlling shareholding is retained, the remaining
investment is measured to fair value with the adjustment to fair value recognised in profit or loss as part
of the gain or loss on disposal of the controlling interest.
Reverse acquisition accounting
On 14 October 2015, the board of directors of Al Noor Hospitals Group plc and the independent board
of directors of Mediclinic International Limited announced that they had reached an agreement on the
terms of a recommended combination of their respective businesses (the "Combination"). Given the
relative size of Al Noor and Mediclinic, the Combination has been classified as a reverse takeover in
terms of IFRS 3, based on the analysis of the voting rights after the combination and the composition of
the Board of directors. For the purpose of the Listing Rules of the UK Listing Authority, the Combination
was also classified as a reverse takeover.
On 15 February 2016, the entire share capital of Mediclinic International Limited was acquired by Al Noor
Hospitals Group plc pursuant to the Mediclinic Scheme. Al Noor Hospitals Group plc acquired all of the
Mediclinic Shares that were not repurchased and cancelled by Mediclinic in the Repurchase Option.
Mediclinic Shareholders were entitled to receive 0.62500 new shares for every Mediclinic share held.
Al Noor Hospitals Group plc has remained the holding company of the Enlarged Group and has been
renamed to "Mediclinic International plc". Mediclinic International plc wholly owns the Al Noor Hospitals
Group and the Mediclinic Group, as well as the 29.9% interest in Spire Healthcare plc, which was
acquired by Mediclinic International Limited in August 2015.
Accordingly, these consolidated financial statements are issued in the name of Mediclinic International
plc (previously Al Noor Hospitals Group plc), but are a continuation of the consolidated financial
statements of Mediclinic International Limited. In accordance with IFRS 3 Business Combinations, the
financial statements of Mediclinic International Limited, including comparative information, have been
retrospectively adjusted to reflect the legal capital position of Mediclinic International plc. For further
details, refer to note 28.
A capital redemption reserve and a reverse acquisition reserve were created (refer to note 12).
Al Noor’s results have been consolidated in the consolidated financial statements from the effective date
of the acquisition, 15 February 2016.
b)
Business combinations
The Group accounts for business combinations using the acquisition method of accounting. The cost
of the business combination is measured as the aggregate of the fair values of assets given, liabilities
incurred or assumed and equity instruments issued. Costs directly attributable to the business
combination are expensed as incurred, except the costs to issue debt that are amortised as part of the
effective interest and costs to issue equity, which are included in equity.
Any contingent consideration to be transferred by the Group is recognised at fair value at the
acquisition date. Subsequent changes to the fair value of the contingent consideration that is deemed to
be an asset or liability is recognised in accordance with IAS 39 in profit or loss. Contingent consideration
that is classified as equity is not remeasured, and its subsequent settlement is accounted for within
equity.
The acquiree’s identifiable assets, liabilities and contingent liabilities that meet the recognition conditions
of IFRS 3 Business Combinations are recognised at their fair values at acquisition date, except for non-
current assets (or disposal company) that are classified as held-for-sale in accordance with
IFRS 5 Non-current Assets Held-for-sale and Discontinued Operations, which are recognised at fair value
less costs to sell.
Contingent liabilities are only included in the identifiable assets and liabilities of the acquiree where there
is a present obligation at acquisition date.
On acquisition, the Group assesses the classification of the acquiree’s assets and liabilities and
reclassifies them where the classification is inappropriate for Group purposes. This excludes lease
agreements and insurance contracts, whose classification remains as per their inception date.
MEDICLINIC ANNUAL REPORT 2016
143
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Non-controlling interests arising from a business combination, which are present ownership interests,
and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation,
are measured either at the present ownership interests’ proportionate share in the recognised amounts
of the acquiree’s identifiable net assets or at fair value. The treatment is not an accounting policy
choice but is selected for each individual business combination, and disclosed in the note for business
combinations. All other components of non-controlling interests are measured at their acquisition date
fair values, unless another measurement basis is required by IFRSs.
In cases where the Company held a non-controlling shareholding in the acquiree prior to obtaining
control, that interest is measured to fair value as at acquisition date. The measurement to fair value is
included in profit or loss for the year. Where the existing shareholding was classified as an available-for-
sale financial asset, the cumulative fair value adjustments recognised previously to other comprehensive
income and accumulated in equity are recognised in profit or loss as a reclassification adjustment.
Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior
to obtaining control, plus non-controlling interest and less the fair value of the identifiable assets and
liabilities of the acquiree. If the total of consideration transferred, non-controlling interest recognised and
previously held interest measured is less than the fair value of the net assets of the subsidiary acquired
in the case of a bargain purchase, the difference is recognised directly in the income statement.
Goodwill is not amortised but is tested on an annual basis for impairment. If goodwill is assessed to be
impaired, that impairment is not subsequently reversed.
Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such
cases the goodwill is translated to the functional currency of the company at the end of each reporting
period with the adjustment recognised in equity through to other comprehensive income.
Investment in associate
Associates are all entities over which the Group has significant influence but not control, generally
accompanying a shareholding of between 20% and 50% of the voting rights. Investments in associates
are accounted for using the equity method of accounting. Under the equity method, the investment
is initially recognised at cost, and the carrying amount is increased or decreased to recognise the
investor’s share of the profit or loss of the investee after the date of acquisition. The Group’s investment
in associates includes goodwill identified on acquisition. If the ownership interest in an associate is
reduced but significant influence is retained, only a proportionate share of the amounts previously
recognised in other comprehensive income is reclassified to profit or loss where appropriate. The
Group’s share of post-acquisition profit or loss is recognised in the income statement, and its share
of post-acquisition movements in other comprehensive income is recognised in other comprehensive
income with a corresponding adjustment to the carrying amount of the investment. When the Group’s
share of losses in an associate equals or exceeds its interest in the associate, including any other
unsecured receivables, the Group does not recognise further losses, unless it has incurred legal or
constructive obligations or made payments on behalf of the associate.
The Group determines at each reporting date whether there is any objective evidence that the
investment in the associate is impaired. If this is the case, the Group calculates the amount of
impairment as the difference between the recoverable amount of the associate and its carrying value
and recognises the amount adjacent to share of profit/(loss) of associates in the income statement.
Profits and losses resulting from upstream and downstream transactions between the Group and its
associate are recognised in the Group’s financial statements only to the extent of unrelated investor’s
interests in the associates. Unrealised losses are eliminated unless the transaction provides evidence
of an impairment of the asset transferred. Accounting policies of associates have been changed where
necessary to ensure consistency with the policies adopted by the Group. Dilution gains and losses
arising in investments in associates are recognised in the income statement.
2.
c)
144
MEDICLINIC ANNUAL REPORT 2016 2.
d)
2.3
2.4
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investment in joint venture
Investments in joint arrangements are classified as either joint operations or joint ventures depending
on the contractual rights and obligations of each investor. The Group has assessed the nature of its joint
arrangements and determined them to be joint ventures. Joint ventures are accounted for using the
equity method. Under the equity method of accounting, interests in joint ventures are initially recognised
at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition profits or losses
and movements in other comprehensive income. When the Group’s share of losses in a joint venture
equals or exceeds its interests in the joint ventures (which includes any long-term interests that, in
substance, form part of the Group’s net investment in the joint ventures), the Group does not recognise
further losses, unless it has incurred obligations or made payments on behalf of the joint ventures.
Unrealised gains on transactions between the Group and its joint ventures are eliminated to the extent
of the Group’s interest in the joint ventures. Unrealised losses are also eliminated unless the transaction
provides evidence of an impairment of the asset transferred. Accounting policies of the joint ventures
have been changed where necessary to ensure consistency with the policies adopted by the Group.
Segment reporting
Consistent with internal reporting, the Group’s segments are identified as Mediclinic Southern Africa,
Mediclinic Switzerland, Mediclinic Middle East, equity investment in the United Kingdom and corporate.
The chief operating decision-maker, who is responsible for allocating resources and assessing
performance of the operating segments, has been identified as the Executive Committee that makes
strategic decisions. The Executive Committee comprises the executive directors and other senior
management.
Property, equipment and vehicles
Land and buildings comprise mainly hospitals and offices. All property, equipment and vehicles are
shown at cost less subsequent depreciation and impairment, except for land, which is shown at cost
less impairment. Cost includes expenditure that is directly attributable to the acquisition of the items.
Subsequent costs are included in the asset’s carrying amount or recognised as a separate asset, as
appropriate, only when it is probable that future economic benefits associated with the item will flow to
the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are
charged to the income statement during the financial period in which they are incurred.
Land is not depreciated. Depreciation on the other assets is calculated using the straight-line method to
allocate the cost of each asset to its residual value over its estimated useful life, as follows:
• Buildings:
• Leasehold improvements:
• Equipment:
• Furniture and vehicles:
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement
of financial position date.
10 – 100 years
10 years or over the lease contract if shorter
3 – 10 years
3 – 8 years
An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying
amount is greater than its estimated recoverable amount.
Profit or loss on disposals is determined by comparing proceeds with carrying amounts. These are
included in the income statement.
MEDICLINIC ANNUAL REPORT 2016
145
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
2.
2.5
a)
b)
c)
2.6
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Intangible assets
Trade names
Trade names that are deemed to have an indefinite useful life are carried at cost less accumulated
impairment losses. Trade names that are deemed to have a finite useful life are capitalised at the cost to
the Group and amortised on the straight-line basis over its estimated useful lifetime of 15 to 20 years. No
value is placed on internally developed trade names. Expenditure to maintain trade names is accounted
for against income as incurred.
Goodwill
Goodwill represents the excess of the cost of an acquisition over the fair value of the Group’s share of
the net identifiable assets, liabilities and contingent liabilities of the acquired subsidiary at the date of
acquisition and the fair value of the non-controlling interest in the subsidiary. Goodwill on acquisition
of subsidiaries is included in intangible assets. Goodwill on acquisition of associates and joint ventures
is included in investments in associates and joint ventures. Goodwill is tested annually for impairment
or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is
carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed.
Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the
entity sold.
Goodwill is allocated to cash-generating units (CGUs) for the purpose of impairment testing. The
allocation is made to those CGUs or Groups of CGUs that are expected to benefit from business
combinations in which goodwill arose. CGUs have been defined as the operating platforms.
Computer software
Acquired computer software licences and internally developed software programmes are capitalised
on the basis of the costs incurred to acquire and bring to use the specific software. These costs are
amortised over their estimated useful lives (1 – 5 years). Costs associated with maintaining computer
software programmes or development expenditure that does not meet the recognition criteria are
recognised as an expense as incurred.
Impairment of non-financial assets
Assets that have an indefinite useful life are not subject to amortisation and are tested annually for
impairment and whenever events or changes in circumstances indicate that the carrying amount may
not be recoverable. Assets that are subject to amortisation are tested for impairment whenever events
or changes in circumstances indicate that the carrying amount may not be recoverable. An impairment
loss is recognised for the amount by which the asset’s carrying amount exceeds its recoverable amount.
The recoverable amount is the higher of an asset’s fair value less costs to sell and value in use. The
recoverable amount is calculated by estimating future cash benefits that will result from each asset
and discounting those cash benefits at an appropriate discount rate. For the purposes of assessing
impairment, assets are grouped at the lowest levels for which there are separately identifiable
cash flows – CGUs. Non-financial assets other than goodwill that suffered an impairment are reviewed
for possible reversal of the impairment at each reporting date.
2.7
Financial assets
The Group classifies its financial assets in the following categories: loans and receivables,
available-for-sale financial assets and financial assets at fair value through profit and loss. The
classification depends on the purpose for which the asset was acquired. Management determines
the classification of its investments at initial recognition.
Purchases and sales of investments are recognised on trade date – the date on which the Group
commits to purchase or sell the asset. Investments are initially recognised at fair value plus transaction
costs for all financial assets not subsequently carried at fair value through profit or loss.
Financial assets are derecognised when the rights to receive cash flows from the financial assets
have expired or have been transferred and the Group has transferred substantially all risks and
rewards of ownership.
Loans and receivables
Loans and receivables are non-derivative financial assets with fixed or determinable payments that
are not quoted in an active market. Loans and receivables are included in current assets, except for
maturities greater than 12 months after the reporting date, which are classified as non-current assets.
Loans and receivables are carried at amortised cost using the effective interest rate method.
146
MEDICLINIC ANNUAL REPORT 2016 2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments available-for-sale
Other long-term investments are classified as available-for-sale and are included within non-current
assets unless management intends to dispose of the investment within 12 months of the reporting date.
These investments are carried at fair value. Unrealised gains and losses arising from changes in the fair
value of available-for-sale investments are recognised in other comprehensive income in the period in
which they arise. When available-for-sale investments are either sold or impaired, the accumulated fair
value adjustments are realised and included in profit or loss.
Financial assets at fair value through profit and loss
These instruments, consisting of financial instruments held-for-trading and those designated at fair value
through profit and loss at inception, are carried at fair value. Derivatives are also classified as held-for-
trading unless they are designated as hedges. Realised and unrealised gains and losses arising from
changes in the fair value of these financial instruments are recognised in the income statement in the
period in which they arise.
Impairment
At each reporting date the Group assesses whether there is objective evidence that a financial asset or
a group of financial assets is impaired. A financial asset is impaired and impairment losses are incurred
only if there is objective evidence of impairment as a result of one or more events that occurred after
the initial recognition of the asset and that loss has an impact on the estimated future cash flows of
the financial asset that can be reliably estimated. Evidence of impairment may include indications
that the receivables or a group of receivables is experiencing significant financial difficulty, default or
delinquency in interest or principal payments, the probability that they will enter bankruptcy or other
financial reorganisation, and where observable data indicate that there is a measurable decrease in
the estimated future cash flows, such as changes in arrears or economic conditions that correlate with
defaults. In the case of available-for-sale financial assets, a significant or prolonged decline in the fair
value of the asset below its cost is considered an indicator that the investments are impaired. If any such
evidence exists for available-for-sale financial assets, the cumulative loss – measured as the difference
between the acquisition cost and the current fair value, less any impairment loss on that financial asset
previously recognised in profit or loss – is removed from other comprehensive income and recognised in
the income statement.
Impairment losses recognised in the income statement on equity instruments are not reversed through
the income statement.
Offsetting of financial instruments
Financial assets and liabilities are offset and the net amount reported in the statement of financial
position when there is a legally enforceable right to offset the recognised amounts, the legal enforceable
right is not contingent of a future event and is enforceable in the normal course of business even in the
event of default, bankruptcy and insolvency, and there is an intention to settle on a net basis or realise
the asset and settle the liability simultaneously.
Inventories
Inventories are valued at the lower of cost, determined on the weighted average method, or net
realisable value. Net realisable value is the estimated selling price in the ordinary course of business,
less applicable variable selling expenses.
Trade and other receivables
Trade and other receivables are recognised at fair value and subsequently measured at amortised cost,
less provision for impairment. A provision for impairment of trade receivables is established when there
is objective evidence that the Group will not be able to collect all amounts due according to the original
terms of the receivables. The amount of the provision is the difference between the asset’s carrying
amount and the present value of estimated future cash flows. The amount of the provision is recognised
in the income statement.
2.8
2.9
2.10
2.11
Cash and cash equivalents
Cash and cash equivalents consist of balances with banks and cash on hand and are classified as loans
and receivables. Bank overdrafts are classified as financial liabilities at amortised cost and are disclosed
as part of borrowings in current liabilities in the statement of financial position.
MEDICLINIC ANNUAL REPORT 2016
147
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
2.
2.12
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Derivative financial instruments and hedging activities
Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are
subsequently measured at fair value. The method of recognising the resulting gain or loss depends on
whether the derivative is designated as a hedging instrument, and if so, the nature of the item being
hedged. Hedges of a particular risk associated with a recognised liability or a highly probable forecast
transaction is designated as a cash flow hedge. The Group uses interest rate swaps as cash flow hedges.
The Group documents, at inception of the transaction, the relationship between hedging instruments
and hedged items, as well as its risk management objectives and strategy for undertaking various
hedging transactions. The Group also documents its assessment, both at hedge inception and on an
ongoing basis, of whether the derivatives that are used in hedging transactions are highly effective in
offsetting cash flows of hedged items.
The fair values of various derivative instruments used for hedging purposes are disclosed in note 19.
The hedging reserve in shareholders’ equity is shown in note 14. On the statement of financial position
hedging derivatives are not classified based on whether the amount is expected to be recovered or
settled within, or after, 12 months. The full fair value of a hedging derivative is classified as a non-current
asset or liability when the remaining maturity of the hedge relationship is more than 12 months;
it is classified as a current asset or liability when the remaining maturity of the hedge relationship is less
than 12 months.
Cash flow hedges
The effective portion of changes in the fair value of derivatives that is designated and qualify as cash
flow hedges are recognised in other comprehensive income. The gain or loss relating to the ineffective
portion is recognised immediately in the income statement.
Amounts accumulated in other comprehensive income are recycled to the income statement in the
periods when the hedged item affects profit or loss (for example, when the interest expense on hedged
variable rate borrowings is recognised in profit and loss).
When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for
hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is
recognised when the forecast transaction is ultimately recognised in the income statement. When a
forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in
equity is immediately transferred to the income statement.
2.13
Share capital
Ordinary shares are classified as equity. Shares in the Company held by wholly-owned Group companies
are classified as treasury shares and are held at cost.
Incremental costs directly attributable to the issue of new shares or options are shown in equity as a
deduction from the proceeds, net of tax.
Treasury shares
Treasury shares are deducted from equity until the shares are cancelled, reissued or disposed of. No
gains or losses are recognised in profit or loss on the purchase, sale, issue or cancellation of treasury
shares. All consideration paid or received for treasury shares is recognised directly in equity.
Trade and other payables
Trade and other payables are recognised initially at fair value and subsequently measured at amortised
cost using the effective interest rate method. Accounts payable is classified as current liabilities if
payment is due within one year or less (or in the normal operating cycle of the business if longer). If not,
they are presented as non-current liabilities.
2.14
2.15
148
MEDICLINIC ANNUAL REPORT 2016 2.
2.16
2.17
2.18
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Borrowings
Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are
subsequently stated at amortised cost. Any difference between the proceeds (net of transaction costs)
and the redemption value is recognised in the income statement over the period of the borrowings
using the effective interest rate method. Borrowings are classified as current liabilities unless the
Group has an unconditional right to defer settlement of the liability for at least 12 months after the
reporting date.
Borrowing costs are expensed when incurred, except for borrowing costs directly attributable to the
construction or acquisition of qualifying assets. Borrowing cost directly attributable to the construction
or acquisition of qualifying assets is added to the cost of those assets, until such time as the assets
are substantially ready for their intended use. A qualifying asset is an asset that necessarily takes a
substantial period of time to get ready for its intended use.
Provisions
Provisions are recognised when the Group has a present legal or constructive obligation, as a result
of past events, and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation, and a reliable estimate of the amount of the obligation can be made.
Current and deferred income tax
The tax expense for the period comprises current and deferred tax. Tax is recognised in the income
statement, except to the extent that it relates to items recognised in other comprehensive income or
directly in equity. In this case, the tax is also recognised in other comprehensive income or directly in
equity, respectively.
The current income tax charge is calculated on the basis of the tax laws enacted or substantively
enacted at the reporting date in the countries where the Group and its subsidiaries operate and
generate taxable income. Management periodically evaluates positions taken in tax returns with respect
to situations in which applicable tax regulation is subject to interpretation. It establishes provisions
where appropriate on the basis of amounts expected to be paid to the tax authorities.
Deferred income tax is recognised, using the liability method, on temporary differences arising
between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial
statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition
of goodwill; deferred income tax is not accounted for if it arises from initial recognition of an asset or
liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred income tax is determined using tax rates (and
laws) that have been enacted or substantially enacted by the reporting date and are expected to apply
when the related deferred income tax asset is realised or the deferred income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit
will be available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and
associates, except for deferred income tax liabilities where the timing of the reversal of the temporary
difference is controlled by the Group and it is probable that the temporary difference will not reverse in
the foreseeable future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset
current tax assets against current tax liabilities and when the deferred income tax assets and liabilities
relate to income taxes levied by the same taxation authority on either the same taxable entity or
different taxable entities where there is an intention to settle the balances on a net basis.
MEDICLINIC ANNUAL REPORT 2016
149
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
2.
2.19
a)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Employee benefits
Retirement benefit costs
The Group provides defined benefit and defined contribution plans for the benefit of employees,
the assets of which are held in separate trustee administered funds. These plans are funded by
payments from the employees and the Group, taking into account recommendations of independent
qualified actuaries.
Defined contribution plans
A defined contribution plan is a pension plan under which the Group pays fixed contributions into a
separate entity. The Group has no legal or constructive obligations to make further contributions if the
fund does not hold sufficient assets to pay all employees the benefits relating to employee service in
the current and prior periods. The contributions are recognised as employee benefit expense when
they are due.
Defined benefit plans
A defined benefit plan is a plan that is not a defined contribution plan. This plan defines an amount
of pension benefit an employee will receive on retirement, dependent on one or more factors such as
age, years of service and compensation. The liability recognised in the statement of financial position
in respect of defined benefit pension plans is the present value of the defined benefit obligation at the
end of the reporting period less the fair value of plan assets. The defined benefit obligation is calculated
annually by independent actuaries using the projected unit credit method. The present value of the
defined benefit obligation is determined by discounting the estimated future cash outflows using
interest rates of high-quality corporate bonds that are denominated in the currency in which
the benefits will be paid and that have terms to maturity approximating to the terms of the related
pension obligation.
Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions
are charged or credited to equity in other comprehensive income in the period in which they arise. Past
service costs are recognised immediately in the income statement. A net pension asset is recorded only
to the extent that it does not exceed the present value of any economic benefit available in the form of
reductions in future contributions to the plan, and any unrecognised actuarial losses and past service
costs. The annual pension costs of the Group’s benefit plans are charged to the income statement.
Incurred interest costs/income on the defined benefit obligations are recognised as wages and salaries.
b)
c)
Post-retirement medical benefits
Some Group companies provide for post-retirement medical contributions in relation to current and
retired employees. The expected costs of these benefits are accounted for by using the projected unit
credit method. Under this method, the expected costs of these benefits are accumulated over the
service lives of the employees. Valuation of these obligations is carried out by independent qualified
actuaries. All actuarial gains and losses are charged or credited to other comprehensive income in the
period in which they arise.
Share-based compensation
The Group operates a equity-settled, share-based compensation plan, under which the entity receives
services from employees as consideration for equity instruments (options) of the Company. The fair
value of the employee services received in exchange for the grant of the options is recognised as
an expense. The total amount to be expensed is determined by reference to the fair value of the
options granted:
• including any market performance conditions
• excluding the impact of any service and non-market performance vesting conditions; and
• including the impact of any non-vesting conditions.
At the end of each reporting period, the Group revises its estimates of the number of options that are
expected to vest based on the non-market vesting conditions and service conditions. It recognises
the impact of the revision to original estimates, if any, in the income statement, with a corresponding
adjustment to equity.
d)
Profit sharing and bonus plans
The Group recognises a liability and an expense where a contractual obligation exist for short-term
incentives. The amounts payable to employees in respect of the short-term incentive schemes are
determined based on annual business performance targets.
150
MEDICLINIC ANNUAL REPORT 2016 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.20 Revenue recognition
Revenues are measured at the fair value of the consideration that has been received or is to be received
and represent the amounts that can be received for services in the regular course of business when
the significant risks and rewards of ownership have been transferred or services have been rendered.
Discounts, sales taxes and other taxes associated with the revenues have to be deducted.
Revenue primarily comprises fees charged for inpatient and outpatient hospital services. Services
include charges for accommodation, theatre, medical professional services, equipment, radiology,
laboratory and pharmaceutical goods used. Revenue is recorded and recognised during the period
in which the hospital service is provided, based upon the amounts due from patients and/or medical
funding entities. Fees are calculated and billed based on various tariff agreements with funders.
Discounts comprise retrospective volume discounts granted to certain customers on attainment of
certain levels of purchases from the Group. These are accrued over the course of the arrangement based
on estimates of the level of business expected and are adjusted at the end of the arrangement to reflect
actual volumes.
In Switzerland, medical services can on occasion be charged based on provisional tariffs as delays
can occur in the agreement of tariffs between providers (including the Group) and funders. When
tariffs have not yet been agreed, tariff provisions are recognised as adjustments in revenue to reflect
any uncertainty about collectibility of amounts invoiced. Revenue continues to be recognised in
these circumstances as the Group has developed significant historical experience of continuing to
collect revenue for delivered services where tariff negotiations have not concluded with all relevant
authorities. However, a tariff provision will be recorded when the Group identifies any uncertainty around
collection of amounts invoiced for delivered services and it is probable that an outflow of resources
will be required, which can be reliably estimated. The provision is calculated on the basis of historical
experience of outcomes to negotiations between providers and funders and this historical experience is
subject to regular reassessment based on the actual outcome to tariff negotiations.
Other revenues earned are recognised on the following bases:
a)
b)
2.21
2.22
Interest income
Interest income is recognised on a time-proportioned basis using the effective interest rate method.
Rental income
Rental income, which is insignificant, is recognised on a straight-line basis over the term of the lease.
With the exception of interest income, all the items above are presented as revenue.
Cost of sales
Cost of sales consists of the cost of inventories, including obsolete stock, which have been expensed
during the year, together with personnel costs and related overheads which are directly attributable to
the provision of services, but excludes depreciation and amortisation.
Leased assets
Leases of property, equipment and vehicles where the Group assumes substantially all the benefits
and risks of ownership are classified as finance leases. Finance leases are capitalised at the lease’s
commencement at the lower of the fair value of the leased property and the present value of the
minimum lease payments. Each lease payment is allocated between the liability and finance charges so
as to achieve a constant rate on the finance balance outstanding. The corresponding rental obligations,
net of finance charges, are included in interest-bearing borrowings. The interest element of the finance
charges is charged to the income statement over the lease period. The property, equipment and vehicles
acquired under finance leasing contracts are depreciated over the useful lives of the assets or the term
of the lease agreement if shorter and transfer of ownership at the end of the lease period is uncertain.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as
operating leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to
the income statement on a straight-line basis over the period of the lease.
2.23 Dividend distribution
Dividends are recorded in the Group’s financial statements in the period in which they are approved by
the Company’s shareholders.
MEDICLINIC ANNUAL REPORT 2016
151
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.24 Foreign currency transactions
Transactions and balances
Transactions in foreign currencies are translated to the functional currency at the rates of exchange
ruling on the dates of the transactions or valuation where items are remeasured. Foreign exchange
gains and losses resulting from the settlement of such transactions and from the translation at year-end
exchange rates of monetary assets and liabilities denominated in foreign currencies are recognised in
the income statement, except when deferred in other comprehensive income as qualifying cash flow
hedges. Translation differences on non-monetary financial assets, such as equities classified as available-
for-sale, are included in other comprehensive income. Foreign exchange gains and losses are presented
in the income statement within ’Administration and other operating expenses’.
Group entities
The results and financial position of all foreign operations that have a functional currency that is different
from the Group’s presentation currency are translated into the presentation currency as follows:
• Assets and liabilities are translated at the closing rate at the reporting date.
• Income and expenses for each income statement are translated at average exchange rates
for the year.
• All resulting exchange differences are recognised in other comprehensive income.
On consolidation exchange differences arising from the translation of the net investment in foreign
operations are taken directly to other comprehensive income. Goodwill and fair value adjustments
arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign
operation and translated at closing rates at the reporting date.
2.25
Exchange rates
The Group uses the average of exchange rates prevailing during the period to translate the results and
cash flows of overseas subsidiaries, the joint venture and associated undertakings into pound sterling
and period end rates to translate the net assets of those undertakings. The following exchange rates
were applicable during the period:
Average rates:
Swiss franc
UAE dirham
South African rand
Period end rates:
Swiss franc
UAE dirham
South African rand
2016
1.47
5.54
20.73
1.38
5.28
21.21
2015
1.50
5.92
17.82
1.44
5.43
18.02
3.
3.1
a)
FINANCIAL RISK MANAGEMENT
Financial risk factors
In respect of the Group’s financial instruments, normal business activities expose the Group to a variety
of financial risks: market risk (including currency risk, interest rate risk and other price risk), credit risk
and liquidity risk. The Group’s overall risk management programme seeks to minimise potential adverse
effects on the Group’s financial performance.
Market risk
i) Currency risk
Investments in foreign operations
The Group has investments in foreign operations, whose net assets are exposed to foreign currency
translation risk. Currency exposure arising from the net assets of the Group’s foreign operations is
managed primarily through borrowings denominated in the relevant foreign currencies. Changes in
the pound sterling/Swiss franc, pound sterling/UAE dirham and pound sterling/South African rand
exchange rate over a period of time result in increased/decreased earnings. Other than the Group’s
earnings and payment of dividends which are presented and declared in Sterling and thus exposed
to currency risk, the Group is not significantly exposed to currency risk since the operating platforms
predominantly operates in its local currency (including its debt).
In the case of corporate offshore transactions and or cross-border business combinations, generally
forward cover contracts are considered or taken out to minimise foreign currency risk. Currently there
are no forward cover contracts in place.
152 MEDICLINIC ANNUAL REPORT 2016
3.
FINANCIAL RISK MANAGEMENT (continued)
The impact of a 10% change in the pound sterling/Swiss franc, pound sterling/South African rand and
the pound sterling/UAE dirham exchange rates for a sustained period of one year is:
• profit for the period would increase/decrease by £11m (2015: increase/decrease by £12m) due to
exposure to the GBP/Swiss franc exchange rate;
• profit for the period would increase/decrease by £6m (2015: increase/decrease by £4m)
due to exposure to the GBP/UAE dirham exchange rate;
• profit for the period would increase/decrease by £7m (2015: increase/decrease by £10m) due to
exposure to the GBP/South African rand exchange rate;
• foreign currency translation reserve would increase/decrease by £112m (2015: increase/decrease by
£106m) due to exposure to the GBP/Swiss franc exchange rate; and
• foreign currency translation reserve would increase/decrease by £24m (2015: increase/decrease by
£20m) due to exposure to the GBP/UAE dirham exchange rate.
• foreign currency translation reserve would increase/decrease by £12m (2015: increase/decrease by
£10m) due to exposure to the GBP/South African rand exchange rate.
ii) Interest rate risk
The Group’s interest rate risk arises from long-term borrowings as well as short-term deposits.
Borrowings and short-term deposits issued at variable rates expose the Group to cash flow interest rate
risk. Interest rate derivatives expose the Group to fair value interest rate risk. Group policy is to maintain
an appropriate mix between fixed and floating rate borrowings and placings.
The Group manages its interest rate risk by using floating-to-fixed interest rate swaps. Such interest rate
swaps have the economic effect of converting borrowings from floating rates to fixed rates. Generally,
the Group raises long-term borrowings at floating rates and swaps them into fixed rates. Under the
interest rate swaps, the Group agrees with other parties to exchange, at specified intervals (primarily
quarterly), the difference between fixed contract rates and floating-rate interest amounts calculated by
reference to the agreed notional amounts.
Interest rate sensitivity
The sensitivity analyses below have been determined based on the exposure to interest rates for both
derivative and non-derivative instruments at the reporting date and the stipulated change taking place
at the beginning of the financial year and held constant throughout the reporting period in the case of
instruments that have floating rates. If interest rates had been 25 basis points higher/lower and all other
variables were held constant, the Group’s:
• profit for the period would increase/decrease by £3m (2015: increase/decrease by £1m). This
is mainly attributable to the Group’s exposure to interest rates on its unhedged variable rate
borrowings and cash.
iii) Other price risk
The Group is not materially exposed to commodity or any other price risk.
b)
Credit risk
Financial assets that potentially subject the Group to concentrations of credit risk consist principally
of cash, short-term deposits and trade and other receivables and derivative financial contracts. The
Group’s cash equivalents and short-term deposits, are placed with quality financial institutions with
a high credit rating. Trade receivables are represented net of the allowance for doubtful receivables.
Credit risk with respect to trade receivables is limited due to the large number of customers comprising
the Group’s customer base, which consists mainly of medical schemes and insurance companies. The
financial condition of these clients in relation to their credit standing is evaluated on an ongoing basis.
Medical schemes and insurance companies are forced to maintain minimum reserve levels. The policy
for patients that do not have a medical scheme or an insurance company paying for the Group’s service,
is to require a preliminary payment instead. The Group does not have any significant exposure to any
individual customer or counterparty.
The Group is exposed to credit-related losses in the event of non-performance by counterparties to
hedging instruments. The counterparties to these contracts are major financial institutions. The Group
monitors its positions and limits the extent to which it enters into contracts with any one party.
The carrying amounts of financial assets included in the statement of financial position represents the
Group’s maximum exposure to credit risk in relation to these assets. At 31 March 2015 and 31 March 2016,
the Group did not consider there to be a significant concentration of credit risk.
MEDICLINIC ANNUAL REPORT 2016
153
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
3.
c)
FINANCIAL RISK MANAGEMENT (continued)
Liquidity risk
The Group manages liquidity risk by monitoring cash flow forecasts to ensure that it has sufficient cash
to meet operational needs, while maintaining sufficient headroom on its undrawn borrowing facilities at
all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of
its borrowing facilities. Given that the Group has bank facilities in place which expires during 2019/2020,
the Group did not consider there to be a significant concentration of liquidity risk.
The Group’s unused overdraft facilities are:
2016
£’m
88
2015
£’m
94
The following table details the Group’s remaining contractual maturity for its financial liabilities. The table
has been drawn up based on the undiscounted cash flows of financial liabilities based on the required
date of repayment. The table includes both interest and principal cash flows. The analysis of derivative
financial instruments has been drawn up based on undiscounted net cash inflows/(outflows) that settle
on a net basis.
Financial liabilities
31 March 2016
Interest-bearing borrowings
Derivative financial instruments
Trade payables
Other payables and accrued
expenses
31 March 2015
Interest-bearing borrowings
Derivative financial instruments
Trade payables
Other payables and accrued
expenses
Carrying
value
Contractual
cash flows
£’m
0 – 12
months
£’m
1 841
20
200
2 025
20
200
169
169
1 618
27
157
1 774
28
157
120
120
358
8
200
169
103
8
157
120
1 – 5
years
£’m
1 597
12
–
–
605
20
–
–
Beyond
5 years
£’m
70
–
–
–
1 066
–
–
–
3.2
a)
b)
c)
d)
e)
Fair value of financial instruments
The fair value of financial assets and liabilities are determined as follows:
Cash and cash equivalents, trade and other receivables: The carrying amounts reported in the
statement of financial position approximate fair values because of the short-term maturities of these
amounts.
Borrowings and trade and other payables: The carrying amounts reported in the statement of financial
position approximate fair values determined on the basis of a discounted cash flow methodology.
Financial assets at fair value through profit and loss: The fair value of these financial instruments is
derived from quoted prices in active markets for identical assets.
Derivative financial instruments: Interest rate swaps are measured at the present value of future cash
flows estimated and discounted based on the applicable yield curves derived from quoted interest rates.
Available-for-sale financial assets: The carrying amounts reported in the statement of financial position
are determined based on an appropriate valuation methodology.
Financial instruments that are measured at fair value in the statement of financial position, are disclosed
by level of the following fair value hierarchy:
• Level 1 – Quoted prices (unadjusted) in active markets for identical assets or liabilities
• Level 2 – Input (other than quoted prices included within level 1) that is observable for the asset or
liability, either directly (as prices) or indirectly (derived from prices)
• Level 3 – Input for the asset or liability that is not based on observable market data
(unobservable input).
154 MEDICLINIC ANNUAL REPORT 2016
3.
3.3
FINANCIAL RISK MANAGEMENT (continued)
Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going
concern while maximising the return to stakeholders through the optimisation of the debt and equity
balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed
in note 16, cash and cash equivalents and equity attributable to equity holders of the parent, comprising
issued capital, retained earnings and other reserves and non-controlling interest as disclosed in notes
12, 13, 14 and 15 respectively. The Group’s Audit and Risk Committee reviews the going concern status
and capital structure of the Group annually. The Group balances its overall capital structure through the
payment of dividends, new share issues and share buy-backs as well as the issue of new debt or the
redemption of existing debt. The debt-to-adjusted capital ratios at 31 March 2016 and 31 March 2015
were as follows:
Borrowings
Less: cash and cash equivalents
Net debt
Total equity
Debt-to-equity capital ratio
2016
£’m
1 841
(305)
1 536
3 570
0.4
2015
£’m
1 618
(265)
1 353
1 840
0.7
4.
a)
b)
c)
d)
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS
The Group makes estimates and assumptions concerning the future. The resulting accounting estimates
will, by definition, seldom equal the related actual results. The estimates and assumptions that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year are discussed below.
Estimated impairment of goodwill and intangible asset
The Group tests annually whether goodwill and the indefinite useful life intangible asset, resulting from
the Al Noor and Swiss acquisitions, have suffered any impairment. The recoverable amounts
of cash-generating units have been determined based on value-in-use calculations. These calculations
require the use of estimates in respect of growth and discount rates and it assumes a stable regulatory
environment. Regulatory environments are subject to uncertainties. The uncertainties in the
regulatory environments can have an impact on the recoverability of the goodwill and the intangible
asset’s recoverable amount. Refer to note 6.
Retirement benefits
The cost of defined benefit pension plans, post-retirement medical benefit liability obligations, and
UAE end of service obligations are determined using actuarial valuations. The actuarial valuation
involves making assumptions about discount rates, expected rates of return on assets, future salary
increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such
estimates are subject to significant uncertainty. Further details are given in note 17.
Property, equipment and vehicles
The estimation of the useful lives of property, equipment and vehicles is based on historical performance
as well as expectations about future use and therefore requires a significant degree of judgement to be
applied by management. These depreciation rates represent management’s current best estimate of the
useful lives and residual values of the assets.
For a private hospital it is fundamentally important that the earnings potential of a building is
maintained on a permanent basis. The Group therefore follows a structured maintenance programme
with regard to hospital buildings with the specific goal to prolong the useful lifetime of these buildings.
Provision for tariff risks
Provisions were raised for risks related to Swiss tariff risk, including historic tariff disputes at various
Swiss hospitals. The provisions are determined by management and represent an estimate based on the
information available. Additional disclosure of these estimates of provisions is included in note 18. Tariff
provisions are charged or released to revenue in the income statement.
MEDICLINIC ANNUAL REPORT 2016
155
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
4.
e)
CRITICAL ACCOUNTING ESTIMATES AND ASSUMPTIONS (continued)
Purchase price allocation
Critical accounting estimates and assumptions were made in the purchase price allocation of the
Al Noor acquisition in accordance with IFRS 3, Business Combinations. Identifiable assets acquired and
liabilities and contingent liabilities assumed in a business combination are measured at their fair values
at the acquisition date. The fair value of an asset or liability represents the price that would be received
to sell an asset or paid to transfer a liability in an orderly transaction between market participants. We
used an independent valuer to assist in the valuation of Al Noor’s opening balance sheet.
The more material estimates and assumptions relate mainly to the identification and valuation of
intangible assets and the determination of the useful lives of these assets. The valuation of the identified
intangible assets uses assumptions relating to future cash flows and discount rates which are based on
forecasts and are therefore inherently judgemental. The key judgements applied were as follows:
• The trademarks acquired were measured by applying the Relief From Royalty (RFR) methodology.
RFR estimates the value of the trademark based on amounts an unrelated party will pay as a
percentage of revenue for use of the trade mark. A royalty factor has been applied based on
comparable transactions. The selected royalty factor reflects that the Al Noor trademark is specific
to the Abu Dhabi market; and
• Certain favourable lease terms were identified in the acquired business, resulting from fixed rental
terms that extend beyond a five-year period. The identified intangible asset has been estimated as
the difference between the present value of the existing contractual rent schedule and the lease
schedule using current market prices, discounted to present value.
The purchase price allocation exercise considered whether any other intangible assets should be
identified, including consideration of customer contracts and non-contractual relationships. However,
no other material assets were separately identifiable.
The excess of the consideration over the fair value of the net identifiable assets acquired has been
recorded as goodwill. The relative proportion of identified intangible assets to goodwill was also
considered and was benchmarked to other transactions in the healthcare sector. Goodwill represents
benefits from Al Noor’s geographic footprint and expansion opportunities, synergies from a combined
business in the UAE and a skilled workforce assembled at the operating facilities.
In addition, a fair value exercise was undertaken for all of the other assets and liabilities acquired as a
result of the transaction in order to ensure completeness of liabilities in the opening balance sheet for
all contractual and other obligations and to ensure that all assets are stated at their recoverable
amounts. An exercise was also undertaken to conform the Al Noor business to the accounting policies
of the Group.
The purchase price allocation for the Al Noor transaction remains provisional at 31 March 2016 as the
Group has one year from the acquisition date to re-measure the fair values of the acquired assets and
liabilities and resulting goodwill if new information is obtained relating to conditions that existed at the
acquisition date.
f)
Income taxes
The Group has tax losses and other deductible temporary differences that have the potential to reduce
tax payments in future years. Deferred tax assets are only recognised to the extent that their recovery
is probable, having regard to the projected future taxable income of these entities and after taking
into account specific risk factors that affect the recovery of these assets. Management uses the same
profit projections for these purposes as are used by the business, for example in assessing the carrying
value of goodwill. Management’s judgement in this area is applied on a case-by-case basis due to the
jurisdictional nature of taxation. This analysis is considered afresh at each balance sheet date.
156
MEDICLINIC ANNUAL REPORT 2016 5.
PROPERTY, EQUIPMENT AND VEHICLES
Land – cost
Buildings
Cost
Accumulated depreciation
Accumulated impairment
Land and buildings
Equipment
Cost
Accumulated depreciation
Furniture and vehicles
Cost
Accumulated depreciation
Subtotal
Capital expenditure in progress
GROUP
2016
£’m
819
1 952
2 119
(166)
(1)
2 771
251
610
(359)
46
169
(123)
3 068
131
3 199
2015
£’m
778
1 869
1 998
(127)
(2)
2 647
200
488
(288)
39
140
(101)
2 886
99
2 985
MEDICLINIC ANNUAL REPORT 2016
157
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
5.
PROPERTY, EQUIPMENT AND VEHICLES (continued)
At 1 April 2014
Cost
Accumulated depreciation
Net book value
Year ended 31 March 2015
Net opening book value
Capital expenditure
Business combinations
Exchange differences
Disposals
Prior year capital expenditure
completed
Impairment losses*
Depreciation per income statement
Net closing book value
At 31 March 2015
Cost
Accumulated depreciation
Accumulated impairment
Net book value
Year ended 31 March 2016
Net opening book value
Capital expenditure
Exchange differences
Disposals
Business combinations
Prior year capital expenditure
completed
Depreciation per income statement
Net closing book value
At 31 March 2016
Cost
Accumulated depreciation
Accumulated impairment
Net book value
Capital
expen-
diture in
progress
£’m
Equipment
£’m
Furniture
and
vehicles
£’m
Land and
buildings
£’m
2 646
(103)
2 543
2 543
55
1
61
(2)
11
(2)
(20)
2 647
2 776
(127)
(2)
2 647
2 647
40
76
–
15
18
(25)
2 771
2 938
(166)
(1)
2 771
62
–
62
62
48
–
–
–
(11)
–
–
99
99
–
–
99
99
47
(13)
–
16
(18)
–
131
131
–
–
131
419
(243)
176
176
54
7
3
–
–
–
(40)
200
488
(288)
–
200
200
71
(4)
–
25
–
(41)
251
610
(359)
–
251
118
(82)
36
36
20
1
–
–
–
–
(18)
39
140
(101)
–
39
39
19
1
–
5
–
(18)
46
169
(123)
–
46
Total
£’m
3 245
(428)
2 817
2 817
177
9
64
(2)
–
(2)
(78)
2 985
3 503
(516)
(2)
2 985
2 985
177
60
–
61
–
(84)
3 199
3 848
(648)
(1)
3 199
*
An impairment charge was booked after the earnings potential of the original part of the Mediclinic Vergelegen
Hospital building was significantly affected after a flood caused damage to the building.
158 MEDICLINIC ANNUAL REPORT 2016
5.
PROPERTY, EQUIPMENT AND VEHICLES (continued)
Total additions
To maintain operations
To expand operations
GROUP
2016
£’m
2015
£’m
177
63
114
177
53
124
Property, equipment and vehicles with a book value of £2 508m (2015: £2 410m) are encumbered as
security for borrowings (see note 16).
Included in equipment is capitalised finance lease equipment with a book value of £1m (2015: £1m).
6.
INTANGIBLE ASSETS
At 1 April 2014
Cost
Accumulated amortisation and impairment
Net book value
Year ended 31 March 2015
Net opening book value
Amortisation charge
Additions
Business combinations
Exchange differences
Net closing book value
At 31 March 2015
Cost
Accumulated amortisation and impairment
Net book value
Year ended 31 March 2016
Net opening book value
Amortisation charge
Additions
Business combinations
Exchange differences
Net closing book value
At 31 March 2016
Cost
Accumulated amortisation and impairment
Net book value
Software
and IT
projects
£’m
Lease*
£’m
Trade
names
£’m
Goodwill
£’m
Total
£’m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
24
–
24
24
–
24
19
(9)
10
10
(5)
15
1
–
21
35
(14)
21
21
(7)
9
8
–
31
54
(23)
31
287
(2)
285
285
(2)
–
12
17
312
316
(4)
312
312
(2)
–
33
11
354
358
(4)
354
228
–
228
228
–
–
63
18
309
309
–
309
309
–
–
1 189
20
1 518
1 518
–
1 518
534
(11)
523
523
(7)
15
76
35
642
660
(18)
642
642
(9)
9
1 254
31
1 927
1 954
(27)
1 927
*
Relates to a favourable lease contracts on buildings. The leases are characterised by fixed annual rent without
annual rent escalations for most part of the contract.
MEDICLINIC ANNUAL REPORT 2016
159
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
6.
INTANGIBLE ASSETS (continued)
Impairment testing of significant goodwill balances and indefinite useful life trade name
The carrying amounts of significant goodwill and Swiss indefinite life trade names is considered annually
for impairment testing. The impairment tests are based on value-in-use calculations. These calculations
use cash flow projections based on financial budgets covering a five-year period. The discount rates
used reflect specific risks related to the hospital industry. These calculations indicate that there was no
impairment in the carrying value of goodwill balances and the Swiss trade names.
Carrying amount of Al Noor goodwill
Carrying amount of Swiss goodwill
Carrying amount of Swiss indefinite life trade names
GROUP
2016
£’m
1 197
278
309
2015
£’m
–
267
297
Impairment testing of Al Noor goodwill
The Al Noor goodwill comprises four CGUs and the key assumptions for the impairment testing are
the same.
Key assumptions used for the value-in-use calculations for the annual impairment testing were
as follows:
Future earnings is based on budgets and forecasts that represents management best view of future
admissions, tariffs and patient mix and includes savings relating to operational and capital expenditures.
Discount rates – discount rates reflect management’s estimate of the time value and the risks associated
with the Al Noor business. The weighted average cost of capital (WACC) has been determined by
considering the respective debt and equity costs and ratios. The discount rate applied to cash flow
projections is 7.8%.
Growth rates – growth rates are based on budgeted figures and management’s estimates. The estimated
figures assume a stable regulatory and tariff environment. Cash flows beyond the five-year period are
extrapolated using a 2.5% growth rate.
Sensitivity analysis – for the goodwill, the recoverable amount calculated based on value in use exceeded
the carrying value by approximately £292m. A fall in growth rate to 1.9% (which will also include the
possible effect of changes in budgeted margins) or a rise in discount rate to 8.3% would remove the
remaining headroom.
Impairment testing of Swiss goodwill and indefinite life trade names
Key assumptions used for the value-in-use calculations for the annual impairment testing were
as follows:
Discount rates – discount rates reflect management’s estimate of the time value and the risks associated
with the Swiss business. The weighted average cost of capital (WACC) has been determined by
considering the respective debt and equity costs and ratios. The pre-tax discount rate applied to cash
flow projections is 4.7% (2015: 5.8%).
Growth rates – growth rates are based on budgeted figures and management’s estimates. The estimated
figures assume a stable regulatory and tariff environment. Cash flows beyond the five-year period are
extrapolated using a 1.6% (2015: 1.6%) growth rate.
Sensitivity analysis – for the goodwill, the recoverable amount calculated based on value in use exceeded
the carrying value by approximately £1 212m (2015: £326m). A fall in growth rate to 0.3%
(2015: 1.1%) (which will also include the possible effect of changes in budgeted margins) or a rise in
discount rate to 5.8% (2015: 6.2%) would remove the remaining headroom.
160 MEDICLINIC ANNUAL REPORT 2016
7.
EQUITY ACCOUNTED INVESTMENTS
Investment in associates
Investment in joint venture
7.1
Investment in associates
Listed investment
Unlisted investment
Reconciliation of carrying value at the beginning and end of the period
Listed investment
Total cost of equity investment (note 29)
Share of profit of associated company
Dividend received from associated company
GROUP
2016
£’m
2015
£’m
452
3
455
451
1
452
447
6
(2)
451
–
4
4
–
–
–
–
–
–
–
Set out below are details of the associate which is material to the Group:
Name of entity
Spire Healthcare Group plc
Country of incorporation
and place of business
United Kingdom
%
ownership
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 four 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.
Summarised financial information in respect of the Group’s material
associate is set out below.
Summarised statement of financial position
Current assets
Non-current assets
Total assets
Current liabilities
Non-current liabilities
Net assets
Mediclinic’s effective interest
Mediclinic’s effective interest in net assets
Goodwill purchase adjustment
Total carrying value of equity investment
Market value of listed investment at 31 March 2016
As at
31 Dec
2015
£’m
243
1 415
1 657
(113)
(547)
998
29.9%
298
153
451
431
Although the market value of the investment is below the carrying value at 31 March 2016, management
has concluded that no impairment exists. The market value of the investment has not been at a level
below its cost for a prolonged period and the shortfall is not considered to be significant.
MEDICLINIC ANNUAL REPORT 2016
161
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
7.
EQUITY ACCOUNTED INVESTMENTS (continued)
Summarised statement of comprehensive income
Revenue
Profit from continuing operations
Other comprehensive income
Total comprehensive income
Unlisted investment
Opening balance
Share in current year profits/(losses)
Additional amounts invested
Exchange differences
The aggregate information of the associate that is not individually material:
The Group’s share of profit (loss)*
The Group’s share of other comprehensive loss*
The Group’s share of total comprehensive loss*
Aggregate carrying amount of Group’s investment in associate*
For the year ended 31 March 2016, the associate is accounted for by using
its financial information for the 12 months ended 31 December 2015,
since it has a different financial year end.
* Amount is less than £1m.
Refer to the annexure for further details of investments in associates.
7.2
Investment in joint venture
Unlisted
Carrying value of investment in joint venture
Opening balance
Share in current year losses*
(Loans repaid)/Additional amounts invested*
Exchange differences
The aggregate information of joint venture that is not individually material:
The Group’s share of profit (loss)*
The Group’s share of total comprehensive loss*
Aggregate carrying amount of Group’s interest in this joint venture
As at
31 Dec
2015
£’m
885
60
–
60
GROUP
2016
£’m
2015
£’m
–
–
1
–
1
–
–
–
–
4
–
–
(1)
3
–
–
3
–
–
–
–
–
–
–
–
–
4
–
–
–
4
–
–
4
For the year ended 31 March 2016, the joint venture is accounted for by using its financial information for
the 12 months ended 31 December 2015, since it has a different financial year end.
* Amount is less than £1m.
Details of the joint venture appear in the Annexure.
162 MEDICLINIC ANNUAL REPORT 2016
8.
OTHER INVESTMENTS AND LOANS
Unlisted – no active market
Loans and receivables*
Available-for-sale: Shares
Other investments and loans are held in the following currencies:
Swiss franc: CHF1m (2015: CHF2m)
South African rand
UAE dirham
*
Supported by the underlying business’s financial position, the credit quality of the
loans is considered satisfactory.
9.
DEFERRED TAX
The movement on the deferred tax account is as follows:
Opening balance
Income statement charge for the year
Provision for the year
Tax rate changes
Business acquisitions
Exchange differences
Charged to other comprehensive income
Balance at the end of the year
Deferred income tax assets
Deferred income tax liabilities
GROUP
2016
£’m
2015
£’m
3
1
4
1
3
–
4
412
13
13
–
–
18
(13)
430
(16)
446
430
4
1
5
1
4
–
5
395
12
12
–
4
11
(10)
412
(17)
429
412
The deferred tax relating to current assets and current liabilities contain temporary differences that are
most likely to realise in the next 12 months.
MEDICLINIC ANNUAL REPORT 2016
163
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
9.
DEFERRED TAX (continued)
The deferred tax balance is comprised of temporary differences arising in separate legal entities.
Offsetting has been applied on a legal entity basis. The table below shows the deferred tax balances and
movements in the various categories before offsetting was applied:
Tangible
assets
£’m
Intangible
assets
£’m
Financial
assets
£’m
Current
assets
£’m
Provisions
and others
£’m
Total
£’m
Deferred tax liabilities
At 1 April 2014
Charged/(credited) to the income
statement
Charged/(credited) to other
comprehensive income
Charged directly to equity
Exchange differences
Acquisition of subsidiary
At 31 March 2015
Set-off of deferred tax liabilities
pursuant to set-off provisions
Net deferred tax liabilities at the
end of the year
At 1 April 2015
Charged/(credited) to the income
statement
Charged/(credited) to other
comprehensive income
Charged directly to equity
Exchange differences
Acquisition of subsidiary
At 31 March 2016
Set-off of deferred tax liabilities
pursuant to set-off provisions
Net deferred tax liabilities at the
end of the year
382
–
–
–
10
–
392
392
1
–
–
16
–
409
64
–
–
–
3
4
71
71
–
–
–
2
–
73
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
6
6
–
–
–
–
–
6
8
–
–
–
–
1
9
9
5
–
–
1
–
15
460
–
–
–
13
5
478
(49)
429
478
6
–
–
19
–
503
(57)
446
164 MEDICLINIC ANNUAL REPORT 2016
9.
DEFERRED TAX (continued)
Current
assets
£’m
Provisions
and others
£’m
Long-
term
liabilities
£’m
Deriva-
tives
£’m
Tax losses
carried
forward
£’m
Total
£’m
Deferred tax assets
At 1 April 2014
Charged/(credited) to the income
statement
Charged/(credited) to other
comprehensive income
Charged directly to equity
Exchange differences
Acquisition of subsidiary
At 31 March 2015
Set-off of deferred tax liabilities
pursuant to set-off provisions
Net deferred tax assets at the
end of the year
At 1 April 2015
Charged/(credited) to the income
statement
Charged/(credited) to other
comprehensive income
Charged directly to equity
Exchange differences
Acquisition of subsidiary
At 31 March 2016
Set-off of deferred tax liabilities
pursuant to set-off provisions
Net deferred tax assets at the
end of the year
(1)
–
–
–
(1)
–
(2)
(2)
–
–
–
–
–
(2)
(7)
(1)
–
–
–
–
(8)
(8)
1
–
–
–
–
(7)
(7)
(2)
(8)
–
(1)
2
(16)
(16)
(1)
(13)
–
(1)
–
(31)
–
(4)
(2)
–
1
–
(5)
(5)
1
–
–
–
–
(4)
(52)
(67)
17
10
–
–
–
–
(35)
(10)
–
(1)
2
(66)
49
(17)
(35)
(66)
6
7
–
–
–
–
(29)
(13)
–
(1)
–
(73)
57
(16)
Deferred income tax assets are recognised to the extent that the realisation of the related tax benefit
through future taxable profits is probable.
MEDICLINIC ANNUAL REPORT 2016
165
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
9.
DEFERRED TAX (continued)
At 31 March 2016, the Group had unutilised tax losses of approximately £18m (2015: £14m) potentially
available for offset against future profits. A deferred tax asset of £29m (2015: £35m) has been
recognised in respect of gross losses based on profitability from approved budgets and business
plans. No deferred tax asset has been recognised in respect of the remaining gross losses due to the
unpredictability and availability of future profit streams in the relevant jurisdictions. The majority of
the unrecognised losses relate to Switzerland, which expire after 7 years. Their utilisation is dependent
upon the profitability of their entities. The financial projections used in assessing the future profitability
are consistent with those used in assessing the carrying value of goodwill as set out in note 6. The rate
of utilisation of these losses will occur at different rates due to the incidence and timing of profits within
these entities which consequently impacts their recognition as deferred tax assets. In Switzerland, tax
losses expire after 7 years, unused tax losses in Switzerland are as follows:
Unused tax losses not recognised as deferred tax assets
Expiry in 1 year
Expiry in 2 years
Expiry in 3 to 7 years
No expiry
GROUP
2016
£’m
2015
£’m
1
9
6
2
18
1
1
9
3
14
No deferred tax liability has been recognised in respect of temporary differences arising on investments
in subsidiaries and equity accounted investments where the Group is able to control the timing of the
reversal and it is probable that such differences will not reverse in the foreseeable future. Similarly tax
is not provided where it is expected that such distributions will not give rise to a tax liability at the
reporting date. The gross timing difference in this regard amounts to £522m (2015: £421m). There are
no significant expected income tax consequences of earnings being distributed from Switzerland and
the UAE, as there is no dividend withholding tax applicable to earnings being distributed from these
operations. Although South African distributions to the UK are typically subject to dividend withholding
taxes, distributions from South Africa are not expected to have income tax consequences in the
foreseeable future as the operations in South Africa have a significant contributed tax capital balance
from which may be paid dividends free from withholding tax. In line with the South African Reserve
Bank requirement, it is intended that dividends to South African resident shareholders on the South
African share register will be paid from a planned dividend access share scheme.
10.
INVENTORIES
Inventories consist of:
Pharmaceutical products
Consumables
Finished goods and work in progress
GROUP
2016
£’m
2015
£’m
67
8
–
75
53
6
1
60
The cost of inventories recognised as an expense and included in cost of sales amounted to £481m
(2015: £455m).
166 MEDICLINIC ANNUAL REPORT 2016
11.
TRADE AND OTHER RECEIVABLES
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Other receivables*
GROUP
2016
£’m
2015
£’m
413
(19)
394
167
561
311
(18)
293
122
415
*
Included in other receivables are Swiss unbilled services of £82m (2015: £68m).
More than 92% will be recovered by Swiss insurance companies and federal
authorities (cantons). Swiss insurance companies are subject to regular credit-
worthiness checks (e.g. minimum reserve levels).
Non-current receivables**
2
–
**
The non-current receivable relates to a 25-year prepaid lease agreement in
the UAE.
Trade and other receivables are categorised as loans and receivables.
The carrying amounts of the Group’s trade and other receivables are
denominated in the following currencies:
South African rand***
Swiss franc
UAE dirham
***
Trade receivables to the value of £41m (2015: £46m) have been ceded as security
for banking facilities.
Included in the Group’s trade receivables balance are trade receivables with
a carrying value of £151m (2015: £98m) that are past due at the reporting
date, but which the Group has not impaired as there has not been a
significant change in credit quality and the amounts are still considered to
be recoverable. The ageing of these receivables are as follows:
Up to 3 months
Over 3 months
Movement in the provision for impairment of receivables
Opening balance
Provision for receivables impairment
Exchange differences
Amounts written off as uncollectable
Balance at the end of the year
59
340
162
561
68
299
48
415
99
52
151
18
9
–
(8)
19
70
28
98
14
10
1
(7)
18
Amounts written off during the year relate to individually identified accounts that are considered to
be uncollectable.
Provision for impairment of receivables is based on historical collection trends, current market
conditions and expected future cash flows.
Management considers the credit quality of the fully performing trade receivables to be high in light of
the nature of these trade receivables as described in note 3.1(b).
Included in the Group’s other receivables balance are other receivables with a carrying value of £nil
(2015: £1m) that are past due at the reporting date.
MEDICLINIC ANNUAL REPORT 2016
167
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
12.
SHARE CAPITAL
Ordinary shares
At 1 April 2014
Shares issued
Share issue costs
At 31 March 2015
Shares issued (August 2015)
Share issue costs
At 14 February 2016
Reverse acquisition*
Combined capital structure
on 15 February 2016
Share subscription
(February 2016)
Reduction of share premium
Number of
shares
516 851 655
25 625 000
–
542 476 655
69 444 444
–
611 921 099
53 207 327
665 128 426
72 115 384
–
737 243 810
Share
capital
£’m
821
177
(4)
994
479
(4)
1 469
(1 402)
67
7
–
74
Capital
redemption
reserve**
£’m
–
–
–
–
–
–
–
6
Share
premium
£’m
–
–
–
–
–
–
–
4 862
Reverse
Acquisition
reserve***
£’m
–
–
–
–
–
–
–
(3 014)
Total
£’m
821
177
(4)
994
479
(4)
1 469
452
6
–
–
6
4 862
(3 014)
1 921
593
(4 765)
690
–
–
(3 014)
600
(4 765)
(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; and
– the share value component of the total consideration.
168 MEDICLINIC ANNUAL REPORT 2016
12.
SHARE CAPITAL (continued)
Treasury shares
At 1 April 2014
Repurchase of shares – Forfeitable Share Plan
Utilised by the Mpilo Trusts
At 31 March 2015
Repurchase of shares – Forfeitable Share Plan
Disposal of shares – Forfeitable Share Plan
Utilised by the Mpilo Trusts
At 31 March 2016
The balance of the treasury comprise:
Forfeitable Share Plan
Mpilo Trusts
Number of
shares
Total
£’m
(21)
(1)
–
(22)
(1)
–
21
(2)
8 450 612
155 454
(178 875)
8 427 191
129 927
(46 091)
(8 238 246)
272 781
239 290
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.
Ordinary shares
Number of shares in issue:
Nominal value:
GROUP
2016
737 243 810
10p
Value: indicating nominal and share premium amount
Rights of the Ordinary Shares (the “Ordinary Shares”) to profits: All dividends shall be declared and
paid according to the amounts paid up on the Ordinary Shares.
Rights of the Ordinary Shares to capital: If there is a return of capital on winding-up or otherwise, the
Ordinary shares shall confer full rights but they do not confer any rights of redemption, and shall rank
after the Subscriber Shares.
Voting rights of the Ordinary Shares: The Ordinary Shares shall confer, on each holder of the Ordinary
Shares, the right to receive notice of and to attend, speak and vote at all general meetings of the
Company. Each Ordinary Share carries the right to one vote on a poll.
Subscriber shares – fully paid up
Number of shares in issue:
Nominal value:
GROUP
2016
10
10p
Value: indicating nominal and share premium amount
10 issued Ordinary Shares were converted into and designated as subscriber shares of 10 pence
each. The Subscriber Shares carry no rights to receive any of the profits of the Company available for
distribution by way of dividend or otherwise. If there is a return of capital on a winding-up or otherwise,
the assets of the Company available for distribution among the members shall be applied first in
repaying in full to the holder of the Subscriber Shares the amount paid up on such shares.
Except as provided above, the Subscriber Shares shall not carry any right to participate in profits or
assets of the Company. The holders of the Subscriber Shares shall not be entitled to receive notice of or
attend and vote at any general meeting of the Company unless a resolution is proposed which varies,
modifies, alters or abrogates any of the rights attaching to the Subscriber Shares.
MEDICLINIC ANNUAL REPORT 2016
169
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
12.
SHARE CAPITAL (continued)
Mpilo trusts
The Mpilo trusts were created in 2005 for purposes of an employee share scheme to introduce
Mediclinic Southern Africa employees up to first line management level as shareholders of the Group.
This share-based payment arrangement is accounted for as an equity-settled share-based payment
transaction. As qualifying employees leave prior to entitlement and shares become available further
allocations were made to new and existing qualifying employees. The allocations of units made by the
trusts were subject to lock-in periods which expired in December 2015, with the shares linked
to participating employees units either transferred to them or sold with the proceeds of the sale
distributed to them.
Summary of the allocations:
Allocation
First allocation**
Second allocation
Third allocation
Fourth allocation
Fifth allocation
Qualifying
date
1 Dec 2005
1 Dec 2009
1 Dec 2010
1 Dec 2012
Issue
price
R18.40
R18.08
R18.59
R17.20
Partici-
pating
shares* Expiry date
80 31 Dec 2015
50 31 Dec 2015
100 31 Dec 2015
70 31 Dec 2015***
31 Dec 2015
18 shares for
every
completed
years service
*
**
Per qualifying employee for each completed year of service since previous allocation.
Initial 1 000 shares per qualifying employee and additional 80 shares for every year completed service prior
1 December 2005.
*** During the year, the expiry date of the Fourth Allocation was changed from 31 March 2018 to 31 December 2015.
Movement in the number of Mpilo
shares outstanding are:
Outstanding at the beginning
of the year
Mpilo shares forfeited
Fifth allocation
Mpilo shares vested
Outstanding at the end of the
period
Outstanding price per share
R17.82 (2015: R17.50)
R16.28 (2015: R17.84)
31 March
2016
Number
7 197 831
(119 296)
1 159 711
(8 238 246)
31 March
2015
Number
7 830 994
(454 288)
–
(178 875)
2015: R17.82
–
7 197 831
The share-based payment charge relating to the Mpilo trust grants are shown in note 14 and note 21.
Forfeitable Share Plan
The Mediclinic International Limited Forfeitable Share Plan ("FSP") was approved by the Company’s
shareholders in July 2014 as a long-term incentive scheme for selected senior management (executive
directors and prescribed officers). This share-based payment arrangement is accounted for as an
equity-settled share-based payment transaction. With the change in control and the acquisition of
the Al Noor Hospitals Group plc, the performance conditions of FSP have been finalised to the extent
that the performance conditions were met as at 30 September 2015. The FSP shares will vest after the
vesting period has lapsed.
170
MEDICLINIC ANNUAL REPORT 2016
12.
SHARE CAPITAL (continued)
Under the FSP, conditional share awards are granted to selected employees of the Group. The vesting of
these shares are subject to continued employment, and is conditional upon achievement of performance
targets, measured over a three-year period. The performance conditions for the year under review
constitute a combination of: absolute total shareholder return (“TSR”) (40% weighting) and underlying
diluted headline earnings per share (60% weighting).
Opening balance
Granted
Shares sold
Vested
Closing balance
Weighted
average
fair value at
grant date
offer price
R87.41
R107.23
31 March
2016
Number
155 454
129 927
(46 091)
–
239 290
31 March
2015
Number
–
155 454
–
–
155 454
A valuation has been determined and an expense recognised over a three-year period. The fair value
of the TSR performance condition has been determined by using the Monte Carlo simulation model and
the fair value of the headline earning per share performance condition, consensus forecasts have been
used. The share-based payment charge relating to the Forfeitable Share Plan are shown in note 14
and note 21.
The following assumptions have been used to determine the fair value of the TSR performance
condition:
Risk-free rate
Dividend yield
Volatility
7.49%
1.0%
20%
6.9%
1.5%
20%
Apart from the FSP, there are no other share option schemes in place. Therefore, no director exercised
any rights in relation to share option schemes during the reporting period. Al Noor Hospital Group plc
directors which exercised options before the acquisition date (15 February 2016) is regarded as a
pre-acquisition transaction in these Group financial statements.
13.
RETAINED EARNINGS
Opening balance
Profit for the year
Dividends paid
Capital redemption on tender offer
Reduction of share premium
Actuarial gains and losses
Transactions with non-controlling shareholders
Balance at the end of the year
GROUP
2016
£’m
485
177
(48)
(6)
4 765
(56)
3
5 320
2015
£’m
321
241
(47)
–
–
(31)
1
485
MEDICLINIC ANNUAL REPORT 2016
171
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
14.
OTHER RESERVES
Share-based payment reserve
Opening balance
Forfeitable Share Plan
Mpilo trusts
Al Noor share option scheme
The balance of the share-based payment reserve comprise:
Executive share option scheme
Forfeitable share plan
Al Noor share option scheme
Mpilo trusts (Employee share trusts)
Strategic South African black partners*
*
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.
Foreign currency translation reserve
Opening balance
Currency translation differences
Hedging reserve
Opening balance
Fair value adjustments of cash flow hedges, net of tax
Recycling of fair value adjustments of derecognised cash flow hedge,
net of tax
15.
NON-CONTROLLING INTERESTS
Opening balance
Transactions with non-controlling shareholders
Dividends to non-controlling interests
Share of total comprehensive income
Share of profit
Currency translation differences
Non-controlling interests in hospital activities
GROUP
2016
£’m
2015
£’m
24
14
1
11
(2)
1
1
(2)
17
7
24
407
306
101
4
2
2
–
61
3
(7)
4
13
(9)
61
14
13
–
1
–
1
–
–
6
7
14
306
247
59
2
7
(6)
1
51
4
(7)
13
13
–
61
172 MEDICLINIC ANNUAL REPORT 2016
15.
NON-CONTROLLING INTERESTS (continued)
Details of non-wholly-owned subsidiaries that have material non-controlling interests:
Mediclinic (Pty) Ltd*
Curamed Holdings (Pty) Ltd Group*
Profit allocated to non-
controlling interests
2016
£’m
1
3
2015
£’m
1
4
Ownership interest
held by NCI
2016
%
3.4%
30.3%
2015
%
3.4%
30.3%
Summarised financial information in respect of the Group’s subsidiaries that has material non-controlling
interests is set out below. The summarised financial information below represents amounts before
inter-group eliminations. The comparatives are for the year ended 31 March 2015.
* Place of business: South Africa
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Total comprehensive income allocated to non-controlling interests
Dividends paid to non-controlling interests
Net cash inflow from operating activities
Net cash inflow (outflow) from investing activities
Net cash inflow (outflow) from financing activities
Net cash outflow
Current assets
Non-current assets
Current liabilities
Non-current liabilities
Equity attributable to owners of the Company
Non-controlling interests
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Total comprehensive income allocated to non-controlling interests
Dividends paid to non-controlling interests
Net cash inflow from operating activities
Net cash (outflow) from investing activities
Net cash (outflow) from financing activities
Net cash inflow
Mediclinic (Pty) Ltd
90
124
(116)
(22)
(71)
(5)
294
35
1
36
1
1
64
1
65
(1)
56
155
(128)
(23)
(53)
(6)
320
32
(1)
31
1
1
46
(38)
(17)
(9)
Curamed Holdings
(Pty) Ltd group
35
23
(7)
(2)
(34)
(15)
51
11
–
11
–
2
11
(3)
(7)
2
38
25
(10)
(2)
(35)
(16)
55
12
–
12
4
2
15
(3)
(7)
6
MEDICLINIC ANNUAL REPORT 2016
173
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
16.
BORROWINGS
Secured long-term bank loans*
Long-term portion
Short-term portion
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% (2015: 1.51%) compounded quarterly, and
is repayable on 2 June 2019.
Preference shares*
Long-term portion
Short-term portion
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*
Long-term portion
Short-term portion
The long-term bank loan bears interest at the 3 month Jibar variable rate
plus a margin of 1.06% (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*
Long-term portion
Short-term portion
The long-term bank loan bears interest at the 3 month Jibar variable rate
plus a margin of 1.51% (2015: 1.31%) compounded quarterly, and
is repayable on 2 June 2019.
Secured long-term bank loans
Long-term portion
Short-term portion
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 (2015: £15m)
are encumbered as security for these loans. Net trade receivables of £1m
(2015: £1m) has also been ceded as security for these loans.
GROUP
2016
£’m
140
139
1
–
90
85
5
10
5
5
9
9
–
5
4
1
2015
£’m
166
165
1
–
111
105
6
18
12
6
11
11
–
7
6
1
Borrowings in Southern African operations
254
313
*
Property and equipment with a book value of £160m (2015: £150m), cash and cash equivalents of £12m
(2015: £10m) and trade receivables of £41m (2015: £46m) have been ceded as security for
these borrowings.
174 MEDICLINIC ANNUAL REPORT 2016
16.
BORROWINGS (continued)
Secured long-term bank loans
Long-term portion
Short-term portion
Capitalised financing costs – long-term
This loan bears interest at variable rates linked to the 3M Libor and
a margin of 2.0% (2015: 2.75%) and is amortising until 31 March 2020
(2015: June 2017). Properties with a book value of £100m (2015: £83m)
are encumbered as security for this loan.
Borrowings in Middle East operations
Secured long-term bank loans
Long-term portion
Short-term portion
Capitalised financing costs – long-term
These loans bear interest at a variable rate linked to the 3M Libor plus
1.5% and 2.85% (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 (2015: £2 161m); and Swiss bank accounts with a book value
of £128m (2015: £138m).
Listed bonds
Long-term portion
Short-term portion
The listed bonds consist of CHF145m 1.625% and CHF90m 2.0%
Swiss franc bonds. The bonds are repayable on 25 February 2021
and 25 February 2025 respectively.
Secured long-term finance
Long-term portion
Short-term portion
These loans bear interest at interest rates ranging between 3% and 12%
(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
(2015: £1m) is encumbered as security for these loans.
Borrowings in Swiss operations
Secured long-term bank loans
Long-term portion
Short-term portion
Capitalised financing costs – long-term
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 of 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
Total borrowings
Short-term portion transferred to current liabilities
Non–current borrowings
GROUP
2016
£’m
2015
£’m
53
50
3
–
56
38
19
(1)
53
56
1 098
1 088
36
(26)
1 084
1 079
35
(30)
170
170
–
164
164
–
–
–
–
1
1
–
1 268
1 249
266
–
266
–
–
–
–
–
266
–
1 841
(317)
1 524
1 618
(68)
1 550
MEDICLINIC ANNUAL REPORT 2016
175
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
17.
RETIREMENT BENEFIT OBLIGATIONS
Statement of financial position obligations for:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end of service benefit obligation
Total retirement benefit obligations
Short-term portion of retirement benefit obligations
Non–current retirement benefit obligations
Total amount charged to the income statement:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end of service benefit obligation
Total amount charged/(credit) to other comprehensive income:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end of service benefit obligation
GROUP
2016
£’m
2015
£’m
119
24
45
188
188
(9)
179
30
4
4
38
(66)
1
(4)
(69)
47
26
15
88
88
(1)
87
26
4
3
33
(37)
(3)
–
(40)
None of the directors of Mediclinic International plc participate in Swiss pension benefits or the UAE end
of service benefit. The two executive directors of Mediclinic International plc participate in the South
African post-retirement medical benefit obligation.
(a) Swiss pension benefit obligation
The Group’s Swiss operations has five (2015: five) defined benefit pension plans, namely:
Pensionskasse Hirslanden (cash balance plan)
Vorsorgestiftung VSAO (cash balance plan) (Association for Swiss Assistant and Senior Doctors)
Radiotherapie Hirslanden AG; Pension fund at foundation "pro" (cash balance plan)
Clinique La Colline SA; Pension fund at banque cantonal vaudois (cash balance plan)
Swissana Clinic AG; Pension fund at foundation "Nest" (cash balance plan)
Statement of financial position
Amounts recognised in the statement of financial position are as follows:
Present value of funded obligations
Fair value of plan assets
Net pension liability
GROUP
2016
£’m
2015
£’m
949
(830)
119
797
(750)
47
176 MEDICLINIC ANNUAL REPORT 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
The movement in the defined benefit obligation over the period is
as follows:
Opening balance
Current service cost
Interest cost
Employee contributions
Benefits paid
Actuarial loss – experience
Actuarial demographical loss assumption
Actuarial financial loss assumption
Acquisition
Exchange differences
Balance at end of year
The movement of the fair value of plan assets over the period is as follows:
Opening balance
Employer contributions
Plan participants contributions
Benefits paid from fund
Interest income on plan assets
Return on plan assets greater/(less) than discount rate
Acquisition
Administration cost paid
Exchange differences
Balance at end of year
Statement of financial position
Opening net liability
Expense as above
Contributions paid by employer
Exchange differences
Actuarial loss recognised in equity
Acquisitions
Closing net liability
Statement of comprehensive income
Amounts recognised in other comprehensive income are as follows:
Actuarial (loss) – experience
Actuarial (loss) due to liability assumption changes
Return on plan assets greater/(less) than discount rate
Total comprehensive income
GROUP
2016
£’m
2015
£’m
797
29
7
26
(8)
14
–
45
–
39
949
750
30
26
(8)
7
(7)
–
(1)
33
830
47
30
(30)
6
66
–
119
(14)
(45)
(7)
(66)
640
26
12
24
(8)
7
(17)
76
16
21
797
637
27
24
(8)
13
28
10
(1)
20
750
3
26
(27)
3
37
5
47
(7)
(58)
28
(37)
MEDICLINIC ANNUAL REPORT 2016
177
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
Income statement
Amounts recognised in the income statement are as follows:
Current service cost
Past service cost
Interest on liability
Interest on plan assets
Administration cost paid
Settlement gain
Total expense
Actual return on plan assets
Principal actuarial assumptions on statement of financial position
Discount rate
Future salary increases
Future pension increases
Inflation rate
Number of plan members
Active members
Pensioners
Experience adjustment
On plan liabilities: loss
On plan assets: (gain)/loss
GROUP
2016
£’m
2015
£’m
29
–
7
(7)
1
–
30
(1)
0.45%
1.50%
0.00%
1.00%
8 617
694
9 311
26
–
12
(13)
1
–
26
41
0.90%
1.50%
0.00%
1.00%
8 219
640
8 859
14
7
7
(28)
178 MEDICLINIC ANNUAL REPORT 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
Asset allocation
Quoted investments
Fixed income investments
Equity investments
Real estate
Other
Non-quoted investments
Fixed income investments
Equity investments
Real estate
Other
2016
2015
£’m
288
197
67
72
624
3
10
137
56
206
%
34.7%
23.7%
8.1%
8.7%
75.2%
0.3%
1.2%
16.5%
6.8%
24.8%
£’m
268
185
82
78
613
2
10
88
37
137
%
35.7%
24.7%
10.9%
10.4%
81.7%
0.3%
1.4%
11.7%
4.9%
18.3%
830
100.0%
750
100.0%
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase
Decrease
Discount rate
Salary growth rate
Pension growth rate
0.5%
1.5%
0.0%
0.3%
0.5%
0.3%
(2.9%)
0.8%
2.5%
3.1%
(0.8%)
–
Decrease
by 1 year
in assump-
tion
Increase by
1 year in
assumption
2.4%
(2.4%)
Life expectancy (mortality)
Change in
assumption
1 year in
expected
life time of
plan par-
ticipant
The above sensitivity analysis are based on a change in an assumption while holding all other
assumptions constant. In practice, this is unlikely to occur, and changes in some of the assumptions may
be correlated. When calculating the sensitivity of the defined benefit obligation to significant actuarial
assumptions the same method (present value of the defined benefit obligation calculated with the
projected unit credited method at the end of the reporting period) has been applied as when calculating
the pension liability recognised within the statement of financial position.
The methods and types of assumptions used in preparing the sensitivity analysis did not change
compared to the previous period.
Expected employer contributions to be paid to the pension plans for the year ended 31 March 2017
are £25m.
MEDICLINIC ANNUAL REPORT 2016
179
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
The weighted average duration of the defined benefit obligation is 14.3 years (2015: 13.4 years).
The maturity profile of the defined benefit obligation is as follows:
31 March 2016
Defined benefit obligation
31 March 2015
Defined benefit obligation
< 1 year
£’m
1 – 5 years
£’m
> 5 years
£’m
Total
£’m
57
51
170
731
958
154
667
872
The Swiss defined benefit pension plans exposes the Group to some actuarial and investment risks.
The pension plans provides employees of the Hirslanden Group with post-employment, death-in-service
and disability benefits in accordance with the Federal Law on Occupational Old-age. It is separate
legal entities from the Hirslanden Group. The funds’ governing bodies consists of an equal number of
employer and employee representatives.
The benefits of the pension plans are substantially higher than the legal minimum. The employee’s
and employer’s contributions is based on their insured salary and range from 1.25% to 15.5% for
Pensionskasse Hirslanden and 14% for VSAO.
If an employee leaves the Hirslanden Group or the pension plans before reaching retirement age, legally
they are to transfer the vested benefits to a new pension plan. On retirement, the participant may decide
to withdraw the benefits as an annuity or a lump-sum.
As per the pension law in Switzerland, benefits provided by the pension funds are financed through
annual contributions. If insufficient investment returns or actuarial losses lead to a funding gap, the
governing body is legally obliged to take actions to close this gap within 5 years to a maximum of
7 years. Such actions may include additional contributions by the respective Group companies and
the beneficiaries.
180 MEDICLINIC ANNUAL REPORT 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(b) South African post-retirement medical benefit obligation
The Group’s Southern African operations have a post-retirement medical benefit obligation for
employees who joined before 1 July 2012.
The Group accounts for actuarially determined future medical benefits and provide for the expected
liability in the statement of financial position.
During the last valuation on 31 March 2016 a 9.25% (2015: 7.1%) medical inflation cost and a 10.25%
(2015: 8.1%) interest rate were assumed. The average retirement age was set at 63 years (2015: 63 years).
The assumed rates of mortality are as follows:
During employment: SA 85/90 tables of mortality
Post-employment: PA(90) tables
Amounts recognised in the statement of financial position are as follows:
Opening balance
Amounts recognised in the income statement
Current service cost
Interest cost
Contributions
Exchange differences
Actuarial (gain)/loss recognised in other comprehensive income
Present value of unfunded obligations
GROUP
2016
£’m
2015
£’m
26
4
2
2
–
(5)
(1)
24
21
4
2
2
–
(2)
3
26
The effect of a 1% movement in the assumed health cost trend rate is
as follows:
Defined benefit obligation
Aggregate of the current service cost and interest cost
2016
Increase
17%
19%
2016
Decrease
(14%)
(15%)
Historical information: The present value of the Group’s post-retirement medical benefits at
31 March 2014 was £21m, 31 March 2013: £22m and 31 March 2012: £28m.
Expected employer contributions to be paid to the post-retirement medical benefit liability for the year
ended 31 March 2017 are £0.5m.
MEDICLINIC ANNUAL REPORT 2016
181
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
17.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(c) UAE end of service benefit obligation
In terms of UAE labour law, employees are entitled to severance pay at the end of employment.
Severance pay is calculated as follows:
First 5 years of service: between 7 and 30 days wage per year of service and thereafter 30 days per
additional year.
The employee benefit was actuarially determined:
The following are the principle actuarial assumptions:
Discount rate
Future salary increases
Average retirement age
Annual turnover rate
Amounts recognised in the statement of financial position are as follows:
Opening balance
Amounts recognised in the income statement
Current service cost
Interest cost
Contributions
Business combinations
Exchange differences
Actuarial loss recognised in other comprehensive income
Present value of unfunded obligations
Current portion of retirement benefit obligations
Non-current retirement benefit obligations
GROUP
2016
£’m
2015
£’m
4.2%
3.5%
60 years
12.8%
7.4%
3.5%
60 years
12.8%
£’m
£’m
15
4
3
1
(1)
22
1
4
45
9
36
45
11
3
2
1
(1)
–
2
–
15
1
14
15
The effect of a 1% movement in the assumed health cost trend rate is
as follows:
Defined benefit obligation
Aggregate of the current service cost and interest cost
2016
Increase
7%
9%
2016
Decrease
(6%)
(8%)
Expected employer contributions to be paid to the post-retirement medical benefit liability for the year
ended 31 March 2017 are £4m.
182 MEDICLINIC ANNUAL REPORT 2016
18.
PROVISIONS
Year ended 31 March 2015
Opening balance
Charged to the income statement
Utilised during the year
Unused amounts reversed
Exchange differences
Balance at the end of the year
At 31 March 2015
Current
Non-current
Year ended 31 March 2016
Opening balance
Charged to the income statement
Utilised during the year
Unused amounts reversed
Exchange differences
Balance at the end of the year
At 31 March 2016
Current
Non-current
Employee
benefits
£’m
Legal cases
and other
£’m
Tariff risks
£’m
Total
£’m
12
4
(1)
–
(1)
14
3
11
14
14
2
(2)
–
1
15
2
13
15
1
–
–
–
–
1
–
1
1
1
1
–
–
–
2
–
2
2
26
10
(1)
(6)
2
31
21
10
31
31
4
–
(10)
1
26
17
9
26
39
14
(2)
(6)
1
46
24
22
46
46
7
(2)
(10)
2
43
19
24
43
(a) Employee benefits
This provision is for benefits granted to employees for long service.
(b) Legal cases and other
This provision relates to third-party excess payments for malpractice claims which are not covered by
insurance and other costs for legal claims.
(c) Tariff risks
This provision relates to compulsory health insurance tariff risks in Switzerland and other tariff disputes
at some of the Group’s Swiss hospitals.
Provisions are expected to be payable during the following financial years:
Within 1 year
After one year but not more than five years
More than five years
2016
£’m
2015
£’m
19
18
6
43
24
13
9
46
MEDICLINIC ANNUAL REPORT 2016
183
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
19.
DERIVATIVE FINANCIAL INSTRUMENTS
Interest rate swaps – cash flow hedges
Non-current
Current
Subtotal
Forward exchange contracts
Call option
GROUP
2016
£’m
2016
£’m
GROUP
2015
£’m
2015
£’m
Assets
Liabilities
Assets
Liabilities
1
–
1
–
2
3
19
–
19
1
–
20
1
–
1
–
–
1
26
1
27
–
–
27
Effective interest rate swaps
In order to hedge specific exposures in the interest rate repricing profile of existing borrowings, the
Group uses interest rate derivatives to generate the desired interest profile. At 31 March 2016, the Group
had eight effective interest rate swap contracts (31 March 2015: six). The value of borrowings hedged by
the interest rate derivatives and the rates applicable to these contracts are as follows:
31 March 2015
1 to 3 years*
3 to 5 years*
31 March 2016
1 to 3 years*
3 to 5 years**
Borrowings
hedged
£’m
Fixed
interest
payable
Interest
receivable
106
15
5.5 – 8.4%
7.6%
3 month Jibar
3 month Jibar
67
13
5.5 – 8.1%
7.6%
3 month Jibar
3 month Jibar
Fair value
gain/(loss)
for the
year
£’m
–
–
1
–
*
**
The interest rate swap agreement reset every 3 months on 1 June, 1 September, 1 December and 1 March with a final
reset on 1 September 2017 and 1 March 2019. There is no ineffective portion recognised in the profit and loss that
arises from the cash flow hedges.
The interest rate swap agreements reset every 3 months on 1 June, 1 September, 1 December and 1 March with a
final reset on 3 June 2019. There is no ineffective portion recognised in the profit and loss that arises from the cash
flow hedges.
184 MEDICLINIC ANNUAL REPORT 2016
19.
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Ineffective interest rate swaps
Due to the current negative interest rates in Switzerland, the hedge relationship in respect of the
3 month Swiss Libor interest rate swaps became ineffective since the interest on the borrowings is
capped at a rate of 0% but is fully considered as interest payments on the swap. Hedge accounting
discontinued from the previous reporting period when hedge effectiveness could be demonstrated,
i.e. from 1 October 2014.
Opening balance
Fair value adjustments through other comprehensive income
Fair value adjustments booked through profit and loss (finance cost)
Exchange differences
Balance at the end of the period
GROUP
2016
£’m
(26)
–
8
(1)
(19)
2015
£’m
3
(8)
(19)
(2)
(26)
31 March 2015
3 years and beyond*
31 March 2016
Beyond 2 years*
Nominal
value
£’m
Fixed
interest
payable
1 128
0.112% and
0.239%
Interest
receivable
£’m
3 month
Swiss
Libor
1 122
0.112% and
0.239%
3 month
Swiss
Libor
*
The interest rate swap agreement resets every 3 months on 31 March, 30 June, 30 September and 31 December
with a final reset on 31 March 2018 and termination date on 30 June 2018.
Based on the degree to which the fair values are observable, the interest rate swaps and the forward
contracts are grouped as Level 2.
Call option
As per an Al Noor shareholders’ agreement, Al Noor Medical Company, Al Noor Hospital and Al Noor
Pharmacy LLC has an option to buy 25% minority shares with effect from 1 January 2016. Fair value of
this option has been recognised as a derivative asset as at 31 March 2016.
Forward contracts
Loss recognised in the income statement
Based on the degree to which the fair values are observable, the interest
rate swaps and the forward contracts are Grouped as Level 2.
20.
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accrued expenses
Social insurance and accrued leave pay
Value added tax
GROUP
2016
£’m
2015
£’m
(1)
–
GROUP
2016
£’m
2015
£’m
200
169
55
7
431
157
120
53
5
335
MEDICLINIC ANNUAL REPORT 2016
185
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
21.
EXPENSES BY NATURE
Fees paid to the Group’s auditors for the following services:
Audit of the parent Company and consolidated financial statements
Audit Company subsidiaries
Audit services
Audit-related services
Tax advice
Tax compliance
All other services
Cost of inventories
Depreciation – buildings
– equipment
– furniture and vehicles
Employee benefit expenses
Wages and salaries
Retirement benefit costs – defined contribution plans
Retirement benefit costs – defined benefit obligations (note 17)
Share-based payment expense (note 14)
Impairment of property
Increase in impairment provision for receivables (note 11)
Maintenance costs
Managerial and administration fees
Operating leases – buildings
– equipment
Amortisation of intangible assets
Other expenses
General expenses
Profit on disposal of property, equipment and vehicles
Classified as:
Cost of sales
Administration and other operating expenses
Depreciation and amortisation is classified as:
Cost of sales
Administration and other operating expenses
Number of employees
22.
OTHER GAINS AND LOSSES
(Losses)/gains on foreign currency forward contracts
Gain on disposal of subsidiary
Discount on loan repayment
Insurance proceeds
186 MEDICLINIC ANNUAL REPORT 2016
GROUP
2016
£’m
2015
£’m
0.4
1.9
2.3
1.1
0.4
0.3
0.2
4.3
–
1.0
1.0
0.3
0.2
–
–
1.5
481
455
25
41
18
934
875
11
38
10
–
1
44
–
32
2
9
227
228
(1)
20
40
18
870
825
11
33
1
2
3
46
–
26
2
7
165
170
(5)
1 818
1 656
1 264
554
1 818
1 184
472
1 656
76
17
93
68
17
85
Number
32 884
Number
27 696
GROUP
2016
£’m
2015
£’m
(1)
–
–
–
(1)
2
2
11
9
24
23.
FINANCE COST
Interest expense
Interest rate swaps
Amortisation of capitalised financing costs
Fair value (gains)/losses on ineffective cash flow hedges
Preference share dividend
Less: amounts included in the cost of qualifying assets
24.
INCOME TAX EXPENSE
Current tax
Current year
Previous year
Deferred tax (note 9)
Taxation per income statement
Composition
UK tax
Foreign tax
Reconciliation of rate of taxation:
UK statutory rate of taxation****
Adjusted for:
Capital gains taxed at different rates
Non-taxable income
Non-deductible expenses*
Non-controlling interests’ share of profit before tax
Effect of different tax rates***
Income tax rate changes
Non-recognition of tax losses in current year
Recognition of tax losses relating to prior years
Prior year adjustment**
Effective tax rate
GROUP
(Restated)
2015
£’m
2016
£’m
44
11
5
(8)
6
–
58
41
1
13
55
–
55
55
49
4
8
19
7
(2)
85
44
(44)
12
12
–
12
12
20.0%
21.0%
0.1%
(0.3%)
5.6%
(0.3%)
(4.3%)
(0.2%)
1.8%
(0.4%)
0.4%
22.4%
(0.6%)
(0.6%)
2.0%
(0.3%)
(1.4%)
–
0.6%
–
(16.4%)
4.3%
*
**
***
Non-deductible expenses in the current year were impacted by:
– Transaction costs in relation to the Al Noor transaction was 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 was 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.
MEDICLINIC ANNUAL REPORT 2016
187
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
25.
EARNINGS PER ORDINARY SHARE
Basic
Diluted
Number of shares reconciliation
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
Al Noor Hospitals Group plc shares prior to reverse acquisition
Al Noor Hospitals Group plc shares repurchased
Weighted average number of ordinary shares issued during the year
(August 2015)
Weighted average number of ordinary shares issued during the year
(February 2016)
Weighted average number of ordinary shares issued during the year
(June 2014)
Adjustment for equity raising – Private placement (June 2014)
(IAS 33 para 26)**
Adjustment for equity raising – Rights Offer (August 2015)
(IAS 33 para 26)**
Weighted average number of treasury shares
BEE shareholder
Mpilo Trusts
Forfeitable Share Plan
Weighted average number of ordinary shares in issue for diluted
earnings per share
Weighted average number of ordinary shares in issue
Weighted average number of treasury shares held in terms of
the BEE initiative not yet released from treasury stock
BEE shareholder*
Mpilo Trusts
Forfeitable Share Plan
GROUP
2016
Pence
29.6
29.5
(Restated)
2015
Pence
44.6
43.8
GROUP
2016
Number
(Restated)
2015***
Number
542 473 328 516 848 328
–
–
14 688 077
(8 000 842)
41 742 562
9 063 634
–
–
–
–
19 868 151
378 641
5 239 773
13 135 323
(6 764 447)
(521 142)
(5 995 653)
(247 652)
(9 957 753)
(1 503 618)
(8 377 728)
(76 407)
598 442 085 540 272 690
598 442 085 540 272 690
768 793
521 141
–
247 652
9 957 753
1 503 618
8 377 728
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.
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 have 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).
188 MEDICLINIC ANNUAL REPORT 2016
25.
EARNINGS PER ORDINARY SHARE (continued)
Headline earnings per ordinary share
The Group is required to calculate headline earnings per share (HEPS) in accordance with the JSE
Limited (JSE) Listings 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:
Profit for the financial period attributable to equity holders of the parent
GROUP
(Restated)
2015
£’m
241
2016
£’m
177
Adjustments
Impairment of property
Insurance proceeds
Gain on disposal of subsidiary
Profit on disposal of property, equipment and vehicles
Headline earnings
Headline earnings per share (pence)
Diluted headline earnings per share (pence)
26.
OTHER COMPREHENSIVE INCOME
Components of other comprehensive income
Currency translation differences
Fair value adjustment – cash flow hedges
Actuarial gains and losses
Other comprehensive income, net of tax
–
–
–
–
177
29.6
29.5
92
2
(56)
38
Year ended 31 March 2015
Currency translation differences
Recycling of fair value adjustments of
derecognised cash flow hedge
Fair value adjustment – cash flow hedges
Actuarial gains and losses
Other comprehensive income
Year ended 31 March 2016
Currency translation differences
Recycling of fair value adjustments of
derecognised cash flow hedge
Fair value adjustment – cash flow hedges
Actuarial gains and losses
Other comprehensive income
Attributable
to equity
holders of
the Company
(before tax)
£’m
59
Tax charge
attributable
to equity
holders of
the Company
£’m
–
Attribut-
able to non-
controlling
interest
(after tax)
£’m
–
1
(8)
(39)
13
101
1
1
(69)
34
–
2
8
10
–
–
–
13
13
–
–
–
–
(9)
–
–
–
(9)
2
(8)
(2)
(4)
229
42.4
41.6
59
(5)
(31)
23
Total
£’m
59
1
(6)
(31)
23
92
1
1
(56)
38
MEDICLINIC ANNUAL REPORT 2016
189
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
GROUP
(Restated)
2015
£’m
2016
£’m
245
49
(6)
1
10
93
–
5
9
(1)
405
6
(1)
4
3
411
58
(6)
(5)
–
8
55
11
–
42
53
(8)
45
63
9
–
72
266
79
–
(24)
1
85
2
8
2
(5)
414
26
(5)
(7)
38
440
85
–
(8)
(1)
(19)
57
64
–
(1)
63
(11)
52
53
15
–
68
114
124
–
1
–
–
1
2
5
(2)
–
5
27.
CASH FLOW INFORMATION
27.1
Reconciliation of profit before taxation to cash generated
from operations
Profit before taxation
Adjustments for:
Finance cost – net
Share of net profit of equity accounted investments
Other gains and losses
Share-based payment
Depreciation and amortisation
Impairment losses
Movement in provisions
Movement in retirement benefit obligations
Profit on disposal of property, equipment and vehicles
Operating income before changes in working capital
Working capital changes
Increase in inventories
Increase in trade and other receivables
Increase in trade and other payables
27.2
Interest paid
Finance cost per income statement
Refinancing costs shown as financing activities
Non-cash items
Amortisation of capitalised financing fees
Other non-cash flow finance expenses
Fair value (gains)/losses on ineffective cash flow hedges
27.3
Tax paid
Liability at the beginning of the period
Exchange differences
Provision for the period
Liability at the end of the period
27.4
Investment to maintain operations
Property, equipment and vehicles purchased
Intangible assets purchased
Loans to subsidiaries
27.5
Investment to expand operations
Property, equipment and vehicles purchased
27.6
Proceeds on disposal of property, equipment and vehicles
Book value of property, equipment and vehicles sold
Profit per income statement
Sale price receivable
Exchange differences
190 MEDICLINIC ANNUAL REPORT 2016
27.
CASH FLOW INFORMATION (continued)
27.7 Distributions paid to shareholders
Dividends declared and paid during the period
48
47
GROUP
(Restated)
2015
£’m
2016
£’m
Dividends not recognised at the end of the reporting period:
In addition to the above dividends, following the reporting date,
the directors have recommended the payment of a final dividend
of 5.24 pence per ordinary share. The aggregate amount of the
proposed dividend expected to be paid on 25 July 2016 from
retained earnings. As at 31 March 2016, no liability has
been recognised.
27.8
Cash and cash equivalents
For the purposes of the statement of cash flows,
cash, cash equivalents and bank overdrafts include:
Cash and cash equivalents
305
265
Cash, cash equivalents and bank overdrafts are denominated in the
following currencies:
South African rand*
Swiss franc**
UAE dirham***
Euro
74
131
100
–
305
83
139
43
–
265
*
**
The counterparties have a minimum Baa2 credit rating by Moody’s.
The facility agreement of the Swiss subsidiary restricts the distribution of cash. The counterparties have
a minimum A2 credit rating by Moody’s and a minimum A credit rating by Standard & Poor’s.
*** The counterparties have a minimum BBB+ credit rating.
Cash and cash equivalents denominated in South African rands amounting to £12m
(31 March 2015: £10m) has been ceded as security for borrowings (see note 16).
28.
BUSINESS COMBINATIONS
Al Noor Hospitals Group plc
Clinique La Colline
Swissana Clinic AG Meggen
GROUP
2016
Cash flow
on acquisi-
tion
£’m
(Restated)
2015
Cash flow
on acquisi-
tion
£’m
17
–
–
17
–
75
6
81
MEDICLINIC ANNUAL REPORT 2016
191
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
28.
BUSINESS COMBINATIONS (continued)
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. Goodwill represents benefits
from the geographic footprint and expansion, synergies from a combined business in the UAE and a
skilled workforce assembled at the operating facilities. 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)
Tender offer (limited to £1bn with special dividend, £8.32 per share)
Value of share element*
Total consideration transferred
Recognised amounts of identifiable assets acquired and liabilities assumed
(provisional purchase price allocation)
Assets
Property, equipment and vehicles
Intangible assets
Non-current receivable
Inventories
Trade and other receivables
Derivative financial instruments
Investment in money market funds
Cash and cash equivalents
Total assets
Liabilities
Retirement benefit obligations
Trade and other payables
Total liabilities
Total identifiable net assets at fair value
Non-controlling interest
Goodwill
Total
GROUP
2016
£’m
383
530
446
1 359
61
65
2
14
111
2
10
24
289
22
92
114
175
(5)
1 189
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.
192 MEDICLINIC ANNUAL REPORT 2016
28.
BUSINESS COMBINATIONS (continued)
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
Net cash acquired with the subsidiary
Net cash flow on acquisition
GROUP
2016
£’m
(41)
24
(17)
Clinique La Colline
On 25 June 2014, Hirslanden acquired a 100% interest in the operating company of Clinique la Colline.
Clinique La Colline is a private hospital based in Geneva, Switzerland.
The goodwill of £62m arising from the acquisition is attributable to the earnings potential of the
business. None of the goodwill recognised is expected to be deductible for income tax purposes.
The following table summarises the consideration paid for Clinique La Colline Group, the fair value of
assets acquired and liabilities assumed at the acquisition date.
Consideration at 25 June 2014
Cash
Total consideration transferred
Recognised amounts of identifiable assets acquired and
liabilities assumed
Assets
Property, equipment and vehicles
Intangible assets
Inventories
Trade and other receivables
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Provisions
Pension liability
Deferred tax liabilities
Trade and other payables
Total liabilities
Total identifiable net assets at fair value
Goodwill
Total
GROUP
(Restated)
2015
£’m
76
76
7
18
1
10
2
38
10
1
4
4
5
24
14
62
76
MEDICLINIC ANNUAL REPORT 2016
193
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
28.
BUSINESS COMBINATIONS (continued)
Acquisition-related costs of £1m have been charged to administrative expenses in the consolidated
income statement.
The fair value of trade and other receivables is £10m and includes trade receivables with a fair value
of £9m. The gross contractual amount for trade receivables due is £10m, of which £nil is expected to
be uncollectible.
From the date of acquisition, Clinique la Colline has contributed £32m of revenue and £6m to the net
profit of the Group. If the business combination had taken place at the beginning of the prior year,
revenue from continuing operations would have been £42m and the net profit for the Group would have
been £7m.
Analysis of cash flow on acquisition
Total consideration transferred
Net cash acquired with the subsidiary
Net cash flow on acquisition
GROUP
(Restated)
2015
£’m
(76)
2
(74)
Swissana Clinic AG Meggen
On 8 August 2014, Hirslanden acquired a 100% interest in the operating company of Swissana Clinic
Meggen. Swissana Clinic Meggen is a private hospital based in Meggen, Switzerland.
The goodwill of £6m arising from the acquisition is attributable to the earnings potential of the business.
None of the goodwill recognised is expected to be deductible for income tax purposes.
The following table summarises the consideration paid for Swissana Clinic AG Meggen, the fair value of
assets acquired and liabilities assumed at the acquisition date.
GROUP
(Restated)
2015
£’m
6
2
1
3
1
1
1
3
–
6
6
Consideration at 8 August 2014
Cash
Total consideration transferred
Recognised amounts of identifiable assets acquired and
liabilities assumed
Assets
Property, equipment and vehicles
Trade and other receivables
Total assets
Liabilities
Borrowings
Pension liability
Trade and other payables
Total liabilities
Total identifiable net assets at fair value
Goodwill
Total
194 MEDICLINIC ANNUAL REPORT 2016
28.
BUSINESS COMBINATIONS (continued)
Acquisition-related costs of £nil have been charged to administrative expenses in the consolidated
income statement.
The fair value of trade and other receivables is £1m and includes trade receivables with a fair value
of £1m. The gross contractual amount for trade receivables due is £1m, of which £nil is expected to
be uncollectible.
From the date of acquisition, Swissana Clinic Meggen has contributed £4m of revenue and £nil to the
net profit of the Group. If the combination had taken place at the beginning of the prior year, revenue
from continuing operations would have been £6m and the net profit for the Group would have been £nil.
Analysis of cash flow on acquisition
Total consideration transferred
Net cash acquired with the subsidiary
Net cash flow on acquisition
29.
CASH FLOW ON ACQUISITION OF INVESTMENT IN ASSOCIATE
Spire Healthcare Group plc
On 24 August 2015, the Group acquired 119 923 335 shares in Spire Healthcare Group plc,
the equivalent to a 29.9% shareholding. Spire Healthcare Group plc is a leading private
healthcare group in the UK with a national network of 39 hospitals across the United
Kingdom. The investment in Spire provides Mediclinic with a further opportunity to
diversify into an attractive new geography with a strong currency. The Group and Spire
will benefit from collaboration, with the potential to unlock procurement benefits and
knowledge transfer.
On 22 June 2015, Remgro through its wholly-owned subsidiary, Remgro Jersey Ltd
(subsequently renamed to Mediclinic Jersey Ltd), acquired 119 923 335 Spire shares
equivalent to a 29.9% shareholding. The purchase of the equity investment were
negotiated jointly by Mediclinic and Remgro with the seller. Mediclinic acquired Remgro’s
indirect shareholding in Spire for an amount equal to the aggregate of the purchase price
paid by Remgro Jersey Ltd, transaction costs and funding costs, totalling approximately
£446m. The Spire acquisition was effected through a series of transactions which
ultimately resulted in Mediclinic, through a wholly-owned subsidiary (Mediclinic Jersey
Limited) directly holding the 29.9% interest in Spire.
Purchase consideration paid, comprise of the following:
Purchase price paid to Remgro (refer to note 33)
Transaction cost
Total cost of equity investment
Less cash acquired in subsidiary (Mediclinic Jersey Ltd)
Cash flow on acquisition of investment in associate
GROUP
(Restated)
2015
£’m
(6)
–
(6)
GROUP
2016
Cash flow
on
acquisition
£’m
446
437
10
447
(1)
446
MEDICLINIC ANNUAL REPORT 2016
195
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
30.
DISPOSAL OF SUBSIDIARY
On 19 February 2015, the Group disposed Med-Immo La Colline SA.
Consideration received at 19 February 2015
Consideration received in cash and cash equivalents
Analysis of assets and liabilities over which control was lost
Assets
Property, equipment and vehicles
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Total liabilities
Net assets disposed of
Gain on disposal of subsidiary
Consideration received
Net assets disposed of
Gain on disposal
Total cash flow on disposal of subsidiary
Less: cash and cash equivalents balanced disposed of
Net cash flow on disposal
31.
COMMITMENTS
Capital commitments
Incomplete capital expenditure contracts
Southern Africa
Switzerland
Middle East
Capital expenses authorised by the Board of Directors but not
yet contracted
Southern Africa
Switzerland
Middle East
These commitments will be financed from Group and borrowed funds.
Operating lease commitments
The Group has entered into various operating lease agreements on
premises and equipment. The future non-cancellable minimum lease
rentals are payable during the following financial years:
Within 1 year
1 to 5 years
Beyond 5 years
196 MEDICLINIC ANNUAL REPORT 2016
GROUP
(Restated)
2015
£’m
3
1
–
1
–
–
1
3
(1)
2
3
–
3
GROUP
(Restated)
2015
£’m
2016
£’m
92
57
10
25
212
70
18
124
304
41
139
322
502
110
45
29
36
101
84
9
8
211
25
73
143
241
31.
COMMITMENTS (continued)
Income guarantees
As part of the expansion of network of specialist institutes in Switzerland
and centres of expertise the Group has agreed to guarantee a minimum
net income to these specialists for a start-up period of three to five years.
Payments under such guarantees become due, if the net income from
the collaboration does not meet the amounts guaranteed. There were no
payments under the above mentioned income guarantees in the reporting
period as the net income individually generated met or exceeded the
amounts guaranteed.
Total of net income guaranteed:
April 2015 to March 2016
April 2016 to March 2017
April 2017 to March 2018
April 2018 to March 2019
GROUP
(Restated)
2015
£’m
2016
£’m
6
3
–
–
9
2
1
–
–
3
Contingent liabilities
Litigation
The Group is not aware of any pending legal claims that are not covered by the Group’s extensive
insurance programmes.
32.
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 are shown as operating segments.
Year ended
31 March 2016
Revenue
Southern
Africa
£’m
649
Switzer-
land
£’m
1 130
Middle
East
£’m
328
United
Kingdom
£’m
–
Corporate
£’m
–
Total
£’m
2 107
EBITDA
129
229
68
EBITDA before
management fee
Management fees
included in EBITDA
Other gains and losses
Depreciation and
amortisation
Operating profit
Income from associate
Finance income
Finance cost
Taxation
Segment result
At 31 March 2016
Investments in associates
Investments in joint
venture
Capital expenditure
Total segment assets
Segment liabilities
133
230
70
(2)
–
(10)
58
–
–
(2)
–
56
(1)
–
(63)
166
–
1
(46)
(24)
97
1
–
–
98
3 809
2 940
–
36
1 800
243
(4)
–
(20)
109
–
8
(21)
(31)
65
–
3
52
485
370
–
–
–
–
–
–
6
–
–
–
6
451
–
–
451
–
(51)
375
–
7
(1)
–
(45)
–
–
(6)
(51)
–
7
(1)
(93)
288
6
9
(75)
(55)
173
–
452
–
–
4
272
3
186
6 549
3 825
MEDICLINIC ANNUAL REPORT 2016
197
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
32.
SEGMENTAL REPORT (continued)
Year ended
31 March 2015
Revenue
(Restated)
Southern
Africa
£’m
691
(Restated)
Switzer-
land
£’m
1 044
(Restated)
Middle
East
£’m
242
(Restated)
United
Kingdom
£’m
–
(Restated)
Corporate
£’m
–
(Restated)
Total
£’m
1 977
EBITDA
150
203
53
EBITDA before
management fee
Management fees
included in EBITDA
Other gains and losses
Depreciation and
amortisation
Operating profit
Income from associate
Income from joint
venture
Finance income
Finance cost
Taxation
Segment result
At 31 March 2015
Investments in associates
Investments in joint
venture
Capital expenditure
Total segment assets
Segment liabilities
154
204
(4)
9
(22)
137
–
–
5
(23)
(33)
86
–
4
80
527
436
(1)
13
(55)
161
–
–
–
(74)
21
108
–
–
94
3 615
2 511
54
(1)
–
(8)
45
–
–
–
(3)
–
42
–
–
17
252
127
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(6)
400
–
6
2
–
2
–
–
–
–
–
2
–
–
–
2
–
–
6
24
(85)
345
–
–
5
(100)
(12)
238
–
4
191
4 396
3 074
198 MEDICLINIC ANNUAL REPORT 2016
32.
SEGMENTAL REPORT (continued)
Reconciliation of segment result, assets and liabilities
Segment result
Total profit from reportable segments
Elimination of intersegment loan interest
Profit for the year
Liabilities
Total liabilities from reportable segments
Elimination of intersegment loan
The total non-current assets, excluding financial instruments and deferred
tax assets per geographical location, are:
Southern Africa
Middle East
Switzerland
United Kingdom
ENTITY-WIDE DISCLOSURES
Revenue
From UK
From foreign countries
Revenues from external customers are primarily from hospital services.
The total non-current assets, excluding financial instruments and
deferred tax assets
From UK
From foreign countries
2016
£’m
173
17
190
3 825
(846)
2 979
322
1 512
3 302
451
2015
£’m
238
15
253
3 074
(520)
2 554
340
154
3 142
n/a
–
2 107
–
1 977
451
5 136
–
3 636
MEDICLINIC ANNUAL REPORT 2016
199
NOTES TO THE CONSOLIDATED FINANCIAL
STATEMENTS (continued) for the year ended 31 March 2016
GROUP
(Restated)
2015
£’m
2016
£’m
600
–
–
2
4
–
–
4
4
–
–
(1)
7
–
–
–
–
–
–
–
3
3
–
–
(1)
7
–
n/a
33.
RELATED-PARTY TRANSACTIONS
Remgro Limited owns, through various subsidiaries (Remgro Healthcare
Holdings (Pty) Ltd, Remgro Health Limited and Remgro Jersey GBP
Limited) 44.56% (2015: 41.35%) of the Company’s issued share capital.
The following transactions were carried out with related third parties:
i)
Transactions with shareholders
Share subscription
Remgro Group and its subsidiaries
In addition to the share subscription (February 2016), Remgro also
participated in the Rights Offer (August 2015).
Remgro Management Services Limited (subsidiary of Remgro Limited)
Managerial and administration fees*
Internal audit services*
Management fee relating to the acquisition of equity investment (Spire
Healthcare Group plc)
Underwriting fees in respect of the rights offer
Balance due to
V&R Management Services AG (subsidiary of Remgro Limited)
Administration fees*
Acquisition of equity investment (Spire Healthcare Group plc)
During the period under review, Mediclinic International Limited and
Remgro Limited jointly negotiated the terms of the transaction to acquire
an equity investment in Spire Healthcare Group plc with the seller. Refer to
note 29 for additional information.
ii)
Key management compensation
Key management includes the directors (executive and non-executive)
and members of the Executive Committee.
Salaries and other short-term benefits
Short-term benefits
Post-employment benefits*
Share-based payment
iii)
Transactions with associates
Zentrallabor Zürich (ZLZ)
Fees earned
Purchases
Spire Healthcare Group plc
Non-executive director fee*
* Amount is less than £0.5m.
200 MEDICLINIC ANNUAL REPORT 2016
34.
STANDARDS AND INTERPRETATIONS NOT YET EFFECTIVE
Certain new and revised IFRSs have been issued but are not yet effective for the Group’s 2016 financial
year. The Group has not early adopted the new and revised IFRSs that are not yet effective.
New and revised IFRSs affecting mainly presentation and disclosure:
IFRS 9: Financial Instruments (1 January 2018)
The new standard improves and simplifies the approach for classification and measurement of financial
assets compared with the requirements of IAS 39. IFRS 9 applies a consistent approach to classifying
financial assets and replaces the numerous categories of financial assets in IAS 39, each of which had
its own classification criteria. IFRS 9 also results in one impairment method, replacing the numerous
impairment methods in IAS 39 that arise from the different classification categories.
IFRS 15: Revenue from Contracts with Customers (1 January 2018)
The new standard requires companies to recognise revenue to depict the transfer of goods or services
to customers, that reflects the consideration to which the company expects to be entitled in exchange
for those goods or services. The new standard will also result in enhanced disclosures about revenue,
and provides guidance for transactions that were not previously addressed comprehensively and
improve guidance for multiple-element arrangements.
IFRS 16: Leases (1 January 2019)
The new standard addresses the definition of a lease, recognition and measurement of leases and
establishes principles for reporting useful information to users of financial statements about the
leasing activities of both lessees and lessors. A key change arising from IFRS 16 is that most operating
leases will be accounted for on balance sheet for lessees. The standard replaces IAS 17 ’Leases’, and
related interpretations.
The amendments to following standards will have no material effect on the financial statements:
IFRS 10 Consolidated Financial Statements (1 January 2016)
IFRS 11 Joint Arrangements (1 January 2016)
IFRS 12 Disclosure of Interest in Other Entities (1 January 2014 & 1 January 2016)
IFRS 14 Regulatory Deferral Accounts (1 January 2016)
IAS 1 Presentation of Financial Statements (1 January 2016)
IAS 16 Property, Plant and Equipment (1 January 2016)
IAS 27 Consolidated and Separate Financial Statements (1 January 2016)
IAS 28 Investments in Associates and Joint Ventures (1 January 2016)
IAS 36 Impairment of Assets (1 January 2016)
IAS 38 Intangible Assets (1 January 2016)
There are numerous other amendments to existing standards relating to the Annual Improvements
process 2012-14 cycle (1 January 2016) that are not yet effective for the Company. Each of these has
been assessed, and will not have a material impact on the financial statements.
35.
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:
Since year-end, the following material events have taken place:
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.
MEDICLINIC ANNUAL REPORT 2016
201
ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES
SUBSIDIARIES
Company
Al Noor Holdings Cayman Limited
("ANH Cayman")
ANMC Management Limited
("ANMC Management")
Mediclinic CHF Finco Limited
(previously held indirectly
through Mediclinic
Investments (Pty) Ltd)
Mediclinic Holdings Netherlands
B.V (previously held indirectly
through Mediclinic Europe
(Pty) Ltd)
Mediclinic International Limited
Mediclinic Middle East Holdings
Limited (previously held indirectly
through Mediclinic Middle East
Investment Holdings (Pty) Ltd)
Country of
incorporation
and place of
business
Cayman Islands
Cayman Islands
Principal activities
Intermediary Holding
Company
Intermediary Holding
Company and manager of
Al Noor Golden
Interest in capital1
2016
%
2015
%
100.0
100.0
100.0
100.0
Jersey
Treasury
100.0
100.0
Netherlands
South Africa
Intermediary Holding
Company
Intermediary Holding
Company
100.0
100.0
100.0
n/a
Jersey
Intermediary Holding
Company
100.0
100.0
Group
Indirectly held through Mediclinic CHF Finco Limited
Mediclinic Jersey Limited
Jersey
Intermediary Holding
Company
100.0
n/a
Indirectly held through Mediclinic International Limited
Mediclinic Investments (Pty) Ltd South Africa
Intermediary Holding
Company
100.0
100.0
Indirectly held through Mediclinic Investments (Pty) Ltd
Business Ventures Investments
No 1871 (Pty) Ltd
Mediclinic Europe (Pty) Ltd
Mediclinic Group Services
(Pty) Ltd
Mediclinic Middle East
Investment Holdings (Pty) Ltd
Mediclinic Southern Africa
(Pty) Ltd
Jersey
South Africa
South Africa
South Africa
South Africa
Dormant (deregistration in
process)
Dormant
Provision of Group services
within the Mediclinic Group
Dormant
Intermediary Holding
Company
Indirectly held through Mediclinic Group Services (Pty) Ltd
Mediclinic Management Services
(Pty) Ltd
South Africa
Dormant
Indirectly held through Mediclinic Southern Africa (Pty) Ltd
Curamed Holdings (Pty) Ltd
South Africa
ER24 Holdings (Pty) Ltd
Hedrapix Investments (Pty) Ltd
Howick Private Hospital Holdings
(Pty) Ltd
Medical Human Resources
(Pty) Ltd
Medical Innovations (Pty) Ltd
South Africa
South Africa
South Africa
South Africa
South Africa
Intermediary Holding
Company
Intermediary Holding
Company
Dormant
Intermediary Holding
Company
Management of Healthcare
Staff
Hospital Equipment
202 MEDICLINIC ANNUAL REPORT 2016
100.0
100.0
n/a
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
69.8
69.8
100.0
100.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
SUBSIDIARIES
Group
Mediclinic (Pty) Ltd (ordinary
shares and Mediclinic Head
Office Hospital Shares)
Mediclinic Brits (Pty) Ltd*
Mediclinic Finance Corporation
(Pty) Ltd
Mediclinic Holdings (Namibia)
(Pty) Ltd
Mediclinic Lephalale (Pty) Ltd
Mediclinic Midstream (Pty) Ltd
Mediclinic Midstream Properties
(Pty) Ltd
Mediclinic Paarl (Pty) Ltd*
Mediclinic Properties (Pty) Ltd
Mediclinic Tzaneen (Pty) Ltd*
(50% plus 1 share)
Medipark Clinic (Pty) Ltd
Newcastle Private Hospital
(Pty) Ltd* (50% plus 1 share)
Country of
incorporation
and place of
business
South Africa
South Africa
South Africa
Namibia
South Africa
South Africa
South Africa
South Africa
South Africa
Principal activities
Intermediary Holding
Company and operating
Company of Mediclinic
Southern Africa
Healthcare Services
Treasury
Intermediary Holding
Company
Healthcare Services
Healthcare Services
Dormant
Healthcare Services
Property Ownership and
Management
South Africa
South Africa
Healthcare Services
Dormant
Interest in capital1
2016
%
2015
%
100.0
64.1
100.0
60.5
100.0
100.0
100.0
87.3
81.1
100.0
74.6
100.0
86.3
100.0
100.0
74.6
100.0
100.0
50.0
100.0
49.4
100.0
50.0
15.1
100.0
100.0
100.0
100.0
Phodiclinics (Pty) Ltd
South Africa
Practice Relief (Pty) Ltd
Victoria Hospital (Pty) Ltd*
(50% plus 1 share)
South Africa
South Africa
Healthcare Services
Dormant (deregistration in
process)
Provision of debt collection
and related services
South Africa
Healthcare Services
50.0
33.7
Indirectly held through Mediclinic Holdings (Namibia) (Pty) Ltd
Mediclinic Capital (Namibia)
(Pty) Ltd
Namibia
Mediclinic Otjiwarongo (Pty) Ltd Namibia
Mediclinic Properties
(Swakopmund) (Pty) Ltd
Mediclinic Properties (Windhoek)
(Pty) Ltd
Mediclinic Swakopmund
(Pty) Ltd
Mediclinic Windhoek (Pty) Ltd
Namibia
Namibia
Namibia
Namibia
Investment Holding Company
Healthcare Services
Property Ownership and
Management
Property Ownership and
Management
Healthcare Services
Healthcare Services
100.0
96.0
100.0
94.0
100.0
100.0
100.0
100.0
97.2
96.4
97.3
96.6
MEDICLINIC ANNUAL REPORT 2016
203
ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (continued)
SUBSIDIARIES
Group
Hospital Investment Companies
Mediclinic Bloemfontein
Investments (Pty) Ltd
Mediclinic Cape Gate
Investments (Pty) Ltd
Mediclinic Cape Town
Investments (Pty) Ltd
Mediclinic Constantiaberg
Investments (Pty) Ltd
Mediclinic Durbanville
Investments (Pty) Ltd
Mediclinic Emfuleni Investments
(Pty) Ltd
Mediclinic George Investments
(Pty) Ltd
Mediclinic Highveld Investments
(Pty) Ltd
Mediclinic Hoogland Investments
(Pty) Ltd
Mediclinic Kathu Investments
(Pty) Ltd
Mediclinic Klein Karoo
Investments (Pty) Ltd
Mediclinic Legae Investments
(Pty) Ltd
Mediclinic Louis Leipoldt
Investments (Pty) Ltd
Mediclinic Milnerton Investments
(Pty) Ltd
Mediclinic Morningside
Investments (Pty) Ltd
Mediclinic Nelspruit Investments
(Pty) Ltd
Mediclinic Panorama Investments
(Pty) Ltd
Mediclinic Pietermaritzburg
Investments (Pty) Ltd
Mediclinic Plettenberg Bay
Investments (Pty) Ltd
Mediclinic Sandton Investments
(Pty) Ltd
Mediclinic Secunda Investments
(Pty) Ltd
Mediclinic Stellenbosch
Investments (Pty) Ltd
Mediclinic Vereeniging
Investments (Pty) Ltd
Mediclinic Vergelegen
Investments (Pty) Ltd
Mediclinic Welkom Investments
(Pty) Ltd
Mediclinic Worcester Investments
(Pty) Ltd
Country of
incorporation
and place of
business
Principal activities
Interest in capital1
2016
%
2015
%
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
98.7
93.5
99.0
75.6
99.4
82.9
98.6
98.6
99.2
99.0
92.8
99.1
77.1
99.8
87.1
98.9
98.7
99.2
South Africa
Dormant
100.0
100.0
South Africa
Hospital Investment Company
100.0
100.0
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
South Africa
Hospital Investment Company
94.3
99.6
99.4
79.7
98.6
99.1
76.9
94.5
92.8
81.8
90.8
99.0
94.3
92.2
99.3
95.9
99.9
99.4
84.8
98.6
99.5
78.3
94.5
93.7
81.5
90.9
99.0
94.5
93.4
99.3
204 MEDICLINIC ANNUAL REPORT 2016
SUBSIDIARIES
Country of
incorporation
and place of
Group
business
Indirectly held through Mediclinic (Pty) Ltd
Mediclinic Barberton (Pty) Ltd†*
Mediclinic Ermelo (Pty) Ltd†*
Mediclinic Hermanus (Pty) Ltd*
(50% plus 1 share)
Mediclinic Kimberley (Pty) Ltd*
Mediclinic Limpopo (Pty) Ltd†*
Mediclinic Potchefstroom
(Pty) Ltd*
Mediclinic Upington (Pty) Ltd*
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Principal activities
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Indirectly held through Howick Private Hospital Holdings (Pty) Ltd
Howick Private Hospital
(Pty) Ltd*
South Africa
Healthcare Services
Indirectly held through Mediclinic Limpopo (Pty) Ltd
Mediclinic Limpopo Day Clinic
(Pty) Ltd (previously Flashing
Star Trading (Pty) Ltd)
Mediclinic Limpopo Investments
(Pty) Ltd
South Africa
South Africa
Day Clinic Investment
Company
Investment Holding Company
Indirectly held through Mediclinic Durbanville Investments (Pty) Ltd
Mediclinic Durbanville Day Clinic
(Pty) Ltd (Hedrapth Investments
(Pty) Ltd)
Day Clinic Investment
Company
South Africa
Indirectly held through Mediclinic Tzaneen (Pty) Ltd
Mediclinic Tzaneen Investments
(Pty) Ltd
South Africa
Investment Holding Company
Indirectly held through Mediclinic Victoria Hospital (Pty) Ltd
Victoria Hospital Investments
(Pty) Ltd
South Africa
Investment Holding Company
Indirectly held through Curamed Holdings (Pty) Ltd
Curamed Hospitals (Pty) Ltd
South Africa
Curamed Properties (Pty) Ltd
South Africa
Healthcare Services
Property Ownership and
Management
Indirectly held through Curamed Hospitals (Pty) Ltd
Mediclinic Thabazimbi (Pty) Ltd South Africa
Healthcare Services
Interest in capital1
2016
%
77.0
50.1
50.0
88.6
50.0
88.7
50.0
2015
%
77.0
50.1
34.8
88.7
50.0
88.3
40.8
100.0
100.0
64.7
n/a
100.0
100.0
89.9
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
76.0
75.0
Indirectly Held through ER24 Holdings (Pty) Ltd
ER24 EMS (Pty) Ltd
South Africa
ER24 Trademarks (Pty) Ltd
South Africa
Emergency Medical Services
Intellectual Property Holding
Company
100.0
100.0
100.0
100.0
Indirectly held through Mediclinic Holdings Netherlands B.V.
Mediclinic Luxembourg S.à.r.l
Luxembourg
Intermediary Holding
Company
100.0
100.0
MEDICLINIC ANNUAL REPORT 2016
205
ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (continued)
SUBSIDIARIES
Group
Indirectly held through Mediclinic Luxembourg S.à.r.l.
Principal activities
Country of
incorporation
and place of
business
Hirslanden AG
Switzerland
Intermediary Holding
Company and operating
Company of the Hirslanden
Group
Switzerland
Switzerland
Indirectly held through Hirslanden AG
Switzerland
Andreas Klinik AG Cham
Switzerland
Clinique La Colline SA
Hirslanden Bern AG
Switzerland
Hirslanden Clinique La Colline SA Switzerland
Hirslanden Freiburg AG,
Düdingen
Hirslanden Klinik Aarau AG
Hirslanden Klinik am
Rosenberg AG
Hirslanden Lausanne SA
IMRAD SA
Klinik am Rosenberg Heiden
AG (indirectly held through
Hirslanden Klinik am
Rosenberg AG)
Klinik Belair AG
Klinik Birshof AG
Klinik St. Anna AG
Klinik Stephanshorn AG
Polyclinique La Colline SA
Radiotherapie Hirslanden AG
Swissana Clinic AG, Meggen
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Indirectly held through Mediclinic Middle East Holdings Limited
Mediclinic International
Co Limited
Emirates Healthcare Holdings
Limited
United Kingdom
British Virgin
Islands
Intermediary Holding
Company
Intermediary Holding
Company
Interest in capital1
2016
%
2015
%
100.0
100.0
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
80.0
99.1
100.0
99.7
100.0
100.0
–
100.0
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.0
99.1
100.0
99.7
100.0
100.0
100.0
100.0
100.0
100.0
n/a
100.0
100.0
Indirectly held through Emirates Healthcare Holdings Limited
Welcare World Holdings Limited
Emirates Healthcare Limited
British Virgin
Islands
British Virgin
Islands
Healthcare Services
100.0
100.0
Healthcare Services
100.0
100.0
Indirectly held through Emirates Healthcare Limited
American Healthcare
Management Systems Limited
Emirates Healthcare Estates
Limited
Mediclinic Al Quasis Clinic LLC4
Mediclinic Beach Road LLC4
Mediclinic City Hospital FZ LLC
Mediclinic Clinics Investment
LLC4
British Virgin
Islands
British Virgin
Islands
UAE
UAE
UAE
UAE
Management Services
Property Management
Healthcare Services
Healthcare Services
Healthcare Services
Intermediary Holding
Company
100.0
100.0
100.0
49.0
49.0
100.0
100.0
49.0
49.0
100.0
49.0
49.0
206 MEDICLINIC ANNUAL REPORT 2016
SUBSIDIARIES
Country of
incorporation
and place of
business
UAE
Group
Mediclinic Ibn Battuta Clinic LLC4 UAE
Mediclinic Medical Stores
Co LLC4
Mediclinic Middle East
Management Services FZ LLC
(indirectly held through World
UAE
Health Systems Limited)
Mediclinic Mirdif Clinic LLC4
UAE
Mediclinic Creek Hospital FZ LLC UAE
Mediclinic Parkview Hospital LLC UAE
Mediclinic Welcare Hospital LLC
(indirectly held through Welcare
Hospitals Limited)
Welcare Hospitals Limited
Welcare World Health Systems
Limited
UAE
British Virgin
Islands
British Virgin
Islands
Principal activities
Healthcare Services
Interest in capital1
2016
%
2015
%
Healthcare Services
49.0
49.0
Healthcare Management
Services
Healthcare Services
Healthcare Services
Healthcare Services
100.0
49.0
–
49.0
100.0
49.0
100.0
n/a
Healthcare Services
49.0
49.0
Healthcare Services
100.0
100.0
Healthcare Services
100.0
100.0
Indirectly held through Welcare World Holdings Limited
Mediclinic Corniche Medical
Centre LLC
UAE
Mediclinic Pharmacy LLC
UAE
Healthcare Services
Healthcare Services
(Pharmacy)
Indirectly held through Al Noor Holdings Cayman Limited/ANMC
Management Limited
Al Noor Golden Commercial
Investment LLC ("Al Noor
Golden")2
Intermediary Holding
Company
UAE
Intermediary Holding
Company and Operating
Company for Al Noor Group
UAE
UAE
Indirectly held through Al Noor Golden/its subsidiaries
Al Noor Medical Company –
Al Noor Hospital – Al Noor
Pharmacy and Al Noor
Warehouse LLC ("ANMC")5
Al Hospital Family Care Centre –
Al Mamoora LLC6
Emirates American Company for
Medical Services LLC7
Rochester Wellness LLC8
Abu Dhabi Medical Services LLC9 Oman
National Medical Services LLC9
Oman
Manchester International Medical
Centre LLC (previously named
British Urology Centre LLC)10
Al Madar Medical Centre LLC
(previously named Al Madar
Group LLC)11
Aspetar Al Madar Reha LLC12
Look Wow One Day Surgery
Company LLC
Manchester Clinic LLC13
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare Services
49.0
49.0
49.0
49.0
49.0
49.0
99.0
99.0
100.0
100.0
100.0
49.0
70.0
70.0
100.0
n/a
70.0
n/a
73.0
73.0
48.0
48.0
76.0
24.0
48.0
n/a
n/a
24.0
MEDICLINIC ANNUAL REPORT 2016
207
ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (continued)
SUBSIDIARIES
1
2
3
4
5
6
7
8
9
10
11
12
13
The actual equity interest in the UAE entities are disclosed herein, with the beneficial interest further explained in the notes.
ANH Cayman holds 48% and ANMC Management holds 1% in the share capital of Al Noor Golden, collectively 49%. The
remaining 51% is held by Al Noor Commercial Investment LLC ("ANCI").3 The constitutional documents of Al Noor Golden
provide that ANH Cayman has the right to receive up to 89% of all distributions by Al Noor Golden, ANMC Management the
right to receive 1%, and ANCI the right to receive the remaining 10%. In terms of the Mudaraba Agreement, ANH Cayman has
the right to receive 99% of ANCI’s right to receive 10% of the distributions of Al Noor Golden. Al Noor Cayman and ANMC
Management therefore, collectively, have an effective beneficial interest of 99.9% in Al Noor Golden.
The First Arabian Corporation LLC holds 99.33% and Sheikh Mohammed Bin Butti Al Hamed holds the remaining 0.67% in
ANCI. ANCI holds 51% of the issued share capital of Al Noor Golden, and 1% of the issued share capital of ANMC and 51% of
the issued share capital of Manchester Clinic LLC Pursuant to a shareholders agreement and a Mudaraba agreement, 99%
of ANCI’s profit or loss should be distributed to ANC Cayman.
In terms of the constitutional and contractual arrangements the Group has full management control and an economic
interest of 100% in these UAE entities.
ANCI holds the remaining 1% in the issued share capital of ANMC. Al Noor Golden has the right to be appointed as the proxy
of ANCI, to attend and vote at all shareholder meetings of ANMC.
ANMC holds 99% and Al Noor Golden holds 1% in the issued share capital of Al Noor Hospital Family Care Centre – AL
Mamoora LLC, collectively 100%.
ANMC holds 99% and Al Noor Golden holds 1% in the issued share capital of Emirates American Company for Medical
Services LLC (trading as Gulf International Cancer Centre/GICC), collectively 100%.
ANCI holds the remaining 51% in the issued share capital of Rochester Wellness LLC, which was acquired from
19 October 2015. The constitutional documents of Rochester Wellness LLC provide that ANCI has the right to receive 20%
of the net profits, and ANMC as the right to receive the remaining 80%. The Group’s effective beneficial interest in the entity
is therefore 80%.
ANMC holds 70% in the issued share capital of Abu Dhabi Medical Services LLC and National Medical Services LLC,
respectively, The remaining 30% interest in these entities is held by a third-party shareholder as a bare nominee. ANMC
therefore holds a 100% beneficial interest in these entities.
ANCI holds the remaining 27% in the issued share capital of Manchester International Medical Centre LLC. The constitutional
documents of Manchester International Medical Centre LLC provide that ANCI has the right to receive 10% of the net
profits, and ANMC has the right to receive the remaining 90%. The Group’s effective beneficial interest in the entity is
therefore 80%.
ANCI holds 27% and a third-party shareholder holds 25% in the issued share capital of Al Madar Medical Centre LLC. The
constitutional documents of Al Madar Medical Centre LLC provide that ANMC has the right to receive 74% of the net profits,
Dr Manasra has the right to receive 25%, and ANCI the right to receive the remaining 1%. The Group’s effective beneficial
interest in the entity is therefore 74%.
ANCI holds 27% and a third-party shareholder holds 25% in the issued share capital of Aspetar Al Madar Reha LLC. The
constitutional documents of Aspetar Al Madar Reha LLC provide that ANMC has the right to receive 74% of the net profits,
Dr Manasra has the right to receive 25%, and ANCI the right to receive the remaining 1%. The Group’s effective beneficial
interest in the entity is therefore 74%.
ANCI holds 51% and a third-party shareholder holds 25% in the issued share capital of Manchester Clinic LLC. The
constitutional documents of Manchester Clinic LLC provide that ANMC has the right to receive 55% of the net profits,
Dr Manasra has the right to receive 25%, and ANCI the right to receive the remaining 20%. The Group’s effective beneficial
interest in the entity is therefore 55%.
* Controlled through long-term management agreements.
† Operating through trusts or partnerships.
208
MEDICLINIC ANNUAL REPORT 2016 JOINT VENTURES
Company
Wits University Donald Gordon
Medical Centre (Pty) Ltd
ASSOCIATES
Group
Listed:
Spire Healthcare Group plc
(held through Mediclinic Jersey
Limited)
Country of
incorporation
and place of
business
Principal activities
South Africa
Healthcare Services
Interest in
capital
2016
%
2015
%
Interest in capital
2016
%
49.9
2015
%
49.9
Book value of
investment
2016
£’m
2015
£’m
29.9
n/a
451
n/a
Unlisted:
Zentrallabor Zürich, Zürich
56.0
57.0
1
452
–
–
The nature of the activities of the associates is similar to the major activities of the Group.
MEDICLINIC ANNUAL REPORT 2016
209
COMPANY FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
to the members of Mediclinic International plc
(formerly Al Noor Hospitals Group plc)
REPORT ON THE PARENT COMPANY FINANCIAL STATEMENTS
Our opinion
In our opinion, Mediclinic International plc’s parent company financial statements (the “financial statements”):
• give a true and fair view of the state of the parent company’s affairs at 31 March 2016 and of its cash flows
for the 15 month period (the “period”) then ended;
• have been properly prepared in accordance with International Financial Reporting Standards (“IFRSs”)
as adopted by the European Union and as applied in accordance with the provisions of the Companies
Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
What we have audited
The financial statements, included within the Annual Report and Accounts (the “Annual Report”), comprise:
• the statement of financial position at 31 March 2016;
• the statement of cash flows for the 15 month period then ended;
• the statement of changes in equity for the 15 month period then ended; and
• the notes to the financial statements, which include a summary of significant accounting policies and other
explanatory information.
Certain required disclosures have been presented elsewhere in the Annual Report, rather than in the notes to
the financial statements. These are cross-referenced from the financial statements and are identified as audited.
The financial reporting framework that has been applied in the preparation of the financial statements is
IFRSs as adopted by the European Union, and as applied in accordance with the provisions of the Companies
Act 2006.
OTHER REQUIRED REPORTING
Consistency of other information
Companies Act 2006 opinion
In our opinion, the information given in the Strategic Report and the Directors’ Report for the period for which
the financial statements are prepared is consistent with the financial statements.
ISAs (UK & Ireland) reporting
Under International Standards on Auditing (UK and Ireland) (“ISAs (UK & Ireland)”), we are required to report to
you if, in our opinion, information in the Annual Report is:
• materially inconsistent with the information in the audited financial statements; or
• apparently materially incorrect based on, or materially inconsistent with, our knowledge of the parent
company acquired in the course of performing our audit; or
• otherwise misleading.
We have no exceptions to report arising from this responsibility.
Adequacy of accounting records and information and explanations received
Under the Companies Act 2006, we are required to report to you if, in our opinion:
• we have not received all the information and explanations we require for our audit; or
• adequate accounting records have not been kept by the parent company, or returns adequate for our audit
have not been received from branches not visited by us; or
• the financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
Directors’ remuneration
Directors’ remuneration report – Companies Act 2006 opinion
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in
accordance with the Companies Act 2006.
Other Companies Act 2006 reporting
Under the Companies Act 2006, we are required to report to you if, in our opinion, certain disclosures
of directors’ remuneration specified by law are not made. We have no exceptions to report arising from
this responsibility.
210
MEDICLINIC ANNUAL REPORT 2016 RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT
Our responsibilities and those of the directors
As explained more fully in the Directors’ Responsibilities Statement on page 123, the directors are responsible
for the preparation of the financial statements and for being satisfied that they give a true and fair view.
Our responsibility is to audit and express an opinion on the financial statements in accordance with applicable
law and ISAs (UK & Ireland). Those standards require us to comply with the Auditing Practices Board’s Ethical
Standards for Auditors.
This report, including the opinions, has been prepared for and only for the parent company’s members as a
body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do
not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to
whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent
in writing.
What an audit of financial statements involves
We conducted our audit in accordance with ISAs (UK & Ireland). An audit involves obtaining evidence about
the amounts and disclosures in the financial statements sufficient to give reasonable assurance that the
financial statements are free from material misstatement, whether caused by fraud or error. This includes an
assessment of:
• whether the accounting policies are appropriate to the parent company’s circumstances and have been
consistently applied and adequately disclosed;
• the reasonableness of significant accounting estimates made by the directors; and
• the overall presentation of the financial statements.
We primarily focus our work in these areas by assessing the directors’ judgements against available evidence,
forming our own judgements, and evaluating the disclosures in the financial statements.
We test and examine information, using sampling and other auditing techniques, to the extent we consider
necessary to provide a reasonable basis for us to draw conclusions. We obtain audit evidence through testing
the effectiveness of controls, substantive procedures or a combination of both.
In addition, we read all the financial and non-financial information in the Annual Report to identify material
inconsistencies with the audited financial statements and to identify any information that is apparently
materially incorrect based on, or materially inconsistent with, the knowledge acquired by us in the course
of performing the audit. If we become aware of any apparent material misstatements or inconsistencies, we
consider the implications for our report.
OTHER MATTER
We have reported separately on the Group financial statements of Mediclinic International plc for the year
ended 31 March 2016.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
25 May 2016
MEDICLINIC ANNUAL REPORT 2016
211
COMPANY STATEMENT OF FINANCIAL
POSITION as at 31 March and 31 December
Non-current assets
Investment in subsidiaries
Current assets
Amounts due from related parties
Cash and cash equivalents
Total current assets
Total assets
Equity
Share capital
Capital redemption reserve
Share premium
Retained earnings/(accumulated losses)
Share-based payment reserve
Treasury shares
Total equity
Current liabilities
Other payables
Amount due to related parties
Bank borrowing
Derivatives payables
Total liabilities
Total equity and liabilities
31 March
2016
£’m
(Restated)
31 December
2014
£’m
(Restated)
31 December
2013
£’m
Notes
3
4
5
5
5
5
5
5
4
7
5 916
456
456
47
–
47
–
6
6
1
–
1
5 963
462
457
74
6
690
4 899
1
(2)
5 668
3
26
265
1
295
12
–
448
(1)
2
–
461
1
–
–
–
1
12
–
448
(5)
2
–
457
–
–
–
–
–
5 963
462
457
These 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
The notes on pages 215 to 220 form an integral part of these financial statements.
AR
212 MEDICLINIC ANNUAL REPORT 2016
COMPANY STATEMENT OF CHANGES IN EQUITY
for the period ended 31 March 2016 and the year ended 31 December 2014
Capital
redemp-
tion
reserve
£’m
–
–
Share
capital
£’m
12
–
Share
premium
£’m
448
–
Retained
earnings/
(Accu-
mulated
losses)
£’m
(5)
19
Share
based
payment
reserve
£’m
2
–
Treasury
shares
£’m
–
–
Total
£’m
457
19
–
–
–
12
12
–
–
–
–
–
–
(6)
7
61
–
–
–
–
74
–
–
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
–
6
–
–
–
448
448
–
–
–
(15)
(1)
(1)
91
(448)
–
–
448
(383)
(15)
–
–
(523)
593
5 385
–
–
–
–
–
(6)
–
–
–
–
–
(4 765)
690
4 765
4 899
1
(1)
–
2
2
–
–
–
–
(1)
1
–
–
–
–
(2)
1
–
1
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(2)
–
–
1
(1)
(15)
461
461
91
–
(383)
(15)
(1)
1
(529)
600
5 446
(2)
(2)
1
–
(2)
–
5 668
At 1 January 2014
Profit for the year
Transactions with owners of the
Company:
Addition to share-based payment
reserve
Reversal of share-based payment
reserve
Dividend paid
At 31 December 2014
At 1 January 2015
Profit for the period
Transactions with owners of the
Company:
Reduction of share premium
Special dividends declared
Dividends paid in the year 2015
Reversal of share-based payment
reserve
Addition of share-based payment
reserve
Tender offer (repurchase of
shares)
Remgro subscription
Repurchase of Mediclinic shares
Additional to treasury shares
Settlement of share–based
payment reserve
Addition to share-based payment
reserve
Transfer of share premium/
Capital reduction
At 31 March 2016
The notes on pages 215 to 220 form an integral part of these financial statements.
AR
MEDICLINIC ANNUAL REPORT 2016
213
COMPANY STATEMENT OF CASH FLOWS
for the period ended 31 March 2016 and the year ended
31 December 2014
Operating activities
Profit for the period/year
Adjustments for:
Finance costs
Loss from derivatives instruments
Dividend income
Net cash used in operating activities before movements in working capital
Change in balances with related parties
Change in other payables
Net cash used in operating activities
Investing activities
Dividend received
Repurchase of shares
Issue of shares
Special dividends paid
Net cash generated from/(used in) financing activities
Financing activities
Obtaining a bank loan
Repayment of bank loan
Payment of facility fees of bank loan
Settlement of share option reserve
Interest paid
Dividend paid
Net cash generate from/(used in) financing activities
Net movement in cash and cash equivalents
Cash and cash equivalents at the beginning of the year
Cash and cash equivalents at the end of the period/year
AR
The notes on pages 215 to 220 form an integral part of these interim accounts.
2016
for
15 months
£’m
2014
for
12 months
£’m
91
6
1
(147)
(49)
13
1
(35)
99
(530)
600
(383)
(214)
313
(46)
(5)
(2)
(2)
(15)
243
(6)
6
–
19
–
–
(23)
(4)
–
1
(3)
24
–
–
–
24
–
–
–
–
–
(15)
(15)
6
–
6
214 MEDICLINIC ANNUAL REPORT 2016
NOTES TO THE COMPANY FINANCIAL
STATEMENTS
1.
STATUS AND ACTIVITY
Mediclinic International plc (the “Company” or “Parent") is a Company which was incorporated in
England and Wales on 20 December 2012. The address of the registered office of the Company is C/O
Capita Company Secretarial Services, 1st Floor, 40 Dukes Place, London, EC3A 7NH. The registered
number of the Company is 08338604. There is no ultimate controlling party. The domicile of the
Company is the United Kingdom. The Company is a public liability company operating mainly in the
United Arab Emirates (UAE).
The core purpose of the Company’s subsidiaries is to enhance the quality of life of patients by providing
cost-effective acute care specialised hospital services.
The Company changed its name from Al Noor Hospitals Group plc to Mediclinic International plc on
15 February 2016.
The financial year has been changed from 31 December to 31 March with effect from 15 February 2016
(the effective date of the reverse acquisition).
These financial statements are the separate financial statements of the parent company only and the
financial statements of the Group are prepared and presented separately. The financial statements
are available at the registered office of Al Noor Hospitals Group plc C/O Capita Company Secretarial
Services, 1st Floor, 40 Dukes Place, London, EC3A 7NH.
2.
BASIS OF PREPARATION
The Company’s principal accounting policies applied in the preparation of these financial statements are
the same as those set out in note 2 of the Group’s financial statements, except as noted below. These
policies have been consistently applied to all the years presented.
Investments in subsidiaries are carried at cost less any accumulated impairment.
Dividend income is recognised when the right to receive payment is established.
The Company is taking advantage of the exemption in section 408 of the Companies Act 2006 not to
present its individual income statement as part of these financial statements.
(a)
Statement of compliance
These financial statements include activities for the period from 1 January 2015 to 31 March 2016 (“the
period”). The comparative information include activities for the period from 1 January 2014 to
31 December 2014 (“the year”).
On 14 October 2015, the board of directors of Al Noor Hospitals Group plc and the independent board
of directors of Mediclinic International Limited announced that they had reached an agreement on the
terms of a recommended combination of their respective businesses (the "Combination").
Al Noor Hospitals Group plc has remained the holding company of the (Enlarged) Group and has been
renamed to "Mediclinic International plc".
(b)
(c)
Basis of measurement
The financial statements of the Company are prepared in accordance with International Financial
Reporting Standards (IFRS), as adopted by the European Union, including IFRS Interpretations
Committee (IFRS IC) applicable to companies reporting under IFRS. The financial statements
are prepared on the historical cost convention, as modified by the revaluation of certain financial
instruments to fair value.
Functional and presentation currency
The financial statements and financial information are presented in pound sterling, rounded to the
nearest million. Due to the reverse acquisition which occurred during the financial year, the Company’s
presentation currency changed from the United States Dollar (USD) in 2015 to the pound sterling
in 2016, the primary economic environment in which the Company operates. 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 restated to pound 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.
MEDICLINIC ANNUAL REPORT 2016
215
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (continued)
3.
INVESTMENT IN SUBSIDIARIES
This investment is stated at cost less impairment, if any.
Al Noor Holdings Cayman Limited (refer to note a)
ANMC Management Limited
Mediclinic CHF Finco Limited (refer to note b)
Mediclinic Holdings Netherlands B.V. (refer to note b)
Mediclinic Middle East Holdings Limited (refer to note b)
Mediclinic International Limited (refer to note b)
Ownership
%
100%
100%
100%
100%
100%
100%
31 March
2016
£’m
456
–
1 195
796
855
2 614
5 916
31 Dec
2014
£’m
456
–
–
–
–
–
456
(a)
This represents the cost of investment in Al Noor Holdings Cayman Limited, a wholly-owned subsidiary
of the Company. The Company issued shares to the existing shareholders of Al Noor Holdings Cayman
Limited in exchange for shares already held in all the operating companies. The cost of investment
represents the Company’s shares of net assets of Al Noor Holdings Cayman Limited at the date of the
Group restructuring. In addition, the Company has made an additional capital contribution to the equity
capital of Al Noor Holdings Cayman Limited amounting to GBP89m.
(b)
The investment in these subsidiaries were acquired as part of the assets transfer agreement between the
Company and Al Noor Hospital Group plc on 14 February 2016.
The activities of the subsidiary are the operation of medical hospitals and clinics and the sale of
pharmaceuticals, medical supplies and related equipment.
4.
(a)
RELATED-PARTY BALANCES AND TRANSACTIONS
Related parties comprise the subsidiaries the Shareholders, key management personnel and those
entities over which the parent, the ultimate parent, the directors or the Company can exercise significant
influence or which can significantly influence the Company.
Key management personnel
Key management includes the directors (executive and non-executive) and members of the
Executive Committee.
Short-term benefits
Salaries and other short-term benefits
(b)
Amount due from a related party:
Mediclinic International Limited
This amount included the dividends declared by Mediclinic International
Limited on 31 March 2016.
(c)
Amount due to a related party:
Al Noor Medical Company – Al Noor Hospital – Al Noor Pharmacy LLC
31 March
2016
£’m
4
31 Dec
2014
£’m
2
4
47
26
2
–
–
This amount included the transaction and operational expenses paid by Al Noor Medical Company –
Al Noor Hospital– Al Noor Pharmacy LLC on behalf of the Company. This amount is payable on demand.
216 MEDICLINIC ANNUAL REPORT 2016
4.
RELATED-PARTY BALANCES AND TRANSACTIONS (continued)
Following the announcement made on 7 August 2015 and the general meeting held on 24 August 2015,
the Company undertook a related-party transaction to lease premises from United Al Saqr Group LLC.
Sheikh Mohammed Bin Butti Al Hamed, a Director and principal shareholder of the pre-Combination
entity Al Noor Hospitals Group plc, had a controlling interest in United Al Saqr Group. At the general
meeting, 99.34% of the shares voted approved the related-party transaction. Sheikh Mohammed Bin
Butti Al Hamed is no longer a shareholder of the Company, as the entire shareholding held through
Sapor Business Corp, was tendered to Al Noor Hospitals Group plc for cancellation, as announced on
8 February 2016.
Information regarding the Group’s subsidiaries and associates can be found in the Annexure to the
Consolidated Financial Statements.
5.
SHARE CAPITAL AND RESERVES
Issued and fully paid 737 243 810 (31 December 2014: 116 866 203)
shares of 10 pence each
Movement of issued share capital and share premium:
31 March
2016
£’m
31 Dec
2014
£’m
74
12
1 January 2015
Reduction of share premium
Remgro subscription
Shares issued to Mediclinic
International Limited
shareholders
Tender offer
Second capital reduction
At 31 March 2016
Number of
shares
116 866 203
–
72 115 384
611 921 099
(63 658 876)
737 243 810
At 31 December 2014
116 866 203
Share
capital
£’m
12
–
7
Capital
redemption
£’m
–
–
–
Share
premium
£’m
448
(448)
593
Total
£’m
460
(448)
600
61
(6)
–
74
12
–
6
–
6
–
5 385
(523)
(4 765)
690
5 446
(523)
(4 765)
770
448
460
(a)
(b)
(c)
The directors of the Company, having taken legal advice, have redesignated share premium in
aggregate of £448m from the share premium account to retained earnings. On 20 and
21 January 2016 the Company applied to the court for a reduction of the Company’s share
premium balance to the amounts of £359m and £89m respectively.
On 16 February 2016, the Company applied to the Court proposed reduction of share capital
from £80 million to £74m and reduction of share premium from £5 454m (US$8 655m) to
£690m (US$1 billion). Accordingly, an amount of £4 765m has been transferred from the share
premium account to retained earnings.
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.
MEDICLINIC ANNUAL REPORT 2016
217
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (continued)
5.
SHARE CAPITAL AND RESERVES (continued)
Retained earnings
As at 1 January
Profit for the year
First reduction of capital
Second reduction of capital
Capital redemption on repurchase of shares
Dividends paid
As at 31 March/December
Other reserves
1 January 2014
Equity-settled share-based payment
Reversal of equity-settled share-based payment
1 January 2015
Reversal of share-based payment reserve
Addition of share-based payment reserve
Settlement of share-based payment reserve
Addition to treasury shares
At 31 March 2016
31 March
2016
£’m
(1)
91
448
4 765
(6)
(398)
4 899
31 Dec
2014
£’m
(5)
19
–
–
–
(15)
(1)
Share-
based
payment
reserve
£’m
2
1
(1)
2
(1)
2
(2)
–
1
Treasury
Shares
£’m
–
–
-
–
–
–
–
(2)
(2)
Total
£’m
2
1
(1)
2
(1)
2
(2)
(2)
(1)
6.
7.
DIVIDENDS
The Company paid special dividends of £383m (dividends per share £3.28) to previous shareholders
of Al Noor Hospitals Group plc on 26 February 2016.
In addition, the Company paid interim dividends for 2015 and final dividends for 2014 amounting
to £15m during the period. These dividends were subject to Board approval.
Details on the final proposed dividend has been disclosed in note 27.7 to the consolidated financial
statements.
BANK BORROWING
The Company has obtained a short-term bridge facility of £400m of which £313m was drawn down on
24 February 2016. This loan is payable within the next financial year. 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.
As at 1 January
Drawdown during the period
Repaid during the period
Unamortised facility costs
As at 31 March/December
218 MEDICLINIC ANNUAL REPORT 2016
31 March
2016
£’m
–
313
(47)
266
(1)
265
31 Dec
2014
£’m
–
–
–
–
–
–
8.
9.
10.
(a)
(b)
AUDITOR’S REMUNERATION
The Company paid or accrued an amount of £352 989 (31 December 2014: £73 674) to its auditor in
respect of the audit of the Company and Group’s financial statements for the year ended 31 March 2016.
SHARE-BASED PAYMENT RESERVE
Forfeitable Share Plan
The Mediclinic International Limited Forfeitable Share Plan ("FSP") was approved by the Company’s
shareholders in July 2014 as a long-term incentive scheme for selected senior management (executive
directors and prescribed officers). This share-based payment arrangement is accounted for as an
equity-settled share-based payment transaction. With the change in control and the acquisition of
the Al Noor Hospitals Group plc, the performance conditions of FSP have been finalised to the extent
that the performance conditions were met as at 30 September 2015. The FSP shares will vest after the
vesting period has lapsed.
Under the FSP, conditional share awards are granted to selected employees of the Group. The vesting of
these shares are subject to continued employment, and is conditional upon achievement of performance
targets, measured over a three-year period. The performance conditions for the year under review
constitute a combination of: absolute total shareholder return (“TSR”) (40% weighting) and underlying
diluted headline earnings per share (60% weighting).
Number of shares transferred from Mediclinic International Limited
Closing balance
31 March
2016
239 290
239 290
31 Dec
2014
–
–
A valuation has been determined and an expense recognised over a three-
year period. The fair value of the TSR performance condition has been
determined by using the Monte Carlo simulation model and the fair value of
the headline earning per share performance condition, consensus forecasts
have been used.
The following assumptions have been used to determine the fair value
of the TSR performance condition:
Risk-free rate
Dividend yield
Volatility
7.49%
1.0%
20%
6.90%
1.5%
20%
Apart from the FSP, there are no other share option schemes in place. Therefore, no director exercised
any rights in relation to share option schemes during the reporting period. Al Noor Hospital Group plc
directors which exercised options before the acquisition date (15 February 2016) is regarded as a pre-
acquisition transaction in these Group financial statements.
FINANCIAL INSTRUMENTS
Capital risk management
The Company manages its capital to ensure it is able to continue as a going concern while maximising
the return on equity. The Company does not have a formalised optimal target capital structure or target
ratios in connection with its capital risk management objective. The Company’s overall strategy remains
unchanged from the prior year. The Company is not subject to externally imposed capital requirements.
Financial risk management objectives
The Company is exposed to the following risks related to financial instruments-credit risk, liquidity
risk, foreign currency risk and interest rate risk. The Company does not enter into or trade in financial
instruments, investments in securities, including derivative financial instruments, for speculative or risk
management purposes.
MEDICLINIC ANNUAL REPORT 2016
219
NOTES TO THE COMPANY FINANCIAL
STATEMENTS (continued)
10.
(c)
FINANCIAL INSTRUMENTS (continued)
Credit risk
Exposure to credit risk
The carrying amount of financial assets represents the maximum credit exposure. There is no credit
risk involve on the Company’s financial statements except for the amount due from a related party
disclosed below:
Amount due from a related party
31 March
2016
£’m
47
31 Dec
2014
£’m
–
(d)
Liquidity risk
Ultimate responsibility for liquidity risk management rests with the Directors of the Company, who
has built an appropriate liquidity risk management framework for the management of the Company’s
short, medium and long-term funding and liquidity management requirements. The Company manages
liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash
flows and matching the maturity profiles of financial assets and liabilities.
Liquidity risk is the risk that the Company will be unable to meet its funding requirements. The table
below summarises the maturity profile of the Company’s non-derivative financial liabilities. The
contractual maturities of the financial liabilities have been determined on the basis of the remaining
period at the end of reporting period to the contractual repayment date. The maturity profile is
monitored by management to ensure adequate liquidity is maintained. The maturity profile of the
liabilities at the end of reporting period based on existing contractual repayment arrangements was
as follows:
31 March 2016
Other payables
Bank borrowing
Derivative payables
Related-party payables
31 December 2014
Other payables
Carrying
amount
£’m
Contractual
cash flows
£’m
1 year
or less
£’m
More than
one year
£’m
3
265
1
26
295
3
265
1
26
295
3
265
1
26
295
1
1
1
–
–
–
–
–
–
(e)
Interest rate risk
The Company’s interest rate risk arises from short-term borrowing. Borrowings issued at variable rates
expose the Company to cash flow interest rate risk. Interest rate expose the Company to fair value
interest rate risk. The Company’s policy is to maintain an appropriate mix between fixed and floating
rate borrowings.
220 MEDICLINIC ANNUAL REPORT 2016
SHAREHOLDER INFORMATION
FINANCIAL CALENDAR
Last date to trade cum dividend (SA register)
First date of trading ex-dividend (SA register)
First date of trading ex-dividend (UK register)
Record date for final dividend
2016 annual general meeting (London)
Final dividend payment date
Financial half year
Half year results announcement and presentation
Thursday, 9 June 2016
Friday, 10 June 2016
Thursday, 16 June 2016
Friday, 17 June 2016
Wednesday, 20 July 2016
Monday, 25 July 2016
Friday, 30 September 2016
November 2016
DIVIDENDS
The Company’s dividend policy, details of the final dividend declared and the proposed dividend access trust
established for South African resident shareholders are provided in the Directors’ Report on pages 116 to 122
and in Note 9 to the financial statements.
AR
DISTRIBUTION OF ORDINARY SHAREHOLDERS AS AT 31 MARCH 2016
UK register
SA register
Certificated
Dematerialised
Total
Number of
beneficial
shareholders
737
40 380
1 124
39 256
41 117
Number of
shares
162 590 037
574 653 773
423 061
574 230 712
737 243 810
%
of issued
22.05%
77.95%
0.06%
77.89%
100.00%
SHARE PRICE
The latest share price information can be found on the Company’s website at www.mediclinic.com or through
your broker.
SHAREHOLDER SERVICES AND CONTACTS
SHAREHOLDER ENQUIRIES
Enquiries relating to shareholdings, including notification of change of address, queries regarding the loss of a
share certificate and dividend payments should be made to the Company’s Registrars:
SHAREHOLDERS ON THE SA REGISTER:
South African Transfer Secretary
Computershare Investor Services (Pty) Ltd
70 Marshall Street, Johannesburg, 2001
Postal address: PO Box 61051, Marshalltown, 2107
Tel: +27 11 370 5000
Fax: +27 11 688 7716
Namibian Transfer Secretary
Transfer Secretaries (Proprietary) Limited
4 Robert Mugabe Avenue, Windhoek
Postal address: PO Box 2401, Windhoek
Tel: +264 61 227 647
Fax: +264 61 248 531
SHAREHOLDERS ON THE UK REGISTER:
UK Registrar
Capita Asset Services
The Registry, 34 Beckenham Road, Beckenham, Kent, BR3 4TU, United Kingdom
Tel: 0871 664 0300 (UK only)
Tel: +44 20 8639 3399 (if dialling from outside the UK)
Lines are open during normal business hours from 8:30am – 5:30pm Monday to Friday and charged at the
standard rate. You can also use their website to check and maintain your records. Details can be found at
www.capitaassetservices.com.
UK Share Dealing Service
The UK Registrars offer a share dealing service which allows you to buy and sell the Company’s shares
if you are a UK resident. You can deal in your shares on the internet or by telephone. Log on
to http://www.capitadeal.com or call 0871 664 0364 (calls cost to 10p per minute plus network extras)
for more details on this service.
ShareGift
If you only have a small number of shares whose value makes it difficult to sell, you may wish to consider
donating to charity through ShareGift, an independent charity share donation scheme. For further details
please contact Capita Asset Services or ShareGift, telephone +44 20 7930 3737 or visit www.sharegift.org.
MEDICLINIC ANNUAL REPORT 2016
221
COMPANY INFORMATION
COMPANY NAME AND NUMBER
Mediclinic International plc (formerly Al Noor Hospitals Group plc)
(incorporated and registered in England and Wales)
Company number: 08338604
REGISTERED OFFICE
Mediclinic International plc, 40 Dukes Place, London, EC3A 7NH, United Kingdom
Postal address: PO Box 456, Stellenbosch, 7599
Tel: +44 20 7954 9600 Fax: +44 20 7954 9886
Ethics Line: +27 12 543 5332/Toll-free 0800 005 316 (South Africa only)/ethics@mediclinic.com
LISTING
FTSE sector: Health Care Equipment & Services
ISIN code: GB00B8HX8Z88
SEDOL Number: B8HX8Z8
EPIC Number: MDC
Primary listing: London Stock Exchange (share code: MDC)
Secondary listing: JSE Limited (share code: MEI)
Secondary listing: Namibian Stock Exchange (share code: MEP)
E-MAIL AND WEBSITE
info@mediclinic.com
www.mediclinic.com
DIRECTORS*
Dr Edwin Hertzog (Chairman) (South African), Danie Meintjes (Chief Executive Officer) (South African),
Craig Tingle* (Chief Financial Officer) (South African), Jannie Durand (ne) (South African), Alan Grieve (ind ne)
(British), Seamus Keating (ind ne) (Irish), Prof Dr Robert Leu (ind ne) (Swiss), Nandi Mandela (ind ne) (South
African), Trevor Petersen (ind ne) (South African), Desmond Smith (ind ne) (South African), Ian Tyler (snr ind)
(British), Pieter Uys (alternate to Jannie Durand) (South African)
*
Jurgens Myburgh will be appointed as an executive director and the Chief Financial Officer of the Company with effect from
1 August 2016, in the place of Craig Tingle who retires on 15 June 2016.
COMPANY SECRETARY
Capita Company Secretarial Services Limited
Ms Victoria Dalby
Tel: +44 20 7954 9600
INVESTOR RELATIONS CONTACT
Mr Gert Hattingh
ir@mediclinic.com
CORPORATE ADVISORS
Auditor
PricewaterhouseCoopers LLP
London
Corporate Broker and Sponsors
Corporate broker: Morgan Stanley & Co International plc
JSE (South Africa) sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited)
NSX (Namibia) sponsor: Simonis Storm Securities (Pty) Ltd
Legal Advisors
English legal advisors: Slaughter and May
South African legal advisors: Cliffe Dekker Hofmeyr Inc.
Remuneration Consultant
New Bridge Street
Communication Agency
Bell Pottinger
222
MEDICLINIC ANNUAL REPORT 2016 GLOSSARY
TERM
Annual Report
Al Noor
Articles
Board
MEANING
this annual report and financial statements for the reporting period ended
31 March 2016
the Al Noor Hospitals Group which was acquired by the Company on
15 February 2016 by way of a reverse takeover
the Company’s Articles of Association as adopted in General Meeting on
15 December 2015
the board of directors of Mediclinic International plc (formerly Al Noor Hospitals
Group plc)
CAGR (%)
compounded annual growth rate
cash conversion (%)
cash generated from operations divided by normalised EBITDA
CCU
CDLI
Combination
critical care unit
Carbon Disclosure Leadership Index
the combination of Al Noor Hospitals Group plc and Mediclinic International Limited,
which was completed on 15 February 2016
Company or Mediclinic or Mediclinic
International
Mediclinic International plc (formerly Al Noor Hospitals Group plc)
DRG
Diagnosis Related Grouping
Emirates Healthcare
Emirates Healthcare Holdings Limited BVI, the intermediary holding company of the
Group’s operations in the United Arab Emirates, which is referred to as Mediclinic
Middle East throughout the report
FCA
GDP
GRI G4
Group
Group
HAI
Hirslanden
JCI
the United Kingdom Financial Conduct Authority
gross domestic product
the fourth revision of the Sustainability Reporting Guidelines developed by the
Global Reporting Initiative
Mediclinic International and its three operating platforms in Southern Africa,
Switzerland and the United Arab Emirates (“Group” refers to one of the Group’s
operating platforms, as the context may indicate, as defined below)
one of the operating platforms of the Group, as the context may indicate (please
note that “Group” is as defined in this definition and “Group” refers to the entire
Mediclinic Group as defined above)
healthcare-associated infection
the Group’s operations in Switzerland, trading under the Hirslanden brand, with
Hirslanden AG as the intermediary holding company of the Group’s operations in
Switzerland
Joint Commission International, an international quality measurement accreditation
organisation, aimed at improving quality of care
MEDICLINIC ANNUAL REPORT 2016
223
GLOSSARY (continued)
TERM
JSE
MEANING
JSE Limited, the stock exchange of South Africa based in Johannesburg
Last Practicable Date
the date of approval of the Annual Report by the Board, being 25 May 2016
Listing Rules
the listing rules of the FCA applicable to companies listed on the LSE, subject to the
oversight of the United Kingdom Listing Authority
LSE
the stock exchange operated by London Stock Exchange plc
Mediclinic or Mediclinic International
Mediclinic International plc (formerly Al Noor Hospitals Group plc)
Mediclinic Middle East
Mediclinic Southern Africa
the Group’s operations in the United Arab Emirates, trading under the Mediclinic
brand, with Emirates Healthcare Holdings Limited BVI as the intermediary holding
company of the Group’s operations in the United Arab Emirates
the Group’s operations in South Africa and Namibia, trading under the Mediclinic
brand, with Mediclinic Southern Africa (Pty) Ltd as the intermediary holding
company of the Group’s operations in South Africa and Namibia
next financial year
the financial year which commenced on 1 April 2016 and ending on 31 March 2017
NSX
the Namibian Stock Exchange based in Windhoek, Namibia
operating platform/s
Mediclinic Southern Africa, Hirslanden (Switzerland) and Mediclinic Middle East
and their subsidiaries and associated entities, or any one of them as the context
may indicate
period under review
the financial year which commenced on 1 April 2015 and ended on 31 March 2016
reporting period
the financial year which commenced on 1 April 2015 and ended on 31 March 2016
SA
the Republic of South Africa
SA Companies Act
the South African Companies Act, 71 of 2008, as amended
UAE
UK
United Arab Emirates
the United Kingdom of Great Britain and Northern Ireland
UK Companies Act
the United Kingdom Companies Act of 2006, as amended
224
MEDICLINIC ANNUAL REPORT 2016 FORWARD–LOOKING STATEMENTS
This Annual Report contains certain forward-looking statements relating to the financial condition,
results of operations and businesses of Mediclinic and the Group, including certain plans and
objectives of the Group. All statements other than statements of historical fact are, or may be
deemed to be, forward-looking statements. Forward-looking statements are statements of
future expectations that are based on management’s current expectations and assumptions and
involve known and unknown risks and uncertainties that could cause actual results, performance
or events to differ materially from those expressed or implied in these statements. Forward-
looking statements include, among other things, statements concerning the potential exposure
of Mediclinic to market risks and statements expressing management’s expectations, beliefs,
estimates, forecasts, projections and assumptions, including as to future potential cost savings,
synergies, earnings, cash flow, production and prospects. These forward-looking statements are
identified by their use of terms and phrases such as “anticipate”, “believe”, “could”, “estimate”,
“expect”, “goals”, “intend”, “may”, “objectives”, “outlook”, “plan”, “probably”, “project”, “risks”, “seek”,
“should”, “target”, “will” and similar terms and phrases.
GREYMATTER & FINCH # 9938