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8
ANNUAL REPORT
AND FINANCIAL
STATEMENTS
for the year ended 31 March 2018
HIGHLIGHTS
SUCCEEDING IN THE
TURNAROUND OF THE
ABU DHABI BUSINESS
with continued strong performance in
Southern Africa and Dubai
740 000+ INPATIENT
ADMISSIONS
across all operating divisions as the
demand for quality healthcare services
continues to increase
£245M – SIGNIFICANT
ONGOING CAPEX
INVESTMENT
across the Group supporting patient
experience, clinical excellence, maintenance,
upgrades and expansion
REVENUE UP 4%
to £2 870m; up 3% in constant
currency terms
ADJUSTED EBITDA UP 3%
to £515m; flat in constant currency
EARNINGS LOSS OF
£492M
impacted by non-cash Hirslanden and
Spire impairment charges and other
exceptional items
ADJUSTED EARNINGS
PER SHARE UP 1%
to 30.0 pence
TOTAL DIVIDEND FOR
THE YEAR 7.90 PENCE
The Group uses adjusted income statement reporting as
non-IFRS measures in evaluating performance. Refer to the
Financial Review on page 29 for an explanation.
CONTENTS
STRATEGIC REPORT
3
4
6
10
12
14
18
19
20
24
33
34
44
50
52
56
60
Report Profile
Business Overview
Performance Highlights
Chairman’s Statement
At a Glance
Business Model
Our Strategy, Progress and Aims
Investment Case
Five-Year Summary
Performance and Future Outlook
Chief Executive Officer’s Review
Financial Review
Value Added Statement
Clinical Services Overview
Risk Management
Risk Management, Principal Risks and Uncertainties
Viability Statement
Divisional Reviews
Divisional Review – Switzerland
Divisional Review – Southern Africa
Divisional Review – UAE
Non-financial Performance
68
Sustainable Development Highlights
GOVERNANCE AND REMUNERATION
85
86
90
93
Chairman’s Introduction
Board of Directors
Senior Management
Corporate Governance Statement
112 Nomination Committee Report
116 Clinical Performance and Sustainability Committee Report
120 Audit and Risk Committee Report
130 Directors’ Remuneration Report
160 Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
162 Group Financial Statements
248 Company Financial Statements
ADDITIONAL INFORMATION
262 Shareholder Information
266 Company Information
267 Glossary
IBC Forward-looking Statements
EXPERTISE YOU CAN TRUST.
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.
MEDICLINIC HAS THREE OPERATING DIVISIONS
IN SWITZERLAND, SOUTHERN AFRICA AND
THE UNITED ARAB EMIRATES
75
HOSPITALS
28
CLINICS
SWITZERLAND
10 684
PATIENT BEDS
SOUTHERN
AFRICA
411
THEATRES
31 504
EMPLOYEES
UNITED ARAB
EMIRATES
With continuing regulatory
changes during the year
in Switzerland, Hirslanden
continues to focus on adapting
to the evolving outpatient
environment whilst delivering
cost savings and operational
efficiencies.
Read more about Hirslanden
from page 52.
AR
Mediclinic Southern Africa,
once again, delivered steady
revenue growth and managed
its cost base despite pressure
on patient volumes in the
current environment.
Read more about Mediclinic
Southern Africa from page 56.
AR
The Middle East division
reached an inflection point
this year with a strong second
half performance delivering
marginal improvement in
revenue and adjusted EBITDA
margin for the year; succeeding
with the turnaround of the Abu
Dhabi business and laying the
foundation for further growth.
Read more about Mediclinic
Middle East from page 60.
AR
CONTRIBUTION TO
REVENUE
CONTRIBUTION TO
ADJUSTED EBITDA*
CONTRIBUTION TO
ADJUSTED EARNINGS*
(1%)
(2%) 1%
22%
16%
TOTAL £2 870M
47%
TOTAL £515M
48%
31%
37%
20%
33%
TOTAL £221M
48%
Switzerland
Southern Africa
Middle East
Corporate
United Kingdom
AR
* The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance. Refer to the Financial Review on page 24
for an explanation and for a reconciliation to the equivalent IFRS measures.
“WE ARE
DETERMINED
TO MEET AND
EXCEED THE
EXPECTATIONS
OF OUR
PATIENTS IN
EVERY MARKET
WHERE WE
OPERATE.”
DANIE MEINTJES
CHIEF EXECUTIVE
OFFICER
OUR STRATEGIC OBJECTIVES
Mediclinic seeks to generate
shareholder value through:
long-term
• putting Patients First;
• improving Group and operational
effi ciencies;
• pursuing attractive growth
opportunities; and
• leveraging our global scale,
invest
while continuing to
in employees,
information and communications technology
and analytics. Read more about Our Strategy,
Progress and Aims from page 14.
AR
FURTHER INFORMATION
This Annual Report is published as part of
a suite of reports, as listed below. The icons
below are used as a cross-referencing tool to
refer to the relevant pages of these reports
or within this Annual Report.
AR Annual Report and Financial
Statements 2018
CSR
SDR
AGM
Clinical Services Report 2018
Sustainable Development Report 2018
Notice of Annual General Meeting 2018
These reports are available on the Company’s
website at www.mediclinic.com from the
date of distribution of this Annual Report
and the Company’s Notice of Annual General
Meeting by no later than 22 June 2018.
GLOSSARY
Please refer to the glossary of terms used in
this report from page 267.
AR
APPROVAL OF ANNUAL
REPORT
This Annual Report and Financial Statements,
including the Strategic Report herein, was
approved by the Board on 23 May 2018.
Edwin Hertzog
Non-executive Chairman
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
1
2 MEDICLINIC | ANNUAL REPORT 2018
REPORT PROFILE
Scope, boundary and reporting
cycle
This Annual Report and Financial Statements
(“Annual Report”) of Mediclinic International plc (the
“Company” or “Mediclinic”) presents the fi nancial
results, and the economic, social and environmental
performance of the Mediclinic Group for the fi nancial
year ended 31 March 2018 (the “reporting period”),
and covers the Company’s operations in Switzerland,
Southern Africa and the United Arab Emirates
(the “Group”).
Reporting principles
The information in this Annual Report is deemed
to be useful and relevant to our stakeholders,
with due regard to their expectations through
continuous engagement, or that the Board believes
may infl uence the perception or decision-making
of our stakeholders. The information provided aims
to provide our stakeholders with an understanding
of the Group’s fi nancial, social, environmental and
economic impacts to enable them to evaluate the
ability of Mediclinic to create and sustain value.
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, and the
UK Companies Act (including the Companies,
Partnerships and Group (Accounts and Non-Financial
Reporting) Regulations 2016 aimed at improving
the transparency of companies regarding non-
fi nancial and diversity information), where relevant.
The Company complied with all the provisions
of the UK Corporate Governance Code, other
than the exceptions explained in the Corporate
Governance Statement on page 93 of this Annual
Report. The Company’s reporting on sustainable
development included in this report, supplemented
by the Sustainable Development Report, available
on the Company’s website at www.mediclinic.com,
was done in accordance with the GRI Sustainability
Reporting Standards 2016 and the non-fi nancial
reporting regulations referred to above.
External audit and assurance
The Company’s annual fi nancial statements and the
Group’s consolidated annual fi nancial statements were
audited by the Group’s independent external auditors,
PricewaterhouseCoopers LLP, in accordance with
International Standards of Auditing (UK).
AR
SDR
AR
The Group follows various other voluntary external
accreditation, certifi cation and assurance initiatives,
complementing the Group’s combined assurance
model, as reported on in the Risk Management
section of this Annual Report. The Group believes
AR
that this adds to the transparency and reliability of
information reported to our stakeholders.
MEDICLINIC | ANNUAL REPORT 2018
3
STRATEGIC
REPORT
“The Group’s strategic focus ensures that it
consistently delivers high-quality healthcare and
optimal patient experience across the operating
divisions in Switzerland, Southern Africa and the
Middle East.”
Danie Meintjes
Chief Executive Offi cer
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PERFORMANCE
HIGHLIGHTS
GROUP FINANCIAL RESULTS
REVENUE (£’m)
9
4
7
2
0
7
8
2
2
9
8
1
7
7
9
1
7
0
1
2
2014 2015 2016 2017 2018
ADJUSTED EBITDA (£’m)
1
0
5
5
1
5
1
0
4
3
0
4
8
2
4
2014 2015 2016 2017 2018
OPERATING (LOSS) PROFIT (£’m)
2
4
3
5
4
3
8
8
2
2
6
3
)
8
8
2
(
2014 2015 2016 2017 2018
ADJUSTED EPS (pence)
.
3
7
3
.
8
5
3
.
7
6
3
.
8
9
2
.
0
0
3
2014 2015 2016 2017 2018
OPERATING CASH FLOW (£'m)
0
4
4
1
1
4
4
9
3
2
9
4
6
6
4
2014 2015 2016 2017 2018
4 MEDICLINIC | ANNUAL REPORT 2018
OPERATIONAL HIGHLIGHTS
STRONG FINANCIAL POSITION
The strong financial position of the Group supported the overall
performance of the three divisions in 2018. In Switzerland, Hirslanden
was faced with a number of regulatory changes that came into effect
during the year and the division will need to continue adapting to
the evolving outpatient environment whilst delivering cost savings
and operational efficiencies. The division recognised an impairment
charge on intangible assets and properties of £644m. The Southern
Africa division, once again, produced steady revenue growth and
managed its cost base despite pressure on patient volumes in the
current environment. The Middle East division reached an inflection
point this year with a strong second half performance delivering
marginal improvement in revenue and adjusted EBITDA margin for
the year. Spire’s reported profit after tax was impacted by exceptional
items that lowered the contribution from the investment in associate
for the year. Further, Mediclinic recognised an impairment on the
investment in associate of £109m. At a Group level, the reported
earnings loss was £492m, impacted by the impairments and other
exceptional items.
SUCCEEDING WITH THE TURNAROUND OF THE
ABU DHABI BUSINESS
The operational changes that were implemented in the Abu Dhabi
business during the prior year, to align with Mediclinic’s established
Dubai business, have laid the foundation for future success. The
Middle East division is now entering a growth phase underpinned
by continued strong performance in the Dubai business, ongoing
improvement in the Abu Dhabi business and the opening of several
new facilities over the coming years.
PATIENTS FIRST STRATEGIC OBJECTIVE
Our patients are at the core of Mediclinic. The Group’s strategic
focus specifically requires that it consistently delivers high-quality
healthcare and optimal patient experience across the operating
divisions in Switzerland, Southern Africa and the Middle East. To this
end, Mediclinic continued to invest in its people, clinical facilities and
technology. We made continued progress this year in the key areas
of clinical performance, patient experience and staff engagement.
BENEFITS OF BEING A GLOBAL HEALTHCARE SERVICE
GROUP
As one of the largest independent pan-EMEA1 healthcare services
groups, Mediclinic is well positioned to deliver long-term value to
its shareholders. The Group’s growing international scale enables it
to unlock further value through promoting collaboration and best
practice across various fields including clinical and patient care,
extracting operational synergies and delivering cost efficiencies
through global procurement.
EVOLVING REGULATORY ENVIRONMENT
The demand for healthcare services is unquestionably growing
around the globe. The challenge for the industry, however, is to
ensure those services remain affordable resulting in changing
care delivery models and greater regulatory oversight. We place
considerable emphasis on the investment we make in our clinical
performance and the facilities that we operate to deliver our
patients the care that we believe will improve the quality of their
lives. However, we must manage the delivery of these services in an
efficient, cost-effective way to ensure sustainability.
1 Europe, Middle East and Africa
KEY PERFORMANCE INDICATORS
FINANCIAL
Revenue
EBITDA
Adjusted EBITDA1
Operating (loss)/profit
(Loss)/earnings2
Adjusted earnings1
(Loss)/earnings per share
Adjusted earnings per share1
Total dividend per share3
Net debt at the year end
Capital expenditure on projects, new equipment
and replacement of equipment
Switzerland
Southern Africa
United Arab Emirates
£'m
£'m
£'m
£'m
£'m
£'m
pence
pence
pence
£'m
£'m
£'m
£'m
£'m
2018
2 870
522
515
(288)
(492)
221
(66.7)
30.0
7.90
1 676
245
101
64
80
2017
2 749
509
501
362
229
220
31.0
29.8
7.90
1 669
249
127
72
50
%
change
4%
3%
3%
(180%)
(315%)
1%
(315%)
1%
0%
0%
(2%)
(20%)
(11%)
60%
Notes
1
The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and as a method to provide
shareholders with clear and consistent reporting. See the reconciliations between the statutory and the non-IFRS measures in the Financial
Review on pages 26 to 29.
2 Earnings refer to (loss)/profit attributable to equity holders.
3 The total dividend per share for the year ended 31 March 2018 in pounds sterling comprises the final dividend of 4.70 pence per share
(2017: 4.70 pence) and the interim dividend of 3.20 pence per share, paid in December 2017 (2017: 3.20 pence).
AR
AR
Group results are subject to movements in foreign currency exchange rates. Refer to page 30 for exchange rates used to
convert the operating divisions’ results to pounds sterling.
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MEDICLINIC | ANNUAL REPORT 2018
5
CHAIRMAN’S
STATEMENT
“OUR LONG-STANDING
REPUTATION AS A TRUSTED,
MARKET-LEADING,
HEALTHCARE SERVICE
PROVIDER FOCUSED
ON PATIENT SAFETY
AND EXCELLENT CLINICAL
PERFORMANCE, WILL
CONTINUE TO DELIVER
LONG-TERM GROWTH
AND RETURNS FOR OUR
SHAREHOLDERS.”
Dr Edwin Hertzog
Non-executive Chairman
STRATEGIC DELIVERY
During the year under review (“FY18”), we made further
progress on our strategic priorities of putting Patients First,
and regularly engages with the executive directors and
senior management across the Group to ensure they are
focused on the delivery of these key priorities.
improving Group and operational effi ciencies, pursuing
attractive growth opportunities and leveraging our global
scale, while continuing to invest in employees, information
In October 2017, Mediclinic made an approach to Spire
Healthcare Group plc (“Spire”) regarding a possible off er for
the entire issued and to be issued share capital of Spire not
and communications technology and analytics. Mediclinic’s
already owned by Mediclinic. However, in November 2017, we
commitment to deliver sustainable, high-quality, cost-
announced that following discussions with the independent
eff ective healthcare services produced a positive operational
directors of Spire, an agreement could not be reached.
performance this year. We fi rmly believe this commitment
The decision not to proceed demonstrates our disciplined
supports our goal of driving continued long-term value
approach to capital allocation, ensuring investments are in the
for our shareholders. The Board continuously reviews our
best interests of Mediclinic shareholders. Mediclinic has every
strategic priorities and the progress made during the year,
intention of remaining a supportive shareholder of Spire.
6 MEDICLINIC | ANNUAL REPORT 2018
OUR PEOPLE AND PATIENTS
Mediclinic’s focus on its culture and values is a key contributor
to the long-term success of the Group. The commitment
of our executive directors, senior management, doctors,
nurses and other staff supports Mediclinic’s core purpose of
enhancing quality of life, which is at the heart of our Patients
First strategy.
Competition in the public and private healthcare markets
provides patients and medical professionals with a choice
of healthcare service providers. We ensure we remain well
positioned as a leading global healthcare service provider
through our ongoing investment in our facilities, commitment
to patient safety and excellent clinical performance. We
deeply appreciate the more than 740 000 inpatients who
chose Mediclinic as their preferred healthcare service
provider during the year.
FINANCIAL PERFORMANCE
Overall, the Group remains in a strong fi nancial position. The
benefi t of having a globally diversifi ed healthcare services
business was refl ected in this year’s results as a weaker
performance in Switzerland was off set by good delivery in
Southern Africa and the Middle East. The latter was as a result
of driving the turnaround of the Abu Dhabi business, with the
Middle East division entering an expansionary phase that
is expected to deliver an increase in revenue and operating
profi ts over time.
During the year, the Group reported non-cash exceptional items
relating to impairment charges at Hirslanden and Spire. Due to
the changes in the Swiss market and regulatory environment,
Hirslanden recorded a £644m impairment charge on intangible
assets and property. An impairment test on Spire was carried
out at 30 September 2017 resulting in an impairment charge
of £109m recorded against the carrying value of the equity
accounted investment. As a result of these impairment charges
and other exceptional items, the reported earnings loss for the
year was £492m (FY17: profi t £229m).
At the Group level, in constant currency, FY18 revenue
was up 3% and adjusted EBITDA was fl at. However, after
the translation eff ect of foreign currency movements,
FY18 revenue was up 4% at £2 870m (FY17: £2 749m) and
adjusted EBITDA increased 3% at £515m (FY17: £501m).
This performance was driven by marginal revenue growth in
Switzerland with a lower adjusted EBITDA margin impacted
by regulatory changes including outpatient tariff reductions,
modest revenue growth in Southern Africa with an improved
adjusted EBITDA margin and revenues up nearly 1% in the
Middle East with an improvement in the adjusted EBITDA
margin of 100 basis points versus the prior year. Adjusted
earnings per share (impacted by the equity-accounted
share of reported profi t after tax from Spire which included
a number of exceptional charges) was up 1% to 30.0 pence
(FY17: 29.8 pence).
CLINICAL EXCELLENCE
I am pleased to report that, during the year under review,
the majority of patient safety and clinical eff ectiveness
indicators showed improvement. In addition, many initiatives
in support of clinical performance and quality improvement
were launched and completed. Much of the progress can be
attributed to a strong collaborative eff ort between the clinical
services teams of the respective operating divisions and the
corporate centre. Highlights from across the Group include:
Mediclinic International:
• The restructuring and strengthening of clinical services
leadership at hospital, divisional and corporate level.
• The establishment of health technology assessment
as the cornerstone to making clinical investment and
process decisions.
Hirslanden:
• Klinik Hirslanden’s stroke centre was re-accredited as the
only private unit of eight across Switzerland.
• The Bellaria Outpatient Surgery Unit (“OSU”) was
successfully launched at Hirslanden Klinik Im Park, which
serves as a blueprint for further outpatient facilities.
Mediclinic Southern Africa:
• The doctors’ alignment project made good progress and
will be expanded to another 23 hospitals.
• A new Clinical Performance Committee structure was
successfully implemented, including external specialist
representation on the committee.
Mediclinic Middle East:
• A stroke unit was established at Mediclinic City Hospital,
which was subsequently certifi ed by the German Stroke
Society in early 2018.
• We initiated a renal transplant programme in collaboration
with the Mohammed Bin Rashid University.
MEDICLINIC | ANNUAL REPORT 2018
7
’
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CHAIRMAN’S STATEMENT (CONTINUED)
REGULATORY LANDSCAPE
The healthcare industry has always operated within an
evolving regulatory environment. Over the years, we have
invested in recruiting and training our people to ensure we
have experienced and well-informed management teams who
can successfully navigate the changing regulatory landscape.
This year, we saw a significant change in outpatients’ tariffs
and procedures in Switzerland that impacted the financial
performance of the division. We continued to engage in
the Health Market Inquiry (“HMI”) and National Healthcare
Insurance (“NHI”) review process in South Africa, and we
have been preparing for a new Diagnostic Related Group
(“DRG”) reimbursement model in Dubai. Globally, there is a
continued focus on the affordability of healthcare. Mediclinic
seeks to address this through its strategic priority of
improving efficiencies. Outmigration of care is an approach
that aims to reduce the cost of certain, low acuity healthcare
services and procedures. Mediclinic is aligning with this
approach, as it is fundamental to the long-term sustainable
delivery of healthcare.
BOARD CHANGES AND GOVERNANCE
The Board announced the appointment of Dr Ronnie van
der Merwe as the Company’s new CEO in November 2017.
The appointment is effective on 1 June 2018.
Danie Meintjes joined the Group in 1985 as the Hospital
Manager of Mediclinic Sandton in Johannesburg. He became
a member of the Group Executive Committee in 1995, mainly
responsible for human resources matters. From 2006, he
was instrumental in establishing the Company’s Dubai
operations over a four-year period, before his appointment
as CEO of Mediclinic International Limited in 2010. Danie
has played an instrumental role in the development of
Mediclinic and the implementation of our strategy. I would
personally like to thank Danie for more than 30 years’
service to the Group which has seen the Company grow
from a small operator in South Africa to a diversified global
healthcare services provider, listed on the London Stock
Exchange, with operating divisions located across three
continents and over 31 500 employees. Subject to Danie’s
re-election as a director of the Company at the AGM, he will
continue as an executive director until 31 July 2018 and as a
non-executive director with effect from 1 August 2018.
Danie’s continued involvement as a non-executive director
was approved by the Board on 23 May 2018 as it was
considered to be in the best interests of the Group, its
shareholders and other stakeholders in view of the wealth
of knowledge and experience he has gained in different
capacities during his service at Mediclinic.
Ronnie is one of Mediclinic’s most experienced senior
executives. He trained and practised as an anaesthesiologist
before joining Mediclinic in 1999 and became a member of
the Group’s Executive Committee in 2008. He established
and developed the Clinical Information, Advanced Analytics,
Information Management and Clinical Services
Health
functions at Mediclinic, and has been Group Chief Clinical
Officer since 2007. He was appointed as a director of
Mediclinic International Limited in 2010 up to the combination
of the businesses of the Company (then Al Noor Hospitals
Group plc) and Mediclinic International Limited. The Board
was unanimous in its support for Ronnie and believes that
his extensive knowledge of Mediclinic’s operations and his
strong track record of driving enhancements, especially in
the quality and effectiveness of our clinical services, will
serve the Company well going forward.
I am pleased to announce that this year the Board made
two independent non-executive director appointments that
further strengthened the Board’s clinical governance and
global healthcare experience.
On 3 October 2017, Dr Felicity Harvey joined the Board. Her
thorough knowledge of and experience in the healthcare
sector, which includes a number of senior roles in the UK
Department of Health, will be a valuable addition to the
Board. On 1 April 2018, Dr Harvey became Chairman of the
Clinical Performance and Sustainability Committee.
On 1 November 2017, Dr Muhadditha Al Hashimi joined the
Board. Her extensive experience and knowledge of the
healthcare and higher education sectors in the UAE, together
with her strategic and tactical expertise in operations and
fiscal management, provide a further positive dynamic to
the Board and, from 1 April 2018, the Clinical Performance
and Sustainability Committee.
Since their appointments to the Board, Drs Harvey and
Al Hashimi have already made important contributions. I look
forward to working closely with them over the coming years.
On 29 March 2018, we announced that Ms Nandi Mandela
and Prof Dr Robert Leu will retire as non-executive directors
of the Company, and as members of all relevant Board
committees, at the conclusion of the 2018 AGM. I would like to
thank them for their commitment and valued contributions
to the Board and the Group over many years.
Over the past 40 years, we have faced dramatic cultural
and demographic changes, both in the UK and globally.
The Parker Review in the UK looks to formally address this
issue by analysing the progress being made in the areas of
diversity, equality and inclusion. I am pleased to report that
Mediclinic ranked eighth out of the FTSE 100 companies
in the 2017 Parker Review analysis of ethnic diversity in
UK Boards. Mediclinic fully recognises that to remain
competitive in a global market, and to ensure we attract and
retain the best talent, our culture and values must continue
to align with our diverse employee base.
8 MEDICLINIC | ANNUAL REPORT 2018
SHAREHOLDER RETURNS
For FY18, the Board recommends a final dividend of
4.70 pence per share which, together with the interim
dividend of 3.20 pence per share, results in the total
dividend maintained for the year at 7.90 pence per share
(FY17: 7.90 pence per share). This represents a 26% pay-out
ratio to adjusted earnings per share, in line with the Group’s
policy of 25% to 30%.
LOOKING AHEAD
Mediclinic has more than 30 years’ experience of providing
private healthcare in a sector where the demand for services
continues to grow. Regulation will always play an important
role in the industry, and the affordability of healthcare will
remain a focus for all stakeholders. The Board is confident
that our long-standing reputation as a trusted, market-
leading, healthcare service provider focused on patient
safety and excellent clinical performance, will continue to
deliver long-term growth and returns for our shareholders.
APPRECIATING YOUR CONTINUED
SUPPORT
As ever, I want to express my sincere thanks to everyone
who contributed to Mediclinic’s performance, including our
executive directors, senior management, doctors, nurses
and other staff. In particular, the support of patients and
medical professionals is absolutely vital to the long-term
sustainability of our business, and we deeply appreciate that
they have chosen Mediclinic as their preferred healthcare
service partner.
Finally, I would like to extend a special thank you to all our
shareholders for their confidence in Mediclinic.
Dr Edwin Hertzog
Non-executive Chairman
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
9
9
’
’
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AT A
GLANCE
UNITED KINGDOM
29.9% investment in Spire Healthcare
AR
Group plc. Refer to page 29.
SWITZERLAND
Find out more about our Swiss
AR
operations from page 52.
UNITED ARAB EMIRATES
Find out more about our UAE
operations from page 60.
AR
SOUTHERN AFRICA
Find out more about our Southern
African operations from page 56.
AR
HOSPITALS
Switzerland
Southern Africa
UAE
CLINICS
Switzerland
Southern Africa
UAE
75
17
52
6
28
4
2
22
PATIENT EXPERIENCE
Switzerland
Southern Africa
UAE
Refer to page 14 for more.
CONTROLLABLE
EMPLOYEE TURNOVER
INPATIENT BEDS 10 684
Switzerland
1 805
Switzerland
Southern Africa
Southern Africa
UAE
8 131
748
UAE
THEATRES
Switzerland
Southern Africa
UAE
411
104
278
29
EMPLOYEES
Switzerland
Southern Africa
UAE
31 504
9 635
16 068
5 801
Refer to pages 71 and 72 for more.
EMPLOYEE ENGAGEMENT
(maximum score of 5)
Switzerland
Southern Africa
UAE
Refer to page 74 for more.
87.7%
82.1%
83.3%
8.7%
7.7%
10.3%
3.93
3.85
3.86
AR
AR
AR
WHO WE ARE
Mediclinic is an international private healthcare services group,
established in South Africa in 1983, with current operating
divisions in Switzerland, Southern Africa (South Africa and
Namibia) and the United Arab Emirates.
Our core purpose is to enhance the quality of life of patients by
providing acute care, specialist-orientated, multi-disciplinary
healthcare services.
HIRSLANDEN
Hirslanden AG, a company registered in Switzerland, is
the holding company of the Group’s operating division
in Switzerland, trading under the Hirslanden brand.
Hirslanden AG is an indirect wholly-owned subsidiary of
the Company.
Hirslanden operates 17 acute care private hospitals with
1 805 beds and 4 clinics.
The Company’s primary listing is on the LSE in the United
Kingdom, with secondary listings on the JSE in South Africa
and the NSX in Namibia. The Group’s registered offi ce is in
London, United Kingdom.
Permanent employees: 9 635
Full-time equivalents: 7 633
For more information, please visit:
www.hirslanden.ch
Mediclinic also holds a 29.9% interest in Spire Healthcare
Group plc, a leading UK-based private healthcare group
listed on the LSE.
OUR CULTURE
Mediclinic is committed to conducting our business with
honesty and integrity. Our Code of Business Conduct and
Ethics and core values represent the basic beliefs to which
we aspire.
• Client orientation
• Team approach
• Mutual trust and respect
• Performance driven
Mediclinic takes a sustainable, long-term approach to
business, putting patients at the heart of its operations and
consistently delivering high-quality healthcare services.
In order to deliver on these priorities, the Group upholds
the highest standards of clinical governance and ethical
behaviour across its divisions, invests signifi cant time and
resources in recruiting and retaining skilled staff , makes
considerable investment into its facilities and equipment and
respects the communities and environment in the areas in
which it operates.
We value diversity and provide equal opportunities for all
in the workplace and do not tolerate any form of unfair
discrimination.
Mediclinic recognises its accountability to its stakeholders
and is committed to eff ective and regular engagement
with them, which is fundamental in maintaining Mediclinic’s
corporate reputation as a trusted and respected provider
of healthcare services and positioning itself as a leading
international private healthcare group. The Group
is committed to conducting its business in a manner that
respects and promotes the human rights and dignity of
all those within our sphere of infl uence throughout our
operations and relationships.
MEDICLINIC SOUTHERN AFRICA
Mediclinic Southern Africa (Pty) Ltd, a company
registered in South Africa, is the holding company of
the Group’s operating division in Southern Africa (South
Africa and Namibia), trading under the Mediclinic brand.
Mediclinic Southern Africa (Pty) Ltd is an indirect wholly-
owned subsidiary of the Company. Most of its operating
subsidiary companies have external doctor shareholding.
Mediclinic Southern Africa operates 49 acute care
private hospitals and 2 day clinics in South Africa and
three hospitals in Namibia, with 8 131 beds in total.
Through its wholly-owned subsidiaries, MHR and ER24
it off ers related services in healthcare recruitment and
emergency transportation services, respectively.
Permanent employees: 16 068
Full-time equivalents:
19 795 (which include
3 792 agency staff )
For more information, please visit:
www.mediclinic.co.za
www.mhr.co.za
www.er24.co.za
MEDICLINIC MIDDLE EAST
Mediclinic Middle East operates 6 acute care private
hospitals and 22 clinics mainly in Abu Dhabi and Dubai,
UAE with 748 beds.
The Group’s operating division in the UAE operates mainly
in Dubai and Abu Dhabi, trading under the Mediclinic brand.
Emirates Healthcare Holdings Limited BVI, a company
registered in the British Virgin Islands, is the intermediary
holding company of the division’s operations in Dubai; and
Al Noor Golden Commercial LLC, a company registered
in the UAE, is the intermediary holding company of the
division’s operations in Abu Dhabi.
Permanent employees: 5 801
5 830
Full-time equivalents:
For more information, please visit:
www.mediclinic.ae
Refer to the Investments in Subsidiaries, Associates and Joint
Ventures annexed to the consolidated annual fi nancial statements
for more information on the Group’s ownership structure.
AR
10 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
11
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BUSINESS
MODEL
PURPOSE DRIVEN
Our business model is focused on our
core purpose:
TO ENHANCE THE
QUALITY OF LIFE OF
PATIENTS
by providing acute care, specialist-
orientated, multi-disciplinary healthcare
services.
OUR VISION
TO BE PREFERRED
LOCALLY AND
RESPECTED
INTERNATIONALLY
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; and
• being a valued member of the
community.
WE WILL BE RESPECTED
INTERNATIONALLY FOR:
• delivering measurable quality
clinical outcomes;
• continuing to grow as a successful
international healthcare group;
• enforcing good corporate
governance; and
• acting as a responsible corporate
citizen.
Our relentless focus on patient
needs will create long-term
shareholder value and establish
Mediclinic International as a leader
in the global healthcare industry.
OUR ASSETS AND RESOURCES
OUR STRATEGY TO DELIVER VALUE
Strong financial position
Mediclinic has a strong financial profile, underpinned by an extensive
property portfolio. The Group has good access to capital, a disciplined
capital allocation approach and invests for growth.
See the Financial Review for more information.
Facilities and technology
We provide high-quality healthcare facilities and technology, with
continuous investments in new technology and to expand and maintain
existing facilities.
See the Financial Review and the Chief Executive Officer’s Review
for more information.
Engaged employees
The Group employs over 31 500 employees across its three divisions.
We value our employees by following fair labour practices and offering
competitive remuneration, training and development opportunities. The
Group overall employee engagement grand mean score increased from
3.81 in the previous year to 3.88 in November 2017.
During the year, £1 293m (2017: £1 231m) was paid to employees
as remuneration and other benefits. Continuous investment in the
training and development of staff creates a highly trained workforce
and talent pipeline.
See the Sustainable Development Highlights for more information.
Operational expertise
Mediclinic has an experienced Board and management team. The
continued growth of Mediclinic is testament to their ability to execute
the Group’s strategy. The expertise of the Group’s clinical staff is a critical
element of its business, allowing it to provide quality healthcare services.
Deep operational expertise delivers a seamless patient experience,
underpinned by high-quality nursing care.
See the Chief Executive Officer’s Review and Clinical Services
Overview for more information.
Sound relationships
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.
See the Corporate Governance Statement and the Sustainable
Development Report (available on the Company’s website) for more
information.
Responsible environmental management
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 the
ISO 14001 standard.
See the Sustainable Development Highlights for more information.
AR
AR
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SDR
AR
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Strategic objectives
Putting Patients First
Patients are at the core of everything we do at Mediclinic.
We strive to deliver superior clinical performance
through efficient structures, processes, and outcomes, in
accordance with the Group clinical performance model.
Improving efficiencies
We strive to use our combined international capacity
and effective collaboration to achieve Group efficiencies
through the principles of simplification, standardisation
and centralisation.
Continuing to grow
Mediclinic 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 of existing facilities.
Adapt to changing business environment
We strive to minimise risk to the business by positioning
the Group to effectively respond to changes in the business
environment.
Key strategic enablers
Invest in employees
Invest in information and
communications technology
Invest in analytics
See Our Strategy, Progress and Aims for
more information.
Risk management
The Group has established an integrated and effective
risk management framework where important and
emerging risks are identified, assessed and managed,
which are aligned to and supports the Group strategy.
See the Risk Management, Principal Risks and
Uncertainties for more information.
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WHAT WE DELIVER
Quality healthcare services
During the year, the clinical performance was satisfactory
across all operating divisions, and several patient safety
and clinical effectiveness indicators showed improvement.
In addition, many
in support of clinical
performance and quality improvement were launched and
completed during the year.
initiatives
AR
See the Clinical Services Overview for more information.
Shareholder value
We deliver value to shareholders through growth in
capitalisation and shareholders returns, with the balance
of funds retained for investment in profitable growth
opportunities.
A focus on disciplined cost management and improving
efficiencies has delivered a strong track record of cash
flow generation, with a total dividend to shareholders of
7.90 pence per share.
See the Financial Review for more information.
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MEDICLINIC’S
BUSINESS MODEL
HAS RESULTED
IN THE DELIVERY
OF QUALITY
HEALTHCARE
SERVICES AND
GENERALLY
A BUSINESS
THAT SUSTAINS
GROWTH
AND CREATES
VALUE FOR ITS
STAKEHOLDERS.
12 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
13
OUR STRATEGY, PROGRESS
AND AIMS
OUR OBJECTIVE
Mediclinic’s overall objective is to generate long-term shareholder value through:
• putting Patients First;
•
improving Group and operational efficiencies;
• pursuing attractive growth opportunities; and
•
leveraging our global scale;
• continuing to invest in employees, information and communications technology and analytics.
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS FY18
AIMS FY19
AR
CSR
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CSR
AR
CSR
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Putting Patients First – superior clinical
performance in a safe clinical environment
More information on this priority is included in the
Clinical Services Overview and the more detailed
Clinical Services Report available on the Company’s
website at www.mediclinic.com.
The Group strives to deliver superior clinical
performance through efficient structures, processes,
and outcomes, in accordance with the Group clinical
performance model.
Putting Patients First – improved patient
experience
More information on this priority is included in the
Clinical Services Overview and the more detailed
Clinical Services Report available on the Company’s
website at www.mediclinic.com.
The Group strives to deliver superior patient experience
before, during and after hospitalisation, through
efficient structures, processes, and outcomes to identify
and respond to the needs of patients, family members,
and visitors.
Putting Patients First – deliver integrated and
coordinated care
More information on this priority is included in the
Clinical Services Overview and the more detailed
Clinical Services Report available on the Company’s
website at www.mediclinic.com.
Improving group and operational efficiencies
More information on this priority is included in the
Chief Executive Officer’s Review.
The Group strives to become a horizontally integrated
healthcare system provider by focusing on effective
collaboration with associated doctors and allied
healthcare professionals.
The Group strives to use combined international
capacity and effective collaboration to achieve Group
efficiencies through the principles of simplification,
standardisation, and centralisation.
The Group strives to drive the continuous improvement
of the operating divisions’ operational efficiency by
proactively identifying and pursuing opportunities for
improvement.
• Restructured and strengthened clinical leadership
at hospital and corporate level across all operating
divisions and the Group
• Strengthened and embedded the Clinical
Performance Committee as a subcommittee
of the Board
• Established a formal Clinical Performance
Committee for Mediclinic Southern Africa
• Established health technology assessment as the
cornerstone of making clinical investment and
process decisions for the benefit of the Group
•
• Managed the patient experience indices and
worked towards improvement targets across
the Group
Improved the patient experience index overall
mean score for the Southern African operating
division to 82.1% from 81.9%, and for Dubai in the
Middle East operating division to 83.3% from
82.5% for inpatients and to 82.8% from 81.6% for
outpatients. The overall mean score for the first
year of implementation in the Swiss operating
division was 87.7%
• Progressed well in establishing closer collaboration
with doctors, with the aim to reduce fragmentation
and enhance the patient value proposition across
the Group
AR
• Refer to the Divisional Reviews for progress
relating to improved operational efficiencies
Improve patient safety throughout the Group
•
• Embed and improve the Group clinical
performance model
• Embed Group clinical governance processes
and structures
•
• Establish formal Clinical Performance Committees
for the Swiss and Middle East operating divisions
Implement a comprehensive electronic health
record system across Mediclinic Middle East.
• Expand on health technology assessments for
effective clinical decision-making and efficient
investments throughout the Group
• Continuously improve accommodation and ancillary
services and clinical services, through using the
patient experience index results across the Group
• Establish and embed service differentiation where
appropriate across the Group
• Establish closer collaboration with doctors to
reduce fragmentation and enhance the patient
value proposition across the Group
Implement a system provider model across
the Group
Improve clinical leadership and doctor-related
governance across the Group
•
•
• Optimise revenue (volume, tariffs and patient mix)
across the Group
• Optimise workforce cost and materials utilisation
across the Group
• Optimise infrastructure (e.g. bed and theatre)
utilisation across the Group
• Continue to centralise and standardise appropriate
processes across the Group
• Embed return on invested capital as a key financial
metric across the Group
14 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
15
O
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OUR STRATEGY, PROGRESS AND AIMS (CONTINUED)
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS FY18
AIMS FY19
Continuing to grow
AR
More information on this priority is included in the
Divisional Reviews.
The Group strives to increase the performance of
the business by identifying and pursuing growth
opportunities.
AR
• Refer to the Divisional Reviews for progress
relating to growth opportunities
AR
AR
SDR
Continuing to address the business environment
More information on this priority is included in the
Divisional Reviews.
The Group strives to minimise risk to the business by
positioning the Group to effectively respond to changes
in the business environment.
• Engaged continuously with regulators to monitor
and influence the regulatory environment in all
operating divisions
Investing in employees
More information on this priority is included in the
Sustainable Development Highlights (material
issue 1), and the more detailed Sustainable
Development Report available on the Company’s
website at www.mediclinic.com.
The Group strives to provide human resources services
to attract, develop, engage and retain a diverse
workforce that effectively enables its objectives and
performance.
•
•
•
Increased the participation rate in the Your Voice
employee engagement programme to 77% (71% in
2017), close to the Gallup Healthcare (peer) overall
participation rate of 80%
Increased the amount of trackable action plans
defined by line managers for 2017, which signals
a strong use of the results to improve employee
engagement
Increased the grand mean score for the Southern
African and Swiss operating divisions, as well as for
the Group (the Middle East operating division is not
directly comparable due to the inclusion of Al Noor)
• Pursue opportunities for organic and inorganic
growth in the core business of the existing
operating divisions (e.g. day surgery, new
service lines)
• Pursue opportunities to expand services across the
continuum of care (e.g. primary, sub-acute, dialyses,
psychiatric, and out-patient care) in the existing
operating divisions
Improve the ability to attract and retain physicians
to support growth across the Group
•
• Pursue new international growth opportunities
• Monitor and influence the regulatory environment
•
in all operating divisions
Identify and research potential disruptors of the
current business model and respond appropriately
across the Group
• Continue to implement and measure progress on
action plans based on the employee engagement
survey across the Group
• Execute talent acquisition and retention strategies
across the Group
• Ensure competitiveness and governance of
remuneration across the Group
Investing in information and communications
technology
AR
More information on this priority is included in the
Chief Executive Officer’s Review.
The Group strives to provide information and
technology solutions and support that effectively
enable business objectives and performance.
• Completed SAP GRC and BPC shared service
implementations
• Optimise back-office technology (SAP) for the Group
• Enhance clinical applications capabilities (electronic
• Concluded global contract with InterSystems for
health record) across the Group
Investing in analytics
AR
CSR
More information on this priority is included in the
Clinical Services Overview and the more detailed
Clinical Services Report available on the Company’s
website at www.mediclinic.com.
The Group strives to provide analytics solutions and
support that effectively enable business objectives
and performance.
electronic health record solutions
• Extended Swiss operating division’s content
•
management solution for marketing functions to
the entire Group
Implemented phase 1 of SAP SuccessFactors
solution for the Southern African and Middle
Eastern operating divisions
• Establish a patient engagement architecture (digital
marketing) for the benefit of the Group
• Ensure information and communications
technology governance across the Group
• Developed a central clinical data warehouse and
improved clinical performance measurement and
benchmarking across the Group
• Entrench the use of centralised analytics in all
operating divisions
• Develop new capabilities (e.g. machine learning) for
• Commenced with developing machine learning
the benefit of the Group
capabilities for the benefit of the Group
O
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16 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
17
INVESTMENT
CASE
In pursuit of our vision to be preferred locally and respected internationally, we offer an attractive investment case that
aligns with seeking to achieve long-term value creation:
Continued growth in demand for healthcare services:
STRONG MARKET
FUNDAMENTALS
• Ageing population
• Growing disease burden
• Technological advances
• Consumerisation of services
DIVERSIFIED
PRESENCE
LEVERAGING
GLOBAL SCALE
ATTRACTIVE
GROWTH
OPPORTUNITIES
HIGH-QUALITY
MANAGEMENT
TEAM WITH PROVEN
DELIVERY
One of the largest independent pan-EMEA
healthcare services groups:
• Leading market positions across all divisions
• Developed markets – Switzerland and UK
• Emerging markets – Southern Africa and UAE
Competitive advantage created from efficient
integration of international operating divisions:
Internationally recognised clinical expertise
•
• Sustainable and efficient operating practices
•
Intellectual property of highly skilled and engaged
human capital
• Global procurement synergies
• Powerful data analytics
Well positioned to take advantage of growth
opportunities that generate sustainable long-term value:
• Leveraging system relevance
• Operational flexibility through extensive property
ownership
• Returns-driven organic and inorganic expansion
• Evolving care delivery models
• Expanding across the continuum of care
A track record of operating global private healthcare
services for over 30 years:
• Focused on long-term value creation
• Financial discipline and strong cash flow generation
• Relentless focus on patient safety and excellent clinical
performance
• Experienced international executive and senior
management teams
• Supportive long-term investor since inception – Remgro
• Dividend pay-out ratio: 25 to 30% of adjusted EPS
18 MEDICLINIC | ANNUAL REPORT 2018
FIVE-YEAR
SUMMARY
The Five-year Summary is presented in pounds sterling, rounded to the nearest million. Financial information of 2014
to 2015 was reported in South African rand and 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 re-translation have been recognised in the foreign currency translation reserve.
INCOME STATEMENTS
Revenue
Operating (loss)/profit
(Loss)/profit after tax
Adjusted operating profit
Adjusted EBITDA
Adjusted earnings
EARNINGS PER SHARE
Basic (loss)/earnings basis
Diluted (loss)/earnings basis
Basic adjusted earnings basis
Diluted adjusted 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
STATEMENTS OF CASH FLOWS
Operating cash flow (£'m)
Adjusted EBITDA cash conversion (%)
2018
£’m
2 870
(288)
(474)
370
515
221
2018
pence
(66.7)
(66.7)
30.0
30.0
7.90
2018
£’m
5 382
961
6 343
3 286
87
3 373
2 445
525
2 970
6 343
2018
466
90%
2017
£’m
2 749
362
243
360
501
220
2017
pence
31.0
31.0
29.8
29.8
7.90
2017
£’m
6 353
1 069
7 422
4 086
78
4 164
2 668
590
3 258
7 422
2017
492
98%
2016
£’m
2 107
288
190
335
428
219
2016
pence
29.6
29.5
36.7
36.7
7.90
2016
£’m
5 604
945
6 549
3 509
61
3 570
2 192
787
2 979
6 549
2016
411
96%
2015
£’m
1 977
345
254
318
403
193
2015
pence
44.6
43.8
35.8
35.1
9.33
2015
£’m
3 654
742
4 396
1 779
61
1 840
2 114
442
2 556
4 396
2015
440
109%
2014
£’m
1 892
342
223
325
401
189
2014
pence
41.4
40.5
37.3
36.5
8.90
2014
£’m
3 368
638
4 006
1 390
52
1 442
2 096
468
2 564
4 006
2014
394
98%
MEDICLINIC | ANNUAL REPORT 2018
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CHIEF EXECUTIVE
OFFICER’S REVIEW
“BY FAR THE BIGGEST
HIGHLIGHT WAS THE
CLEAR DEMONSTRATION
THAT WE ARE DELIVERING
ON THE TURNAROUND OF
THE ABU DHABI BUSINESS
AND LAYING THE
FOUNDATION FOR
FURTHER SUCCESS
IN THE MIDDLE EAST
DIVISION.”
Danie Meintjes
Chief Executive Offi cer
HOW WELL DO YOU FEEL THE
GROUP PERFORMED THIS YEAR
AGAINST ITS STRATEGIC OBJECTIVE
OF PUTTING PATIENTS FIRST?
Patients are at the core of everything we do at Mediclinic. The
Group’s strategic focus ensures it consistently delivers high-
quality healthcare and optimal patient experience across
the operating divisions in Switzerland, Southern Africa and
the Middle East. To this end, Mediclinic continues to invest
in its people, clinical facilities and technology. The Group’s
growing international scale enables it to unlock further value
by promoting collaboration and best practice, extracting
operational synergies and delivering cost effi ciencies
through global procurement.
Long-term demand for Mediclinic’s services across its
operating divisions remains robust. This is underpinned by,
inter alia, an ageing population, growing disease burden,
technological
innovation and the consumerisation of
healthcare services. The increase in demand across the
operating divisions is contrasted by greater competition
and lower economic growth in some regions. There is an
increased focus on aff ordable delivery of healthcare, which
results in changing care delivery models and increased
regulatory oversight.
This year, we progressed in the key areas of clinical
performance, patient experience and staff engagement. As
referenced in the Chairman’s Statement and the Clinical
Services Overview, the majority of patient safety and clinical
eff ectiveness indicators showed improvement.
AR
Dr Felicity Harvey, who joined the Board in October 2017, has
chaired the Clinical Performance and Sustainability Committee
since April 2018. The aim of the committee is to promote a
culture of excellence in patient safety, quality of care and
patient experience; and ensure the Group remains a good and
responsible corporate citizen by monitoring its sustainability
performance. During the year, Mediclinic Southern Africa
established a Clinical Performance Committee with the same
clinical functions as the Board committee. This committee
reports to the Board committee as part of the Group’s
Ward-to-Board strategy. During the new fi nancial year,
we plan to establish similar committees at Hirslanden and
Mediclinic Middle East. The committees in the operating
divisions will include Group independent experts as members
to further strengthen the oversight function.
We rolled out the Press Ganey patient experience measurement
system in a standardised format to all operating divisions,
including the Abu Dhabi business following its integration
into the Group last year. We compared the Group’s results to
20 MEDICLINIC | ANNUAL REPORT 2018
tough international benchmarks and used the feedback to
deliver specifi c initiatives that matter most to our patients,
as we strive to provide them with an improved experience.
As part of its commitment to the Competition Commission’s
Health Market Inquiry, Mediclinic Southern Africa agreed to
publish the detailed patient feedback on its website. I was very
proud that Mediclinic had the largest representation in the
annual Discovery Health Top 20 South Africa Hospital survey
in 2017. Based on patient feedback, eight of our hospitals were
recognised in the survey for the quality of care from doctors
and nurses, patients’ overall experience and hospital conditions.
Employee engagement is a key factor in ensuring we deliver
against our Patients First strategy. We evaluate this through
the annual Gallup employee engagement survey. This
standardised and independent evaluation system objectively
measures employee engagement and identifi es specifi c gaps
where improvements need to be made across the operating
divisions. Now in its third year of use at Mediclinic, I am glad
to report that we saw an increased participation rate of 77%
across the Group in comparison to 71% in the previous year. We
experienced an increase in the engagement grand mean score
for the Southern African and Hirslanden divisions. Data for
the Middle East division showed a slight regression, however,
it is not directly comparable because the Al Noor hospitals
were included in the survey for the fi rst time. Consequently,
the Mediclinic Group overall employee engagement grand
mean score increased from 3.81 to 3.88. Following the 2016
survey results, there was a signifi cant increase in the amount of
trackable action plans, defi ned by line managers in 2017. This
signals that the results are being used to positively impact the
level of engagement among employees.
WHAT ARE YOUR VIEWS ON THE
OPERATIONAL PERFORMANCE
ACROSS MEDICLINIC’S DIVISIONS
THIS YEAR?
Group revenue increased by 4% to £2 870m (FY17: £2 749m)
and adjusted EBITDA was up 3% to £515m (FY17: £501m).
On an adjusted basis, the operating divisions performed
well overall this year given their diff erent market and
regulatory environments. The biggest highlight was the clear
demonstration that we are delivering on the turnaround
of the Abu Dhabi business. Once again, Southern Africa
produced steady revenue growth, and the team managed
the cost base well, despite pressure on patient volumes.
In Switzerland, the Hirslanden team faced a number
of regulatory changes that came into eff ect during the year.
The division will need to continue adapting to the evolving
outpatient environment while delivering cost savings and
operational effi ciencies. The Hirslanden 2020 strategic
programme is key to addressing these factors.
In the Middle East division, the operational changes
implemented in the Abu Dhabi business during the prior
year to align with our established Dubai business, laid the
foundation for future growth. I was encouraged by the
improved performance this year, particularly in the second
half, which delivered a 1% improvement in revenue and a
100 basis points improvement in the adjusted EBITDA
margin. We welcomed a large number of new doctors into
the division over the past year, and we continue to recruit
high-quality clinical personnel to meet the future demands
of the business. The rebranding of the Abu Dhabi business
to Mediclinic was completed earlier in the year. We saw a
strong return of Thiqa (health insurance for UAE nationals)
patients during the year following the reversal of the co-
payment in April 2017 with Thiqa inpatient and outpatient
volumes increasing by 83% and 38% respectively. The
quality of our engagement with the regulator in Abu Dhabi
advanced during the year, as we continue to demonstrate
our long-term commitment to the region and sustainable
operating practices. Mediclinic was honoured to be invited
by the Department of Health in Abu Dhabi to join its
healthcare advisory board.
This is only the start, as we enter a growth phase underpinned
by continued strong performance in the established Dubai
business, signifi cant improvement in the Abu Dhabi business
and the opening of several new facilities over the coming
years. Two of our recent expansion investments in the Middle
East performed ahead of expectations. The dedicated
cancer centre at Mediclinic City Hospital’s new North Wing
in Dubai and the new Mediclinic Al Jowhara Hospital in
Al Ain brought international clinical expertise to patients
in the region. Several key expansion and upgrade projects
underway will support future growth. The largest and most
signifi cant of these is the new 182-bed Mediclinic Parkview
Hospital in Dubai, which is six months ahead of schedule
and due to open in October 2018. A special feature on
this exciting project is included in the Annual Report from
page 64.
AR
Mediclinic Southern Africa performed well during the year
considering the macro environment and stagnant medical
insurance membership. Despite patient volumes being under
pressure due to the timing of Easter and a number of other
public and school holidays, the division grew revenue and
adjusted EBITDA by 5% and 6% respectively. The adjusted
EBITDA margin improved to 21.5% as a result of a strong
focus on cost management and effi ciencies. Although we
remain cautious of the need for additional bed capacity given
the current macro environment, we continue to upgrade our
facilities, and will be establishing six additional day clinic
facilities co-located with some of our busiest hospitals over
the coming two years. Further, as we look at expansionary
opportunities across the continuum of care, the Southern
Africa division is in the process of acquiring a stake in the
Intercare day hospital business and a controlling share in
Matlosana Medical Health Services in Klerksdorp, subject to
Competition Commission approval.
MEDICLINIC | ANNUAL REPORT 2018
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CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)
Previously announced regulatory changes
in the Swiss
healthcare system, centred around the outpatient environment,
negatively impacted the division’s performance resulting in the
recognition of impairment charges on intangible assets and
property totalling £644m. On 1 January 2018, the TARMED
tariff revisions were implemented, effectively reducing the
tariff for outpatient treatments. During the year, five cantons,
including Zurich, implemented a list of procedures that
will be reimbursed at outpatient tariffs. The 2% increase in
revenue was impacted by the timing of the Easter period, a
subdued summer market, the continued change in insurance
mix and the evolving changes in the regulatory environment.
The continued focus on cost-management programmes and
efficiency savings is a key priority for the division, including
the Hirslanden 2020 strategic programme. Despite these
initiatives, Hirslanden’s adjusted EBITDA margin decreased
to 18.3% as it adapts to the current trends in the market and
regulatory environment.
The Hirslanden division completed the acquisition of the
Linde Private Hospital (“Linde”) in Biel at the end of
June 2017. Linde, a market-leading 115-bed hospital, offers
a wide range of medical services, including an outpatient
clinic facility, radiology and an ophthalmology centre. Linde
delivered a good operating performance following its
integration into the Hirslanden division.
WHAT KEY CHALLENGES IS THE
GROUP ADDRESSING IN THE GLOBAL
HEALTHCARE MARKET?
The demand for healthcare services is growing worldwide.
The challenge for the industry, however, is to ensure those
services remain affordable. We emphasise the investment
we make in our clinical performance and the facilities we
operate to deliver to our patients the care we believe will
improve the quality of their lives. However, we must manage
the delivery of these services efficiently and cost-effectively
to ensure sustainability. These efforts are supported by
two key Group functions: the Clinical Information, Advanced
Analytics, Health Information Management and Clinical
Services team, which was established and built up by
2020 strategic programme. This programme has two main
goals: to increase the efficiency of the existing business by
implementing standardised systems and processes; and to
develop new areas of business, such as outpatient facilities
to efficiently deliver outpatient services. Hirslanden
is
assessing the most appropriate outpatient solution for each
hospital, including reconfiguring existing hospital surgery
units and establishing specialised outpatient and medical
centres – moving towards a more integrated medical network
that improves access to healthcare for all our patients.
HOW DOES THE GROUP’S ICT
INVESTMENTS SUPPORT ITS
STRATEGY?
Mediclinic employs various information and communications
its
technology (“ICT”) enabled capabilities to pursue
strategic and operational goals. To this end, Mediclinic
has further invested over the past year in some significant
capabilities and the associated technologies:
• electronic health record (“EHR”) capability for MCME by
acquiring and implementing the TrakCare system and
related IT applications;
• established a centralised shared services environment for
Hirslanden with the SAP suite products at the core of this
project;
• advanced Mediclinic’s analytics and data warehousing
initiatives by implementing the SAP HANA enterprise
data warehouse solution;
• a Global Human Resource Service Delivery model is
being enabled through the roll-out of SAP’s cloud-based
SuccessFactors HCM product;
• collaboration for teams and individuals through the Vidyo
and Skype-for-Business technologies; and
•
the safeguarding of Mediclinic’s operations and assets
is supported through the acquisition and installation of
various cybersecurity solutions.
that
We anticipate
these new
and enhanced business capabilities will benefit clinical
performance, operational efficiencies, productivity and
investments
the
in
Dr Ronnie van der Merwe (CEO Designate) in his role as
eventually business results.
Group Chief Clinical Officer; and the Global Procurement
team. Leveraging the powerful clinical data analytics across
the Group supports our drive to improve clinical performance
and efficiency by establishing best practice pathways
and processes. Our global procurement approach, using
our Group scale, resulted in tangible cost savings, and
we will continue to deliver on various procurement initiatives
in future.
Regulation in the healthcare sector continues to evolve.
Governments aim to make healthcare efficient, accessible and
affordable to their citizens. The trend of outmigration of care
in Switzerland is being addressed as part of the Hirslanden
DOES MEDICLINIC BENEFIT FROM
BEING A DIVERSIFIED GLOBAL
HEALTHCARE PROVIDER?
Given our scale, international presence and leading market
positions, Mediclinic is uniquely positioned to benefit
from being an integrated healthcare services group that
leverages off world-class clinical expertise. We made great
progress on our strategic priority of improving efficiencies
by simplifying, standardising and centralising key business
support processes and back-office services. Our central
procurement function continues to deliver significant cost
22 MEDICLINIC | ANNUAL REPORT 2018
savings, using our Group scale and international footprint.
Mediclinic’s ICT function unlocked meaningful synergies
through standardising the systems deployed across the
Group. In future, this will generate lower ICT maintenance
cost and simplify the task of ensuring we adhere to stringent
data protection legislation.
Although clinical models differ from country to country, the
basic principles are similar. Therefore, we actively promote
collaboration and the transfer of knowledge within the Group
to ensure we embrace best practice and deliver clinical
excellence. As they did last year, colleagues from Hirslanden
are collaborating with the Middle East team as they design
our second cancer centre at the Mediclinic Airport Road
Hospital in Abu Dhabi. Mediclinic’s international reputation
supports our efforts to attract and retain highly skilled
people, which is key to the Group delivering on its long-term
growth strategy.
As part of the Group’s strategic financial framework,
investment hurdle rate requirements ensure rigorous capital
allocation across the Group. This informs our decision-
making regarding ongoing investment in the maintenance
and upgrade of our facilities, in addition to selective
organic and inorganic growth opportunities. The substantial
ownership of our property portfolio also allows the Group
to secure long-term financing at competitive rates. This
was demonstrated in Switzerland, with the refinancing of
Hirslanden’s secured debt in October 2017. The new facility
was expanded by up to CHF0.45bn, and the cost of debt
reduced by 25 basis points. The maturity profile extended
to at least 2023. Efficiently allocating capital across an
international business and appropriately managing the cost
of debt will provide opportunities to improve returns, thus
generating long-term value for shareholders.
WHAT ARE YOUR PROUDEST
ACHIEVEMENTS DURING YOUR TIME
AT MEDICLINIC?
I have been with Mediclinic for more than 30 years, and I
am proud to have been part of a team that grew the Group
from a single South African hospital under construction in
1985 to one of the largest independent pan-EMEA healthcare
services groups. Our first venture outside Southern Africa
was the investment in Dubai. We acquired a minority interest
in a relatively small business with one hospital. Craig Tingle,
our former Group CFO, and I were sent to Dubai as the initial
Mediclinic team to manage the investment. Despite the
uncertainty of operating in a new market, we overcame a
number of challenges and grew the modest initial investment
to create a market-leading healthcare services business in
Dubai. In Dubai, we now have eight clinics, with two further
additions following the Majid Al Futtaim acquisition in
May 2018, and there will soon be three hospitals with the
opening of the new Mediclinic Parkview Hospital later in 2018.
The opportunity to further grow in that region is supported by
the recent addition of the Abu Dhabi business which I believe,
over time, will emulate the success of our Dubai business.
I am fortunate to have worked with some of the industry’s
leading professionals and an experienced team of senior
executives. Across the Group, we have built a strong
management team with a wealth of experience, functioning
in a well-embedded value-based culture. I am privileged
to have worked in various roles during my career. It is an
honour for me to have been part of a team that established
corporate structures, processes and systems that are
standing the test of time. I am proud of the diverse team of
highly skilled and experienced people in Mediclinic, who has
the capacity and tenacity to take the Company forward as
a respected international healthcare services group to the
long-term benefit of all the stakeholders.
WHY DO YOU BELIEVE MEDICLINIC
IS WELL-POSITIONED FOR FUTURE
SUCCESS?
As mentioned, the demand for quality healthcare services
is continuously growing on an international basis driven
by a variety of factors such as an ageing population, new
technology, growing middle class and consumerism. We
acknowledge that affordability of healthcare needs to be
factored in to ensure long-term sustainability of the industry.
However, as one of the largest independent pan-EMEA
healthcare services groups, Mediclinic is well-positioned to
deliver long-term value to its shareholders through a well-
balanced, diversified portfolio of operations, with a leading
position across attractive healthcare markets; a relentless
focus on patient safety and excellent clinical performance;
and attractive growth opportunities.
Stepping down as CEO after eight years in the role, I depart
as an executive director from a Group that is established
as an industry-leading healthcare services provider, with
international best practice and processes in place, and a
great depth in the management capacity which will support
the growth of the business going forward. Most importantly,
there is a positive and collaborative culture across the Group
that forms the principal framework for how we provide
services to our patients. I know that Ronnie, who will take
over from me in June 2018, will be supported by the broader
senior management team and will lead the Group to further
success to the benefit of all our stakeholders. I wish them
every success in the future and look forward to continuing to
support the Group in my new role as a non-executive director.
Danie Meintjes
Chief Executive Officer
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
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FINANCIAL
REVIEW
“OUR COMMITMENT TO
SHAREHOLDER VALUE IS
MEASURED USING RETURNS
ON INVESTED CAPITAL,
THEREBY FOCUSING
STRATEGIC DELIBERATIONS
ON WAYS TO IMPROVE
RETURNS ON THE
GROUP’S INVESTED
ASSET BASE.”
Jurgens Myburgh
Chief Financial Offi cer
INTRODUCTION
Mediclinic has a defi ned purpose to enhance the quality
Our commitment to shareholder value is measured using
of life of our patients and a strategic objective to generate
returns on invested capital, thereby focusing strategic
long-term shareholder value. These fundaments inform our
deliberations on ways to improve returns on the Group’s
daily operational activity and frame our fi nancial strategy.
invested asset base. We do this through, for example, improving
We strive to make decisions that improve the quality of our
effi ciencies or the use of technology. Our commitment
business to drive sustainable, long-term value for the Group.
also informs the governance process around investment
Mediclinic operates in an industry where the combination of
growth and dynamic disruptive and regulatory forces create
an opportunity for investment and collaboration. The Group
has a well-invested asset base that is able to, by adopting
technology and operating innovation, drive the business
to improved asset utilisation while taking advantage of
selective opportunities for value-adding growth.
decisions, which follows a framework of mandated authority
levels and required internal rates of return. The combination
of improvements in asset utilisation and application of
investment discipline is aimed at generating improved value
for shareholders in the long term.
24 MEDICLINIC | ANNUAL REPORT 2018
GROUP FINANCIAL PERFORMANCE
Group revenue increased by 4% to £2 870m (FY17: £2 749m)
for the reporting period. In constant currency terms, FY18
revenue was up 3%. This was as a result of marginal revenue
growth in Hirslanden and the Middle East and modest
revenue growth in Southern Africa, compared to the
comparative period.
Earnings before interest, tax, depreciation and amortisation
(“EBITDA”) was 3% higher at £522m (FY17: £509m). Adjusted
EBITDA was also 3% higher at £515m (FY17: £501m), with
adjusted EBITDA margins declining from 18.2% to 17.9%.
EBITDA was adjusted for the following exceptional items:
• a past-service cost credit of £4m relating to a change
in the Swiss pension fund conversion rate advised by an
independent professional. The credit is not related to the
current year performance of Hirslanden; and
• a release of a pre-acquisition fair value adjustment to
debtors of £3m in Mediclinic Middle East.
Adjusted depreciation and amortisation was up 5% to
£145m (FY17: £138m) in line with the continued investment
programme expanding the asset base to support growth
and enhancing patient experience and clinical quality.
The Group recorded an operating loss of £288m in FY18
(FY17: operating profi t of £362m). Adjusted operating profi t
increased by 3% to £370m (FY17: £360m). Operating profi t
was adjusted for the following exceptional items:
•
recognition of an impairment charge to Hirslanden
properties. Non-fi nancial assets are considered for
impairment when impairment indicators are identifi ed
at an individual cash-generating unit (“CGU”) level.
During the year, the CGUs in Hirslanden were tested
charges against goodwill and indefi nite life trade names
of £300m and £260m, respectively. Hirslanden goodwill
and indefi nite life trade names were carried at £307m
and £341m, respectively, at the previous year end balance
sheet date of 31 March 2017. The impairment charge is
non-cash;
• accelerated amortisation of £23m relating to the rebranding
of the Al Noor hospitals to Mediclinic;
•
release of unutilised pre-acquisition Swiss provision of
£9m; and
• a loss on disposal of certain non-core businesses in
Mediclinic Middle East of £7m.
Adjusted net fi nance costs benefi ted from the refi nance
in Switzerland and were down 13% at £70m (FY17: £80m).
The Group's reported eff ective tax rate is signifi cantly
skewed by exceptional non-deductible expenses which
include impairment of goodwill; impairment of the equity
investment and accelerated amortisation. The rate is also
aff ected by unrelievable losses on disposals of non-core
businesses. Adjusted taxation was £64m (FY17: £58m) with
an adjusted eff ective tax rate for the period of 20.8% (FY17:
20.4%). After adjusting for the amortisation of intangible
assets recognised in the notional purchase price allocation
of the equity investment, the FY18 income from associates
was £2.8m (FY17: £12.4m).
The Group recorded an earnings loss of £492m in FY18
(FY17: earnings of £229m). Adjusted earnings increased
by 1% to £221m (FY17: 220m). Adjusted earnings per share
were 1% higher at 30.0 pence (FY17: 29.8 pence). Earnings
were adjusted for the following exceptional items:
•
fair value gains on ineff ective cash fl ow hedges of £4m
(FY17: £13m) in Hirslanden;
for impairment. For one CGU in particular, the carrying
• derecognition of unamortised fi nance expenses of £19m
value was determined to be higher than its recoverable
following the refi nance in Switzerland; and
amount and as a result an impairment charge of £84m
•
recognition of an impairment charge on the equity
was recognised in the income statement;
investment in Spire of £109m. During the year, the
•
recognition of an impairment charge to Hirslanden
Group performed an impairment test updating the
intangible assets of £560m. In line with the requirements
key assumptions applied in the value in use calculation
of IFRS, the Group performed an annual review of the
performed at 31 March 2017. In particular, the Group
carrying value for goodwill and other intangible assets.
adjusted the value in use calculation for the guidance
In Switzerland, the changes in the market and regulatory
announced by Spire in September 2017 about the current
environment, that became evident during the annual
fi nancial performance and about the related impact on
fi nancial planning exercise for 2019 and future years which
short- and medium-term growth rates and revisited other
was completed in the fourth quarter of FY18, aff ected
key assumptions in this context. As a result, an impairment
key inputs to the review that gave rise to impairment
loss of £109m was recorded against the carrying value.
MEDICLINIC | ANNUAL REPORT 2018
25
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O
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FINANCIAL REVIEW (CONTINUED)
EARNINGS RECONCILIATION
2018 STATUTORY
RESULTS
Revenue
Operating (loss)/profit
(Loss)/profit attributable
to equity holders
Reconciliations
Total
£’m
2 870
(288)
(492)
Hirslanden
£’m
1 349
(470)
(471)
Southern
Africa
£’m
877
160
72
Middle
East
£’m
643
25
17
Operating (loss)/profit
(288)
(470)
160
Add back:
– Other gains and losses
– Depreciation and
amortisation
– Impairment of properties
– Impairment of intangible
assets
EBITDA
Exceptional items:
– Past service cost credit
– Pre-acquisition fair value
adjustment to debtors
Adjusted EBITDA
Operating (loss)/profit
Exceptional items:
– Past service cost credit
– Pre-acquisition fair value
adjustment to debtors
– Impairment of properties
– Impairment of intangible
assets
– Accelerated amortisation
– Release of pre-acquisition
Swiss provision
– Loss on disposal of
businesses
Adjusted operating
profit/(loss)
(2)
168
84
560
522
(4)
(3)
515
(9)
86
84
560
251
(4)
–
247
(288)
(470)
(4)
(3)
84
560
23
(9)
7
(4)
–
84
560
–
(9)
–
–
29
–
–
189
–
–
189
160
–
–
–
–
–
–
–
370
161
160
25
7
53
–
–
85
–
(3)
82
25
–
(3)
–
–
23
–
7
52
Spire
£’m
Corporate
£’m
–
–
(106)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(3)
(4)
(3)
–
–
–
–
(3)
–
–
(3)
(3)
–
–
–
–
–
–
–
(3)
26 MEDICLINIC | ANNUAL REPORT 2018
EARNINGS RECONCILIATION (CONTINUED)
2018 STATUTORY
RESULTS
Reconciliations
(Loss)/profit attributable
to equity holders
Exceptional items
– Past service cost credit
– Pre-acquisition fair value
adjustment to debtors
– Impairment of properties
– Impairment of intangible
assets
– Accelerated amortisation
– Release of pre-acquisition
Swiss provision
– Loss on disposal of
businesses
– Fair value gains on
ineffective cash flow
hedges
– Derecognition of
unamortised finance
expenses
– Impairment of associate
– Tax on exceptional items
Adjusted earnings
Weighted average number
of shares (millions)
Adjusted earnings per
share (pence)
(4)
–
84
560
–
(9)
–
(4)
19
–
(69)
106
(4)
(3)
84
560
23
(9)
7
(4)
19
109
(69)
221
737.1
30.0
Total
£’m
Hirslanden
£’m
Southern
Africa
£’m
Middle
East
£’m
Spire
£’m
Corporate
£’m
(492)
(471)
72
–
–
–
–
–
–
–
–
–
–
–
17
–
(3)
–
–
23
–
7
–
–
–
–
(106)
(4)
–
–
–
–
–
–
–
–
–
109
–
3
–
–
–
–
–
–
–
–
–
–
–
(4)
72
44
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W
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A
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R
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O
N
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A
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MEDICLINIC | ANNUAL REPORT 2018
27
FINANCIAL REVIEW (CONTINUED)
EARNINGS RECONCILIATION (CONTINUED)
2017 STATUTORY
RESULTS
Revenue
Operating profit/(loss)
Profit attributable to
equity holders
Reconciliations
Operating profit/(loss)
Add back:
– Other gains and losses
– Depreciation and
amortisation
EBITDA
Exceptional items
– Past service cost credit
– Restructuring costs
Adjusted EBITDA
Operating profit/(loss)
Exceptional items
– Past service cost credit
– Restructuring costs
– Other gains and losses
– Accelerated amortisation
Adjusted operating
profit/(loss)
Profit attributable to
equity holders
Exceptional items
– Past service cost credit
– Restructuring costs
– Fair value gains on
ineffective cash flow hedges
– Other gains and losses
– Accelerated amortisation
– Tax on exceptional items
Adjusted earnings
Weighted average number
of shares (millions)
Adjusted earnings per
share (pence)
Total
£’m
2 749
362
229
362
2
145
509
(13)
5
501
362
(13)
5
(1)
7
360
229
(13)
5
(13)
(1)
7
6
220
736.9
29.8
Hirslanden
£’m
Southern
Africa
£’m
1 321
201
141
201
–
76
277
(13)
–
264
201
(13)
–
–
–
188
141
(13)
–
(13)
–
–
6
121
780
140
67
140
–
25
165
–
–
165
140
–
–
–
–
140
67
–
–
–
–
–
–
67
Middle
East
£’m
648
28
22
28
(1)
44
71
–
5
76
28
–
5
(1)
7
39
22
–
5
–
(1)
7
–
33
Spire
£’m
Corporate
£’m
–
–
12
–
–
–
–
–
–
–
–
–
–
–
–
–
12
–
–
–
–
–
–
–
(7)
(13)
(7)
3
–
(4)
–
–
(4)
(7)
–
–
–
–
(7)
(13)
–
–
–
–
–
–
12
(13)
28 MEDICLINIC | ANNUAL REPORT 2018
ADJUSTED NON-IFRS FINANCIAL
MEASURES
The Group uses adjusted income statement reporting as non-
IFRS measures in evaluating performance and as a method
to provide shareholders with clear and consistent reporting.
The adjusted measures are intended to remove volatility
associated with certain types of exceptional income and
is important to allow shareholders to better understand the
Group’s trading performance for the reporting period. It is
the Group’s intention to continue to consistently apply this
definition in the future.
SPIRE HEALTHCARE GROUP
Mediclinic has a 29.9% investment in Spire.
charges from reported earnings. Historically, EBITDA and
Spire’s underlying performance for the twelve months
adjusted EBITDA were disclosed as supplemental non-IFRS
to 31 December 2017 resulted in revenue increasing 1.0%,
financial performance measures because they are regarded
EBITDA decreasing 4.7% and the underlying EBITDA margin
as useful metrics to analyse the performance of the business
decreasing to 17.3%. Adjusted EPS (excluding exceptional and
from period to period. Measures like adjusted EBITDA are
tax one-off items) decreased by 25.0%. Underlying inpatient
used by analysts and investors in assessing performance.
and day case admissions declined 1.8% driven by PMI and
The rationale for using non-IFRS measures:
•
it tracks the adjusted operational performance of the Group
and its operating segments by separating out exceptional
items;
• non-IFRS measures are used by management for budgeting,
planning and monthly financial reporting; and
• non-IFRS measures are used by management
in
presentations and discussions with investment analysts.
The Group’s policy is to adjust, inter alia, the following types
of income and charges from the reported IFRS measures to
present adjusted results:
•
significant restructuring costs;
• profit/loss on sale of significant assets;
NHS volume declines more than offsetting growth in self-pay.
Mediclinic’s investment in Spire is equity accounted. Spire
reported profit after tax of £16.8m for Spire’s financial year
ended 31 December 2017 (31 December 2016: £53.6m).
Spire’s adjusted profit after tax for the year was £57.9m
(31 December 2016: £76.6m). The principal differences related
to a £28.7m provision for the potential cost of a civil
litigation settlement against a consultant who previously
had practicing privileges at Spire and a charge relating to a
decision to cease the provision of radiotherapy services at
the Spire Specialist Cancer Care Centre in Baddow (Essex).
The exceptional items materially impacted Mediclinic’s FY18
equity accounted share of reported profit after tax from
Spire. After adjusting for the amortisation of intangible
assets recognised in the notional purchase price allocation
• past service cost charges/credits in relation to pension
of the equity investment, the FY18 income from associate
fund conversion rate changes;
• accelerated IFRS 2 charges;
• accelerated amortisation charges;
was £2.8m (FY17: £12.0m). The underlying and adjusted
measures referenced above have been extracted from Spire’s
results announcement for the year ended 31 December 2017.
• mark-to-market fair value gains/losses, relating to ineffective
As previously disclosed, under the UK Takeover Code,
•
•
•
•
•
interest rate swaps;
significant impairment charges;
reversal of significant impairment charges;
significant insurance proceeds;
significant transaction costs incurred during acquisitions; and
significant prior year tax adjustments and tax impact of
the above items.
EBITDA is defined as operating profit before depreciation
and amortisation and impairments of non-financial assets,
excluding other gains and losses.
Non-IFRS financial measures should not be considered in
isolation from, or as a substitute for, financial information
presented in compliance with IFRS. The adjusted measures
Mediclinic is presumed to be acting in concert with a number
of entities in which its major shareholder, investment holding
company Remgro Limited (“Remgro”), has a direct interest
of 20%. or more and/or other entities in which such investee
companies (or their investee companies and so on down
the chain) have an interest of 20%. or more. Some of these
entities deal in listed securities during the ordinary course of
their businesses.
On 6 November 2017, Mediclinic announced that it had become
aware that two such entities (Kagiso Asset Management
(Pty) Ltd (“KAM”) and Truffle Asset Management (Pty) Ltd
(“Truffle”)) had acquired shares in Spire Healthcare Group
plc (“Spire”) which, together with Mediclinic's 29.9% interest,
meant that the presumed concert party group held, in
used by the Group are not necessarily comparable with
aggregate, shares representing over 30% of the voting rights
those used by other entities.
The Group has consistently applied this definition of adjusted
measures as it has reported on its financial performance in
the past as the directors believe this additional information
of Spire. It was also announced that the UK Takeover Panel
had ruled that the aggregate presumed concert party holding
in Spire must be reduced to below 30%, through a sale of
Spire shares by the entities or Mediclinic.
MEDICLINIC | ANNUAL REPORT 2018
29
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FINANCIAL REVIEW (CONTINUED)
Following further discussions with the Panel, the Panel has
agreed that the presumption of concertedness between each
of KAM and Truffle, on the one hand, and each of Mediclinic
and Remgro, on the other hand, has been rebutted, and
consequently no longer requires any Spire shares to be sold
in respect of those holdings.
FOREIGN EXCHANGE RATES
Although the Group reports its results in pounds sterling, the
divisional profits are generated in Swiss franc, UAE dirham
and South African rand. Consequently, movements in
exchange rates affected the reported earnings and reported
balances in the statement of financial position. Exchange rate
movements also had a significant impact on the statement
CASH FLOW
The Group continued to deliver strong cash flow and
converted 90% (FY17: 98%) of adjusted EBITDA into cash
generated from operations, impacted by accounts receivable
build ups in Switzerland (billing process changes) and the
Middle East (increase in credit sales in the final quarter)
towards the end of the financial year. Cash conversion in
FY17 has been adjusted because of a reclassification between
cash flow categories with no impact on net cash. Refer to the
basis of preparation in note 2 to the condensed consolidated
financial information for an explanation of this reclassification.
2018
£’m
466
515
90%
2017
£’m
492
501
98%
of financial position. The resulting currency translation
Cash from operations (a)
difference, which is the amount by which the Group’s interest
in the equity of the operating divisions increased because of
spot rate movements, amounted to £310m (2017: increase
Adjusted EBITDA (b)
Cash conversion
((a)/(b) x 100)
of £388m) and was debited (2017: credited) to the statement
of comprehensive income. The main reason for the decrease
was the weakening of the period end Swiss franc and UAE
dirham rates against sterling.
Foreign exchange rate sensitivity:
• The impact of a 10% change in the GBP/CHF exchange
rate for a sustained period of one year is that profit
for the year would increase/decrease by £12m (2017:
increase/decrease by £14m) due to exposure to the
GBP/CHF exchange rate.
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings decreased from £2 030m at
31 March 2017 to £1 937m at 31 March 2018, largely due to
closing exchange rate differences.
The cash and cash equivalents balance reduced predominantly
because of the acquisition of Linde as well as expansion
projects in the Middle East.
• The impact of a 10% change in the GBP/ZAR exchange
rate for a sustained period of one year is that profit
for the year would increase/decrease by £9m (2017:
increase/decrease by £8m) due to exposure to the
GBP/ZAR exchange rate.
Borrowings
Less: cash and cash
equivalents
Net debt
Total equity
• The impact of a 10% change in the GBP/AED exchange
Debt-to-equity capital ratio
2018
£’m
1 937
(261)
1 676
3 373
49.7%
2017
£’m
2 030
(361)
1 669
4 164
40.1%
rate for a sustained period of one year is that profit
for the year would increase/decrease by £4m (2017:
increase/decrease by £2m) due to exposure to the
GBP/AED exchange rate.
During the period under review, the average and closing
exchange rates were the following:
Average rates
Swiss franc
South African rand
UAE dirham
Period end rates
Swiss franc
South African rand
UAE dirham
2018
2017
1.29
17.22
4.87
1.34
16.57
5.15
1.29
18.41
4.80
1.25
16.74
4.59
30 MEDICLINIC | ANNUAL REPORT 2018
ASSETS
Property, equipment and vehicles decreased from £3 703m
at 31 March 2017 to £3 590m at 31 March 2018. This included
an increase of £223m on capital projects and fixed asset
additions in line with the continued investment programme
expanding the asset base to support growth and enhancing
patient experience and clinical quality. In addition, the
closing balance increased by £110m as a result of the Linde
acquisition. In addition to the depreciation and amortisation
charge, the balance was further reduced by the impairment
charge of £84m recognised on properties in the Hirslanden
division and the change in the closing exchange rate.
Intangible assets decreased from £2 156m at 31 March 2017 to
£1 406m at 31 March 2018 due to the impairment of goodwill
(£300m) and trade names (£260m) in the Hirslanden
division. The accelerated amortisation of the Al Noor trade
name of £23m (FY17: £7m), reducing the balance to nil,
decreased the closing balance further.
Adjusted depreciation and amortisation was calculated
as follows:
Depreciation and
amortisation
Accelerated amortisation
Adjusted depreciation
and amortisation
2018
£’m
168
(23)
145
2017
£’m
145
(7)
138
HIRSLANDEN PENSION PLAN
Hirslanden provides defined contribution pension plans in
terms of Swiss law to employees, the assets of which are
held in separate trustee-administered funds. These plans
are funded by payments from employees and Hirslanden,
taking into account the recommendations of independent
qualified actuaries. Because of the strict definition of defined
contribution plans in IAS 19, in terms of IFRS, these plans
are classified as defined benefit plans, since the funds are
obliged to take some investment and longevity risk in terms
of Swiss law.
The IAS 19 pension liability was valued by the actuaries at
the end of the year and amounted to £4m (2017: £73m),
included under “Retirement benefit obligations” in the
Group’s statement of financial position. The decrease in the
pension liability was largely due to increase of the discount
rate from 0.55% to 0.75% as well as changes in actuarial
assumptions.
DEFERRED TAX LIABILITIES
The deferred tax liability balance decreased from £527m in
the prior year to £467m at 31 March 2018. The impairment
of the trade names and properties in Hirslanden led to
INCOME TAX
The Group’s effective tax rate changed significantly for
the period under review to 1.1% (FY17: 20.8%), mainly due
to exceptional non-deductible expenses which include the
impairment of goodwill, impairment of the equity investment
and accelerated amortisation. The rate is also affected by
unrelievable losses on disposals of non-core businesses.
Excluding these exceptional non-deductible charges, the
effective tax rate would be 20.8% (FY17: 20.4%) for the year
ended 31 March 2018. The higher proportional contribution
to profits from the Mediclinic Southern Africa operations
increased the effective tax rate.
Adjusted income tax was calculated as follows:
2018
£’m
2017
£’m
Income tax (credit)/expense
Tax on exceptional items
– Past service cost credit
– Impairment of properties
– Impairment of intangible
assets
– Release of unutilised pre-
acquisition Swiss provision
– Fair value gains on
ineffective cash flow
hedges
– Derecognition of
unamortised finance
expenses
Adjusted income
tax expense
(5)
69
(1)
13
55
(2)
–
4
64
64
(6)
–
–
–
–
(3)
(3)
58
TAX STRATEGY
The Group is committed to conduct its tax affairs consistent
the release of deferred tax liabilities of £55m and £13m
with the following objectives:
respectively which caused the decrease in the deferred tax
liability balance.
• comply with relevant laws, rules, regulations, and reporting
and disclosure requirements in whichever jurisdiction it
FINANCE COSTS
Adjusted net finance costs benefited from the refinance
in Switzerland and were down 13% at £70m (FY17: £80m).
Adjusted net finance cost was calculated as follows:
operates; and
• maintain mutual trust and respect in dealings with all tax
authorities in the jurisdictions the Group does business.
Whilst the Group aims to maximise the tax efficiency of
Finance cost
Finance income
Net finance cost
Derecognition of
unamortised financing costs
Fair value gains on
ineffective cash flow hedges
Adjusted finance cost
2018
£’m
94
(9)
85
(19)
4
70
2017
£’m
its business transactions, it does not use structures in its
tax planning that are contrary to intentions of relevant
legislation. The Group interprets relevant tax laws to ensure
74
(7)
67
–
13
80
that transactions are structured in a way that is consistent
with a relationship of co-operative compliance with tax
authorities. It also actively considers the implications of any
planning for the Group’s wider corporate reputation.
In order to meet these objectives, various procedures are
implemented. The Audit and Risk Committee has reviewed
the Group’s tax strategy and related corporate tax matters.
MEDICLINIC | ANNUAL REPORT 2018
31
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FINANCIAL REVIEW (CONTINUED)
REFINANCING OF SWISS DEBT
At the end of October 2017, the elective refinancing of the
Group’s Swiss debt was successfully completed. The
refinanced Swiss debt funding comprises up to CHF2.0bn of
property-backed facilities:
• Mediclinic Middle East: In FY19, the Middle East division
is expected to deliver revenue growth (adjusted for the
adoption of IFRS 15) in the low double-digit percentage
range reflecting the underlying operating performance of
the business and additional bed capacity coming online
in the second half of the year. The EBITDA margin of the
• CHF1.5bn senior term loan facility with a partially amortising
existing operations is expected to increase by around
repayment profile over six years and priced at Swiss Libor
250bps and to continue improving year-on-year to
plus a margin of 1.25%;
around 20% in FY22. As a result of the early opening of
• CHF0.4bn capex facility, priced at Swiss Libor plus a
Mediclinic’s Parkview Hospital and the updated schedule
margin of 1.25%, but which could increase funding costs
for the planned upgrade and expansion projects in Abu
up to a maximum of Swiss Libor plus a margin of 1.65%
Dhabi, the ramp-up costs associated with these projects
at the time of drawing, depending on the loan-to-value
are expected to offset the margin of the existing business
at that time;
by around 250bps per annum between FY19 and FY21,
• CHF0.1bn revolving facility, priced at Swiss Libor plus a
reducing thereafter.
margin of 1.25%;
•
•
the new financing results in future finance cost savings; and
the existing ineffective interest rate swap was settled at
CHF5m and no new hedging was entered into for the
time being.
OUTLOOK
The Group provides the following guidance for FY19, unless
otherwise stated:
• Hirslanden: In FY19, Hirslanden expects modest revenue
growth supported by an increase in average bed capacity
for the year, largely related to Linde. As a result of the
regulatory and market trends more than offsetting the
benefits of cost savings and efficiency initiatives, the
FY19 EBITDA margin is expected to contract by around
100 basis points (“bps”) from the prior year. However, the
EBITDA margin is targeted to gradually improve from
FY20 onwards.
• Mediclinic Southern Africa: FY19 revenue growth will
be driven by an expected increase in bed days sold of
1-2%, largely as a result of an increase in productive days
compared to the prior year, combined with tariff increases
• The Group’s capital expenditure budget, in constant
currency, for FY19 is expected to increase by 18% to
£289m (FY18: £245m). This comprises £102m
in
Hirslanden (FY18: £101m), £76m in Mediclinic Southern
Africa (FY18: £62m), £110m in Mediclinic Middle East
(FY18: £80m) and £1m (FY18: £2m) for Corporate. The
increase is largely driven by expansion in the Middle
East and an upgrade cycle in Southern Africa.
DIVIDEND POLICY AND PROPOSED
DIVIDEND
The Group’s dividend policy is to target a pay-out ratio of
between 25% and 30% of adjusted earnings. The Board may
revise the policy at its discretion.
The Board proposes a final dividend of 4.70 pence per
ordinary share for the year ended 31 March 2018 for
approval by the Company’s shareholders at the annual
general meeting on Wednesday, 25 July 2018. Together
with the interim dividend of 3.20 pence per ordinary share
for the six months ended 30 September 2017 (paid on
18 December 2017), the total final proposed dividend reflects
a 26% distribution of adjusted Group earnings attributable
broadly in line with inflation. The medium-term EBITDA
to ordinary shareholders.
margin is expected to be broadly in line with recent years.
Shareholders on the South African register will be paid the
ZAR cash equivalent of 79.52400 cents (63.61920 cents
net of dividend withholding tax) per share. A dividend
withholding tax of 20% will be applicable to all shareholders
on the South African register who are not exempt therefrom.
The ZAR cash equivalent has been calculated using the
following exchange rate: GBP1:ZAR16.92, being the five-day
average ZAR/GBP exchange rate on Friday, 18 May 2018 at
3:00pm GMT Bloomberg.
32 MEDICLINIC | ANNUAL REPORT 2018
VALUE ADDED
STATEMENT
The Value Added Statement depicts the economic benefit created by the Group and how that is distributed amongst the
various stakeholders, comprising employees, shareholders, banks, government, creditors and the economic value retained
in the business.
VALUE CREATED
Revenue
Cost of materials and services
Finance income
Share of net profit of equity accounted investments
DISTRIBUTION OF VALUE
To employees as remuneration and other benefits
Tax and other state and local authority levies (excluding VAT)
To suppliers of capital:
Non-controlling interests
Finance cost on borrowed funds
Distributions to shareholders
VALUE RETAINED
To maintain and replace assets
Income retained for future growth
2018
£’m
%
2017
£’m
%
2 870
(1 022)
9
3
2 749
(1 000)
7
12
1 860
100.0
1 768
100.0
1 293
75
18
94
58
69.5
4.0
1.0
5.1
3.1
1 231
75
14
74
62
69.7
4.2
0.8
4.2
3.5
1 538
82.7
1 456
82.4
159
163
322
8.5
8.8
17.3
154
158
312
8.7
8.9
17.6
V
A
L
U
E
A
D
D
E
D
S
T
A
T
E
M
E
N
T
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
DISTRIBUTION OF VALUE
To employees as remuneration and other benefits
4.0%
1.0%
5.1%
3.1%
8.5%
8.8%
69.5%
2018
69.7%
2017
4.2%
0.8%
4.2%
Tax and other state and local authority levies
(excluding VAT)
3.5%
Non-controlling interests
8.7%
Finance cost on borrowed funds
Distributions to shareholders
8.9%
To maintain and replace assets
Income retained for future growth
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
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N
T
S
I
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O
N
A
L
I
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N
F
O
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M
A
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O
N
I
MEDICLINIC | ANNUAL REPORT 2018
33
CLINICAL SERVICES
OVERVIEW
“MEDICLINIC HAS
DEVELOPED A STRONG
FOCUS ON CLINICAL
PERFORMANCE TO
ENSURE EFFICIENT,
EFFECTIVE AND SAFE
PATIENT CARE OF THE
HIGHEST STANDARD.”
Dr Ronnie van der Merwe
Chief Clinical Offi cer and CEO Designate
INTRODUCTION
Mediclinic provides a wide range of clinical services
throughout its operating divisions. These services include
acute care inpatient services, highly specialised services,
day case surgery, hospital-based emergency centres, pre-
hospital emergency services, and outpatient consultation
services. Support services include laboratories, radiology
and nuclear medicine.
Mediclinic strives to ensure that the clinical services provided
throughout the Group are effi cient, eff ective, appropriate,
evidence-based, and in line with modern technological
During the year under review, the clinical performance of the
business across all operating divisions was satisfactory. We
made considerable progress in further developing underlying
structures and processes to enable clinical performance
improvements. Much of the progress can be attributed to
the strong collaborative eff ort of the clinical services teams
of the divisions.
All indicators included in this Clinical Services Overview are
reported per calendar year to ensure completeness and
consistency, as a signifi cant time lag needs to be provided
for in the collection of clinical data.
advances. To this end, we emphasise measuring and
Mediclinic developed a
framework
to
support a
improving clinical performance throughout our organisation.
structured approach to clinical management, the clinical
On a monthly basis, a comprehensive set of clinical
management model. The model comprises two elements:
performance indicators are collected, measured, analysed
clinical governance and clinical performance. The clinical
and reported on. These clinical performance reports outline
governance foundation layer provides the structure required
and track the performance of healthcare facilities, inform
for clinical performance. Mediclinic does not use the standard
operational decisions, identify opportunities for clinical quality
defi nition for clinical governance. We defi ne and stratify it
improvement initiatives, and inform our strategic direction.
as: governance including oversight and assurance; systems
improvement; medico-legal processes and ethics; research;
clinical information; clinical processes and education; and
continued medical education.
34 MEDICLINIC | ANNUAL REPORT 2018
CLINICAL MANAGEMENT MODEL
SUPERIOR CLINICAL PERFORMANCE
CLINICAL PERFORMANCE
PATIENT SAFETY
(including infection
prevention and control)
EFFECTIVENESS
EFFICIENCY
VALUE-BASED CARE
CLINICAL GOVERNANCE
Clinical performance refers to the quality of the clinical
The fall rate increased by 6.36% compared to 2016. The
processes and outcomes and is supported by the clinical
increase in the rate is believed to be due to increased
performance model. The four components of the model
awareness and better reporting. The prevention of falls and
are patient safety, effectiveness, cost efficiency and value-
a reduction in the reported rate remain focus areas. The
based care.
This report provides an overview of the Group’s clinical
CSR
performance for the year under review. The detailed
Clinical Services Report, available on the Company’s
website at www.mediclinic.com, provides a more in-depth
description.
FIGURE 1: ADVERSE EVENTS – MEDICLINIC
SOUTHERN AFRICA
s
y
a
d
t
n
e
i
t
a
p
0
0
0
r
e
p
e
t
a
R
HIRSLANDEN
8
1
.
1
Clinical performance
Hirslanden has the highest case mix in the Group, reflecting
2016
7
0
.
1
4
1
.
1
the complexity of cases treated. However, clinical outcomes
remain excellent, as evidenced by low infection rates and
.
6
8
0
other outcome measures, e.g. patient falls, healthcare-
associated infections (“HAI”), etc.
1
2015
2017
Patient safety
A patient safety culture is well established in the operating
division as reflected by the low rate of never events (serious
incidents, such as wrong site surgery and retained instrument
6
2
0
.
post operation, that are wholly preventable) and serious
adverse events (“SAE”). We report near misses, or critical
incidents routinely, and lessons learnt are disseminated to
Falls
In-hospital
make systems safer and to improve patient outcomes.
pressure
ulcers
Medication
errors
Adverse event type
in-hospital pressure ulcer rate decreased by 23.9% (see
Figure 1). This decrease is statistically significant and in
line with focused initiatives to decrease the incidence of in-
hospital pressure ulcers.
FIGURE 1: WEIGHTED AVERAGE IN-HOSPITAL
PRESSURE ULCER RATE – HIRSLANDEN
2016'
2015'
s
y
a
d
2014'
t
n
e
i
t
a
p
0
0
0
1
r
e
p
e
t
a
R
0
0
.
1
6
9
0
.
3
7
0
.
2015
2016
2017
Calendar year
MEDICLINIC | ANNUAL REPORT 2018
35
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I
CLINICAL SERVICES OVERVIEW (CONTINUED)
FIGURE 2: DEVICE-ASSOCIATED INFECTIONS – HIRSLANDEN
i
s
y
a
d
e
c
v
e
d
0
0
0
1
r
e
p
e
t
a
R
0
1
.
1
1
9
0
.
3
4
0
.
0
7
.
1
5
3
0
.
8
3
0
.
2016'
2015'
0
3
4
.
4
4
4
.
7
2
2
.
2015
2016
2017
Catheter-
associated urinary
tract infections
Central
line-associated
bloodstream
infections
Ventilator-
associated
pneumonia
Device–associated infection type
Infection prevention and control
Healthcare-associated infections
Progress against objectives
Patients First at Mediclinic
The HAI and related conditions rate remained stable in 2017.
As these conditions are rare, a single infection causes a high
rate based on small denominators.
Figure 2 reflects an increase in the catheter-associated
urinary tract infections (“CAUTI”) and ventilator-associated
pneumonia (“VAP”) rates compared to the prior year. Neither
of these increases is statistically significant. The central line-
associated bloodstream infections (“CLABSI”) rate remains
stable.
Clinical effectiveness
The SAPS II is used to measure clinical outcomes of critical
care units (“CCU”). The SAPS II mortality rate remains low at
2.50% and the index is well below the Swiss benchmark of
0.42 at 0.32.
• Reviewed the compliance of the hospitals with the
patient safety policy – the majority of the hospitals
implemented every item of the policy or was busy with
the implementation of the remaining items.
• Checked the adherence to safe surgery checklist during
unannounced inspections – compared to the previous
inspection, further improvement was noted.
•
Initiated a pilot project on patient-related outcome
measurement – patients were surveyed on quality of life
before and after joint replacement. The results show a
significant improvement of pain and movement after the
procedure.
Value-based care
• Compiled a policy on indication quality and introduction
of indication boards – the implementation is planned
In-hospital mortality is reported as a crude rate, and
for 2018.
remained low at 0.93%, a decrease of 2.1% when compared
to 2016.
• Successfully started the project on the introduction
of fast-track orthopaedics in one of the orthopaedic
The re-admission rate is reported as a 15-day unscheduled
hospitals of the group.
re-admission rate, as defined by the International Quality
•
Introduced a common structure for highly specialised
Indicator Project. The 15-day interval was chosen according
medicine services.
to the 18-day re-admission criteria of the SwissDRG
(diagnosis-related groups) system to provide input to the
case management process. The rate increased by 19.4%, is
not statistically significant, and no concerns were raised.
36 MEDICLINIC | ANNUAL REPORT 2018
FIGURE 3: ADVERSE EVENTS – MEDICLINIC SOUTHERN AFRICA
2015
2016
2017
0
6
.
1
8
1
.
1
6
8
0
.
s
y
a
d
t
n
e
i
t
a
p
0
0
0
1
r
e
p
e
t
a
R
4
1
.
1
7
0
.
1
1
0
.
1
Medication
errors
Falls
Adverse event type
6
2
0
.
7
2
0
.
2
2
0
.
In-hospital
pressure
ulcers
Clinical information systems
• Compiled the definition of the future documentation
in
catheterisation
laboratories
and
emergency
departments – the manufacturer is implementing this in
•
Introduce a standardised documentation approach for
doctors in the electronic patient record.
• Continue with the rollout of the patient data management
system (“PDMS”).
our electronic patient record.
• Conceptualise the integration of the PDMS and the
• Completed the re-evaluation of the radiology information
system and selected a new system – the pilot project
has started.
• Reviewed the integration of medical source data –
Hirslanden decided to connect this project to
its
transformation exercise.
Future objectives
Patients First at Mediclinic
electronic patient record.
MEDICLINIC SOUTHERN AFRICA
Clinical performance
Mediclinic and the greater Southern Africa healthcare
community experienced significant and ever-increasing cost
pressures; continued shortage of healthcare professionals
(especially specialised disciplines); outmigration of care,
resulting in hospitals caring for more complex cases; and an
•
Identify patient pathways qualifying for standardisation.
increase in the elderly population. Despite these challenges,
• Complete the introduction of a continuous patient
Mediclinic Southern Africa improved clinical performance of
experience survey for all inpatients.
the operating division compared to the 2016 calendar year.
Value-based care
Patient safety
Hirslanden will continue with the definitions of the
requirements of the system provider model; and develop
evaluation criteria to determine the introduction status
We prioritise the continuous improvement of patient safety.
Adverse events, as illustrated in Figure 3, are reported and
tracked as a barometer of safe patient care.
per hospital.
Clinical information systems
• Continue with the rollout of the radiology information
system in a second hospital.
In 2017, we reported a significant increase of 35.59% in the
medication error rate, mainly due to increased awareness
and reporting, driven by focused audits. This rate is expected
to increase even further as additional sources of information,
obtained from the audits, are included in the report.
MEDICLINIC | ANNUAL REPORT 2018
37
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CLINICAL SERVICES OVERVIEW (CONTINUED)
The fall rate and in-hospital pressure ulcer rate are regarded
preventing multidrug resistance are critical. Antimicrobial
as nursing sensitive indicators and correlate with the number
resistance increases with using all antimicrobials and not
and skills of available nursing staff. The fall rate decreased
only certain classes of antimicrobials. The total antimicrobial
by 7% in 2017, however, the decrease is not statistically
consumption needs to be reduced. The total antimicrobial
significant. The prevention of falls remains a priority.
usage and utilisation decreased by 1.6% in 2017.
The in-hospital pressure ulcer rate decreased by 25.92%.
This decrease is statistically significant, and is mainly due
to continued focus on the early detection and prevention of
incontinence-associated dermatitis, one of the main drivers
of in-hospital pressure ulcers.
Infection prevention and control
Healthcare-associated infections
Clinical effectiveness
The clinical performance measurement of CCUs was refined
by implementing the Simplified Acute Physiology Score
(“SAPS”) 3 physiological mortality prediction model, instead
of the previously used APACHE®IV. SAPS 3 is statistically
better suited to the Mediclinic population and predicts
mortality more accurately. During 2017, the average mortality
HAI remain one of the highest risks. Hand hygiene
rate for patients admitted to CCUs was 16.97% compared to
compliance, which is a focus area for improvement, is an
the expected mortality rate of 17.85%. The resultant SAPS 3
important measure in the prevention of HAI, and remained
stable at 75.3%.
mortality index was 0.95.
The in-hospital mortality prediction model calculates the
The HAI rate, reflected in Figure 4, increased by 7.57%
over the 2017 calendar year. The increase is statistically
expected mortality rate based on administrative data. This
model was reviewed and refined in 2016. The 2015 values
significant. The adherence to evidence-based practices,
can therefore not be compared directly to the 2016/2017
such as care bundles to reduce device-associated infections,
values due to the change in methodology. When compared
remain a focus area. HAI rates and compliance with hand
hygiene principles are closely monitored by audits, and
hospitals are supported in dealing with outbreaks timeously
and efficiently.
Antimicrobial stewardship
to the 2017 index, a 6% decrease is noted. This decrease is
statistically significant (see Figure 5).
The 30-day all-cause re-admission rate increased by 0.08%
in 2017. Re-admissions within seven days of discharge
account for half the re-admissions, and remains a focus area
Considering the high burden of infectious disease in Southern
for improvement. The extended stay rate is expressed as an
Africa, effectively managing antimicrobial resources and
index, and decreased by 0.88% compared to 2016.
FIGURE 4: HEALTHCARE-ASSOCIATED INFECTIONS –
MEDICLINIC SOUTHERN AFRICA
FIGURE 5: INPATIENT MORTALITY – MEDICLINIC
SOUTHERN AFRICA
2016'
2015'
s
y
a
d
2014'
t
n
e
i
t
a
p
0
0
0
1
r
e
p
e
t
a
R
9
1
.
2
6
9
0
.
5
8
.
1
9
9
.
1
)
%
(
o
i
t
a
r
y
t
i
l
a
t
r
o
M
.
6
0
1.00
3
.
1
7
5
.
1
7
5
.
1
0.94
2
7
.
1
1
6
.
1
.
4
0
Crude
mortality
rate
Expected
mortality
rate
Mortality
index
2015
2016
2017
Calendar year
2016
2017
Calendar year
38 MEDICLINIC | ANNUAL REPORT 2018
FIGURE 1: ADVERSE EVENTS – MEDICLINIC
SOUTHERN AFRICA
4
1
.
1
7
0
.
1
2015
2016
2017
8
1
.
1
6
8
.
0
s
y
a
d
t
n
e
i
t
a
p
0
0
0
1
r
e
p
e
t
a
R
Adverse event type
Medication
Falls
errors
6
2
.
0
In-hospital
pressure
ulcers
Progress against objectives
Patients First at Mediclinic
Future objectives
Patients First at Mediclinic
•
•
Implemented the surgical safety checklist in all hospitals.
• Complete the implementation of specific patient safety
Improved reporting of SAE through many initiatives and
initiatives aimed at preventing adverse events.
valuable information was gathered that will guide the
•
Implement specific training initiatives that will further
future strategy.
enable staff to drive quality improvement continuously.
•
Implemented a successful quality improvement project,
• Develop and implement action plans that will improve
which enhanced patient safety and patient care further.
hand hygiene compliance further.
• Developed and implemented a new nursing workforce
• Develop action plans to improve medication safety.
model
to ensure accurate allocation of scarce
• Further refine clinical performance measures.
nursing skills.
• Successfully
launched a national hand hygiene
campaign; and developed compliance measures to track
• Share more detailed clinical information with doctors.
• Further reduce infection rates through the implementation
of a comprehensive infection prevention and control
improvement.
strategy.
•
Implemented the combined BetterObs and Mediclinic
obstetric enhancement projects, which will further
Value-based care
mitigate risks identified in obstetric care.
• Proceed with further appointments of hospital clinical
•
Implemented a specific infection prevention and control
managers.
strategy, which was critical in managing the ever-
increasing risk of infectious diseases and multidrug-
• Proceed with the further implementation of the new
clinical performance, oversight and governance model in
resistant organisms.
Value-based care
•
Implemented a new clinical performance oversight and
governance model in collaboration with supporting
doctors.
• Developed (in collaboration with supporting doctors)
collaboration with supporting doctors.
• Develop (in collaboration with supporting doctors) and
implement more clinical pathways led by doctors.
• Develop a structured
implementation plan for the
integrated comprehensive critical care strategy.
•
Implement the national stroke management strategy.
and implemented two clinical pathways led by doctors.
Clinical information systems
• Developed a comprehensive and integrated critical
Mediclinic Southern Africa will engage with specific service
care strategy.
• Developed a national stroke management strategy.
Clinical information systems
Mediclinic Southern Africa developed a clinical information
readiness strategy and a proposed roadmap for evaluating
potential solutions.
providers to evaluate potential solutions for the South
African market and commence a thorough assessment of
proposed solutions.
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MEDICLINIC | ANNUAL REPORT 2018
39
CLINICAL SERVICES OVERVIEW (CONTINUED)
MEDICLINIC MIDDLE EAST
Clinical performance
Mediclinic Middle East has the lowest case mix index in the
Group, and serves a younger, healthier community. The
clinical performance is satisfactory as demonstrated by low
infection rates and other outcome measures, e.g. patient
The in-hospital pressure ulcer rate increased by 150%, when
compared with the 2016 rate, which is statistically significant.
The division initiated various quality improvement projects,
specifically in the CCUs, where the patient population has
higher acuity levels with multiple co-morbidities. A steady
decline in the in-hospital pressure ulcer rate was noted in the
latter part of 2017 and the trend will be closely monitored.
falls, HAI, etc.
Patient safety
Infection prevention and control
Healthcare-associated infections
Providing safe care remains a priority across the division and
Preventing HAI remains a key patient safety objective
is reflected in a “Just Culture” supported by management.
for Mediclinic Middle East. This includes standardised
“Just Culture” is a culture in which staff are not punished
processes around infection control (based on international
for actions, omissions or decisions taken by them which are
best practices), implementing care bundles (Surgical Site
in line with their experience and training, but where gross
Infections, VAP, CLASBI and CAUTI), and a surveillance
negligence and wilful violations are not tolerated.
Figure 6 reflects the rate of adverse events per
1 000 patient days.
Medication errors increased significantly by 169.23% when
compared to 2016. The increase is due to an auditing
and reporting drive, with the main contributor being
prescribing errors. Most medication errors are identified and
reported by the pharmacy and prevented from reaching
patients. Medication management remains a key focus area
for the group.
programme with a multilayer methodology. This methodology
includes surveillance that is active and passive, patient and
laboratory-based, prospective and retrospective, priority-
directed and comprehensive.
When compared to 2016, the HAI rate decreased by 12.5%;
the CAUTI rate decreased by 15.9%; the CLABSI rate
decreased by 13.6%; and VAP rate decreased by 76.1% (see
Figure 7). Although the decrease in the CLABSI and CAUTI
rates are not statistically significant, the decrease in the VAP
rate is. A change in the Centres for Disease Control and
Prevention definition of HAI, especially for VAP, contributed
The fall rate increased by 25% but is not statistically
significantly to the decline in the rate.
significant. Fall awareness and prevention remain a key focus
area for Mediclinic Middle East. The fall awareness campaign
includes educational videos for staff, fall prevention posters
Clinical effectiveness
SAPS 3 was implemented in all the CCU in Mediclinic Middle
in patient rooms and a fall prevention booklet for patients
East since October 2016. It replaced the APACHE IV Scoring
and visitors.
system, which was implemented only in the Dubai facilities.
FIGURE 6: ADVERSE EVENTS – MEDICLINIC MIDDLE EAST
s
y
a
d
t
n
e
i
t
a
p
0
0
0
1
r
e
p
e
t
a
R
0
5
3
.
0
3
.
1
0
6
0
.
4
4
0
.
1
5
0
.
0
0
3
7
0
.
1
.
Medication
errors
Falls
Adverse event type
40 MEDICLINIC | ANNUAL REPORT 2018
4
4
4
.
2015
2016
2017
.
7
9
2
4
2
9 0
.
0
3
4
.
0
5
0
.
1
.
0
In-hospital
pressure
ulcers
This will ensure that outcomes can be benchmarked across
•
Implemented the Vermont Oxford Network databases in
the Mediclinic Group. The data collected for 2016 was only
all facilities.
part of the calendar year and not suitable for including
• Combined the clinical services departments of the group,
as a comparative value for 2017. The performance of the
which was implemented, expanded and embedded all the
SAPS 3 model was calibrated. Even though the mortality
clinical oversight committee structures.
index is 1.4, the crude mortality rate is low at 3.0%.
The predicted mortality rate is influenced by the accuracy
of the data and the validation of data quality is a focus area
• Developed clinical key performance
indicators
for
doctors, and will be part of the formal doctors’ appraisal
process implementation plan for 2018.
for 2018.
The in-hospital mortality rate decreased by 4.16% during the
period under review and remained low at 0.23% in line with
the young population and low case mix of the operating
division (see Figure 8).
FIGURE 1: ADVERSE EVENTS – MEDICLINIC
SOUTHERN AFRICA
The re-admission rate increased by 12.24% when compared
FIGURE 8: INPATIENT MORTALITY – MEDICLINIC
MIDDLE EAST
2016'
to 2016. The increase is not statistically significant and no
8
1
.
1
concerns were raised.
s
y
a
d
t
n
Progress against objectives
e
i
t
a
Patients First at Mediclinic
p
0
0
0
6
8
0
7
0
.
1
4
1
.
1
.
2015
2016
2017
• Appointed quality and patient safety officers, established
a quality department on corporate level and updated its
1
r
e
p
e
t
a
R
patient safety strategy.
by JCI in November 2017.
• Mediclinic Al Noor Hospital was successfully re-accredited
2015'
)
%
(
s
n
2014'
o
i
s
s
i
m
d
a
f
o
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g
a
t
n
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c
r
e
P
• Standardised clinical indicators across the group; and
created a central repository.
6
2
0
.
•
Implemented SAPS 3 in all CCUs across all the division’s
hospitals.
Adverse event type
Medication
errors
Falls
In-hospital
pressure
ulcers
FIGURE 7: DEVICE-ASSOCIATED INFECTIONS – MEDICLINIC MIDDLE EAST
6
2
0
.
6
9
0
.
4
2
0
.
3
7
0
.
3
2
0
.
2015
2016
2017
Calendar year
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2016
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0
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.
Catheter-
associated urinary
tract infections
Central
line-associated
bloodstream
infections
Ventilator-
associated
pneumonia
Device–associated infection type
MEDICLINIC | ANNUAL REPORT 2018
41
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CLINICAL SERVICES OVERVIEW (CONTINUED)
Value-based care
• The division expanded the affiliation agreement with the
Mohammed Bin Rashid University of Health Sciences
(“MBRUHS”) in Dubai. Mediclinic City Hospital is an
accredited external training facility for medical students,
and the second intake of medical students was enrolled
in September 2017.
• Mediclinic Middle East hosted a successful first annual
research day in February 2018 at MBRUHS.
• We developed the current breast and metabolic centres
at Mediclinic City Hospital to streamline clinical processes.
• The division commissioned a stroke centre at Mediclinic
City Hospital and achieved the certification of the German
Stroke Association in January 2018.
• Mediclinic Middle East successfully commissioned and
opened the new Comprehensive Cancer Centre in the
north wing expansion at Mediclinic City Hospital.
• The division signed off a cancer strategy that includes
the clinical oversight structure, site-specific tumour
board structure and function, as well as scope of service
delivery at the different facilities.
Future objectives
Patients First at Mediclinic
•
Implement the standardised doctors’ appraisal process
across the group.
• Finalise the scope and project plan for the nursing
performance management system.
• Expand and implement new clinical indicators across
the group.
• Expand the outcome database participation and roll out
the obstetrics dashboard.
• Formulate the JCI re-accreditation preparedness plan for
all facilities in the group.
• Update the quality and patient safety strategy for
the group.
• Develop a strategy for managing quality indicators
(as defined by the regulators) and agree on a quality
management framework for the group.
• Align the clinical risk management strategy to the Group.
• Define a clear strategy for the establishment of centres of
excellence in the division.
• The division
implemented
the centralisation and
Value-based care
consolidation strategy of laboratory services for the group.
• Mediclinic City Hospital laboratory was successfully
re-accredited by The College of American Pathologists
in August 2017.
• Successfully obtained the
ISO certification for all
laboratories in the Abu Dhabi, Al Ain and Western Region.
• Mediclinic Middle East relocated and commissioned
the in-vitro fertilisation (“IVF”) and dialysis centres
(previously located in Mediclinic Al Noor hospital in Abu
Dhabi) to Mediclinic Al Ain hospital.
• Finalise the formulation of the clinical strategy for certain
key service lines for the group (IVF, metabolic centre,
vascular surgery, cosmetics, etc.).
• Continue developing the metabolic surgery service at
Mediclinic Airport Road hospital and prepare for the
accreditation of the centre.
• Further develop and expand coordinated care initiatives
across the group (breast centre, comprehensive cancer
centre, metabolic centre, etc.).
• Continue the centralisation and consolidation strategy for
• Mediclinic is in the process of reviewing the existing
laboratory services in the division.
clinical pathways and developed additional pathways
in preparation for the implementation of DRG and
implementing
(“EHR”) system.
the new electronic health
record
Clinical information systems
• Mediclinic Middle East selected a new EHR system
for the group.
• Define a strategy for doctors benchmarking.
• Develop a strategy to centralise radiology services across
the division.
Clinical information systems
Mediclinic Middle East will
implement
the newly
selected EHR system across the group as per the agreed
project plan.
42 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC INTERNATIONAL
Mediclinic International’s clinical services department consists
Future objectives
•
Implement a clinical adverse event and clinical risk
of a small team that coordinates clinical services across the
management across the Group.
divisions. The team provides strategic direction, oversight and
• Further refine and optimise the clinical performance
accountability; coordinates collaboration across operating
model and clinical performance indicators.
divisions; and is directly involved in selected projects.
Progress against objectives
• A master data management programme, compiling and
governing data relating to doctors, was implemented in
Southern Africa.
• Clinical performance measures and operational dashboards
were refined.
• We established a patient safety sub-committee to
standardise and enhance collaboration across the Group.
• An initiative was started to coordinate collaboration of
nursing services across operating divisions.
• Further drive collaboration on nursing across the Group.
• Support the operating divisions in eradicating never
events and decreasing the number of SAE.
• Refine and optimise the medication management process
across the Group.
• Develop an integrated clinical digital roadmap, including
artificial intelligence, machine learning and telemedicine.
• Continue to collaborate with and provide support
to Mediclinic Middle East and Hirslanden with the
implementation of their EHR systems.
• Refine and optimise the clinical governance structure
to enforce the Ward-to-Board accountability framework
• We established a collaborative forum for clinical risk
across the Group.
management across the Group.
• Centrally advise and coordinate clinical research across
• We sourced a clinical adverse event and clinical risk
the Group.
management solution suitable for the Group.
•
Initiatives are underway to coordinate health technology
assessments centrally. These initiatives will be further
refined.
• Thought leadership, oversight and close collaboration
were provided in the selection of an EHR system in the
Middle East and Southern Africa divisions.
• Continued collaboration and support are provided to
Hirslanden with the implementation of its EHR systems.
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MEDICLINIC | ANNUAL REPORT 2018
43
RISK MANAGEMENT,
PRINCIPAL RISKS
AND UNCERTAINTIES
The Board believes that effective risk management and internal control systems underpin a successful business and are
integral to realising the Group’s overall objective of delivering value to its shareholders. The Board is ultimately responsible for
monitoring and reviewing the effectiveness of these systems and reporting on its review in the Annual Report. The Board has
delegated to the Audit and Risk Committee the tasks of evaluating the Group’s risk management procedures, assessing the
effectiveness of the internal controls and monitoring the integrity of the Group’s reporting, but maintains strong and regular
oversight of the outcome of the Audit and Risk Committee’s work.
RISK MANAGEMENT
The objective of risk management in the Group is to identify and assess important and emerging risks. To this end, the
Group has established an Enterprise-wide Risk Management (“ERM”) policy which follows the international Committee of
Sponsoring Organisations of the Treadway Commission (“COSO”) framework and is aligned to the Group’s operations and
strategy. The Group ERM framework defines the risk appetite, risk management objectives, methodology, risk identification,
assessment and treatment processes and the responsibilities of the various risk management role-players in the Group. The
ERM policy is embedded in the Group’s daily management and operational processes. It provides a robust structure within
which management can operate and which directors can oversee without stifling the core activities of the business. The
policy reinforces a strong risk management culture within the Group by setting the tone and acting as the starting point for
all components of risk management and internal control. It is subject to annual review, and any amendments are submitted
to the Audit and Risk Committee for approval. In accordance with the recommendations of the Financial Reporting Council’s
UK Code on Corporate Governance and Guidance on Risk Management, Internal Control and Related Financial and Business
Reporting, the Board annually reviews the Group’s principal risks and ERM policy and processes, taking account of the Audit
and Risk Committee’s recommendations and assessment.
An ERM software application supports the Group’s risk management process in all three operating divisions. The Group’s
principal risk items (grouped by category, business process and strategic priorities), the movement in risk during the financial
year, and key measures taken to mitigate these risks, are listed in the table below.
PRINCIPAL RISKS
PRINCIPAL
RISK
MOVEMENT
IN 2018
Economic
and business
environment risk
1
Economic growth
in Switzerland and
in South Africa
continued to be
weak, resulting
in increased risk
exposure.
Business
investment and
acquisition risks
1
2
The investments
and governance
processes were
strengthened
during the year.
44 MEDICLINIC | ANNUAL REPORT 2018
DESCRIPTION OF RISK
MITIGATION OF RISK
The risk relates to the
downturn in the general
economic and business
environment, including all those
factors that affect 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 tariffs and fees
resulting from the shift of the
relative negotiating power
towards funders, away from
healthcare service providers.
This is the risk of increased
financial exposure relating
to major strategic business
investments and acquisitions.
• 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 the
Company’s position
• Strategic planning processes
• Due diligence processes
Investment mandates
•
• Board oversight
• Post-acquisition management
processes
A
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U
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E
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T
A
N
T
E
S
I
I
PRINCIPAL
RISK
Competition
1
Availability and
cost of capital
(including financing
and liquidity risk)
2
MOVEMENT
IN 2018
Healthcare
providers market
continued to
grow through
normal channels
of acquisitions,
expansions, new
facilities etc. There
were no major
changes to impact
risk exposure.
Interest rates are
expected to rise
in the year ahead,
which may lead to
an increase in the
cost of capital.
Operational and
credit risks
2 3
The risk exposure
was reduced
following the
successful
integration of the
Al Noor business.
DESCRIPTION OF RISK
MITIGATION OF RISK
The risk relates to the
uncertainty created by the
existence of competitors or the
emergence of new competitors
with their own strategies.
The risk includes the
outmigration of care, partly
driven by further technological
developments and the
development of alternative
care models.
These risks involve the cost,
terms and availability of capital
to finance strategic expansion
opportunities and/or the
refinancing or restructuring of
existing debt which has been
affected by prevailing capital
market conditions.
Operational risk refers to
diverse types of operational
events with the potential for
financial loss, operational
interruptions or reputational
damage.
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
patients.
• Proactive monitoring
• Strategic planning processes
• Quality and value of care
processes
AR
• Long-term planning of capital
requirements and cash-flow
forecasting
• Scrutiny of cash-generating
capacity within the Group
• Proactive and long-term
agreements with banks and
other funders relating to funding
facilities
• Monitoring compliance with
requirements of debt covenants
• Further details on capital risk
management and the Group’s
borrowings are contained in the
annual financial statements
• Preservation of a sound internal
financial control environment
• Effective operational risk
management processes
• Extensive combined assurance
processes
• Monitoring operations through
key performance indicators
(“KPIs”)
• Continuous enhancement of
operational efficiency and cost
reduction
• Regulated minimum solvency
requirements for funders
• Monitoring approved funders
• Treasury policy
• Executive and board level
oversight
MEDICLINIC | ANNUAL REPORT 2018
45
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RISK MANAGEMENT, PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
PRINCIPAL
RISK
MOVEMENT
IN 2018
DESCRIPTION OF RISK
MITIGATION OF RISK
Quality and
stability of
operational
services risk
3
The operational
services risk
did not change
significantly and
remained stable
throughout the
year.
Information
systems security
and availability
risk
4
The increased
risk relates to the
continued external
threats arising
from cyberattack.
Regulatory and
compliance risk
5
The increased
risk relates to the
introduction of
new regulations
which includes
TARMED (Tariff
System for
Outpatient
Medical Services)
in Switzerland and
the EU General
Data Protection
Regulation
(“GDPR”).
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 refers to any
disruption of the facility and
may include the threat of
disrupted power or water
supply; and
• fire and allied perils causing
damage or business
interruption.
Information systems security
risk (including cyber risk)
relates to unauthorised access
to information systems,
failure of data integrity and
confidentiality. Availability
risk relates to instances where
systems are not available for
use by its intended users.
Project delivery risk, closely
associated with information
systems risk, refers to issues
or occurrences that could
potentially interfere with
completion of projects,
including scope, timeliness and
appropriateness of delivery.
The risk involves adverse
changes in laws and regulations
impacting the Group or failure
to comply with laws and
regulations which may result
in losses, fines, prosecution or
damage to reputation.
The risk includes ethical and
governance risks that refer
to the 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 organisation.
• Patient satisfaction surveys
(internal and external)
• Complaints monitoring
• Training programmes
• Supervising 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
• Comprehensive information
systems logical access, change
and physical access controls
• Disaster recovery planning
• System design and architecture
• Group ICT Security Committee
• Experienced project management
teams
• Proactive monitoring and
oversight
• Proactive engagement strategies
with stakeholders
• Health policy units created to
conduct research and provide
strategic input into reform
processes
• Active industry participation
across all divisions
• Company Secretarial and/
or 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 compliance
management processes
• Visible ethical leadership
• Monitoring and investigation
of incidents reported on the
ethics line
• Executive and Board level
oversight
46 MEDICLINIC | ANNUAL REPORT 2018
PRINCIPAL
RISK
Clinical risks
6
MOVEMENT
IN 2018
Clinical processes
across operating
divisions
continued to be
a key focus area
for the Group.
Risk exposure
remained at a
comparable level
to the previous
year.
Risk of availability,
recruitment and
retention of
skilled resources
and medical
practitioners
7
Vacancies and
turnover ratios
in respect of
skilled resources
and medical
practitioners
are expected to
remain at similar
levels to the prior
year.
DESCRIPTION OF RISK
MITIGATION OF RISK
Clinical risks are associated
with the provision of clinical
care and may result in
undesirable quality of care or
clinical outcomes.
The risks include a pandemic
and disease outbreak. A
pandemic is an epidemic of
infectious disease that spreads
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, which is the value of the
Group’s brand names.
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.
CSR
• Refer to the Clinical Services
Report for a detailed analysis
of the strategies to manage and
monitor clinical risks
• A Group-wide clinical risk
registers per operating division
• Accreditation processes
• Clinical governance processes
• Monitoring clinical performance
indicators
• Comprehensive processes for
infection control and prevention
• Marketing and communication
strategies
• Quality management processes
• Stakeholder engagement and
disclosure strategies
• Monitoring doctor satisfaction,
movement and doctors’ profiles
• Details on the relationship
with doctors are provided in
the Sustainable Development
Report.
• The employment, recruitment and
retention strategies are explained
in the Sustainable Development
Report.
• The extensive training and
skills development programme,
and the foreign recruitment
programme are further explained
in the Sustainable Development
Report.
SDR
SDR
SDR
KEY
REFERENCE
CATEGORY
BUSINESS PROCESSES
STRATEGIC PRIORITIES
1
2
3
4
Strategic
and business
environment
Financial and
reporting risks
Operational risks
• Strategy formulation and
implementation
• Delivering business value
• Continuing to expand as a successful
• Strategic investments and strategic
international healthcare group
projects
• Revenue cycle
• Procure to pay cycle
• Financial management and control
• Treasury
• Health information (including
coding)
Infrastructure
•
• Marketing and corporate
communication
• Operations
Information
technology risks
•
•
Information and communications
technology (“ICT”)
ICT projects
MEDICLINIC | ANNUAL REPORT 2018
47
A
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S
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M
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T
,
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P
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RISK MANAGEMENT, PRINCIPAL RISKS AND UNCERTAINTIES (CONTINUED)
REFERENCE
CATEGORY
BUSINESS PROCESSES
STRATEGIC PRIORITIES
5
6
7
Regulatory
compliance risks
Clinical risks
• Legal and secretarial
• Governance, risk and compliance
• Environmental management
• Ensuring good corporate governance
• Acting as a responsible corporate
citizen
• Clinical
• Nursing
• Pharmacy
• Coding
• Delivering superior value to its
patients
• Delivering integrated healthcare in
collaboration with doctors and allied
healthcare professional communities
People risks
• Human resources
• Compensation and benefits cycle
• Being an employer of choice
• Having constructive relationships with
all stakeholders
• Being a valued member of the
community
Risk exposure 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 resulted in lowering of risk exposure.
Risk exposure has not changed significantly as the operating and regulatory environment has remained mostly
the same and enhanced risk mitigation measures have kept the risk at same level.
INTERNAL CONTROLS
The Group upholds an effective control environment
designed to ensure risks are mitigated and the Group attains
its objectives, including the accuracy and reliability of the
Group’s financial reporting. The system includes monitoring
mechanisms and ensures that appropriate actions are taken
to correct deficiencies when they are identified.
The key features of the Group’s internal control and risk
management systems in relation to the financial reporting
process include:
• clearly defined matters reserved for the Board or its
lines of
Committees, delegations of authority and
accountability;
• policies and procedures covering:
– the Group’s approach to treasury activities and tax
matters;
– internal and external audit mandates;
– preparation of financial reports;
– governance of key projects; and
– ICT security;
• periodic audits conducted by the Internal Auditor;
•
•
representation letters from the divisional CEOs regarding
the key risks and mitigating actions for their division; and
review of disclosures in financial reports by the divisional
CEOs and CFOs and the Group senior management as
relevant, as well as the Audit and Risk Committee and the
Board, to ensure that they fulfil the relevant requirements.
During the year, the Group and each operating division
executed their assurance plans. These plans comprise various
assurance processes, including internal and external audit
processes which are in place to evaluate the effectiveness
of key controls designed to mitigate the significant risks
identified in each operating division.
The Group makes use of an outsourced internal audit
is closely aligned to the Group risk
function which
management function. It reports independently to the
Audit and Risk Committee of the Board. At each operating
division, the effectiveness of the system of internal financial
control is independently evaluated through the internal and
external audit programmes. In addition to these audits, the
effectiveness 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 division’s management team.
Each operating division has, in addition to the above
mentioned assurance processes,
further
independent assurance processes with professional
organisations, as summarised in the table on page 49.
implemented
The company secretaries at Group and operating division
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 Hirslanden, Mediclinic
Southern Africa and Mediclinic Middle East, and the
Group’s risk management function. The Board, via the Audit
and Risk Committee, is satisfied that there is an effective
risk management process in place and that there is an
adequate and effective system of internal control in place
to appropriately mitigate the significant risks faced by
the Group.
48 MEDICLINIC | ANNUAL REPORT 2018
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T
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S
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COMBINED ASSURANCE
ASSURANCE OUTPUT*
External calculation of carbon
footprint based on carbon emissions
data of Mediclinic Southern Africa
BUSINESS PROCESSES
ASSURED
PROVIDER/STANDARD
Carbon footprint calculation
Carbon Calculated
ISO 14001:2004 certification of
42 of Mediclinic Southern Africa’s
52 hospitals
Environmental management
system
British Standards Institute, as
accredited by United Kingdom
Accreditation Service (“UKAS”)
COHSASA accreditation of 34
of Mediclinic Southern Africa’s
37 participating hospitals
Quality standards of healthcare
facilities
Council for Health Services
Accreditation of Southern Africa
(“COHSASA”), which is accredited
by the International Society for
Quality in Health Care (“ISQua”)
B-BBEE verification
Broad-based black economic
empowerment
Empowerdex
ISO 9001:2008 certification of all
Hirslanden hospitals and Hirslanden
Corporate Office. Five hospitals are
already ISO 9001:2015 certified with
the remainder to be concluded by
September 2018
Self-assessment against EFQM
Excellence Model by all Hirslanden
hospitals and Hirslanden
Corporate Office
Process and Quality
management
Swiss Association for Quality
and Management Systems
(“SQS”)
Assessment against the EFQM
Excellence Model, a framework
for organisational management
systems aimed at promoting
sustainable excellence within
organisations
European Foundation for
Quality Management (“EFQM”)
Excellence Model
ISO 14001:2015 certification of
Hirslanden Klinik Belair
Environmental management
system
SQS
JCI reaccreditation of Mediclinic
Al Noor Hospital in Abu Dhabi in
November 2017
JCI accreditation and re-accreditation
of all Mediclinic Middle East facilities
(hospitals and clinics) is scheduled for
mid-2019
Quality and safety of patient
care
Joint Commission International
(“JCI”) Accreditation
All Mediclinic Middle East laboratories
operating within Mediclinic hospital
and clinic facilities are ISO 15189:2012
accredited.
Pathology laboratories of
Mediclinic Middle East hospitals
and clinics in Dubai, Abu Dhabi,
Al Ain and Western Region
International Organisation for
Standardisation (“ISO”)
CAP re-accreditation of the laboratory
of Mediclinic City Hospital in 2017
Pathology laboratory of
Mediclinic City Hospital
College of American
Pathologists (“CAP”)
* The flags indicate the operating division where the assurance process is in place
Key:
= Mediclinic Southern Africa
= Hirslanden
= Mediclinic Middle East
MEDICLINIC | ANNUAL REPORT 2018
49
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VIABILITY
STATEMENT
The assessment of viability is an extension of the risk
would be refinanced broadly in line with the terms and
management and annual financial planning processes
conditions of the existing facilities. The Group successfully
which translate into each of the Group’s operating divisions’
refinanced CHF1.9bn and R4.2bn in 2012; CHF1.7bn in 2015;
business plans. The business plans reflect the current Group
and in 2016 refinanced the UK bridge facility of £266m with
strategies and their associated risks and the directors’
facilities amounting to R2.7bn in South Africa and US$155m
best estimations of their prospects. Fundamental to the
in the Middle East. At the end of October 2017, the elective
assessment of the Group’s prospects is the long-term
refinancing of the Group’s Swiss debt was successfully
business model of quality service delivery and revenue
completed. The refinanced Swiss debt funding comprises
growth under manageable risk tolerance.
up to CHF2bn of property-backed facilities for a minimum
The annual financial planning process includes a detailed
period of six years and up to a maximum of 10 years.
bottom-up approach per division for the budget year
The Audit and Risk Committee monitors the Group’s robust
(performed by each clinic and hospital) and the extension of
risk management process and system of internal control
AR
the key assumptions to the forecast period. The budgets are
via a mandate from the Board (see pages 124 and 125). The
subject to review and, if necessary, re-budgeting. The annual
principal risks as detailed on pages 44 to 47 were identified
financial planning, including the strategic Group goals and
by these systems and, for the purposes of the viability
objectives, are reviewed and approved by the divisional
Executive Committees, Mediclinic International Executive
assessment, severe but plausible scenarios reflecting the
risks that could impair the viability of the Group were
Committee and Mediclinic International plc Board.
identified for each of the operating divisions to form the
The Board has adopted a five-year time frame for the
basis for stress testing.
assessment, in line with the Group’s business planning period
On a divisional level the potential impact of each scenario
which reflects the impact of investments made in the present
and certain scenarios in combination, were modelled and
period. The five-year period extends beyond the maturities
assessed on EBITDA or profit after tax (as appropriate), net
of a material portion of the Group’s borrowings. Under
debt and debt covenants over the five-year forecast period.
current operating and market circumstances, as well as the
existing levels of debt and the forecast headroom in respect
of debt covenants, the assumption is that these borrowings
The principal risks and related key assumptions underlying
each of the operating divisions’ business plans that were
flexed in the stress testing are set out below:
KEY ASSUMPTION STRESS
TESTED
PRINCIPAL RISK
DIVISIONS STRESS TESTED
Reductions in tariffs and fees
Economic and business environment
Switzerland; Southern Africa; UAE
Regulatory and compliance risk
Reduction in volumes
Competition
Switzerland; Southern Africa; UAE
Economic and business environment
Regulatory and compliance risk
Change in (insurance patient) mix
Regulatory and compliance risk
Switzerland; UAE
Interest rate increases
Availability and cost of capital
Switzerland
A downturn in the macroeconomic
and business environment
Availability and cost of capital
Southern Africa
Economic and business environment
The shortage and availability of
qualified and experienced
healthcare staff
Availability, recruitment and
retention of skilled resources and
medical practitioners
Southern Africa
Adverse regulatory changes
Regulatory and compliance risk
Switzerland; Southern Africa; UAE
Outmigration of care
Economic and business environment
Switzerland
The investment in Group initiatives
not being successfully implemented
Information systems security and
availability risk
Switzerland
50 MEDICLINIC | ANNUAL REPORT 2018
KEY ASSUMPTION STRESS
TESTED
Delays in expansion projects
Accounts receivable book tracks
above expectation and relationship
with key funders deteriorates
PRINCIPAL RISK
DIVISIONS STRESS TESTED
Information systems security and
availability risk which includes
project delivery risk
UAE
Operational and credit risk
UAE
This analysis showed that the business, in its geographically
31 March 2023. In making their assessment, the Directors
diverse portfolio, would be able to withstand any individual
have assumed that there will be no material change in the
and certain combinations of the severe but plausible
business environment as such assumptions are subject to
scenarios by taking management action, ceteris paribus, with
a level of uncertainty and judgment for which outcomes
the key mitigating steps being a reduction in discretionary
cannot be projected and foreseen.
investment, obtaining a new facility (GBP±100m) at Group
level (subject to being able to agree appropriate terms
and conditions and subject to market conditions), cost
management initiatives and improvement in net working
The analysis does not take account of any changes arising
from the introduction of new accounting standards over the
forecast period.
capital days. The Directors therefore have a reasonable
Having considered the principal risks and the viability
expectation that the Group will be able to continue in
assessment, the Board also considers it appropriate to
operation and meet its liabilities as they fall due over the
adopt the going concern basis of accounting in preparing
five-year period of their detailed assessment, ending in
the financial statements.
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MEDICLINIC | ANNUAL REPORT 2018
51
DIVISIONAL REVIEW
SWITZERLAND
17
NUMBER OF
HOSPITALS
4
NUMBER OF
CLINICS
1 805
NUMBER OF
BEDS
104
NUMBER OF
THEATRES
+2%
REVENUE
CHF1 735M
-7%
ADJUSTED
EBITDA CHF318M
+2%
BED DAYS SOLD
87.7%
PATIENT EXPERIENCE
INDEX
Dr Ole Wiesinger
Chief Executive Offi cer: Hirslanden
CEO’S STATEMENT
“This year was a particularly challenging one with a number of Swiss healthcare regulatory changes impacting
Hirslanden. To address the trends in inpatient and outpatient activity driven by this evolving regulatory environment,
Hirslanden is adapting its business model. We are continuing to transform from being a pure acute hospital operator
to an integrated healthcare service provider that off ers medical services across various levels of care. During the
year we opened the Bellaria Outpatient Surgery Unit in Zurich, which allows procedures to be carried out safely
and effi ciently in an ambulatory environment that aligns with the regulatory changes. Through our Hirslanden 2020
strategic programme we are accessing the most appropriate outpatient solution for each hospital and seeking
to increase the effi ciency of the existing business by implementing standardised systems and processes. Despite
these challenges and the mature, saturated market, as the largest private healthcare service provider in Switzerland,
Hirslanden is well positioned to take advantage of future opportunities for growth through selective investments. In
July, we successfully completed the acquisition of the 115-bed Linde Private Hospital in Biel which has performed well
since its integration. Throughout all this fl ux, patients remain at the core of Hirslanden’s long-term strategy and we
remain focused on providing them with excellent clinical care.”
52 MEDICLINIC | ANNUAL REPORT 2018
KEY FINANCIAL AND OPERATIONAL
HIGHLIGHTS
As at the end of the reporting period, Hirslanden operated
17 hospitals and 4 outpatient clinics with a total of
1 805 inpatient beds and 9 635 employees ( 7 633 full-time
equivalents). It is the largest private acute care hospital
group in Switzerland servicing approximately one third of
inpatients treated in Swiss private hospitals. Hirslanden
accounted for 47% of the Group’s revenues (FY17: 48%) and
48% of its adjusted EBITDA (FY17: 53%).
Eff ective 1 July 2017, Hirslanden acquired Linde Holding
Biel/Bienne AG (“Linde”) for a total consideration of
CHF107m. Linde is a leading private hospital in the Biel region
of Switzerland off ering a wide range of medical services
with 115 beds, an outpatient clinic facility, emergency unit,
six operating theatres, physiotherapy, radiology and an
ophthalmology centre. In March 2017, the hospital’s main
building was expanded with a new wing which provides
the opportunity for future growth. Linde delivered a good
operating performance following its successful integration.
Hirslanden’s FY18 revenues were impacted by the timing of
the Easter period, a subdued summer market, the continued
change in insurance mix and the evolving changes in the
regulatory environment. Revenue in FY18 was up 2% to
9 635
NUMBER OF EMPLOYEES
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EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
-1.5%
AVERAGE REVENUE PER BED DAY
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BED OCCUPANCY
Net fi nance costs increased by 42% to CHF81m (FY17:
CHF57m), mainly due to the derecognition of unamortised
fi nance expenses of CHF24m due to the refi nance of debt
facilities implemented during the year.
CHF1 735m (FY17: CHF1 704m) as a result of fl at inpatient
Hirslanden contributed £106m to the Group’s adjusted
revenues and an 8% increase in outpatient revenues, which
earnings
(representing 48%) compared
to £121m
contributed around 19% of the division’s total revenue. The
(representing 55%) in the prior year. Hirslanden converted
gradual insurance mix change continued, with a 10% increase
81% (FY17: 96%) of adjusted EBITDA into cash generated
in general insured patients and a 3% decline in supplementary
from operations, down from 96% in FY17 due to an increase in
insured patients. This, together with the integration of Linde,
trade receivables largely caused by billing process changes.
contributed to the 1.5% decline in revenue per bed day.
Bed days sold and inpatient admissions were up 1.6% and 2.6%
respectively. Excluding Linde, Hirslanden revenue was down
1% and outpatient revenue was up 3% with bed days sold and
inpatient admissions down 2.6% and 2.1% respectively.
Adjusted EBITDA decreased by 7% in FY18 to CHF318m
(FY17: CHF340m) with the adjusted EBITDA margin
decreasing to 18.3% from 20.0%. This refl ects the impact
on revenue of current trends in the market and regulatory
environment as well as the continued investment costs
relating to the Hirslanden 2020 strategic programme off set
by the benefi ts from cost-management programmes and
effi ciency savings.
In October 2017, the Group completed the refi nancing of
Hirslanden’s secured long-term bank loans with a 25bps
reduction in the cost of debt on a like for like basis and an
extended maturity profi le to at least 2023. The new facilities
total CHF2.0bn.
In line with the requirements of IFRS, the Group performs
an annual review of the carrying value for goodwill and
other intangible assets. In Switzerland, the changes in the
market and regulatory environment aff ected key inputs to
the review that gave rise to impairment charges recorded
against properties and intangible assets of £84m and
£560m, respectively. Hirslanden's goodwill and indefi nite life
trade names were carried at £307m and £341m, respectively,
Depreciation and amortisation increased by 12% to CHF110m
at the previous year end balance sheet date of 31 March 2017.
(FY17: CHF98m) refl ecting the incorporation of Linde
The impairment charges are non-cash and excluded from
and ongoing fi xed asset investments. Adjusted operating
the adjusted earnings metrics. The remaining trade names
profi t decreased by 14% to CHF208m (FY17: CHF242m).
will be amortised over their respective estimated useful lives.
MEDICLINIC | ANNUAL REPORT 2018
53
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DIVISIONAL REVIEW – SWITZERLAND (CONTINUED)
programme. This programme has two main goals: to increase
the efficiency of the existing business by implementing
standardised systems and processes; and to develop new
areas of business, such as outpatient facilities to efficiently
service day case patients. During the year, a new corporate
office was opened in Zurich which will support the drive
to deliver efficiencies across the division in addition to the
roll out of standardised systems across the Zurich based
hospitals in April 2018 that will continue across the rest
of the division over the coming three years. Hirslanden is
assessing the most appropriate outpatient solution to
implement for each hospital, including the reconfiguration
of existing hospital surgery units and the establishment of
specialised outpatient and medical centres moving towards
a more integrated medical network that facilitates the access
to healthcare for patients. New medical centres where
doctors’ practices will be located are planned to open in
Zurich, Cham and St. Gallen during the financial year ending
31 March 2019 (“FY19”).
INVESTING FOR FUTURE GROWTH
In FY18, Hirslanden
invested CHF47m
in expansion
capital projects and new equipment and CHF82m on the
replacement of existing equipment and upgrade projects.
The division continues to invest in Hirslanden 2020.
Hirslanden Klinik Im Park in Zurich opened its new Bellaria
outpatient surgery centre in April 2017, which includes a
ward for procedures requiring short inpatient stays. In FY19,
Hirslanden expects to invest CHF55m and CHF77m on
expansion and maintenance capex, respectively. Building
work continues on an expanded emergency department
for Klinik Hirslanden in Zurich and a new ward at Hirslanden
Klinik St. Anna in Lucerne which are both expected to be
completed in FY19. Other key projects in the year ahead
include Hirslanden 2020, the new Birshof medical centre
and intermediate care facility, new emergency units at Klinik
Linde and Andreas Klinik as well as an outpatient surgery
unit and medical centre at the train station in Lucerne.
REGULATORY UPDATE
On 1 January 2018, the transitional solution to the national
outpatient tariff (“TARMED”) became effective. After
improved utilisation and
mitigating actions,
including
increased efficiencies, Hirslanden expects the annualised
impact on adjusted EBITDA to be around CHF25m. The
Federal Government has also been preparing a national
framework for the outmigration of basic medical treatments
transferring from an inpatient to an outpatient tariff, which is
expected to be implemented from 1 January 2019. The final
list of interventions will be agreed following the conclusion
of a recent working group review. In the Canton of Lucerne,
similar measures were implemented on 1 July 2017 and in four
further Cantons (Zurich, Zug, Schaffhausen and Aargau) on
1 January 2018. Although the Federal Government is
from
expected to
1 January 2019, a number of insurance companies in
implement a national
framework
Switzerland are already applying certain elements of the
framework in some further cantons.
ADAPTING TO THE CURRENT
MARKET AND REGULATORY TRENDS
Hirslanden continues to adapt its business model to address
the trends in inpatient and outpatient activity driven by
the evolving regulatory environment in Switzerland and
the ongoing insurance mix change whilst maintaining
excellent clinical performance. The continued investment
in the Hirslanden 2020 strategic programme is a key
building block of the long-term strategy to adapt to this
changing environment, whilst also delivering cost savings
and operational efficiencies for the division over time. The
pace of regulatory change and its impact on the business
continues to evolve and we are monitoring it closely to
adapt accordingly.
The growing outmigration of care trend in Switzerland is
being addressed as part of the Hirslanden 2020 strategic
54 MEDICLINIC | ANNUAL REPORT 2018
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MARKET OVERVIEW
The Swiss healthcare market is one of the best funded in the
OUTLOOK
There continues to be a significant focus on the shift of basic
developed world and continues to grow steadily. Hirslanden
is the largest medical network and the largest private
hospital group in Switzerland, and operates effectively within
medical treatments from the inpatient to the outpatient
sector (“outmigration”). The Federal Government
preparing a framework for the outmigration of services,
is
a high-quality healthcare system where the population
likely to be ready for implementation from 1 January 2019,
enjoys freedom of choice and high-quality services in both
across Switzerland. Having opened the new Outpatient
the public and private sector. A survey, financed by the
Surgery Unit at Klinik Im Park, Hirslanden will also open a
Commonwealth Fund and conducted in 11 countries, found
new medical centre in Zurich (Seefeldstrasse) in spring 2018
that 60% of respondents in Switzerland rated the functioning
and further ones at Schuppis (canton of St. Gallen) and
of the Swiss healthcare system as “good” or “very good”.
Cham (canton of Zug) early in 2019.
66% considered the medical care provided as either
“excellent” or “very good”. Of the 11 countries surveyed,
Switzerland had the best response.
Given the current market and regulatory trends, the
investment programme within Hirslanden and the potential
for increased synergies, the division is well positioned to
Hirslanden’s main competitors are the public hospitals.
adapt its business model and maintain its status as the
Many of these will improve their infrastructure in the coming
largest medical network in Switzerland while continuing to
years. According to publicly available sources, CHF16bn is
improve patient satisfaction and clinical outcomes.
earmarked for the construction and renovation of hospital
buildings.
There are 26 cantons that supervise and manage hospitals
and ensure their funding in collaboration with the mandatory
health insurance. Besides the regulation of the inpatient
sector, the cantons increasingly intervene by defining lists
of medical procedures to be performed ambulatory or by
establishing a moratorium for foreign doctors.
MEDICLINIC | ANNUAL REPORT 2018
55
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DIVISIONAL REVIEW
SOUTHERN AFRICA
52
NUMBER OF
HOSPITALS
2
NUMBER OF
DAY CLINICS
8 131
NUMBER OF
BEDS
278
NUMBER OF
THEATRES
+5%
REVENUE
R15 106M
+6%
ADJUSTED EBITDA
R3 245M
-1.5%
BED DAYS SOLD
82.1%
PATIENT EXPERIENCE
INDEX
Koert Pretorius
Chief Executive Offi cer: Mediclinic Southern Africa
CEO’S STATEMENT
“Mediclinic Southern Africa delivered good operational and fi nancial results for the period under review despite some
weaker patient volumes. We have continued to make good progress with the rollout of further strategic initiatives to
improve the value proposition that we off er to our patients, focusing on patient safety initiatives, improving patient
experience and initiatives to improve collaboration with our supporting doctors. We have continued to invest in the
maintenance and upgrade of our facilities and will add six new day clinics to our portfolio in the next few years to
provide the most appropriate range of care for our patients in the future. We continued to address a number of
matters in the wider business environment, specifi cally the Health Market Inquiry and National Health Insurance
developments.”
KEY FINANCIAL AND OPERATIONAL
HIGHLIGHTS
In Southern Africa (including South Africa and Namibia),
as at the end of the reporting period, Mediclinic operated
52 hospitals and 2 day clinics with a total of 8 131 beds and
16 068 employees (19 795 full-time equivalents). Mediclinic
Southern Africa is the third largest private healthcare
provider in Southern Africa by number of licensed beds.
Mediclinic Southern Africa accounted for 31% of the Group’s
revenues (FY17: 28%) and 37% of its adjusted EBITDA
(FY17: 33%).
Following a fi rst half performance where patient volumes
were impacted by the timing of Easter and other public
holidays, Mediclinic Southern Africa delivered an improved
and stronger-than-expected second half performance.
Despite a continued weak macroeconomic environment,
stable medical insurance membership and certain funder
interventions, revenue in Southern Africa increased by 5% to
ZAR15 106m (FY17: ZAR14 367m). Bed days sold decreased
by 1.5% and average revenue per bed day increased by 6.7%.
Admissions decreased by 2.2% with the greatest decline in
surgical day cases as the outmigration trend continues. The
average length of stay increased by 0.8% whilst occupancy
rates were 69.7% (FY17: 71.5%).
56 MEDICLINIC | ANNUAL REPORT 2018
Adjusted EBITDA
increased by 6% to ZAR3 245m
(FY17: ZAR3 049m) resulting in the adjusted EBITDA margin
increasing to 21.5% from 21.2% as the ongoing shift in case
mix towards medical versus surgical cases and lower patient
volumes were more than off set by cost management and
effi ciency initiatives.
Depreciation and amortisation increased by 7% to ZAR495m
(FY17: ZAR465m) mainly because of an increased spend on
medical equipment. Operating profi t increased by 6% to
ZAR2 749m (FY17: ZAR2 584m).
Net fi nance costs
increased by 6%
to ZAR526m
(FY17: ZAR496m), helped by interest received on cash
balances. Mediclinic Southern Africa contributed £72m to
the Group’s adjusted earnings (representing 33%) compared
to £67m (representing 30%) in the comparative period.
The division converted 103% (FY17: 104%) of adjusted
EBITDA into cash generated from operations.
INVESTING TO SUPPORT LONG-TERM
GROWTH
Medi clinic Southern Africa invested ZAR423m on expansion
capital projects and new equipment and ZAR634m on the
replacement of existing equipment and upgrade projects.
16 068
NUMBER OF EMPLOYEES
3.85
EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
+6.7%
AVERAGE REVENUE PER BED DAY
69.7%
BED OCCUPANCY
In August 2017, Mediclinic announced it had agreed to an
investment in the Intercare group of companies (“Intercare”).
The Intercare group was founded in 2000 and currently
The total number of licensed beds increased marginally
manages 20 multi-disciplinary primary care medical centres
during the year to 8 131 (FY17: 8 095) as existing hospital
(which includes 15 dental centres), as well as 4 day hospitals
expansion work in the second half of the year at Mediclinic’s
and 4 sub-acute and rehabilitation hospitals in South Africa,
Thabazimbi and Newcastle hospitals was completed.
servicing over 1 million patients per annum. The investment
In addition to these modest expansion works, other
in Intercare comprises a minority shareholding in the multi-
projects during the year included expansion of Mediclinic
disciplinary medical and dental centres and a controlling
Bloemfontein and Mediclinic Vergelegen. In FY19, Mediclinic
shareholding in the day hospitals and sub-acute and
Southern Africa expects to invest ZAR472m and ZAR846m
rehabilitation hospitals. Intercare will continue to manage all
on expansion and maintenance capex respectively. Several
its facilities under the Intercare brand. Mediclinic’s proposed
existing hospital and day clinic projects are due for
acquisition of the controlling shareholding in the day hospital
completion in FY19 and FY20, which are expected to add
and sub-acute and rehabilitation hospitals remains subject
some 300 additional operational beds. In line with our
to Competition Commission approval.
commitment to provide quality clinical care, we expect to
invest during the year in additional resources to deliver
further improvements across the division.
Mediclinic’s day clinic roll-out is unique and premised on
co-locating the facilities with the main hospitals to adapt
Mediclinic’s proposed acquisition of a controlling
shareholding in Matlosana Medical Health Services (Pty) Ltd
(“MMHS”), based in Klerksdorp in the North West Province
of South Africa, has been referred to the Competition
Tribunal by the Competition Commission with the case
to the outmigration of care trend in Southern Africa where
expected to be heard in the fi rst quarter of FY19.
admissions across the division have been impacted by
declining day cases. The six day clinics Mediclinic now plans
to open during FY19 and FY20 are at Mediclinic Newcastle,
Nelspruit, Stellenbosch, Bloemfontein, Pietermaritzburg and
Cape Gate, which will provide an additional 15 theatres to
the Southern African operations. The fi rst of these will be
Mediclinic Newcastle Day Clinic which is scheduled to open
in September 2018 with Mediclinic Nelspruit Day Clinic to
follow next in 1H20.
EFFICIENCY AND OTHER
DEVELOPMENTS
Mediclinic Southern Africa progressed with several
improvements to its core processes during the period under
review. A particular focus on optimising nurse utilisation
without compromising on the quality of care enabled the
operating division to manage nursing cost particularly well
during the period under review.
MEDICLINIC | ANNUAL REPORT 2018
57
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DIVISIONAL REVIEW – SOUTHERN AFRICA (CONTINUED)
In addition, the operating division introduced action plans
eight of Mediclinic’s hospitals were recognised in the survey
to improve employee engagement and conducted the third
for the quality of care they receive from doctors and nurses,
survey through its employee engagement index. Detailed
patients’ overall experience and hospital conditions.
plans to improve employee engagement were successful
in improving employee engagement to 3.85 (2017: 3.73)
during the year (the grand mean score based on a 1 to
5 rating scale).
As part of Mediclinic Southern Africa’s commitment to
the Competition Commission’s Health Market
Inquiry,
the operating division agreed to publish, in an open and
transparent way, the detailed patient feedback from Press
Ganey on its website. The division also had the largest
representation in the annual Discovery Health Top 20 South
Africa Hospital survey in 2017. Based on patient feedback,
REGULATORY UPDATE
The Competition Commission is currently undertaking a
market inquiry into the private healthcare sector in South
Africa to understand both whether there are features of
the sector that prevent, distort or restrict competition
and how competition in the sector can be promoted. The
inquiry is due to publish its provisional recommendations
by the end of May 2018, having been further delayed. The
final publication is expected by the end of August 2018.
Mediclinic has submitted documentation and participated in
numerous seminars and discussions during the inquiry.
Mediclinic Otjiwarongo
Mediclinic Swakopmund
Mediclinic Windhoek
Pretoria hospitals:
• Mediclinic Gynaecological Hospital
• Mediclinic Heart Hospital
• Mediclinic Kloof
• Mediclinic Medforum
• Mediclinic Midstream
• Mediclinic Muelmed
Mediclinic Limpopo Day Clinic
Nelspruit
Mediclinic Morningside
Mediclinic Sandton
Wits Donald Gordon
Medical Centre
Mediclinic
Lephalale
Mediclinic Upington
Mediclinic Kimberley and
Mediclinic Gariep
KwaZulu-Natal
Western Cape hospitals:
• Mediclinic Cape Gate
• Mediclinic Cape Town
• Mediclinic Constantiaberg
• Mediclinic Durbanville
• Mediclinic Durbanville Day Clinic
• Mediclinic Louis Leipoldt
• Mediclinic Milnerton
• Mediclinic Panorama
Mediclinic Paarl
Mediclinic Worcester
Mediclinic Klein Karoo
Vergelegen
Mediclinic Vergelegen
Strand
Mediclinic Strand
Mediclinic Stellenbosch
Mediclinic Plettenberg Bay
Mediclinic George
Mediclinic Geneva
Hermanus
Mediclinic Hermanus
58 MEDICLINIC | ANNUAL REPORT 2018
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The South African Government
is seeking a phased
introduction of a National Health Insurance system over
a 14-year period. The latest White Paper was released in
June 2017 for consultation. Mediclinic has engaged with
the Department of Health with regards to the functioning
of the proposed seven institutions, bodies and commissions,
submitting comments on the draft guidelines and making
nominations to the committees. Mediclinic will continue to
closely monitor the process and seeks further clarity on a
large number of matters that still need to be addressed.
MARKET OVERVIEW
In recent years, growth in the South African private
healthcare market has stagnated due to political uncertainty,
low economic growth and a lack of job creation. However,
latest economic forecasts indicate improving GDP growth
rates which may provide the opportunity for insured lives
in Southern Africa to increase. In the meantime, the market
offers isolated incremental growth opportunities to expand
existing hospitals, and to build new hospitals and day
clinics. The focus remains on improving the efficiency of
healthcare delivery across the value chain in a fragmented
market to ensure services remain affordable. At the same
time Mediclinic Southern Africa is committed to improving
outcomes for patients, attracting and retaining qualified
staff and investing in infrastructure and medical technology.
OUTLOOK
Mediclinic Southern Africa remains well positioned for future
success in the current market and regulatory environment.
The private healthcare industry has reached maturity
with limited opportunities for material growth in the large
multi-disciplinary acute care hospital environment given
Mediclinic Southern Africa’s extensive footprint. Future
growth will focus on related business opportunities across
the continuum of care.
The focus in the coming year will be on further developing
Mediclinic Southern Africa’s strategy to position itself for
future value-based contracting opportunities. The operating
division will continue to focus strategically on the value that
it delivers 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
efficiency. The division will also continue to focus on
opportunities to develop an integrated Southern African
private healthcare delivery model through collaboration
with doctors.
MEDICLINIC | ANNUAL REPORT 2018
59
DIVISIONAL REVIEW
UNITED ARAB EMIRATES
6
NUMBER OF
HOSPITALS
22
NUMBER OF
CLINICS
748
NUMBER OF
BEDS
29
NUMBER OF
THEATRES
+1%
REVENUE
AED3 134M
+9%
ADJUSTED
EBITDA AED397M
-3.5%
BED DAYS SOLD
83.3%
INPATIENT
EXPERIENCE INDEX
David Hadley
Chief Executive Offi cer: Mediclinic Middle East
CEO’S STATEMENT
“Following the challenges faced by the Middle East division last year, we are succeeding with the turnaround of the
Abu Dhabi business and laying the foundation for long-term, sustainable performance. We reached an infl ection point
this year in Abu Dhabi driven by the successful implementation of business and operational alignment initiatives, an
improved regulatory environment and better-than-expected results from the new Mediclinic Al Jowhara Hospital and
Mediclinic Al Yahar Clinic in Al Ain. The Middle East division is entering a growth phase underpinned by continued
strong performance in the established Dubai business, signifi cant improvement in the Abu Dhabi business and the
planned opening of several new facilities over the coming years. In Dubai, the 182-bed Mediclinic Parkview Hospital is
progressing ahead of schedule and is now expected to be commissioned in October 2018.”
KEY FINANCIAL AND OPERATIONAL
HIGHLIGHTS
Mediclinic Middle East, as at the end of the reporting period,
operated 6 hospitals and 22 clinics with a total of 748 beds
and 5 801 employees (5 830 full-time equivalents). Mediclinic
Middle East is one of the leading private healthcare providers
in the UAE with the majority of its operations in Dubai
and Abu Dhabi (including Al Ain). Mediclinic Middle East
accounted for 22% of the Group’s revenues (FY17: 24%) and
16% of its adjusted EBITDA (FY17: 15%).
After reaching an infl ection point, second half revenue in
the Middle East division increased 6% comparatively and
12% sequentially. Continued strong delivery in Dubai was
supported by a signifi cantly improved operating performance
in Abu Dhabi with Mediclinic Al Jowhara Hospital and
Mediclinic Al Yahar, which opened in Al Ain during the prior
year, exceeding expectations. FY18 revenue increased by 1%
to AED3 134m (FY17: AED3 109m). Inpatient and outpatient
volumes were up 3.3% and down 9.7% respectively in FY18,
impacted largely by the business and operational alignment
initiatives and non-core asset disposals in Abu Dhabi.
60 MEDICLINIC | ANNUAL REPORT 2018
The former includes strategies to actively migrate away
from Basic to Thiqa (health insurance for UAE nationals)
and Enhanced insured patients in Abu Dhabi and to invest
in higher acuity inpatient services, generating higher-quality
revenue and margin improvement.
Following a strong second half operating performance,
FY18 adjusted EBITDA increased by 9% to AED397m
(FY17: AED364m). The adjusted EBITDA margin was
ahead of expectations, increasing to 12.7% (FY17: 11.7%).
The ongoing effi ciency and cost-management initiatives
implemented since the combination in February 2016 is
expected to support margin improvement in the Middle East
operating division as revenues increase.
In line with guidance, a provision for trade receivables
impairment of AED88m (FY17: AED113m) was charged to
the income statement. This represents 3% of Middle East
revenue where the practice of disallowances is common.
This matter receives ongoing attention as part of the
revenue management cycle improvement programme. The
Group will adopt the new IFRS 15 accounting standard
(Revenue from Contracts with Customers) from 1 April 2018.
Under IFRS 15, revenue is recognised at an amount that
refl ects the consideration to which an entity expects to be
entitled to in exchange for transferring goods or services to
a customer. Whilst this will not have an impact on the Middle
5 801
NUMBER OF EMPLOYEES
3.86
EMPLOYEE ENGAGEMENT
(grand mean score based on a 1 to 5 rating scale)
+4.4%
AVERAGE REVENUE PER BED DAY
53%
BED OCCUPANCY
INVESTING IN A DYNAMIC AND
GROWING MARKET
Mediclinic Middle East is succeeding with the turnaround of the
East division’s EBITDA, certain operating expenses will be
Abu Dhabi business, laying broader foundations for growth in
reclassifi ed and set off against revenue in future periods.
the region. In February 2017, the important strategic decision
Further disclosure is contained in the notes to the accounts.
was taken to rebrand the Abu Dhabi business to Mediclinic.
Depreciation and amortisation
increased by 22% to
AED256m (FY17: AED210m), mainly due to accelerated
amortisation of AED107m in relation to the Al Noor
trade name, resulting from the rebranding exercise that
commenced in February 2017. This asset has now been
fully amortised and the charge is excluded from adjusted
earnings. Depreciation increased due in part to the opening
of the new North Wing at Mediclinic City Hospital in Dubai
and the Mediclinic Al Jowhara Hospital in Abu Dhabi during
FY17. Operating profi t was AED122m (FY17: AED134m).
This exercise was successfully completed at the end of 2017
and has started to deliver the desired eff ect of enhancing
the brand reputation and recognition of the Mediclinic
hospitals and clinics in Abu Dhabi. Whilst doctor recruitment
continues, supporting the growing business, vacancies have
normalised compared to the prior year, and the focus has
shifted to supporting doctors to grow their patient activity.
This included the roll-out of a new remuneration policy, similar
to that established in Dubai, that is fundamentally based
on doctors’ professional services and the quality of care
provided. Aligned with this strategy is the target in Abu Dhabi
Net fi nance costs
increased by 9%
to AED34m
of increasing the ratio of inpatient volumes, similar to that in
(FY17: AED31m) due to the June 2016 increase in debt
Dubai, through the continued investment in doctors, services
facilities by AED567m (of which AED220m remains
and facilities. The divestment strategy was concluded during
undrawn) to refi nance the Group bridge loan facility fund
the year, with the successful sale of fi ve clinics and closure of
expansion projects. The division contributed £44m to the
four others that were considered non-core.
Group’s adjusted earnings (representing 20%) compared to
£33m (representing 15%) in the prior year.
Since the Thiqa co-payment requirement in Abu Dhabi
was removed in April 2017, the business continues to see
The d ivision converted 74% (FY17: 121%) of adjusted
an improving trend in Thiqa patient activity. FY18 Thiqa
EBITDA into cash generated from operations. The decline
inpatient and outpatient volumes in Abu Dhabi increased
was largely due to the signifi cant increase in revenue
by 83% and 38% respectively compared to the prior year.
in the fi nal quarter.
The removal of the Thiqa co-payment has enabled the
business to accelerate its strategy of migrating activity away
from Basic, towards Enhanced and Thiqa insured patients.
MEDICLINIC | ANNUAL REPORT 2018
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DIVISIONAL REVIEW – UNITED ARAB EMIRATES (CONTINUED)
In January 2018, the strategy was fully implemented at
Mediclinic Al Noor Hospital is ongoing with the expectation
Mediclinic Airport Road Hospital, resulting in a revenue uplift
that a decision will be made in the third quarter of 2018.
for the fourth quarter, despite a drop in volumes. In Abu Dhabi,
the business expects the positive momentum in higher tariff
patient volumes to continue to grow in FY19, as the recently
appointed doctors increase their patient activity.
In May 2018, Mediclinic Middle East completed the
acquisition of the Dubai based City Centre Clinics Deira and
Me’aisem from Majid Al Futtaim, the leading shopping mall,
retail and leisure pioneer across the Middle East and North
The Middle East division is now entering an expansionary
Africa. Under the terms of the agreement, Mediclinic Middle
phase that is expected to drive an increase in revenue and
East will acquire City Centre Clinic Deira, a large outpatient
improvement in EBITDA margins over time. In Abu Dhabi, the
facility which opened in 2013 with two day-care surgery
growth will be driven by an improved operating performance
theatres and 18 medical disciplines, and City Centre Clinic
in the existing business and strategic expansion projects at
Me’aisem, a smaller community clinic focusing on six core
the Mediclinic Airport Road, Mediclinic Al Noor and the new
disciplines. The clinics serve strategic geographic locations
Mediclinic Western Region hospitals. In Dubai, the ongoing
and offer the opportunity to refer higher acuity inpatient
performance of the existing business will be supported by
cases to existing Mediclinic Middle East hospitals and the
significant growth from the new 182-bed Mediclinic Parkview
forthcoming Mediclinic Parkview Hospital. Significant
Hospital. Recruitment of doctors and staff for the new
hospital is on track to support the 100 beds that will initially
potential also exists to attract additional doctors and over
time to grow patient volumes and revenues as well as
be opened before ramping up to full bed capacity over some
allowing Mediclinic Middle East the opportunity to partner
three years.
with Majid Al Futtaim in the future.
During the year, Mediclinic Middle East invested AED358m
on expansion capital projects and new equipment and
AED31m on the replacement of existing equipment
and upgrade projects. The major component of the
expansion capital expenditure was the Mediclinic Parkview
Hospital project
in Dubai. Construction of the new
182-bed Mediclinic Parkview Hospital, the seventh hospital
in the Middle East operations, is progressing well and is
ahead of schedule, expected to now open in October 2018.
Other expansion capex in FY18 included projects at
Mediclinic Airport Road Hospital, Mediclinic City Hospital,
Mediclinic Al Ain Hospital and Mediclinic Khalifa City. In
September 2017, the Electronic Health Record (“EHR”)
project, Mediclinic International’s largest ever IT investment,
was launched in conjunction with InterSystems. A team of
some 200 members of staff, are currently engaged in the
project design process. The EHR will be systematically rolled
out across the Mediclinic Middle East division during FY19
and FY20. The EHR is expected to deliver seamless care
and improved service quality for patients as well as
improved administration efficiency for the division.
In FY19, Mediclinic Middle East expects to invest AED455m
and AED84m on expansion and maintenance capex
respectively. During the year, ground floor and mezzanine
renovations at the Mediclinic Al Noor Hospital will be carried
out with expected completion of the work by the end of 2018.
Looking further ahead, as part of the division’s expansionary
phase, the Mediclinic Airport Road 100-bed expansion and
cancer centre project has been further re-configured with
work commencing imminently ahead of an expected opening
in 2020. The project to construct a new 40-bed hospital in
the Western Region of Abu Dhabi, which was postponed last
year, has been re-initiated with project planning currently
underway. A review of the long-term options to enhance the
REGULATORY UPDATE
The division continues to maintain an active dialogue with
government authorities on regulatory changes within
the UAE healthcare sector. Preparations are ongoing for
the implementation of Diagnosis Related Groups (“DRG”) in
Dubai which is now expected to be implemented in early
2019 with Mediclinic commencing a shadow billing process
in February 2018. The Dubai Health Authority (“DHA”)
is following a collaborative approach in the design and
implementation of the DRGs and in addition to sharing
and discussing the test version of the DRG methodology
with the market, they also shared hospital level results
and impact studies. Currently it is expected that the DRGs
will have a revenue neutral impact on the division, as
prescribed by the DHA. At the end of January 2018, the
DHA also announced they are in the process of developing
a comprehensive Dubai Healthcare Facilities Performance
Framework in collaboration with IBM Watson, which will
contain clinical and financial key performance indicators.
During the year, Mediclinic was privileged to be invited by
the Department of Health in Abu Dhabi to join its healthcare
advisory board. There were some significant changes to
the regulatory environment in Abu Dhabi at the start of the
year. On 26 April 2017, His Highness Sheikh Mohammed bin
Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy
Supreme Commander of the UAE Armed Forces, ordered
the waiving of the 20% Thiqa co-payment when receiving
treatment at private healthcare facilities in Abu Dhabi,
with immediate effect. This rule had been in place since
1 July 2016, substantially impacting the division. At the same
time the 50% co-insurance applicable for the Thiqa plan for
the cost if patients sought medical services outside Abu
Dhabi (including Dubai and the Northern Emirates) was
62 MEDICLINIC | ANNUAL REPORT 2018
reduced to 10%. In Dubai, UAE nationals are covered under
and utilisation, which are still prevalent in some areas of the
the ENAYA and SAADA health insurance programmes,
market and to focus on quality performance and outcome
under the supervision of the Dubai Health Authority, with a
measures. The senior management of Mediclinic Middle
10% co-payment for inpatient and outpatient services in the
East continues to forge ever deeper relationships with the
public and private sectors.
authorities to ensure Mediclinic remains an integral part of
The Gulf Corporation Council Value-Added Tax (“VAT”)
framework agreement was published in April 2017 and
subsequently in August 2017 healthcare was confirmed as a
zero-rated service. Mediclinic completed its VAT registration
ahead of the 1 January 2018 implementation of the tax.
MARKET OVERVIEW
The Middle East remains a long-term growth market for the
provision of high-quality private healthcare services, driven by
a growing expatriate market and ageing local population facing
an increased incidence of lifestyle-related medical conditions
and a maturing regulatory environment which is increasingly
focused on quality and clinical outcomes measures. Mediclinic
has confidence in its Middle East growth strategy, which
the healthcare delivery system in the region.
OUTLOOK
The economic outlook for the UAE is more positive for 2018
and 2019. This is premised on greater stability in the oil price,
increased government expenditure likely as Expo 2020
draws closer, non-oil revenues increase from new forms of
direct and indirect taxation and a predicted rise in foreign
trade. Economically, there is still opportunity for greater
diversification away from hydrocarbons in Abu Dhabi than
in Dubai, which in turn can create new opportunities for the
private healthcare industry. Mediclinic’s strategy to reduce
reliance on the low-priced insurance sector in Abu Dhabi has
proved successful and will continue to be rolled out.
includes the opening of new hospitals and clinics in addition to
With the operational integration following the combination
expansion and upgrades to existing facilities.
now largely complete and the focus now on bringing newly
Within the region’s healthcare market, government authorities
remain heavily involved in the private sector and continue to
introduce controls in order to reduce levels of over-servicing
opened facilities to capacity and ensuring timely delivery of
projects under construction, Mediclinic Middle East is now
well positioned to consider further appropriate opportunities
for growth.
ARABIAN GULF
QATAR
Mediclinic Al Qusais
Mediclinic Welcare Hospital
Mediclinic City Hospital
Mediclinic Dubai Mall
Mediclinic Al Sufouh
Mediclinic Ibn Battuta
Mediclinic Meadows
Mediclinic Arabian Ranches
Mediclinic Al Bahr
Mediclinic Mirdif
OMAN
RAS AL-KHAIMAH
AJMAN
SHARJAH
DUBAI
FUJAIRAH
ADU DHABI
AL AIN
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ENEC
Mediclinic Ghayathi
Mediclinic Al Musaffah
Mediclinic Al Bateen
Mediclinic Airport Road Hospital
Mediclinic Madinat Zayed (2)
Mediclinic Al Mamora
Mediclinic Al Noor Hospital
Mediclinic Khalifa City
Mediclinic Baniyas
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Mediclinic Al Ain Hospital
Mediclinic Zakher
Mediclinic Al Jowhara Hospital
Mediclinic Bawadi
Mediclinic Al Yahar
Mediclinic Al Madar
Mediclinic Aspetar
OMAN
SAUDI ARABIA
CLINICS
HOSPITALS
MEDICLINIC | ANNUAL REPORT 2018
63
MEDICLINIC
PARKVIEW HOSPITAL
BRINGING OUR NEXT STATE-OF-THE-ART
HEALTHCARE FACILITY TO DUBAI
Announced in 2015 and due to open in October 2018, the
Announced in 2015 and due to open in October 2018, the
182-bed Mediclinic Parkview Hospital is Mediclinic Middle East’s
182-bed Mediclinic Parkview Hospital is Mediclinic Middle East’s
third hospital in Dubai and its seventh across the UAE. This major
third hospital in Dubai and its seventh across the UAE. This major
investment will deliver high-level clinical care and treatment to
investment will deliver high-level clinical care and treatment to
the region, further underpinning Mediclinic Middle East’s leading
the region, further underpinning Mediclinic Middle East’s leading
market position in the UAE.
David Hadley
Chief Executive Offi cer:
Mediclinic Middle East
HOSPITAL BEDS
Dubai:
Mediclinic City Hospital 278
Mediclinic Welcare Hospital 121
Abu Dhabi:
Mediclinic Airport Road Hospital 136
Mediclinic Al Noor Hospital 85
Mediclinic Al Ain Hospital 78
Mediclinic Al Jowhara Hospital 43
64 MEDICLINIC | ANNUAL REPORT 2018
SPECIAL FEATURE
MEDICLINIC PARKVIEW HOSPITAL
impressed with
“I have been extremely
the
collaborative effort of all involved in this major
investment project that will provide residents in Dubai
with unparalleled healthcare services. Departments
and individuals from across the business have been
instrumental bringing this project to fruition, including
marketing, who carried out extensive research to
establish the viability and suitability of the location;
our Executive Director, Ahmed Ali, who facilitated
the acquisition of the land; operations, who were
heavily involved in the initial design and equipment
selection; the clinical team who shaped the framework
of the hospitals services; and of course engineering,
who turned the vision into reality. I would also like
to thank HH Sheikh Mansoor bin Mohammed bin
Rashid Al Maktoum, for his unwavering support.
With Mediclinic Parkview Hospital due to open ahead
of schedule in October 2018, the foundations are
in place as Mediclinic enters its next exciting stage
of growth in the Middle East.”
David Hadley
Chief Executive Officer, Mediclinic Middle East
A KEY ADDITION TO THE MEDICLINIC
MIDDLE EAST DIVISION
Mediclinic first entered the Dubai healthcare market in 2007,
growing to become the largest provider of high-quality
private healthcare services in Dubai today. In 2016, Mediclinic
Middle East significantly expanded its footprint in the UAE
through the combination with Al Noor Hospital Group in
Abu Dhabi. The core purpose of the Group is to enhance the
quality of life of its patients through a clear focus on clinical
excellence.
Mediclinic Parkview Hospital is one of the largest capital
investment projects undertaken by the Mediclinic Group.
Its construction is testament to Mediclinic’s confidence in
the UAE’s economy and continued growth opportunities.
The new hospital will deliver the same international standard
healthcare services and procedures that patients have come
to expect from Mediclinic’s existing hospitals and clinics.
Located in the rapidly growing “New Dubai” area in the south
of Dubai, where new schools and commercial developments
are being built, the hospital will provide services to a
currently estimated population of 800 000 UAE nationals
and expatriates living in a 10km radius.
KEY PROJECT FACTS
AED680m
PROJECT INVESTMENT
58 737m²
TOTAL AREA
8
NUMBER OF FLOORS
700
NUMBER OF STAFF
MEDICLINIC | ANNUAL REPORT 2018
65
THE PROGRESS OF MEDICLINIC
PARKVIEW HOSPITAL
In May 2015, Mediclinic Middle East purchased three adjacent
plots of land in the expanding area of Al Barsha South. The
plots are located on one of the main arterial routes between
Dubai, Abu Dhabi and the Northern Emirates, in addition
to being a key thoroughfare between the affluent areas
of Jumeirah, Umm Suqeim and a number of flourishing
inland communities. The subsequent announcement of
the construction of Mediclinic Parkview Hospital on the
site, supported by the opportunities presented by the
UAE’s growing healthcare sector, represented the largest
ever greenfield investment by Mediclinic International.
Construction has progressed smoothly and is ahead of
schedule. The Hospital Director was appointed in August
2017 and other core members of the team, including the
Medical Director, were announced in early 2018.
PROJECT TIMELINE
May
2015
July
2015
Purchase of land
Appointment of lead designers
(Stantec)
February
2016
Appointment of enabling works
contractor (Swissboring)
February
2016
Ground breaking
October
2016
Appointment of main
contractor (ASGC)
May
2017
August
2017
October
2017
Coming out of the ground
Appointment of Hospital Director
Completion of the concrete
structure
December
External walls for the facade
2017
completed
October
2018
Projected opening
A COLLABORATIVE PROJECT
“Seeing Mediclinic Parkview Hospital rise literally from the dust has been a source of great pride for me
personally, for Mediclinic Middle East as a company, and for the myriad of contractors and suppliers who
have worked so tirelessly to ensure that this hospital, upon opening, will be everything that we envisaged.
“I would like to recognise the efforts of all those who have been involved in the project, their professionalism and
their high standard of working practice. A greenfield construction project of this scale in Dubai is not without its
challenges, but I am proud to report that there have been no major incidents in 4.37 million man hours to date.
The team has exceeded expectations in their efficiency, speed and attention to detail and safety throughout the
project, all of which have been instrumental in the project nearing completion sooner than expected.
“With just a few months remaining ahead of commissioning in October 2018, we will be focusing on the final
technical specifications in sensitive areas such as theatres and the adult and neonatal intensive care units. I look
forward to the ongoing management of the hospital as we bring this respected tertiary healthcare facility to
capacity over the coming years.”
Alan Wilkinson
Senior Director: Engineering Services, Mediclinic Middle East
66 MEDICLINIC | ANNUAL REPORT 2018
KEY CLINICAL FACTS
182
NUMBER OF BEDS
15 (8 ON OPENING)
ICU BEDS
5
OPERATING THEATRES
1 3T MRI & 1 256-SLICE CT
NUMBER OF SCANNERS/MRI
150 (80 ON OPENING)
NUMBER OF DOCTORS
SPECIAL FEATURE
MEDICLINIC PARKVIEW HOSPITAL
SPECIALITIES AT MEDICLINIC
PARKVIEW HOSPITAL:
• Accident and emergency
• Anaesthesiology
• Bariatric surgery
• Breast surgery
• Cardiology
• Dentistry
• Dermatology
• Endocrinology
• ENT
• Family medicine
• Fetal medicine
• Gastroenterology and
hepatology
• General surgery
Intensive care
Internal medicine
•
•
• Laboratory
• Neonatology
• Nephrology
• Neurology
• Neurosurgery
• Obstetrics and
gynaecology
• Oncology
• Ophthalmology
• Orthopaedics
• Paediatric surgery
• Plastic surgery
• Pulmonary medicine
• Radiology
• Rheumatology
• Sports medicine
• Urology
• Vascular surgery
• Wound care
CONSULTANT-LED CARE
“Mediclinic Parkview Hospital will provide consultant-
led primary, secondary and tertiary level care in over
30 disciplines. Under the leadership of Dr Albert Oliver,
Medical Director of Mediclinic Parkview Hospital and
previously Head of the Emergency Department at
Mediclinic City Hospital, our team of internationally
trained doctors has been carefully selected to meet the
requirements of the area’s unique demographic profile.
The expertise of our doctors is supported by state-of-
the-art technology and equipment including a 3T MRI,
256 slice CT and cath lab.
“We look forward to welcoming our first patients to
Mediclinic Parkview Hospital and demonstrating to them
the Mediclinic philosophy of Expertise you can Trust.”
Barry Bedford
Hospital Director, Mediclinic Parkview Hospital
MEDICLINIC | ANNUAL REPORT 2018
67
SUSTAINABLE DEVELOPMENT
HIGHLIGHTS
Mediclinic takes a sustainable, long-term approach to business,
putting patients at the heart of its operations and consistently
delivering high-quality healthcare services. In order to deliver
on these priorities, the Group upholds the highest standards
of clinical governance and ethical behaviour across its
divisions, invests significant time and resources in recruiting
and retaining skilled staff, makes considerable investment into
its facilities and equipment and respects the communities and
environment in the areas in which it operates.
SDR
AR
AR
This report provides an overview of the Group’s
sustainability initiatives, with specific reference to our
material sustainability issues. For more information, please
refer to the detailed Sustainable Development Report
and the GRI Standards Disclosure Index, available on the
Company’s website at www.mediclinic.com.
This is the first year that the Company is required to include
a non-financial information statement in the strategic
report in accordance with the Companies, Partnerships
and Groups (Accounts and Non-financial Reporting)
Regulations 2016. The regulations implemented the EU
Non-financial Reporting Directive 2014/95/EU requiring
disclosure of
information about policies, risks and
outcomes regarding:
• environmental matters – refer to our Material issue 2:
Minimising our environmental impacts;
• employee matters – refer to our Material issue 1:
Developing an engaged and productive workforce;
and
•
AR
SDR
social, human rights, as well as anti-corruption and
anti-bribery matters – refer to our Material issue 3:
Being an ethical and responsible corporate citizen).
This report, read with the Sustainable Development
Report, constitutes the Group’s non-financial information
statement.
During the reporting process, minor corrections have been
made to the prior year data as reported in the previous
reports.
STAKEHOLDER ENGAGEMENT
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 who have a
material impact on, or are materially impacted by, Mediclinic
and its operations, including: patients, doctors, employees and
trade unions, suppliers, healthcare funders, government and
authorities, industry associations, investors, the community
and the media. The Group’s key stakeholders, methods of
engagement, topics discussed or concerns raised are outlined
in the Sustainable Development Report, available on the
Company’s website at www.mediclinic.com. The Board’s
engagement with stakeholders is also reported on in the
Corporate Governance Statement on pages 102 to 104.
SDR
AR
Effective communication with stakeholders is fundamental
in maintaining Mediclinic’s corporate reputation as a trusted
and respected provider of healthcare services and positioning
itself as a leading international private healthcare group.
Mediclinic’s commitment to its stakeholders to conduct its
business in a responsible and sustainable way, and to respond
to stakeholder needs, is entrenched in the Group’s values
and supported by the Group Code of Business Conduct
and Ethics. A wide variety of communication vehicles are
used to engage with stakeholders, which serve as an impact
assessment to assess stakeholders’ needs and to effectively
respond thereto. Stakeholders’
legitimate expectations
have been taken into account in setting the Group’s key
sustainability priorities, as reported on throughout this report.
The Group continually looks for ways to improve its use of
online channels to communicate with its stakeholders through
the corporate website and webcasting.
68 MEDICLINIC | ANNUAL REPORT 2018
AWARDS AND ACCOLADES
GROUP
• Mediclinic International confirmed as a FTSE4Good* constituent, which index recognises the performance of companies
demonstrating strong environmental, social and governance (“ESG”) practices.
• Mediclinic International confirmed as a FTSE/JSE Responsible Investment Index constituent, which index recognises
such companies listed on the JSE who meet the required FTSE Russell ESG rating.
• Mediclinic International achieved global A List status from CDP (Carbon Disclosure Project) for water conservation.
SWITZERLAND
• Hirslanden ranked first in the healthcare sector and among over 500 enterprises in Switzerland and Liechtenstein by
Best Recruiters, an independent recruitment study.
• All 17 Hirslanden hospitals are registered as CO2-reduced businesses by the Energy Agency of the Swiss Private Sector
on behalf of the Swiss Federal Office of Energy.
SOUTHERN AFRICA
• Mediclinic Southern Africa’s brand ranked 16th in the Top 20 Brand South Africa rankings for 2017, being the only
South African healthcare provider recognised by Brand Finance and Brand Africa.
• Eight Mediclinic Southern Africa hospitals included in Discovery Health’s Top 20 Private Hospitals in South Africa 2017,
based on the results of their patient surveys.
• Eight Mediclinic Southern Africa hospitals awarded the Katrin Kleijnhans Quality Trophy from the Council for Healthcare
Services Accreditation of Southern Africa (“COHSASA”) during 2017, recognising their substantial contribution to
quality improvement during the COHSASA accreditation process.
• Mediclinic awarded Go-Live Project of the Year at the OpenText Digiruption Indaba Awards for 2017 for the successful
integration OpenText Extended ECM and SAP SuccessFactors consolidating human resources record keeping into a single,
trusted database.
UAE
• Mediclinic Dubai Mall Clinic recognised as the best Medical Clinic of the Year at the Mother, Baby and Child
Awards 2017.
• David Hadley, CEO of Mediclinic Middle East, recognised as the Healthcare Business Leader of the Year at the
Gulf Business Awards 2017.
* FTSE Russell (the trading name of FTSE International Limited and Frank Russell Company) confirms that Mediclinic has been independently
assessed according to the FTSE4Good criteria, and has satisfied the requirements to become a constituent of the FTSE4Good Index
Series. Created by the global index provider FTSE Russell, the FTSE4Good Index Series is designed to measure the performance of
companies demonstrating strong Environmental, Social and Governance (ESG) practices. The FTSE4Good indices are used by a wide
variety of market participants to create and assess responsible investment funds and other products.
I
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MEDICLINIC | ANNUAL REPORT 2018
69
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
MATERIALITY ASSESSMENT
Mediclinic has many economic, social and environmental
impacts,
including creating employment opportunities,
training and developing employees, responsible use of
natural resources, investing in local communities and black
economic empowerment in South Africa.
In terms of the Group Sustainable Development Policy, the
the following three material issues, as illustrated in Figure 1,
which constitute the focus of this report:
• developing an engaged and productive workforce;
• minimising our environmental impacts; and
• being an ethical and responsible corporate citizen.
Clinical Performance and Sustainability Committee annually
The Group’s strategy, performance, risks and sustainability
reviews the Group’s material sustainability issues to ensure
are inseparable. The link between the Group’s three material
management initiatives are directed at those sustainable
development issues that are most signifi cant to the business,
and which directly aff ect the Group’s ability to create value
for its key stakeholders. The materiality assessment identifi ed
sustainability issues and the Group’s strategy (as further
detailed in Our Strategy, Progress and Aims from page 14
of the Annual Report) is indicated.
AR
FIGURE 1: MATERIALITY ASSESSMENT MATRIX
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70 MEDICLINIC | ANNUAL REPORT 2018
MATERIAL ISSUE 1:
DEVELOPING AN ENGAGED AND PRODUCTIVE WORKFORCE
HIGHLIGHTS
•
Implementation of world-class workforce optimisation initiatives and the integration of these principles in the relevant
business processes
• Continued investment in training and skills development to maintain and improve quality service delivery
• Entrenching the employee engagement survey and embedding follow up actions across the Group
• Continued people management development for line managers
• Ongoing implementation of a standardised human resources ICT system
WHY THIS IS IMPORTANT TO
THE BUSINESS
The attraction of suitably qualified healthcare professionals
is essential in delivering the Group’s Patients First strategy.
We aim to provide a working environment with a supporting
culture where employees can thrive. The continued
KEY PERFORMANCE INDICATORS
CONTROLLABLE EMPLOYEE
TURNOVER RATE*
Switzerland
investment in initiatives that support this overarching goal
Southern Africa
is visible in the turnover of scarce skills that has shown a
significant decline. These initiatives include engagement,
corporate health and wellness, continuous development,
UAE
mentoring and coaching. It requires a long-term focus and
8.7%
(2017: 7.2%)
7.7%
(2017: 6.3%)
10.3%
(2017: 8.4%)
genuine transformation of practices in order to be successful.
* Refer to page 72 for more on the increase in the turnover rate.
These initiatives will be continued and expanded to create
a diverse and inclusive environment that enables optimal
performance of employees.
Workforce optimisation has been a key focus for the year.
EMPLOYEE ENGAGEMENT
(GRAND MEAN SCORE)
(MAXIMUM SCORE OF 5)
Resources were allocated to analyse current workforce
practices with the intention to optimise the utilisation of
Group
human resources especially in the clinical environment.
A new methodology of workforce planning and scheduling
Switzerland
was piloted and integrated during the annual budgeting
process. Continued focus on workforce planning and
Southern Africa
forecasting will ensure that the goal of operational efficiency
is achieved as required in order to deliver on the Patients
First strategy.
UAE*
3.88
(2017: 3.81)
3.93
(2017: 3.91)
3.85
(2017: 3.73)
3.86
(2017: 3.92)
LINK TO GROUP STRATEGY
•
•
•
•
Invest in employees
Improve safe, quality clinical care
Improve patient experience
Improve efficiency
KEY STAKEHOLDERS
• Employees and trade unions
• Doctors
• Patients
* The prior year employee engagement index of Mediclinic Middle
East excluded the employees of its Abu Dhabi operations.
TRAINING SPEND AS APPROXIMATE
PERCENTAGE OF PAYROLL
Switzerland
Southern Africa
UAE
4.6
(2017: 4.8)
3.5%
(2017: 3.2%)
0.2%
(2017: 0.1%)
MEDICLINIC | ANNUAL REPORT 2018
71
I
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SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
RISKS TO THE BUSINESS
•
Inability to recruit healthcare practitioners to meet
business demand
• Poor clinical outcomes and services
• Medical malpractice liability
• Reputational damage
Through the internalisation of the human resources strategy,
the focus remains on the harmonisation and embedding of
enhanced human resources processes and practices. This
internalisation is achieved through the standardisation of
processes where possible, sharing of best practice, and
system integration. The Human Resources (“HR”) function is
thereby positioned as an enabling partner delivering visible,
• Delayed new nursing qualifications framework, causing
credible and value-adding services to the business where
a gap in the education pipeline
required on a continuous basis.
• Ageing nursing workforce and noticeable trend of earlier
retirement of nursing professionals
•
Ineffective management teams
• Poor staff engagement and wellness
• Fraud and ethics failures
RISK MITIGATION
• Extensive training and skills development programmes
• Governance of suitable selection processes with focus
Employee recruitment and retention
The talent supply of scarce skills remains on the strategic
agenda of the Group and is regarded as a key enabler of
reaching the goals of the Patients First strategy. The ever-
increasing risk of not obtaining the right skills in the future
due to a variety of reasons, is clearly evident in a global
context. This has urged the Group to take deliberate and
proactive action in building a secure talent pool in the areas
on skills assessments, employment references and
where necessary.
verification of credentials
The globalisation of relevant human capital management
• Targeted sourcing and recruitment initiatives, with a
processes will continue to put emphasis on talent metrics
strong focus on agile sourcing techniques ensuring that
and measurable data across divisions, which enables the
best fit candidate talent is channelled to appropriate
identification of trends and risks to be addressed proactively.
vacancies, supported by a seamless hiring process
• Proactive
international
recruitment
programme
supplementing anticipated medium-term skills gaps
• Tailored retention strategies, supporting the retention of
priority audiences within each business unit
• Succession planning and/or career management
initiatives within scarce skills disciplines, ensuring
proactive development of high-performing employees
with potential to supervisory and leadership roles
• Deployment of integrated talent strategies in support of
core business areas
• Employee engagement and satisfaction monitoring
through standardised process
POLICY, APPROACH AND
PERFORMANCE
The human capital environment is strongly supported
The implementation of an integrated human resources
management system has gained momentum and line
managers and employees alike are positively impacted.
Further rollout of additional modules is scheduled to be
phased in over a three-year period.
The Group’s workforce composition is provided in Figure 2.
Controllable employee turnover rate is provided on page 71,
AR
indicating an increase across all divisions. Although not a
significant increase, the reasons for employee turnover are
monitored in a rigorous manner and themes are proactively
addressed to minimise the loss of employees. With the ever-
increasing shortage of qualified staff, we are experiencing
increased competition in the market place for quality staff.
As a result, emphasis is placed on retention and effective
utilisation of available skills. To address this, various measures
are in place with the aim to be regarded as an employer
of choice: regular engagement, offering attractive working
by policies and best practice guidelines and is governed
conditions, career development, a consistent performance
to ensure compliance to achieve best practice globally
management system, fair remuneration practices. The
and to minimise possible risks within the human resource
divisions’ turnover rate by age group and gender, new
environment.
employees versus employee terminations and return to
work after maternity leave are provided in the Sustainable
Development Report, available on the Company’s website.
SDR
72 MEDICLINIC | ANNUAL REPORT 2018
FIGURE 2: WORKFORCE COMPOSITION
2
3
8
6
1
0
2
1
9
0
6
.
1
2
3
9
6
8
4
8
6
1
4
1
.
1
2
0
4
9
0
0
.
1
5
7
3
6
2016
Total: 32 884
2017
Total: 32 625
Calendar year
8
6
0
6
1
5
3
6
9
1
0
8
5
2018
Total: 31 504
Switzerland
Southern Africa
UAE
Training and skills development
The Group continues to invest significantly in training and
skills development to maintain and improve quality service
delivery. The Group’s commitment to provide quality care for
its patients can only be ensured if its staff have appropriate,
Mediclinic Southern Africa received formal performance
reviews. At Hirslanden,
100% of employees received
formal performance reviews during the year; and at
Mediclinic Middle East, 81% of employees received formal
performance reviews.
evolving skill sets, which is reflected in the number of
Succession planning and career management
learning initiatives undertaken each year. The percentage
of payroll invested in training and skills development by each
AR
of the Group’s operating divisions is provided on page 71.
Performance management
A consistent performance management system is applied
throughout the Group, which allows us to identify and manage
the training needs of individual employees, and to discuss
career development. Performance tracking discussions take
place on a continuous basis throughout the Group. There is
a dedicated commitment to optimise the quality of these
discussions where expectations regarding performance and
development are shared and personal development plans
compiled accordingly. These discussions also provide the
opportunity to translate the organisational strategic goals
to individual employee objectives, activities and deliverables.
Mediclinic Southern Africa continuously enhances the support
provided to line managers. There is an e-learning tool which
helps new and existing managers to enhance their knowledge
about the process in a self-paced manner.
Strong leaders have proven to be of great value to the
business and therefore resources have been invested
to embed sufficient succession planning and career
management towards key functional roles across the
business. This will proactively enhance and develop
leadership. Succession planning is standardised on an
organisational level in all three operating divisions and a
Group talent review is performed annually. Critical talent
as well as high-performing individuals with potential are
identified and supported through tailored development
initiatives. An inter-division development programme which
offers a series of secondments across divisions has been
designed to help these individuals excel at Mediclinic. The
programme is currently implemented at organisational
level for talent with the potential to be successors to a key
position in their own division or across divisions within the
larger Group. The programme aims to provide priority talent
(either critical talent or high performers with potential), the
opportunity to gain cross-division exposure. All divisions
have received the programme with great enthusiasm and
Formal performance reviews are conducted on a bi-annual
the Group is proud to continue to grow this development
basis. During the past 12 months, 88.3% of employees at
opportunity to the benefit of all.
MEDICLINIC | ANNUAL REPORT 2018
73
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SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
Employee remuneration, recognition
and benefits
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. Benefits to employees may include a
retirement fund and medical aid scheme. The Group further
covers the liability insurance for medical staff and other
employees where liability insurance is required. Managers
who are eligible to receive variable remuneration receive
short-term incentives and senior management receive a
combination of short and long-term incentives. The Group’s
management remuneration structures consist of a fixed
(guaranteed base salary and benefits) and a variable (short-
term and long-term incentives) component.
Employee engagement
In 2015, Mediclinic, in partnership with Gallup, introduced
the Your Voice employee engagement programme across
all operating divisions to measure levels of engagement,
identify gaps at a departmental level and support line
managers in developing action plans to address concerns.
Overall, the Group achieved a 77% (2017: 71%) participation
rate in the Your Voice survey and 40% (2017: 36%)
of employees showed high levels of engagement, as
AR
illustrated on page 71. The 2017 Your Voice survey identified
predominant strengths and opportunities in terms of the
employee engagement
levels of Mediclinic. Mediclinic
continued to perform well on the foundation elements of
employees knowing what is expected of them and having
the appropriate materials and equipment to perform at work.
Labour relations
The Group believes in building sound long-term relations
with its employees and employee representatives, which
supports its goal of being the employer of choice in the
healthcare industry. This is measured by the Your Voice
employee engagement survey and continuous assessment
Employee benefits and the value they add to the overall
of the Group’s employment conditions.
employment proposition are key factors in attracting and
SDR
retaining high-calibre staff. Details of benefits offered are
included in the Sustainable Development Report.
Employee health and safety
The Group recognises the role it has to play towards
employee wellness and believes in promoting employee
health and reducing absenteeism. The Group is committed
to supporting the overall well-being of employees and
recognises the importance of employee wellness in the
workplace, building a more caring culture for its employees
by applying sound wellness practices.
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
SDR
various business units to mitigate health and safety risks are
outlined in the Sustainable Development Report.
The Group respects and complies with the labour legislation
in the countries in which it operates and ensures that the
internal policies and procedures are evaluated regularly to
accommodate continual amendments to relevant legislation.
The employee relations policies of the operating divisions,
which deal with matters relating to misconduct, incapacity
of employees and the disciplinary and grievance procedures,
are communicated to new employees as part of their on-
boarding process and are also available to all staff to ensure
that employees are aware of the avenues to put forward
grievances, should they have the need to.
Details of trade union membership throughout the Group
is provided in the Sustainable Development Report.
SDR
74 MEDICLINIC | ANNUAL REPORT 2018
MATERIAL ISSUE 2:
MINIMISING OUR ENVIRONMENTAL IMPACTS
HIGHLIGHTS
• Since January 2014, the entire Hirslanden electricity supply has been generated from 100% sustainable electricity
• Mediclinic International was included in the global A List for leadership and performance by corporate environmental
action, showing leadership on water in the CDP Water Disclosure Project
• Total consumption and intensity per bed day sold for both energy and water decreased in Mediclinic Southern Africa,
with Mediclinic Middle East and Hirslanden’s consumption remaining stable
WHY THIS IS IMPORTANT TO
THE BUSINESS
The Group’s main environmental impacts are the utilisation
of resources, predominantly energy, through electricity
consumption and water, and the disposal of healthcare risk
waste. The Group is fully aware of the need to use resources
LINK TO GROUP STRATEGY
•
Improve efficiencies
KEY STAKEHOLDERS
• Employees and doctors
• Suppliers
responsibly and is committed to minimising its environmental
• Governments and authorities
impacts to every extent possible.
The Group recognises the risks that regulatory changes,
environmental constraints and climate change present to its
operations. Potential impacts include rising costs, reduced
access to facilities, interruptions in service, and incidents
of extreme weather events as a result of climate change
placing additional stress on operations. Additionally, climate
change can lead to water shortages (especially in the UAE
and in Southern Africa) and weather-induced pandemics
and disease outbreaks which can cause high mortality rates.
However, the Group also believes that using resources
responsibly can be a source of strategic advantage for the
• Community
• Patients
RISKS TO THE BUSINESS
• Business interruptions due to water shortages
• Business interruptions due to electricity supply
•
Increased operational costs due to cost of electricity,
water and healthcare risk waste
• Reputational damage
RISK MITIGATION
•
Implementation
of
appropriate
environmental
management systems (certified by an internationally
Group, allowing it to manage and contain its operating costs
recognised body, where appropriate)
and to ensure ongoing access to water and energy supplies.
•
Implementation of the Corporate Sustainable Water
Mediclinic’s patients are always its first priority, but without
Management Strategy in Southern Africa
natural resources, especially water, Mediclinic would not be
• Environmental impact assessments for new building
able to provide a service to its patients. The Group takes
projects where required
its policies to reduce its impact on the environment very
•
Introduction of renewable energy sources, such as
seriously and is constantly investigating new opportunities
solar photovoltaic systems, in order to reduce energy
to reduce its impact on the environment.
consumption and costs
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MEDICLINIC | ANNUAL REPORT 2018
75
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
KEY PERFORMANCE INDICATORS
Unless indicated to the contrary, all environmental data
POLICY, APPROACH AND
PERFORMANCE
Effective environmental
management system
The Group Environmental Policy, available on the Company’s
website at www.mediclinic.com, 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.
Mediclinic is committed to ensuring that its environmental
management systems and practices are aligned with
international best practices to safeguard its reputation and
provide assurance regarding the environmental quality,
safety and reliability of Mediclinic’s processes and services.
Environmental impact assessments are performed for all
new building projects when required by legislation.
All 17 Hirslanden hospitals are registered as CO2-reduced
businesses by the Energy Agency of the Swiss Private
Sector on behalf of the Swiss Federal Office of Energy.
This achievement recognises the contracted commitment
to reduce CO2 emissions within the operations. The
implemented measures are being monitored annually.
All Mediclinic Southern Africa hospitals are ISO 14001 trained,
follow the same environmental management practices
and are subject to annual internal audits. During the year,
ISO 14001 gap audits were conducted at 38 Mediclinic
Southern Africa hospitals, achieving an average score of
80%. Adhering to the system procedures and processes
has a direct impact on consumption as well as the group
carbon emissions and is expected to reduce the likelihood
and magnitude of the risk. At year-end, 42 of Mediclinic
Southern Africa’s 52 hospitals are ISO 14001 certified by an
external assurance provider.
Mediclinic Middle East undertook a number of environmental
initiatives and environmental events and rolled out
policies which support the Group Environmental Policy.
It has initiated the EHS strategy, with the aim of obtaining
ISO 14001 certification of all its facilities in the future, and will
be implementing further energy saving initiatives as part of
Mediclinic Middle East’s overall strategic objectives during
next year.
reported is for the 2017 calendar year (included in the CDP
2018 submission), with the prior year data for the 2016
calendar year (included in the CDP 2017 submission). This is
to ensure the accuracy of the data reported and to align the
reporting to the annual submission of reports to CDP.
TOTAL CO2 EMISSIONS (KG/BED DAY)
(PER CDP 2017)
Switzerland
Southern Africa
UAE
12kg
(CDP 2016: 13kg)
112kg
(CDP 2016: 117kg)
220kg
(CDP 2016: 226kg)
WATER USAGE (KL/BED DAY)
(PER CALENDAR YEAR)
Switzerland
Southern Africa
UAE*
0.649kl
(2016: 0.629kl)
0.594kl
(2016: 0.652kl)
1.523kl
(2016: 0.654kl)
ENERGY CONSUMPTION (GJ/BED DAY)
(PER CALENDAR YEAR)
Switzerland
Southern Africa
UAE*
0.458gj
(2016: 0.474gj/bed day)
0.318gj
(2016: 0.327gj/bed day)
1.202gj
(2016: 0.991gj/bed day)
WASTE RECYCLED (PER CALENDAR YEAR)
Switzerland
Southern Africa
UAE
586 tonnes
(2016: 550 tonnes)
1 172 tonnes
(2016: 1 283 tonnes)
196 tonnes
(2016: 72 tonnes)
* The intensity measures of CO2 emissions, water usage and energy
consumption per bed 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 five hospitals and 23 clinics with only outpatient consultations
(i.e. no bed days). The extreme weather conditions in the UAE also
negatively impact its energy and water consumption, which is
being managed through various initiatives. Mediclinic Middle East
has begun working towards a comprehensive energy and water
reduction plan for the year ahead to decrease overall consumption.
76 MEDICLINIC | ANNUAL REPORT 2018
Reduction of carbon emissions
The Carbon Disclosure Project (“CDP”) is a global initiative
measuring companies around the world, their reporting on
greenhouse gas emissions and climate change strategies. It is
regarded as a global leader in capturing and analysing data
that record the business response to climate change, including
management of risks and opportunities, absolute emissions
levels, performance over time and governance. Participation
and disclosure of the results are voluntary. The project was
launched in South Africa in 2007 in partnership with the
National Business Initiative, in which JSE-listed companies
are measured. Mediclinic has participated in the project
since 2008, initially only in respect of Mediclinic Southern
Africa. Limited information on Mediclinic Middle East has
also been included since 2010, although it still remains an
initiative focusing mainly on Mediclinic Southern Africa’s data.
Mediclinic’s CDP reports can be obtained on the CDP website
at www.cdp.net, with the most recent reports also available
on the Company’s website at www.mediclinic.com.
•
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 Group’s main environmental impacts are the utilisation
of resources and waste which have a direct effect on
carbon emissions. Items listed in the aspect register relating
to regulatory compliance, healthcare risk waste, water,
electricity, paper, hazardous waste and gases not only could
have a significant impact on the environment, but also informs
strategy on climate change related risks and opportunities.
The operating divisions of the Group measure, with the
assistance of external consultants, its carbon footprint using
the GHG Protocol and includes, in varying degrees:
The carbon emissions per division, reported per calendar
year, are reported in the Sustainable Development Report,
as summarised in Figures 3 to 5.
SDR
• direct emissions, which in the healthcare industry will refer
mainly to the emissions of anaesthetics gases (scope 1
emissions);
FIGURE 3: TOTAL CARBON EMISSIONS (HIRSLANDEN) (PER CALENDAR YEAR)
Scope 1: Direct emissions
Scope 2: Indirect emissions from
purchased electricity
Scope 3: Indirect emissions from
supply chain, business travel and
waste removal
TOTAL CO2e (tonnes)
CO2e/bed day (kg)
Intensity
2013
7 332
2014
7 163
2015
6 743
2016
7 349
2017
6 317
365
419
389
389
837*
5
7 702
15
102
7 684
14
102
7 234
13
84
7 822
13
–
n/a
7154
12
* The scope 2 indirect emissions have risen due to the integration of Klinik Linde into the division. Klinik Linde has been using so called “grey
electricity” (electricity from unknown sources). This sort of electricity can be derived from nuclear energy or coal power stations. In FY 2019
Klinik Linde will change its electricity supply to guarantee the whole division uses nuclear and fossil-free electricity.
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MEDICLINIC | ANNUAL REPORT 2018
77
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
FIGURE 4: TOTAL CARBON EMISSIONS (MEDICLINIC SOUTHERN AFRICA)
ACTIVITY
CDP 2014
(2013/14 FY)
CDP 2015
(2014/15 FY)
CDP 2016
(2015/16 FY)
Scope 1: Direct emissions
21 869
22 999
23 841
CDP 2017
(2016
CDP 2018
(2017
CALENDAR
CALENDAR
YEAR)
24 687
YEAR)
24 193
Scope 2: Indirect emissions from
purchased electricity
Scope 3: Indirect emissions from
supply chain, business travel and
waste removal
Non-Kyoto Protocol emissions
TOTAL CO2e (tonnes)
CO2e/full time employee
CO2e/square meterage
CO2e/bed day (kg)
151 156
154 035
159 571
156 781
149 109
35 062
6 952
33 382
6 419
36 037
3 966
215 039
216 834
223 415
13.567
0.335
115
13.326
0.320
111
13.273
0.313
111 —
49 488
5 236
236 192
14.026
0.299
117
47 270
2 841
223 413
13.680
0.274
112
FIGURE 5: TOTAL CARBON EMISSIONS (MEDICLINIC MIDDLE EAST)
Scope 1: Direct emissions
Scope 2: Indirect emissions from purchased electricity
Scope 3: Indirect emissions from supply chain, business travel and
waste removal
Non-Kyoto Protocol emissions
TOTAL CO2e (tonnes)
CO2e/bed day (kg)
Intensity
CDP 2015
(2014/15 FY)
CDP 2016
(2015/16 FY)
CDP 2017*
(2016/17 FY)
1 158
12 038
4 449
726
18 371
246
1 731
12 148
3 464
621
17 964
226
5 594
19 892
4 722
3 476
33 684
220
* Since the CDP 2017, the Mediclinic Middle East figures include the Al Noor business, whereas in previous years it only included the Dubai
business, and therefore not directly comparable with that of previous years.
Energy efficiency
Electricity is the main contributor to our carbon footprint
Responsible water usage
There are various measures in place to minimise water
and all our divisions are taking steps to reduce their
consumption; including reclaiming water, monitoring hot
electricity consumption intensity through the adoption of
water consumption and installing water meters and control
ISO 14001 management standards, leading to improved
sensors.
operational efficiency of technical installations, introduction
of various new energy-efficient and renewable technologies
and changes in staff behaviour regarding energy use.
In South Africa, the Western Cape region has experienced
the worst drought in history, driven by a prevailing weak La
Nina weather event. This has resulted in water restrictions
The direct and indirect energy consumption per division,
and threat of water cuts in the Western Cape region. The
SDR
for the periods as specified therein, is reported in the
Sustainable Development Report.
threat of prolonged dry weather could last up to three years.
78 MEDICLINIC | ANNUAL REPORT 2018
The City of Cape Town has indicated a "possible failure of
dam systems in 2018" if there is a below average winter
rainfall. Climate change predictions for the Western Cape
indicate continued warming, drying and windier conditions
going forward. Water disruptions have increased in the last
five years in South Africa and Namibia.
A Corporate Sustainable Water Management Strategy
was developed in 2016 and implemented the same year.
The strategy includes actions to mitigate and address
various risks associated with the water management crisis
in Southern Africa, and especially the water crisis in the
Western Cape. Mediclinic Southern Africa actively engaged
with public policy makers and other stakeholders in the
Western Cape region, and also embarked on extensive
employee and patient awareness campaigns on water
conservation, which all contributed to the decline in water
consumption during the year. Recognising the division’s
initiatives, Mediclinic South Africa received global A List
status for water conservation by the prestigious CDP in 2017.
The total volume of water withdrawn from water utilities
SDR
throughout the Group, for the periods as specified therein, is
reported in the Sustainable Development Report.
Safe waste and hazardous 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
offices leading to significant spills.
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MEDICLINIC | ANNUAL REPORT 2018
79
SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
MATERIAL ISSUE 3:
BEING AN ETHICAL AND RESPONSIBLE CORPORATE CITIZEN
HIGHLIGHTS
• Anonymous independent ethics lines at all operating divisions
• A three-year compliance monitoring programme was developed to enhance the existing compliance culture
• Hirslanden supports Mercy Ships, an international charity which operates the largest non-governmental hospital ship
in the world
• Contributed R5m to the South African Department of Health’s Public Health Enhancement Fund
•
In partnership with the public health sector, Mediclinic Southern Africa performed over 100 pro bono procedures on
public patients
WHY THIS IS IMPORTANT TO THE
BUSINESS
Governance and corporate social responsibility are integral
to Mediclinic’s approach to running a sustainable, long-term
business. In line with the Group’s vision of being preferred
locally and respected internationally, it:
Group where ethical values are displayed on a day-to-day
basis. It encourages staff to be vigilant and transparent for
any suspicious or unethical behaviour. These policies provide
clear guidelines and frameworks to assist in achieving set
objectives, for example, compliance with applicable laws and
regulations. The policies are communicated to all relevant
employees and where necessary training is provided. The
• enforces good corporate governance
standards
enhanced training and awareness of Group policies are
throughout the organisation;
• acts as a responsible corporate citizen;
• builds constructive relationships with its local stakeholders;
and
• acts as a valued member of the community in the regions
where it operates.
The Group has entrenched a range of policies, processes
and standards to support the Group’s governance and
Corporate Social
Investment (“CSI”) programmes and
provide a framework of the standards of business conduct
and ethics that are required of all operating divisions,
directors and employees within the Group, such as the
Code of Business Conduct and Ethics, Enterprise-wide
Risk Management Policy, Fraud Risk Management Policy,
Regulatory Compliance Policy and the Anti-bribery Policy.
Adherence to these policies is monitored through the various
risk management and assurance initiatives implemented
throughout the Group. Non-adherence to these policies is
immediately highlighted as a corrective action and addressed
accordingly. The Group risk management department
regularly monitors the status of these corrective actions.
planned for the year ahead.
LINK TO GROUP STRATEGY
Although not directly linked to any particular Group strategic
priority, governance and corporate social responsibility
are regarded as key enablers and the basis from which the
Group conducts its business.
KEY STAKEHOLDERS
• Suppliers
• Healthcare funders
• Governments and authorities
• Community
RISKS TO THE BUSINESS
• Fines, prosecution or reputational damage
•
Inability to continue business due to legal and regulatory
non-compliance or changes in regulatory environment
• Financial and reputational damage caused by poor
governance and ethical practices and inadequate risk
management
• Reputational damage at local community level due to
These policies are intended to create a culture within the
inadequate community involvement
80 MEDICLINIC | ANNUAL REPORT 2018
KEY PERFORMANCE INDICATORS
CALLS TO ETHICS LINES*
CONTRIBUTION TO CSI INITIATIVES
Switzerland
Southern Africa
UAE
21
(2017: 20)
97
(2016: 202)
10
(2017: 6)
* Six high-priority cases were reported to the Group’s ethics lines
during the year, all of which were investigated and closed.
INVESTMENT IN CAPITAL PROJECTS
AND NEW EQUIPMENT (OPERATING
DIVISIONS)
Switzerland
Southern Africa
UAE
CHF47m
(2017: CHF74m)
R423m
(2017: R766m)
AED358m
(2017: AED188m)
INVESTMENT IN REPLACEMENT
OF EQUIPMENT AND PROPERTY
UPGRADES (OPERATING DIVISIONS)
Switzerland
Southern Africa
UAE
CHF82m
(2017: CHF89m)
R634m
(2017: R515m)
AED31m
(2017: AED57m)
EXPENDITURE ON REPAIRS
AND MAINTENANCE
(OPERATING DIVISIONS)
Switzerland
Southern Africa
UAE
CHF40m
(2017: CHF37m)
R219m
(2017: R275m)
AED42m
(2017: AED39m)
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UAE
CHF2.3m
(2017: CHF2.5m)
R29.3m
(2017: R27.5m)
AED1.0m
(2017: AED992 000)
TRANSFORMATION (SOUTH AFRICA)
Percentage black
employees
Percentage black
management
employees
72.1%
(2017: 71.2%)
29.4%
(2017: 27.7%)
RISK MITIGATION
• Visible ethical leadership
• Regular fraud and ethics feedback to management, the
Board and relevant Board committees
• Ethics lines available to all employees and external parties,
with reported incidents monitored and investigated
• Established Group risk management and compliance
department and internal audit function
• Compliance risks assessed as part of risk management
process, with regular internal self-assessments, with
necessary advice and support by the company secretarial
and legal departments
• Compliance consultant appointed
to
implement
compliance framework and monitor compliance maturity
• Monitoring of corporate social investment initiatives
by senior management, with feedback to the Clinical
Performance and Sustainability Committee
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SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
POLICY, APPROACH AND
PERFORMANCE
Ethics
The Group’s commitment to ethical standards is set out in
the Group’s values, and is supported by the Group Code
of Business Conduct and Ethics (the “Code”) and Anti-
bribery Policy, available on the Company’s website. The
Code 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.
The Group adopts a zero-tolerance policy to unethical
business conduct, including bribery, fraud and corruption.
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.
The Group is focused on streamlining and centralising its
procurement processes to improve efficiency and cost-
effectiveness. During the reporting period, good progress
was made on a range of international procurement initiatives
including:
•
the classification and matching of products used across
all its operating divisions to compare prices and drive
procurement strategies;
Any employee or external stakeholder is able to report
any wrongdoing throughout the Group on a confidential
basis to the ethics lines. All reports are dealt with in a
• better prices through pooling of capital equipment
purchases across the three divisions;
• volume bonus agreements with key capital equipment
non-discriminatory manner and any person making use
suppliers; and
of the independent ethics lines has the option to remain
anonymous. Any form of retaliation against an employee
or other person making a report in good faith shall not be
tolerated. A dedicated ethics contact person per division is
available to deal with matters pertaining to the Code. The
number of calls received through the Group’s ethics lines
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is indicated on page 81. All complaints are investigated in
accordance with the Code. Over the years, the majority of
calls were of a grievance nature. Only in exceptional cases
has information been received that has led to the discovery
of unethical, corrupt or fraudulent behaviour.
The Group’s Anti-bribery Policy governs the granting and
acceptance of gifts, hospitality and entertainment, which
will only be approved if it is acceptable business practice,
there is a proper business case and no potential to adversely
affect Mediclinic’s reputation.
• direct importing and distribution of more cost-effective
surgical and consumable products.
Refer to the Chief Executive Officer’s Review, Our Strategy,
Progress and Aims, as well as the Divisional Reviews for
initiatives to improve cost-effectiveness.
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Supply chain management
In order to deliver its services, Mediclinic is dependent on a
large and diverse range of suppliers, who form an integral
part of the Group’s ability to provide quality hospital care.
Mediclinic believes in building long-term relationships with
suitable suppliers and establishing a relationship of mutual
trust and respect. Regular meetings are held with suppliers
to ensure continuity of service. The Group relies on its
suppliers to deliver products and services of the highest
quality in line with Mediclinic’s standards. Various other
The Group’s Fraud Risk Management Policy facilitates the
criteria play an important role in selecting suppliers, such as:
development of controls for the prevention of fraud and
compliance with applicable international and local quality
corruption. Feedback on ethics and fraud is provided to the
standards, price, compliance with appropriate specifications
Audit and Risk Committee at every meeting, with regular
suited for the Group’s markets, stability of the organisation
feedback to the Clinical Performance and Sustainability
and the relevant equipment brand, good-quality and cost-
Committee.
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Further details regarding the Group’s management of these
matters are included in the report on Risk Management,
Principal Risks and Uncertainties and the Audit and Risk
Committee Report.
effective solutions, support network, technical advice and
training philosophy.
The availability of products and services is imperative in
enabling the Group to deliver quality care to its patients,
and therefore an important criterion in its supplier selection
process. Though not always the case, this often leads to local
suppliers being preferred, which adds to better and faster
service delivery and knowledge of local laws and regulations,
particularly with regard to pharmaceutical products.
82 MEDICLINIC | ANNUAL REPORT 2018
Maintain high-quality healthcare
infrastructure
To ensure a safe and user-friendly environment for both its
patients and employees, the Group strives 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
its facilities and the replacement of existing equipment, as
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well as on the repair and maintenance of existing property
and equipment (refer to figures on page 81 and to the Chief
Executive Officer’s Review, the Divisional Reviews and Our
Strategy, Progress and Aims).
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
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to in all aspects of hospital operations. For more details on
accreditation, please refer to the Clinical Services Report,
available on the Company’s website at www.mediclinic.com.
Information security
Mediclinic is committed to conducting its business in
accordance with all applicable data protection laws as may
line with country-specific legislation. There were no material
information security or data privacy incidents reported
during the year under review.
The Group ICT Steering Committee is supported by the
Group’s
Information Security Architecture Committee,
consisting of the information security officers of the
Group and the operating divisions. The proceedings of
this committee are
informed by
information security
best practices sourced from Gartner, ISACA, CoBIT 5,
ITIL, ISO27001 and the South African King IV™ Report on
Corporate Governance.
Further details on the Group’s ICT investments are included
in the Chief Executive Officer’s Review included in the
Annual Report.
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Support of external training
institutions
The Group is committed to educational development within
all three of its operating divisions and provides financial
and other necessary support towards advancing healthcare
education.
Respecting human rights
The Group is committed to conducting its business in a
apply from time to time in the various operating divisions.
manner that respects and promotes the human rights
Maintaining and respecting the privacy of our employees,
and dignity of all those within its sphere of influence and
directors, patients, affiliated doctors, suppliers and
avoids involvement in human rights abuses throughout its
stakeholders remains a priority. Mediclinic has reaffirmed its
operations and relationships. This commitment is entrenched
commitment to protect the personal data of its stakeholders
in the Group’s Code of Business Conduct and Ethics, which
by embarking on a group-wide data privacy project to align
is further supported by the Group’s commitment to:
and ensure compliance with relevant data protection laws,
as may be applicable in the various countries of operation,
including the European Union’s General Data Protection
Regulation (“GDPR”), widely regarded as the gold standard
for data protection. The Group Privacy and Data Protection
Policy has been aligned to the GDPR standards and various
initiatives are underway to ensure that core components
are legally compliant by 25 May 2018, which is the date the
GDPR will come into effect. The project will be rolled out to
the rest of the Group thereafter while ensuring that other
applicable data protection laws are also complied with.
• avoid and not contribute to any indirect adverse human
rights impacts that are directly linked to the Group’s
operations or services by its suppliers or other business
relations;
•
respect patients’ rights, including but not limited to
privacy, confidentiality, dignity, no discrimination, full
information on health status and treatment, a second
opinion, access to medical records, self-determination
and participation, refusal of treatment and the right to
complain;
• value diversity and equal opportunities for all in the
Information security policies and controls are in place
workplace; and
throughout the Group regulating, inter alia, the processing,
• not tolerate any form of unfair discrimination, such as
use and protection of own, personal and third-party
access to employment, career development, training
information. This is further entrenched through ongoing user
or working conditions, based on gender, age, religion,
training, security awareness programmes and certification
courses in information security. Flows of personal data across
nationality, race/ethnic origin, language, HIV/AIDS status,
family status, disability, sexual orientation or other form
country borders are dealt through formal arrangements in
of differentiation.
MEDICLINIC | ANNUAL REPORT 2018
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SUSTAINABLE DEVELOPMENT HIGHLIGHTS (CONTINUED)
Modern slavery and human traffi cking
The Mediclinic modern slavery and human traffi cking
statement, which is available on the Company website at
www.mediclinic.com, sets out the steps Mediclinic has
taken to prevent any form of modern slavery and human
traffi cking, which includes any direct form of forced labour
rigorous and comprehensive review of its transformation
strategy. A review of the current structure and content of
diversity management interventions throughout the company
is underway. This process will yield a more structured
approach and an important outcome would be an engaged
workforce wherein inclusivity is the ultimate goal.
or child labour in its business, or indirectly through its supply
Mediclinic Southern Africa’s new fi ve-year employment
chain. During the year, Mediclinic has developed additional
equity plan was submitted to the Department of Labour in
steps to strengthen its position in monitoring slavery and
human traffi cking activities, in order to ensure that it is not
November 2017. The summarised employment equity report
(EEA2) is included in the Sustainable Development Report.
SDR
taking place in its supply chains.
Diversity
The number of black employees increased year-on-year from
71.2% to 72.1% of total employees; and black management
The Group values diversity and provides equal opportunities
representation increased from 11% in 2006 to 29.4% in
in the workplace, a matter which has received signifi cant
2018 (2017: 27.7%), based on Mediclinic Southern Africa’s
focus by the Nomination Committee during the year. The
diversity representation (by race, gender and age) of the
Group’s most senior governing bodies, as well as direct
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SDR
reports to members of those governing bodies, are provided
in the Nomination Committee Report and the Corporate
Governance Statement in the Annual Report. Please also
refer to the Sustainable Development Report for further
information in this regard.
Broad-based black economic empowerment
(“B-BBEE”) (South Africa)
Mediclinic Southern Africa forms an integral part of the
political, social and economic community in South Africa
and is committed to sustainable transformation as part of
its business strategy. Mediclinic Southern Africa’s Executive
Committee is responsible for ensuring that the appropriate
focus is placed on the company’s commitment to the
development and implementation of sustainable B-BBEE
employment equity report referred to earlier.
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 itself as an integral member of these
communities, enriching the lives of many communities
throughout Southern Africa, Switzerland and the UAE.
The Group’s CSI 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 the fi nancial support of
training. Due to the socio-economic conditions in Southern
Africa, the majority of the Group’s CSI contributions are by
Mediclinic Southern Africa.
initiatives. Mediclinic Southern Africa has embarked on a
The CSI spend per division is provided on page 81.
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84 MEDICLINIC | ANNUAL REPORT 2018
CHAIRMAN’S INTRODUCTION
The Board and management team of Mediclinic are committed
to maintaining strict principles of corporate governance and the
highest standards of integrity and ethics, which is embedded
in our corporate culture and values. Our corporate governance
structures support the eff ective delivery of Mediclinic’s strategy
and are focused on building and maintaining a sustainable
business and supporting our commitment to be a responsible
corporate citizen in every country and community in which the
Group operates.
In the Corporate Governance Statement that follows, feedback
is given on the governance framework, Board meetings and the
principal activities of the Board, the composition and diversity
of the Board and measures to ensure the Board’s accountability
to our wider stakeholders. Every director demonstrated their
commitment to Mediclinic throughout the year, through their
meeting attendance and the high quality of their contributions
at those meetings. An external evaluation of the Board
was conducted during the year by Lintstock, the outcome
of which is detailed herein. With the announcement of the
appointment of Dr Ronnie van der Merwe as CEO successor
to Mr Danie Meintjes from 1 June 2018, and the appointment of
Dr Muhadditha Al Hashimi and Dr Felicity Harvey as independent
non-executive directors during 2017, the Nomination Committee
and the Board continue to demonstrate their commitment to
succession planning and targeting diverse pools of talent from
which to recruit the right individuals. Further, as referred to in
my statement on pages 6 to 9, the continued involvement of
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Mr Meintjes as a non-executive director from 1 August 2018 is
considered by the Board to be in the best interests of the Group,
its shareholders and other stakeholders in view of the wealth of
knowledge and experience he has in diff erent capacities gained
over 30 years at Mediclinic.
The key elements of our governance structures include:
• managing our business in a sustainable manner; ensuring
good clinical outcomes and quality healthcare;
• upholding strict principles of corporate governance, integrity
and ethics;
• maintaining eff ective risk management and internal controls;
• engaging with our stakeholders and responding to their
reasonable expectations; and
• off ering our employees competitive remuneration packages
based on the principles of fairness and aff ordability.
the Clinical Services Report and
further details of which are included in this Annual Report, as well
as
the Sustainable
Development Report available on the Company’s website
at www.mediclinic.com. I remain confi dent that the Board,
supported by an eff ective management team and an eff ective
governance structure, is well placed to continue to drive long-
term value for stakeholders and maintaining Mediclinic’s leading
position in the international healthcare market.
CSR
SDR
Dr Edwin Hertzog
Non-executive Chairman
MEDICLINIC | ANNUAL REPORT 2018
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MEDICLINIC
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GOVERNANCE
AND
REMUNERATION
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BOARD OF
DIRECTORS
The committee memberships of the directors provided herein are as at the Last Practicable Date, being Wednesday,
23 May 2018.
DR EDWIN HERTZOG
MR DANIE MEINTJES
MR JURGENS MYBURGH
Non-executive Chairman
Nationality: South African
Chief Executive Offi cer
Nationality: South African
Chief Financial Offi cer
Nationality: South African
Committee membership: Investment Committee
Mr Jurgens Myburgh was appointed as an
executive director and Chief Financial Offi cer of
the Company on 1 August 2016. Prior to joining
the Mediclinic Group, he served as Chief Financial
Offi cer at Datatec Limited, an international
information and communications technology
group, which operates in over 60 countries, and
before that, worked at The Standard Bank of
South Africa Limited as Executive Vice President
of Investment Banking.
Qualifi cations: Mr Myburgh holds an Honours
degree in Accounting from the University of
Johannesburg (B.Comm. (Hons)); and is a
qualifi ed Chartered Accountant with the South
African Institute of Chartered Accountants.
Committee memberships: Clinical Performance
and Sustainability Committee, Investment
Committee (Chair), Nomination Committee
(Chair)
Dr Edwin Hertzog* was appointed as the
non-executive Chairman of the Company on
15 February 2016. Prior to the combination
of the businesses of the Company (then
Al Noor Hospitals Group plc) and Mediclinic
International Limited in 2016, he served as a
director of Mediclinic
International Limited
from 1983 and as the Chairman from 1992. As
a specialist anaesthetist, he was commissioned
by the then Rembrandt group (now Remgro)
in 1983 to undertake a feasibility study on the
establishment of a private hospital group, and
three years later, in 1986, Mediclinic International
Limited (then Medi-Clinic Corporation Limited)
was listed on the JSE. He was appointed as the
fi rst managing director of Mediclinic International
Limited upon its establishment in 1983. He
served as executive Chairman of Mediclinic from
1992 until August 2012 when he retired from
his executive role, but remained on the Board
as non-executive Chairman. He also serves as
the non-executive deputy Chairman of Remgro
and is a past Chairman of the council of the
Stellenbosch University.
Committee memberships: Clinical Performance
and Sustainability Committee, Investment
Committee
Mr Danie Meintjes was appointed as an executive
director and Chief Executive Offi cer of the
Company on 15 February 2016. Prior to the
combination of the businesses of the Company
(then Al Noor Hospitals Group plc) and Mediclinic
International Limited in 2016, he served as the
Chief Executive Offi cer of Mediclinic International
Limited from 2010. He has served in various
management positions in the Remgro group,
before joining the Mediclinic Group in 1985 as the
hospital manager of Mediclinic Sandton. He was
appointed as a member of Mediclinic’s Executive
Committee in 1995 and as a director in 1996. He
was seconded to serve as a senior executive
of the Group’s operations in Dubai in 2006,
and appointed as the Chief Executive Offi cer
of Mediclinic Middle East in 2007. He serves as
a non-executive director of Spire Healthcare
Group plc from 2015, from which position he
will retire on 24 May 2018. He will retire from his
position as Chief Executive Offi cer on 1 June 2018
and, subject to re-election as a director of the
Company at the AGM, will continue to serve as an
executive director until 31 July 2018 and as a non-
executive director with eff ect from 1 August 2018.
Qualifi cations: Dr Hertzog holds a Bachelor of
Medicine and Bachelor of Surgery (MB,ChB); a
Fellowship of the Faculty of Anaesthesiologists
(SA) and a Doctor of Philosophy (Ph.D)
(honoris causa).
Qualifi cations: Mr Meintjes holds an Honours
degree in Industrial Psychology from the
University of the Free State; and completed the
Advanced Management Program at Harvard
Business School.
* Dr Hertzog’s non-executive directorship of
Remgro, as
reported above, constitutes
his other signifi cant commitments for the
purposes of Provision B.3.1 of the UK Corporate
Governance Code.
86 MEDICLINIC | ANNUAL REPORT 2018
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MR DESMOND SMITH
DR MUHADDITHA AL HASHIMI
MR JANNIE DURAND
Senior Independent Director
Independent Non-executive Director
Non-executive Director
Nationality: South African
Nationality: Emirati
Nationality: South African
Committee memberships: Audit and Risk
Committee (Chair), Nomination Committee
Mr Desmond Smith was appointed as an
independent non-executive director of the
Company on 15 February 2016. Prior to the
combination of the businesses of the Company
(then Al Noor Hospitals Group plc) and Mediclinic
International Limited in 2016, he served as an
independent non-executive director of Mediclinic
International Limited from 2008 and as the lead
independent director from 2010. He 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)
(“RGA(SA)”) from March 1999 to March 2005.
He is currently Chairman of RGA(SA) and retired
as Chairman of Sanlam Group in June 2017.
During his career, he has served on various boards
and was president of both the Actuarial Society
of South Africa (1996) and the International
Actuarial Association (2012).
Qualifi cations: Mr Smith holds a Bachelor
of Science (B.Sc.) degree; is a fellow of
the Actuarial Society of South Africa; and
completed an International Senior Managers
Program at Harvard Business School.
Committee membership: Clinical Performance
and Sustainability Committee
Dr Muhadditah Al Hashimi was appointed as
an independent non-executive director of the
Company on 1 November 2017. She is also a
member of the board of trustees and the Audit
and Compliance Committee of the University of
Sharjah, and a member of the board of trustees
of the UAE Nursing and Midwifery Council and
the UAE Genetics Diseases Association. She
is the campus director of Higher Colleges of
Technology Sharjah Women's College in the UAE.
Prior to her current positions, Dr Al Hashimi held
the position of executive Dean of the Faculty of
Health Sciences, Higher Colleges of Technology;
acting deputy vice-chancellor of Academic
Aff airs at the Higher Colleges of Technology;
Chief Executive Offi cer of the Mohammed Bin
Rashid Al Maktoum Academic Medical Center in
Dubai; Deputy Chief Executive Offi cer of Tatweer
LLC; Chief Executive Offi cer of Dubai Healthcare
City (both members of Dubai Holding); and a
director of education of the Harvard Medical
School Dubai Centre.
Qualifi cations: Dr Al Hashimi obtained a
Doctorate in Public Health from the University
of Texas; a Master's degree in Clinical
Laboratory Sciences from the University of
Minnesota; and a Bachelor's degree in Medical
Technology from the University of Minnesota.
Committee Memberships: Investment
Committee, Nomination Committee
Mr Jannie Durand* was appointed as a
non-executive director of the Company on
15 February 2016. Prior to the combination of
the businesses of the Company (then Al Noor
Hospitals Group plc) and Mediclinic International
Limited in 2016, he served as a non-executive
director of Mediclinic International Limited from
2012. He joined the Rembrandt group in 1996 and
was appointed as the Chief Executive Offi cer of
Remgro Limited in 2012, which holds a 44.56%
interest in the Company. In his current role, with
more than 20 years’ experience in the investment
industry, he acts as a non-executive director
of various companies, including Distell Group
Limited, FirstRand Limited, RCL Foods Limited
and RMI Holdings Limited.
Qualifi cations: Mr Durand holds an Honours
degree in Accountancy from the University
of Stellenbosch (B.Acc. (Hons)); a Master’s
of Philosophy in Management Studies from
Oxford University (M.Phil. (Management
Studies)); and is a qualifi ed Chartered
Accountant with the South African Institute
of Chartered Accountants.
* Mr Pieter Uys, the Head of Strategic Investment
at Remgro Limited, is appointed as the alternate
to Mr Durand since 7 April 2016. Prior to joining
Remgro, Mr Uys was a founding member and
ultimately became the Chief Executive Offi cer
of the Vodacom group, one of the leading
mobile networks in Africa.
Qualifi cations: Mr Uys holds an M.Eng.
(Electrical) degree; and an MBA from the
University of Stellenbosch.
MEDICLINIC | ANNUAL REPORT 2018
87
BOARD OF DIRECTORS (CONTINUED)
MR ALAN GRIEVE
DR FELICITY HARVEY CBE
MR SEAMUS KEATING
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Nationality: British
Nationality: British
Nationality: Irish
Committee memberships: Audit and Risk
Committee, Investment Committee
Mr Alan Grieve was appointed as an independent
non-executive director of the Company on
15 February 2016. Prior to the combination of
the businesses of the Company (then Al Noor
Hospitals Group plc) and Mediclinic International
Limited in 2016, he served as an independent
non-executive director of Mediclinic International
Limited from 2012 and served as a director of
Medi-Clinic Switzerland AG (now Hirslanden AG)
from 2008 to 2012. He served as Chief Financial
Offi cer of Reinet Investments Manager S.A.
and Reinet Fund Manager S.A. from 2008 to
2011 and Chief Executive Offi cer from 2012 until
he retired in 2014. He remains on the Board of
both companies as a non-executive director. He
served as Company Secretary of Richemont,
luxury goods group, from 1998
the Swiss
to 2004 and as Director of Corporate Aff airs
from 2004 to 2014. Prior to joining Richemont’s
predecessor companies in 1986, he worked with
the international auditing fi rms now known as
PricewaterhouseCoopers and Ernst & Young.
Qualifi cations: Mr Grieve holds a degree in
Business Administration from Heriot-Watt
University, Edinburgh; and is a member of the
Institute of Chartered Accountants of Scotland.
Committee membership: Clinical Performance
and Sustainability Committee (Chair)
Dr Felicity Harvey was appointed as an
independent non-executive director of the
Company on 3 October 2017. She serves as
a Visiting Professor at the Institute of Global
Health Innovation at Imperial College London;
is a non-executive director of Guy's and
St Thomas' NHS Foundation Trust in London;
a Trustee of Royal Trinity Hospice in London;
and a member of the WHO
Independent
Oversight & Advisory Committee for Health
Emergencies. Previously, she served as Director-
General of Public and International Health at the
UK Department of Health; Director of the UK
Prime Minister's Delivery Unit, then HM Treasury’s
Performance and Reform Unit; Head of the
Medicines, Pharmacy and Industry Group at
the Department of Health; Director of Prison
Health at Her Majesty's Prison Service; Head
of Quality Management at NHS Executive and
private secretary to the Chief Medical Offi cer of
the Department of Health of the United Kingdom.
Dr Harvey was appointed CBE in 2008.
Qualifi cations: Dr Harvey qualifi ed in medicine
in 1980; is an honorary fellow of the Royal
College of Physicians; a fellow of the Faculty
of Public Health; has an international MBA from
Henley Management College; and has gained
a Postgraduate Diploma in Clinical
Microbiology at The Royal London Hospital
College, University of London.
Committee memberships: Audit and
Risk Committee, Investment Committee,
Remuneration Committee
Mr Seamus Keating was appointed as an
independent non-executive director of
the
Company (then Al Noor Hospitals Group plc) on
5 June 2013 and continues to serve as a director
of the Company following the combination of
the businesses of the Company (then Al Noor
Hospitals Group plc) and Mediclinic International
Limited in 2016. He has over 20 years’ experience
in the global technology sector in fi nance and
operational roles, and was a main board director
of Logica plc from 2002 until April 2012. He was
Chief Financial Offi cer of Logica plc 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 in senior fi nance roles in the UK and Italy.
He served as 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, a non-executive
director of BGL Group Limited, a non-executive
director of Callcredit Information Group plc and a
non-executive director of Mi-pay Group plc.
Qualifi cations: Mr Keating is a fellow of
the Chartered Institute of Management
Accountants.
88 MEDICLINIC | ANNUAL REPORT 2018
PROF DR ROBERT LEU
MS NANDI MANDELA
MR TREVOR PETERSON
Independent Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Nationality: Swiss
Nationality: South African
Nationality: South African
International Limited
Committee memberships: Clinical Performance
and Sustainability Committee, Nomination
Committee, Remuneration Committee
Prof Dr Robert Leu was appointed as an
independent non-executive director of the
Company on 15 February 2016. Prior to the
combination of the businesses of the Company
(then Al Noor Hospitals Group plc) and
Mediclinic
in 2016, he
served as an independent non-executive director
of Mediclinic International Limited from 2010.
He 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, he has acted
as economic adviser to executive and legislative
bodies on all policy levels in Switzerland and to
international institutions, in particular the WHO,
the OECD and the World Bank. He is a director
of Visana AG since 2009 and serves as the
Vice-President of the company since 2014,
is President of the Alliance for a Free Health
Care System in Switzerland since 2013, and a
director of Medgate Integrated Care Holding AG
in Switzerland since May 2017. He was a prior
director of Hirslanden AG and past President of
Arcovita AG.
Qualifi cations: Prof Dr Leu holds a Master’s
degree in Economics; and a Doctorate in
Economics (Ph.D.), both from the University
of Basel.
Note: Prof Dr Leu will be retiring as a director
after the annual general meeting of the Company
scheduled to be held on 25 July 2018.
Committee membership: Clinical Performance
and Sustainability Committee
Ms Nandi Mandela was appointed as an
independent non-executive director of the
Company on
15 February 2016. Prior to
the combination of the businesses of the
Company (then Al Noor Hospitals Group plc)
and Mediclinic International Limited in 2016, she
served as an independent non-executive director
of Mediclinic International Limited from 2012. She
is a director of Linda Masinga & Associates, a
town planning and consultancy fi rm, since 2003.
Prior to that, she worked as a marketing offi cer
at 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.
Qualifi cations: Ms Mandela holds a Bachelor’s
degree in Social Science from the University
of Cape Town (B.Soc.Sc.); 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.
Note: Ms Mandela will be retiring as a director
after the annual general meeting of the Company
scheduled to be held on 25 July 2018.
Committee memberships: Audit and Risk
Committee, Nomination Committee,
Remuneration Committee (Chair)
Mr Trevor Petersen was appointed as an
independent non-executive director of the
Company on
15 February 2016. Prior to
the combination of the businesses of the
Company (then Al Noor Hospitals Group plc)
and Mediclinic International Limited in 2016, he
served as an independent non-executive director
of Mediclinic International Limited from 2012.
In 1996, he resigned from the University of Cape
Town 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. He is an independent non-executive
director on the board of Media24 (Pty) Ltd
(a subsidiary of Naspers Limited) and is currently
the managing trustee of the Woodside Village
Trust. He 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.
Qualifi cations: Mr Petersen holds an Honours
degree in Accountancy from the University
of Cape Town (B.Comm. (Hons)); and is a
qualifi ed Chartered Accountant with the South
African Institute of Chartered Accountants.
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MEDICLINIC | ANNUAL REPORT 2018
89
SENIOR
MANAGEMENT
The Group Chief Executive Offi cer, Mr 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 its ability
to successfully execute the Group’s strategy. As reported,
Mr Meintjes will be succeeded by Dr Ronnie van der Merwe,
the current Group Chief Clinical Offi cer, as the Group Chief
Executive Offi cer from 1 June 2018.
The biographies of Mr Meintjes, Chief Executive Offi cer, and
Mr Jurgens Myburgh, Chief Financial Offi cer are provided on
page 86 of this Annual Report.
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DR RONNIE VAN DER MERWE
MR GERT HATTINGH
DR DIRK LE ROUX
Chief Clinical Offi cer and CEO Designate
Chief Corporate Services Offi cer
Chief Information Offi cer
Nationality: South African
Mr Gert Hattingh joined the Mediclinic Group in
1991 as Group Accountant. He served in various
management positions in the Group and was
appointed as the company secretary in 2010 and
Group Services Executive in 2011. Subsequent
to the combination of the businesses of the
Company (then Al Noor Hospitals Group
plc) and Mediclinic International Limited in
February 2016, he no longer serves as the
company secretary, but holds the position of
Chief Corporate Services Offi cer.
Qualifi cations: Mr Hattingh holds an Honours
degree in Accountancy from the University of
Stellenbosch (B.Acc. (Hons)); completed the
Advanced Management Program at Harvard
Business School; and is a qualifi ed Chartered
Accountant with the South African Institute of
Chartered Accountants.
Nationality: South African
Dr Dirk le Roux joined the Mediclinic Group
in August 2014 as the Group ICT Executive.
Prior to joining Mediclinic, he served in various
managerial roles, including as managing director
of Think Worx Consulting, Chief Information
Offi cer at Media24, General Manager of IT
Strategy and Risk at Absa Bank Limited, as well
as the Head of IT at the Development Bank of
Southern Africa.
Qualifi cations: Dr Le Roux holds a D.Com.
(Informatics) degree from the University
of Pretoria; a Master’s degree in Business
Administration (cum laude); a Postgraduate
Diploma in Data Metrics; and a Bachelor’s
degree in Civil Engineering.
in
Nationality: South African
is a specialist
Dr Ronnie van der Merwe
anaesthetist who worked
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 subsequently served
as the Mediclinic Group’s Chief Clinical Offi cer.
He was appointed as an executive director
of Mediclinic International Limited in 2010 up
to the combination of the businesses of the
Company (then Al Noor Hospitals Group plc) and
Mediclinic
International Limited. The Board
appointed him as an executive director and the
Chief Executive Offi cer of the Company from
1 June 2018, and he will stand for election as a
Director at the Company’s annual general meeting
on Wednesday, 25 July 2018. As announced by
Spire, he will be appointed as a non-executive
director of Spire Healthcare Group plc from
24 May 2018.
Qualifi cations: Dr Van der Merwe holds
a medical degree from the University
of Stellenbosch (MB,ChB.); a Diploma in
Anaesthetics from the College of Anaesthetists
of South Africa (DA (SA)); the Fellowship of
the College of Anaesthetists of South Africa
(FCA (SA)); and completed the Advanced
Management Program at Harvard Business
School.
90 MEDICLINIC | ANNUAL REPORT 2018
MR MAGNUS OETIKER
MR KOERT PRETORIUS
Chief Human Resources Offi cer
Nationality: Swiss
Mr Magnus Oetiker was appointed as Chief Human Resources Offi cer
of the Company in February 2018. Prior to joining Mediclinic, he was the
Chief Executive Offi cer of a family-owned company in Switzerland with
13 business units in healthcare and in the catering industry from 2016.
Prior to that, he served in various management positions from 2000
to 2016 within the Hirslanden group, where he was appointed as a
member of Hirslanden’s Executive Committee in 2008 and acted as
Chief Strategy Offi cer, including Human Resources.
Qualifi cations: Mr Oetiker holds a Bachelor of Science in Business
Administration from the Zurich University of Applied Sciences,
Switzerland; and an Executive Master of Business Administration
from the University of Zurich, Switzerland.
Chief Executive Offi cer:
Mediclinic Southern Africa
Nationality: South African
Mr 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 Offi cer of the Mediclinic Group in 2003. He
was appointed as the Chief Executive Offi cer of Mediclinic Southern Africa in
2008 and served as an executive director of Mediclinic International Limited in
2006 up to the combination of the businesses of the Company (then Al Noor
Hospitals Group plc) and Mediclinic International Limited.
Qualifi cations: Mr Pretorius holds a Bachelor’s degree in Accounting
Science from the University of the Free State (B.Compt.); and a Master’s
degree of Business Leadership from the University of South Africa (MBL).
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DR OLE WIESINGER
MR DAVID HADLEY
Chief Executive Offi cer: Hirslanden
Chief Executive Offi cer: Mediclinic Middle East
Nationality: German and Swiss
Dr Ole Wiesinger joined the Hirslanden Private Hospital Group in
2004 as the Hospital Manager of Klinik Hirslanden. He was appointed
as the Chief Executive Offi cer of the Hirslanden group and served as
an executive director of Mediclinic International Limited from 2008 up
to the combination of the businesses of the Company (then Al Noor
Hospitals Group plc) and Mediclinic International Limited. Prior to joining
Hirslanden, he served in various management positions of the Euromed
AG in Germany from 1995 and was appointed as the Chief Executive
Offi cer of Euromed AG from 2003 to 2004.
Qualifi cations: Dr Wiesinger holds a doctorate in medicine from the
University of Erlangen, Germany (Ph.D.); and a Postgraduate Diploma
in Health Economics from the European Business School, Germany.
Nationality: British
Mr David Hadley joined the Mediclinic Group in 1993, and worked in a variety
of administrative roles in human resources, fi nance, 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 Offi cer
of Mediclinic Middle East in 2009 and has served as a member of Mediclinic’s
Executive Committee since 2011.
Qualifi cations: Mr Hadley holds a Bachelor’s degree in Commerce
from the University of South Africa; and a Master’s degree in Business
Administration (with distinction) from the University of Liverpool.
MEDICLINIC | ANNUAL REPORT 2018
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92 MEDICLINIC | ANNUAL REPORT 2018
CORPORATE GOVERNANCE
STATEMENT
INTRODUCTION
The Board of Directors is accountable to the Company’s
shareholders for ensuring the sound management and long-
term success of the Group. This can only be achieved if the
Board is supported by appropriate governance processes
to ensure that the Group is managed responsibly and with
integrity, fairness, transparency and accountability. The
Board is committed to maintaining the highest standards of
corporate governance, integrity and ethics. This Corporate
Governance Statement describes the key elements of
Mediclinic’s corporate governance framework.
A Group Corporate Governance Manual, dealing with
Board practices and Group policies, provides guidance to
the company secretaries, boards and management of the
Company and its three operating divisions in Switzerland,
Southern Africa and the United Arab Emirates to ensure
that similar corporate governance practices are followed
throughout the Group.
COMPLIANCE WITH UK CORPORATE
GOVERNANCE CODE AND LISTING
RULES
The current UK Corporate Governance Code (the “UK
Corporate Governance Code” or the “Code”), published
in
by the Financial Reporting Council (the “FRC”)
April 2016 and available on the FRC’s website at
www.frc.org.uk, contains a series of broad principles and
specific provisions which embody good practice in relation
to five key areas: leadership, effectiveness, accountability,
remuneration and relations with shareholders. This Corporate
Governance Statement, together with the Directors’
Remuneration Report and the various Board committee
reports included in this Annual Report, describes how the
Board applied the main principles of the Code and complied
with its provisions.
During the year under review and up to the date of this
report, the Company complied with all the provisions of the
UK Corporate Governance Code, other than the exceptions
noted below:
• Provision B.2.1 (regarding the Nomination Committee
leading the process for Board appointments and making
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 112 to 115. In accordance with the Company’s
relationship agreement with its principal shareholder,
Remgro Limited (“Remgro”), further details of which
are provided on pages 108 to 109 (the "Relationship
Agreement"), Remgro is entitled to appoint up to
the Board.
three directors
a maximum of
Mr Jannie Durand was appointed by Remgro on
15 February 2016 and represents Remgro on the Board
of Directors. His appointment was therefore not led by
the Nomination Committee. With the exception of this
appointment, made in accordance with the terms of the
to
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Relationship Agreement, the Nomination Committee
leads the process for Board appointments and makes
recommendations to the Board in accordance with the
Code. No new Board appointments were made in terms of
the Relationship Agreement during the year under review.
• Provision B.2.4 (an explanation should be given if neither
an external search consultancy nor open advertising has
been used in the appointment of a chairman or a non-
executive director)
Neither an external search consultancy nor open
advertising was used
the appointment of
in
Dr Muhadditha Al Hashimi in November 2017. An
explanation is given in the report of the Nomination
Committee on page 113 regarding external search
consultancies and open advertising of appointments.
AR
• Provision E.1.1 (regarding the attendance by the Senior
Independent Director (“SID”) of sufficient meetings with
a range of major shareholders)
The Company has not met the requirement that the
“SID should attend sufficient meetings with a range of
major shareholders to listen to their views in order to
help develop a balanced understanding of the issues and
concerns of major shareholders”. This provision of the Code
supports the main principle of the Code requiring dialogue
with shareholders based on a mutual understanding of
objectives and that the Chairman should ensure that all
directors are made aware of their major shareholders’
issues and concerns, with which the Company complies.
The Board believes that appropriate mechanisms are in
place to engage with shareholders, without the need for the
SID to attend meetings with major shareholders. The SID is,
however, available to attend such meetings if requested by
shareholders and did so, along with the Chairman, this year
as requested by a top five shareholder. Although the SID
and any other non-executive directors have the opportunity
to attend analyst presentations hosted by the Company, the
principal engagement with the capital markets lies mainly
with CEO, CFO and the Head of Investor Relations, who
provide regular feedback to the Board on investor relations
matters, including, inter alia, an overview of meetings held
with investors. Refer to page 104 for more information
on the Company’s shareholder engagement. Further, in
April 2018 the Group commenced a detailed perception
study using a third party independent service provider,
the results of which will be shared with the Board.
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 and the NSX Listings Requirements arising
from its secondary listings on the JSE securities exchange
in South Africa and the NSX securities exchange in Namibia.
BOARD STRUCTURE AND ROLES
The Board has full and effective control of the Company
and all material resolutions are approved by the Board.
The Board has adopted a robust corporate governance
MEDICLINIC | ANNUAL REPORT 2018
93
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
framework, as summarised in Figure 1, which assists the
Board in the exercise of its responsibilities, namely providing
strategic direction to the Company in order to create long-
term shareholder value. A Board Charter sets out the key
responsibilities of the Chairman, SID, non-executive directors,
executive directors, the CEO and the Company Secretary,
FIGURE 1: CORPORATE GOVERNANCE FRAMEWORK
CHAIRMAN
Dr Edwin Hertzog
Key responsibilities
• Leads the Board
• Ensures the effective
SENIOR INDEPENDENT
DIRECTOR
Mr Desmond Smith
Key responsibilities
• Provides a sounding board
and outlines the roles of the various Board committees.
performance of the Board
for the Chairman
Board committees
The Board has delegated authority to five committees
to carry out certain tasks on its behalf, in order to operate
efficiently and provide the appropriate level of attention
and consideration to relevant matters, while reserving the
authority to approve certain key matters, as documented in
the Group’s authority levels and reserved matters, which are
reviewed annually by the Board. The key responsibilities of
the Board committees, namely the Audit and Risk Committee,
Remuneration Committee, Nomination Committee, Clinical
Performance and Sustainability Committee, and Investment
Committee, are summarised in Figure 1. The terms of reference
of each Board committee, which are reviewed annually by
the relevant committee and approved by the Board, are
available on the Company’s website at www.mediclinic.com.
Reports on the role, composition and activities of the Audit
and Risk Committee, Remuneration Committee, Nomination
Committee, Clinical Performance
and Sustainability
Committee are included in this Annual Report.
During the year, the Board approved the constitution of the
• Works closely with
the CEO to ensure the
implementation of Board-
approved actions
• Ensures effective
communications with
shareholders
The Chairman’s other
significant commitments are
indicated in his biography on
page 86.
• Acts, if necessary, as a focal
point and intermediary for
other directors
• Available to shareholders
should they have concerns
if contact outside the
normal channels is required
• Leads the annual appraisal
of the Chairman’s
performance and non-
executive directors’
independence
AR
BOARD1,2,3
Membership:
One non-executive Chairman, one other non-executive director, eight
independent non-executive directors and two executive directors
Key responsibilities
• Responsible for the effective oversight of the Company
• Agrees the strategic direction of the Group and the nature and
extent of the principal risks it is willing to take
• Establishes the governance structure, corporate reporting, risk
management and internal control principles for the Group
Disclosure Committee as a management committee, instead
• Sets appropriate corporate culture and ensures it is embedded
of a Board committee, further details of which are provided
below.
Separation of Chairman and CEO roles
There is a distinct division of responsibilities between the
Chairman and the CEO, as summarised in Figure 1. The
separation of authority, which is set out in writing and
agreed by the Board in a policy on the segregation of the
roles of the Chairman and the CEO, 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.
Notes
1
Dr Ronnie van der Merwe (currently Chief Clinical Officer) will
succeed Mr Meintjes as CEO with effect from 1 June 2018. Subject
to his re-election as a director of the Company at the AGM,
Mr Meintjes will continue to serve as an executive director until
31 July 2018 and as a non-executive director with effect from
1 August 2018.
2 Prof Dr Leu and Ms Mandela will retire from the Board and the
Board committees upon the conclusion of the AGM.
3 Formerly named Capita Company Secretarial Services.
throughout the Group
• Accountable to shareholders for the long-term success of the
Group and delivering value to shareholders
• Delegates authority to Board committees to carry out certain
tasks on its behalf
The biographies of the Board members are set out on pages 86
to 89.
AR
EXECUTIVE DIRECTORS
Mr Danie Meintjes – CEO1
Mr Jurgens Myburgh – CFO
CHIEF EXECUTIVE
OFFICER
Mr Danie Meintjes1
Key responsibilities
• Contribute detailed
insight of the operations
of the business, enabling
the Board to determine
feasibility and practicality
of proposed strategies,
goals and direction
• Make and implement
operational decisions
Key responsibilities
• Leads and oversees the
executive management
team
• Manages the business
of the Group
• Progresses, develops
and oversees the
implementation of Board-
approved actions, and the
strategic direction of the
Group and its commercial
objectives
• Ensures appropriate
culture and governance
are embedded throughout
the Group.
NON-EXECUTIVE DIRECTORS
AUDIT AND RISK COMMITTEE
Dr Muhadditha Al Hashimi, Mr Jannie Durand,
Mr Alan Grieve, Dr Felicity Harvey,
Mr Seamus Keating, Prof Dr Robert Leu2,
Ms Nandi Mandela2, Mr Trevor Petersen,
Mr Desmond Smith
Key responsibilities
• Support the development of the
Group’s strategy
• Scrutinise the performance of
management
• Provide constructive challenge, drawing
on their skills, experience and judgement
• Satisfy themselves on the integrity of
the Group’s financial reporting and on
the effectiveness of its internal controls
and risk management systems
• Determine the remuneration of
executive directors
• Approve the appointment or removal
of directors and review succession
planning
Membership
Four independent non-executive
directors
Key responsibilities
• Reviews and monitors the
integrity of the Group’s financial
reporting
• Reviews and monitors the
Group’s relationship with
the external auditor and the
effectiveness of the external
audit
• Reviews the effectiveness
of the Group’s internal audit
arrangements
• Reviews and monitors the
effectiveness of the Group’s
internal controls systems and
risk management processes
CLINICAL PERFORMANCE
AND SUSTAINABILITY
COMMITTEE
Membership
Four independent non-executive
directors, one non-executive director
and one executive director
Key responsibilities
• Monitors clinical performance
throughout the Group
• Promotes culture of excellence
in patient safety, quality of care
and patient experience, together
with Mediclinic’s values, ethical
standards and behaviours
• Monitors the sustainable
development performance of the
Group
• Ensures the Group is a good and
responsible corporate citizen
COMPANY SECRETARY
REMUNERATION COMMITTEE
INVESTMENT COMMITTEE
Link Company Matters3
Key responsibilities
• Acts as secretary to the Board and its
committees
• Provides advice and guidance to
the Board collectively and directors
individually with regard to their duties,
responsibilities and powers
• Ensures the effective administration
of proceedings and matters related
to the Board, the Company and its
shareholders
• A point of contact for shareholders
on corporate governance matters
Membership
Three independent non-executive
directors
Key responsibilities
• Makes recommendations to the
Board on the Company’s policy
on executive remuneration
• Establishes the parameters and
governance of the Remuneration
Policy
• Determines the remuneration
and benefits package for
individual executive directors
and other members of executive
management
Membership
Two independent
non-executive directors,
two non-executive directors
and two executive directors
Key responsibilities
• Reviews and approves proposed
investments and capital
expenditures within its authority
levels
• Reviews and makes
recommendations to the Board
regarding proposed investments
and capital expenditures that
exceed its own authority level
• Monitors performance of
approved investments
EXECUTIVE COMMITTEE
DISCLOSURE COMMITTEE
NOMINATION COMMITTEE
Membership
CEO, CFO, Chief Corporate Services Officer,
Chief Clinical Officer, Chief Information
Officer, Chief Human Resources Officer and
the three divisional CEOs
Key responsibilities
• Responsible for the executive
management of the Group’s businesses
• Considers investment opportunities,
operational matters and other
aspects of strategic importance
to the Group and make
recommendations to the Board
• Performs any other functions
delegated to management by
the Board
The Disclosure Committee was
re-constituted from a Board to a
management committee during the
year, reflecting common practice
amongst the majority of FTSE
100 companies. The information
below reflects its status as a Board
committee up to March 2018.
Membership
Two independent non-executive
directors and two executive directors
Key responsibilities
•
Identifies inside information and
makes recommendations about
how such information should be
disclosed
• Reviews and monitors internal
arrangements regarding inside
information in accordance with
the EU Market Abuse Regulation
Membership
Three independent non-executive
directors and two non-executive
directors
Key responsibilities
• Reviews the structure, size, and
•
composition of the Board
Identifies and recommends
potential candidates to be
appointed as directors or
members of Board committees,
as the need arises
• Reviews succession planning and
diversity within the Board, the
Executive Committee and their
direct reports
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
BOARD MEETINGS
Meeting attendance
The names of all the directors who served during the reporting period are set out in Figure 2 below, together with their
attendance of Board meetings held during the period under review. Their biographies are provided on pages 86 to 89.
AR
Members’ attendance of Investment Committee and Disclosure Committee meetings held during the period under review is
set out in Figure 3 and Figure 4, respectively. Individual directors’ attendance at Board and Board committee meetings is
considered part of the formal annual review of their performance. When a director is unable to attend a Board or committee
meeting, they communicate their comments and observations on the matters to be considered in advance of the meeting
via the Chairman, the SID or relevant Board committee chairman for raising, as appropriate, during the meeting.
FIGURE 2: BOARD MEETING ATTENDANCE
NAME1
DESIGNATION
Dr Edwin Hertzog
Non-executive Chairman
Mr Danie Meintjes
Chief Executive Officer
Mr Jurgens Myburgh
Chief Financial Officer
Mr Desmond Smith
Senior Independent Director
DATE OF
APPOINTMENT
15/02/2016
15/02/2016
01/08/2016
15/02/2016
Dr Muhadditha Al Hashimi3
Independent non-executive director
01/11/2017
Mr Jannie Durand
Non-executive director
15/02/2016
Mr Alan Grieve
Independent non-executive director
15/02/2016
Dr Felicity Harvey4
Independent non-executive director
03/10/2017
Mr Seamus Keating
Independent non-executive director
05/06/2013
Prof Dr Robert Leu
Independent non-executive director
15/02/2016
Ms Nandi Mandela
Independent non-executive director
15/02/2016
Mr Trevor Petersen
Independent non-executive director
15/02/2016
FIGURE 3: INVESTMENT COMMITTEE MEETING ATTENDANCE
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
7 of 7
7 of 7
7 of 7
7 of 7
3 of 3
7 of 7
7 of 7
3 of 3
7 of 7
7 of 7
7 of 7
7 of 7
DATE OF
APPOINTMENT
(as committee member)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED5
19/02/2016
19/02/2016
01/08/2016
19/02/2016
2 of 2
2 of 2
2 of 2
2 of 2
2 of 2
1 of 2
NAME1
DESIGNATION
Dr Edwin Hertzog
(Committee Chairman)
Non-executive Chairman
Mr Danie Meintjes
Chief Executive Officer
Mr Jurgens Myburgh
Chief Financial Officer
Mr Jannie Durand
Non-executive director
Mr Alan Grieve
Independent non-executive director
19/02/2016
Mr Seamus Keating6
Independent non-executive director
19/02/2016
96 MEDICLINIC | ANNUAL REPORT 2018
FIGURE 4: DISCLOSURE COMMITTEE MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT
(as committee member)
NUMBER OF
MEETINGS
ATTENDED7
Mr Alan Grieve7
(Committee Chairman)
Mr Danie Meintjes
Mr Jurgens Myburgh8
Independent non-executive director
17/03/2017
CEO
CFO
15/02/2016
01/08/2016
Mr Seamus Keating7, 9
Independent non-executive director
02/06/2017
7 of 7
7 of 7
6 of 7
3 of 3
Notes
1
The composition of the Board and its Committees is shown as at 31 March 2018. Dr Van der Merwe’s appointment as CEO and a director of
the Company will take effect on 1 June 2018. Therefore, during the financial year, he was not eligible to attend meetings of the Board and
its committees as a member.
2 The attendance reflects the number of scheduled Board meetings held during the financial year. Five additional ad hoc meetings were
held during the financial year to deal with urgent matters; the majority of directors made themselves available at short notice for these
meetings. Between the Company’s financial year end and the Last Practicable Date, the Board met once and all members who were eligible
to attend did so.
3 Dr Al Hashimi was appointed an independent non-executive director of the Company on 1 November 2017 and attended all subsequent
scheduled Board meetings.
4 Dr Harvey was appointed an independent non-executive director of the Company on 3 October 2017 and attended all subsequent
scheduled Board meetings.
5 The attendance reflects the number of scheduled meetings of the Investment Committee held during the financial year. The Investment
Committee held two additional ad hoc meetings during the financial year to deal with urgent matters, which were attended by all
Committee members. Between the Company’s financial year end and the Last Practicable Date, the Investment Committee met once and
all members were present.
6 One of the scheduled meetings of the Investment Committee had to be rearranged at short notice, which meant Mr Keating was unable
to attend due to other commitments.
7 The attendance reflects the number of ad hoc meetings of the Disclosure Committee held during the financial year. Prior to the year end,
the Disclosure Committee was re-constituted as a management committee. Consequently, both Mr Grieve and Mr Keating stepped down
from the Disclosure Committee with effect from 28 March 2018.
8 Mr Myburgh was unable to attend one meeting of the Disclosure Committee for personal reasons. Nevertheless, a quorum was present at
the meeting.
9 Mr Keating was appointed as a member of the Disclosure Committee with effect from 2 June 2017 and attended all subsequent meetings
of the Disclosure Committee.
The attendance of the other Board committee meetings is set out in the reports of the Audit and Risk Committee, the
Nomination Committee, the Remuneration Committee and the Clinical Performance and Sustainability Committee included
in this Annual Report.
Principal Board activities
Figure 5 outlines a number of specific areas that the Board focused on during the year under review. The Board’s annual agenda
plan is designed to ensure that sufficient time is allocated to ensure all necessary matters are addressed. The agendas are adjusted
throughout the course of the year to prioritise relevant issues and ensure focused consideration of strategic priorities. Sufficient
time is provided for the Chairman to meet privately with the SID and non-executive directors to discuss any issues arising.
STRATEGIC GOALS
(As described in Our Strategy, Progress and Aims from
page 14)
AR
PRINCIPAL RISKS AND UNCERTAINTIES
CATEGORIES
(as described in Risk Management, Principal Risks and
Uncertainties from page 44)
1 Putting Patients First
1 Strategic and business environment
2 Improving Group and operational efficiencies
2 Financial and reporting
3 Continuing to grow
3 Operational
4 Continuing to address the business environment
4 Information technology
AR
AR
5 Compliance risks
6 Clinical risks
7 People risks
MEDICLINIC | ANNUAL REPORT 2018
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
STRATEGIC
GOALS
PRINCIPAL
RISKS
1 2 3 4
1 2
2 3
1 2 3 6 7
1 2 3 4
2 3 4 5 6 7
1 2 4
5 6 7
2 3
1 2
FIGURE 5: PRINCIPAL BOARD ACTIVITIES
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STRATEGY AND BUSINESS PLANS
• Monitored progress against the Group’s overall strategic objectives and
goals (re-affirmed during the financial year), including the long-term
business plan and annual budget for each operating division and the
Group as a whole
Refer to Our Strategy, Progress and Aims from page 14.
• Considered requests for approval of investments and business
development transactions of a size that require Board approval, such as
expanding Mediclinic Airport Road and building a hospital in Madinat
Zayed (both in Abu Dhabi) and the acquisition of Hirslanden Klinik
Linde (Switzerland)
• Considered options regarding the Group’s investment in Spire, including
the proposed acquisition of Spire
• Discussed other potential opportunities for growth and cooperation in
new jurisdictions
Refer to the Divisional Reviews from page 52 and the Chief Executive
Officer's Review from page 20.
OPERATIONAL PERFORMANCE
• Discussed regular reports from the CEO on the operating performance
of the Group’s divisions, central functions and the Group’s investment in
Spire
• Received in-depth reviews of each division from the divisional CEOs
• Discussed initiatives being undertaken to counter declines in tariffs and
volumes and to drive greater cost efficiencies
Refer to the Chief Executive Officer’s Review from page 20, the Divisional
Reviews from page 52.
CLINICAL PERFORMANCE
• Discussed regular reports from the Chief Clinical Officer and the Clinical
Performance and the Sustainability Committee, on matters such as
clinical indicators for patient safety, clinical effectiveness and clinical
cost efficiency, accreditation of doctors and facilities, implementation
of clinical information systems and clinical governance matters across
the Group
Refer to the Clinical Services Overview from page 34.
FINANCIAL PERFORMANCE, REPORTING, TAX STRATEGY
AND DIVIDEND POLICY
• Discussed regular reports from the CFO on the actual and forecast
financial performance of each division and the Group as a whole
• Reviewed and approved the half-year and full-year trading updates,
the interim financial report, the Annual Report and the corresponding
results announcement and investor presentations, with support from
the Disclosure Committee, as appropriate
• Considered the capital structure and financing options for Hirslanden
and approved the refinancing structure implemented during FY18
• Reviewed and adopted a Group tax strategy
• Considered and approved decisions regarding the interim and final
dividends paid during FY18, taking account of the Company’s dividend
policy and previous dividends paid
AR
Refer to the Financial Review from page 24.
98 MEDICLINIC | ANNUAL REPORT 2018
FIGURE 5: PRINCIPAL BOARD ACTIVITIES (continued)
RISK MANAGEMENT AND INTERNAL CONTROLS
• Reviewed bi-annual feedback provided by the Group Risk Manager on
the Group’s risk appetite, risk management framework, internal control
systems, and statutory and regulatory compliance
• Reviewed the going concern and long-term viability statements, based
on the principal risks and uncertainties for the Group
• Conducted a robust assessment of the Group’s principal risks and
uncertainties and mitigating actions
• Conducted a robust assessment of the effectiveness of the Group’s
internal control systems and risk management processes
• Monitored progress on the establishment of an in-house internal audit
function, to transition away from the outsourcing arrangement with
Remgro, the Company’s principal shareholder
Refer to the report on Risk Management, Principal Risks and
Uncertainties from page 44 and the Audit and Risk Committee Report
from page 120.
AR
ICT
• Considered regular reports from the Chief Information Officer
• Received updates on the Group’s ICT infrastructure, strategy, risks,
potential impact, existing controls, and mitigants and proposed
enhancements
CORPORATE GOVERNANCE
• Considered developments in corporate governance and disclosure
requirements resulting from the reviews conducted by the UK
Government, the Department of Business, Energy and Industrial
Strategy and proposals to update the UK Corporate Governance Code
• Considered the feedback from the Hampton Alexander and Parker
reviews, and enhanced existing policies and succession planning
arrangements to improve the diversity of the Board, the senior
management team and their direct reports
• Reviewed and approved the Company’s updated Modern Slavery
Act statement
• Considered feedback: from the Audit and Risk Committee in respect
of tax and non-audit services disclosures: from the Remuneration
Committee in relation to executive remuneration; and from the
Nomination Committee in relation to diversity, the appointment of a
new CEO and the appointment of new non-executive directors
• The Board reviewed and approved all Group policies and procedures,
including in relation to:
– Board Charter and committees’ terms of reference
– authority levels and matters reserved for the Board
– business conduct and ethics
– anti-bribery
– sustainable development and environment
– Board diversity
– EU Market Abuse Regulation
– code of practice for dealing in the Company’ securities
– internal audit mandate
– treasury policy and procedures
– tax strategy
STRATEGIC
GOALS
PRINCIPAL
RISKS
2 3
1 2 3 4 5 6 7
2 3
3 4
1 2 3
1 3 5
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MEDICLINIC | ANNUAL REPORT 2018
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
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STRATEGIC
GOALS
PRINCIPAL
RISKS
2 3 4
1 2 3 6 7
1 2 3 4
1 2 3 4 5 6 7
FIGURE 5: PRINCIPAL BOARD ACTIVITIES (continued)
SUSTAINABILITY
• Considered the feedback from the Clinical Performance and
Sustainability Committee on sustainability matters after each
committee meeting
• Monitored the broad-based black economic empowerment initiatives
being undertaken by the Group in South Africa
Refer to the Clinical Performance and Sustainability Committee Report
from page 116.
LEADERSHIP
• Considered the recommendations of the Nomination Committee
regarding the composition of the Board and its committees and
potential candidates to fill the vacancies identified, and approved:
– the appointment of two new female independent non-executive
directors with different backgrounds, skills and experience to
broaden the diversity and refresh the Board’s composition;
– the appointment of Dr Van der Merwe to succeed Mr Meintjes as
CEO after a robust selection process; and
– the proposed continued involvement of Mr Meintjes in the Company
as an executive director until 31 July 2018 and as a non-executive
director from 1 August 2018, in view of the wealth of knowledge and
experience he will continue to offer to the Group
• Reviewed the outcomes and agreed actions after the externally
facilitated evaluation of the composition, structure and functioning of
the Board
Refer to the Nomination Committee Report from page 112 and the section
regarding the Board evaluation on page 102.
STAKEHOLDER ENGAGEMENT
• Mediclinic’s network of stakeholders is vital to building a successful
and sustainable business
Refer to the Stakeholder Interest and Board Engagement section
further below.
BOARD COMPOSITION AND DIVERSITY
The delivery of the Company’s long-term strategy depends
The following changes to the Board will take place after the
publication of this Annual Report:
on attracting and retaining the right skills across the Group,
• Dr Van der Merwe will succeed Mr Meintjes as CEO and
starting with the Board, as well as the executive management
is appointed a director of the Company with effect from
team, and their direct reports. A list of the Company’s current
1 June 2018;
directors, including their biographies, who were in office
•
subject to his re-election as a director at the Company’s
during the year and up to the date of signing the financial
2018 AGM, Mr Meintjes will continue to serve as an
statements, can be found on pages 86 to 89 and page 96.
executive director until 31 July 2018 and as a non-
As at 31 March 2018 and as at the date of this Annual
Report, the Board comprised the non-executive Chairman,
a non-executive director, eight independent non-executive
directors, and two executive directors from wide-ranging
backgrounds and with varying industry and professional
experience. The Company complies with the Code’s
recommendation that at least half the Board should be
independent.
executive director with effect from 1 August 2018; and
• Ms Mandela and Prof Dr Leu will retire as directors of the
Company at the end of the AGM.
The Company’s Chairman, Dr 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 and his position as non-
executive Deputy Chairman of Remgro Limited, the principal
100 MEDICLINIC | ANNUAL REPORT 2018
shareholder of the Company. Nonetheless, given his in-depth
industry knowledge and experience, the Board considers it in
the best interests of the Company that he serves as Chairman.
The Board’s diversity policy statement is set out on
page 113 to 114. For details on the diversity of the Group,
including a breakdown by gender, age and race (only for
Mr Meintjes would also not meet the criteria to be considered
an independent non-executive director. The Board considered
his proposed appointment as a non-executive director
and, after careful deliberation, concluded his appointment
is in the best interests of the Group, its shareholders and
other stakeholders, taking into account the knowledge and
experience of the industry and the business that Mr Meintjes
has developed over 30 years in different capacities across the
business, and the overall composition of the Board.
Mediclinic recognises the importance and benefits of having
a diverse Board, and believes that diversity at Board level is
an essential element in maintaining a competitive advantage.
The Board considers that diversity is not limited to gender
and that a diverse Board will include and make good use of
differences in the skills, geographic and industry experience,
background, race, gender and other characteristics of
directors.
AR
The Board seeks to construct 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. The Board and the
Nomination Committee actively consider the structure, size
and composition of the Board and its committees when
contemplating new appointments and succession planning
for the year ahead. A range of diversity factors are taken
into account in determining the optimum composition of the
Board and its committees, together with the need to balance
their composition and refresh this progressively over time.
The Company’s non-executive directors come from a wide
range of industries, backgrounds and geographic locations
and have appropriate experience of organisations with
international reach. The skills and expertise of the Board have
been extended and reinforced through the appointment of
Drs Al Hashimi and Harvey. Nevertheless, the Nomination
Committee will continue to consider and develop succession
plans for the Board and its committees. No quota regarding
gender balance has been set. However, the Nomination
Committee and Board remain committed to ensuring that the
business benefits from a diverse Board. Accordingly, when
considering Board appointments and internal promotions at
senior level, the Company will continue to take account of
relevant voluntary guidelines and the performance of peer
companies in fulfilling their role regarding diversity, while
seeking to ensure that each post is offered strictly on merit
to the best available candidate.
South Africa) on the Board and senior management roles,
see the section on Employees on pages 109 to 110. Figure
6 provides an overview of the Board’s composition and
diversity in terms of gender and experience.
FIGURE 6: BOARD COMPOSITION AND DIVERSITY
Financial services
(accounting,
banking, insurance)
Healthcare
Technology
32%
Academia
Infrastructure
Industrials
Consumer goods
5%
5%
5%
11%
10%
32%
Industry sector
experience
17%
17%
66%
Independent non-executive
directors
Non-executive directors
Executive directors
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Composition
25%
75%
Gender
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MEDICLINIC | ANNUAL REPORT 2018
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
EVALUATION OF THE BOARD,
COMMITTEES AND CHAIRMAN
During the year under review, the Board conducted an
external evaluation to review performance and effectiveness
of the Board as a whole, the Board committees and the
Chairman. The evaluation process was conducted by way of
externally facilitated questionnaires and discussions with the
Chairman of the Board and each committee. The results of
the evaluation of the Board committees were considered by
the relevant committee prior to their presentation, together
with all other evaluations, for discussion at the Board
meeting held in March 2018.
• The relationships and dynamics between members of
the Board were reviewed, and the atmosphere during
meetings was assessed.
• The management and focus of the Board meetings were
considered, and Board members identified areas which
they felt that either too much or too little time is spent.
• The performance of the Board in overseeing strategy,
risk, human resources and management succession was
addressed, and the top strategic issues facing Mediclinic
were identified by the directors.
• The members of the Board also identified the top
priorities for improving the Board’s performance over the
coming year.
The Company will continue to conduct an externally
• The performance of the Chairman and each of the Board
facilitated performance evaluation every three years, and
committees was reviewed.
internal self-evaluations in the intervening years.
Mediclinic engaged Lintstock to facilitate an evaluation
of the performance of the Board, the Chairman and its
committees. Lintstock is an advisory firm that specialises
in Board reviews, and provides no other services to the
Company. The first stage of the review involved Lintstock
engaging with the Chairmen of the Board and the various
In addition to these core aspects of Board performance,
the review involved a case study on a recent transaction,
to enable the Board to draw lessons from the process. The
output of the review was discussed at a subsequent Board
meeting in March 2018 and, as a result of the exercise, the
Board agreed to prioritise an ongoing focus on clinical quality
and outcomes, devote further time to strategic matters and
Board committees and the Company Secretary to set the
continue to support the new CEO in settling into the role.
context for the evaluation and determine the scope of the
evaluation, having regard to the specific circumstances of
Mediclinic. All Board members were invited to complete a
set of online surveys addressing the performance of the
Board, the Chairman and the committees. The anonymity
of the respondents was ensured throughout the process in
order to promote an open and frank exchange of views.
Lintstock subsequently produced a report addressing the
following areas of performance:
• The composition of the Board was reviewed and
directors provided their views on key changes that ought
to be made to the Board’s profile over the next three to
five years to match the Company’s strategy.
• The Board’s understanding of
the shareholders,
employees, doctors and patients was assessed, as was
the directors’ knowledge of the markets in which the
Company operates and the regulatory environment.
There was a separate evaluation of the individual performance
of the directors and their independence undertaken by the
Nomination Committee and discussed by the Board.
STAKEHOLDER INTEREST AND
BOARD ENGAGEMENT
Mediclinic recognises its accountability to its stakeholders.
Effective communication with stakeholders, not just at Board
level but across the whole Group, is fundamental in maintaining
Mediclinic’s corporate reputation as a trusted and respected
provider of healthcare services, and positioning itself as a
leading international private healthcare group. The Group’s
key stakeholders, methods of engagement, topics discussed
or concerns raised are outlined further in the Sustainable
Development Report, available on the Company’s website at
www.mediclinic.com.
SDR
102 MEDICLINIC | ANNUAL REPORT 2018
STAKEHOLDERS
Patients
Shareholders
People
Regulators
Healthcare funders
WHY THEY ARE IMPORTANT
TO US
HOW THE BOARD HAS
ENGAGED
Patients lie at the heart of Mediclinic’s
core purpose, strategy and objectives.
The long-term success of the Group is
built on its ability to understand and serve
patients’ needs.
• Regular reviews of clinical performance
indicators and their evolution over time
• Review of patient experience index
and implementation of resulting action
plans
Shareholder support and engagement
is critical to the delivery of Mediclinic’s
long-term strategy and the business’
sustainability.
Mediclinic’s ownership structure allows
management and the Board to adopt a
long-term approach to value creation,
consistent with the nature of the business.
Mediclinic’s ability to provide
comprehensive, high-quality healthcare
and be regarded as the most respected
and trusted provider of healthcare
services depends on attracting and
retaining suitably qualified healthcare
professionals and other employees.
Mediclinic can only operate with the
approval of its regulators, who have a
legitimate interest in how the Group runs
its business and treats its patients.
Government and private sector funders
of healthcare services are critical to
Mediclinic’s success.
Mediclinic aims to demonstrate to funders
that it provides high-quality, effective and
efficient services.
• Considered investors’ views and
feedback
• Through the executive directors, sought
to increase the amount and quality
of engagement with shareholders, to
continue to develop their understanding
of investors’ views
• Consultation regarding key developments
• Attendance by Dr Hertzog at annual
and half-yearly results presentations
• Review of annual employee engagement
surveys and implementation of resulting
action plans
• Monitoring of remuneration
arrangements across the Group
• Regular communications through
management briefings, internal
announcements
• Encourages a constructive dialogue with
the Group’s regulators
• Monitors clinical, regulatory and
legal compliance through regular
management reports
• Regularly reviews the clinical
performance indicators across the
Group
• Encourages the development and
publication of clinical performance
information
• Encourage a constructive dialogue with
the Group’s healthcare funders
Suppliers
To deliver its services, Mediclinic depends
on a large and diverse range of suppliers.
• Review and approval of the Company’s
arrangements regarding modern slavery
• Payment practices and performance
reporting in the UK
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
Shareholder engagement
Responsibility for shareholder relations rests with the
Chairman, CEO, CFO, SID and Head of Investor Relations.
AR
Collectively, but mainly through the CEO, CFO and Head of
Investor Relations, as referred to on page 93, they ensure
that there is effective, regular and clear communication with
shareholders on matters such as operational performance,
The Group receives regular feedback from investors which is
appreciated by the Board. This year the Group formalised the
investor feedback and perception study process. QuantiFire,
on behalf of the Group, collects feedback and confidence
measures from investors and presents these results on a
quarterly basis in addition to carrying out a detailed annual
perception study exercise that commenced around year-end.
regulatory changes, governance and strategy. In addition,
Shareholders can access details of the Group’s results and
they are responsible for ensuring that the Board understands
other news releases through the LSE’s Regulatory News
the views of shareholders on matters such as governance
Service and the Johannesburg Stock Exchange News
and strategy. The Board is supported by the Company’s
Service. In addition, the Group publishes the announcements
corporate brokers with whom it is in constant dialogue. The
Disclosure Committee assists the Board to ensure the timely
and accurate disclosure of all information that is required to
in the Investor Relations section of the Group’s website at
www.mediclinic.com. Shareholders and other interested
parties can subscribe to email news updates by registering
be so disclosed to meet the legal and regulatory obligations
on the website.
and requirements arising from its listing on the LSE.
The Group continually looks for ways to improve its use
During the year, the investor relations programme included
of online channels to communicate with our stakeholders
regular communication with the capital markets including
through the corporate website and webcasting. Currently
investor meetings, attendance at investor conferences,
the Group is investing in a new corporate website which will
roadshows, presentations, site visits and ad hoc events
enhance accessibility to information and user experience.
with investors, sell-side analysts and sales teams. Members
of the Board, senior management and investor relations
department met with over 200 institutions and participated
in some 20 roadshows, investor conferences and ad hoc
capital market events across the UK, Continental Europe,
South Africa and North America. A breakdown of the fund
manager style and geographic holdings as at year end are
provided in Figures 7 and 8 respectively.
In June 2018, the Group will host a Capital Markets Day
and site visit for investors and analysts in Switzerland.
Several Executive Committee members will be presenting
at the event including the Group’s newly appointed CEO,
Dr Van der Merwe, with all presentations available to view
via a live webcast on the Group’s website.
ACCOUNTABILITY
Internal controls and risk management
The Group has comprehensive risk management and internal
control systems in place. These systems are designed to
identify and appropriately mitigate the principal risks of
the business and ensure the accuracy and reliability of the
Group’s financial reporting, while facilitating the delivery
and sustainability of the Group financial, operational and
strategic objectives.
The Board is responsible for reviewing and confirming the
effectiveness of risk management and internal controls
operated by the Group. This includes all material controls,
FIGURE 7: STYLE OF FUND MANAGER BREAKDOWN
FIGURE 8: GEOGRAPHIC HOLDING
4%
6%
6%
8%
13%
24%
Corporate
GARP
Growth
45%
Retail
Index
Value and growth
Other
Rest of Africa
UK
43%
30%
North America
Western Europe and Nordic
14%
Other
10%
1%
2%
Remgro (South Africa)
104 MEDICLINIC | ANNUAL REPORT 2018
including financial, operational and compliance controls. The
Board has delegated to the Audit and Risk Committee the
tasks of evaluating the Group’s risk management procedures,
assessing the effectiveness of the internal controls and
monitoring the integrity of the Group’s reporting, but
maintains strong and regular oversight of the outcome of
the Audit and Risk Committee’s work.
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
The key features of the Group’s internal control systems
include clearly defined delegations of authority and
lines of accountability; policies and procedures covering
the management of the Group’s financial resources, the
by the Company’s Code of Business Conduct and Ethics
(the “Ethics Code”) which is available on the website at
www.mediclinic.com. The Ethics Code provides a framework
of the standards of business conduct and ethics that are
preparation of financial reports, governance of key projects
required of all business divisions, directors and employees
and security of information and communications technology;
within the Group in order to promote and enforce ethical
periodic checks conducted by the Internal Audit function;
business practices and standards throughout the Group. The
representation letters from the divisional CEOs regarding
Ethics Code is available to all staff and communicated to
the key risks and mitigating actions for their division; and
review of the disclosures within the annual, half-yearly report
and other price-sensitive reports by the divisional CEOs and
CFOs and the Group senior management team as relevant,
as well as the Audit and Risk Committee and the Board, to
ensure that they fulfil the relevant requirements.
The Group’s governance structure for risk management is
illustrated in Figure 9 below.
FIGURE 9: GOVERNANCE STRUCTURE OF RISK
MANAGEMENT
g
n
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o
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f
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c
A
g
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p
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o
f
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t
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s
e
R
Board of
Directors
Audit
and Risk
Committee
Responsible for our
system of corporate
governance, strategy,
risk management and
financial performance
Responsible for
reviewing and approving
the adequacy and
effectiveness of our risk
management and internal
controls
Senior
management
team
Supports the CEO in
managing the Group’s
business and activities
Operating
divisions
Responsible for
identifying, assessing,
implementing and
managing risks within
their businesses
AR
A review of the Group’s risk management approach and
internal control systems is further discussed in the Strategic
Report on pages 44 to 49. For detail on the management
and mitigation of each principal risk see pages 44 to 48. The
Group’s viability statement is detailed on pages 50 and 51.
Please refer to pages 120 to 129 for further detail in relation
to the Audit and Risk Committee’s role.
new employees as part of the on-boarding process.
Compliance with relevant laws, regulations, accepted standards
or codes is integral to the Group’s risk management process
and is monitored in accordance with the terms of the Group’s
Regulatory Compliance Policy.
Slavery and human trafficking
The Board has considered and approved the Company’s
updated
slavery and human
trafficking
statement
for the year under review, as required in terms of the
Modern Slavery Act 2015. The updated statement reflects
the steps taken by the Group to enhance its internal
processes and due diligence of suppliers to prevent slavery
and human trafficking and demonstrate its commitment to
this objective. A link to the Company’s slavery and human
trafficking statement can be found on the home page of the
Company’s website at www.mediclinic.com.
Fraud and corruption
The Group adopts a zero-tolerance policy to unethical
business conduct, in particular fraud and corruption, which
is addressed in the Group’s Ethics Code and the Anti-bribery
Policy. Refer to the Audit and Risk Committee Report on
page 128 for an overview of the Group’s approach to fraud
AR
and corruption.
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 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 continuing
its 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
MEDICLINIC | ANNUAL REPORT 2018
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
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who guide Mediclinic through the process, as referred to in the
Divisional Review of Mediclinic Southern Africa on page 58.
The Group’s risk management system is used to capture and
track all ICT risks, audit findings, actions and responsibilities.
No legal action for anti-competitive, anti-trust or similar
Mediclinic employs a wide range of technology capabilities
conduct was instituted against the Group during the year
to safeguard its ICT installation, its ICT users and connections
under review.
to other external ICT systems to ensure business continuity.
Information and communications
technology governance
Mediclinic has an extensive information and communications
technology (“ICT”) environment that acts as an enabler of
its business strategies and operations. The core business
Information security policies and controls are in place
throughout the Group regulating, inter alia, the processing,
use and protection of own, personal and third-party
information. This is further entrenched through ongoing user
training, security awareness programmes and certification
courses in information security. Flows of personal data across
information systems cover clinical processes, revenue cycle
country borders are dealt through formal arrangements in
management and patient administration. The SAP ERP back-
line with country-specific legislation. There were no material
office systems support, inter alia, the finance, accounting,
information security or data privacy incidents during the
human resources management and procurement functions.
year under review.
An enterprise data warehouse enables advanced analytics
activities, as well as providing data for decision support.
Lastly, an extensive office automation environment exists
which enables both on-premise and mobile working, as well
as collaboration and communication within and across the
DIRECTORS
Appointment, removal and tenure
The rules relating to the appointment and removal of
Mediclinic operating divisions. A global network enables data
directors are set out in the Company’s Articles of Association.
flows and communication between the Group’s operating
divisions. Major ICT-related projects in the pipeline, which
include various SAP projects, an electronic health record
system and the introduction of a global HR system.
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. All non-executive directors
ICT governance is done in context of the Group’s overall
serve on the basis of letters of appointment, which are available
corporate governance and specifically the Group’s risk
for inspection at the Company’s registered office. The letters of
management structures and processes. Central to ICT
appointment set out the time commitment expected of non-
governance is the Group’s ICT Steering Committee, and
executive directors who, on appointment, undertake that they
various
ICT architecture management committees at
will have sufficient time to meet their requirements.
the operating divisions. The ICT Steering Committee is a
sub-committee of Company’s Executive Committee, and
membership consists of the Group’s Chief Information
Officers (“CIOs”), various Group ICT architects, and key
functions such as risk management, finance and the
enterprise project management office. This committee
focuses on collaboration, standardisation and synergies
across the various ICT entities in the Group by way of:
• establishing ICT reference architectures and standards;
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.
Upon appointment, all directors are provided with training in
respect of their legal, regulatory and governance responsibilities
and obligations in accordance with the UK regulatory regime.
The induction includes face-to-face meetings with executive
•
setting information security-related policies and standards;
management and operational site visits to orientate and
• developing and reviewing ICT risk profiles; and
• providing
assurance
regarding
information
and
cybersecurity, data protection and privacy, as well as
access control, change management and disaster recovery.
The ICT Steering Committee is supported by the Group’s
Information Security Architecture Committee, consisting
of the information security officers of the Group and the
operating divisions. The proceedings of this committee are
informed by information security best practices sourced
familiarise the new directors with Mediclinic’s
industry,
organisation, business, strategy, commercial objectives and key
risks. Drs Al Hashimi and Harvey were appointed during the
year under review and are each undertaking a comprehensive
Board induction programme tailored to their individual needs
and requirements.
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
from Gartner, ISACA, CoBIT 5, ITIL, ISO27001 and the South
importance.
African King IV™ Report on Corporate Governance.
106 MEDICLINIC | ANNUAL REPORT 2018
The Board is kept up to date on legal, regulatory and
favour thereof, in addition to a majority of votes cast by all
governance matters at Board meetings. Additional training
shareholders being in favour thereof.
is available on request, where appropriate, so that directors
can update their skills and knowledge as applicable.
During the year, the Board received refresher training on
Powers of directors
The general powers of the directors are contained within
the EU Market Abuse Regulation and presentations on
relevant UK legislation and the Company’s Articles of
the data protection legislation being introduced in the UK,
Association. The directors are entitled to exercise all powers
Switzerland and South Africa.
Independent professional advice
All directors may seek independent professional advice in
connection with their roles as directors. All directors have
of the Company, subject to any limitations imposed by the
Articles of Association or applicable legislation.
Indemnification of directors
The Company has entered into a deed of indemnity with
access to the advice and services of the Company Secretary
each director who served during the year under identical
at the expense of the Company.
Election/re-election
In accordance with the Company’s Articles of Association,
a director appointed by the Board must stand for election
at the first annual general meeting subsequent to such
appointment, and other directors must retire by rotation and
seek re-election by shareholders every three years. However,
the UK Corporate Governance Code requires that all directors
of FTSE 350 companies should stand for re-election annually.
Accordingly, Drs Harvey and Al Hashimi (appointed on
3 October 2017 and 1 November 2017, respectively) and
Dr Van der Merwe (appointed as a director with effect from
1 June 2018), will stand for election at the AGM. All other
directors will stand for annual re-election at the AGM, including
Mr Meintjes, who (subject to re-election) will continue to
serve as an executive director until 31 July 2018 and as a non-
executive director with effect from 1 August 2018.
Taking into account the result of the Board evaluation carried
out during the year and following recommendations from
the Nomination Committee, the Board considers that all the
current directors continue to be effective, are committed to
their roles and have sufficient time available to perform their
duties. The Board therefore recommends their election or
re-election as directors of the Company and the election of
Dr Van der Merwe.
Remgro Limited, through wholly-owned subsidiaries, (“Remgro”
or the “Remgro Group”, as the context may indicate) 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 such company. The resolutions proposed at the AGM for
the election of the independent non-executive directors of
the Company will therefore be taken on a poll, and the votes
cast by independent shareholders and all shareholders will be
calculated separately. Such resolutions will be passed only if
a majority of votes cast by independent shareholders are in
terms. The deeds indemnify the directors in accordance with
the applicable laws of England against liability incurred as a
director or employee of the Company, or associated entities
in the Group. In addition, the Company has put into place
directors’ and officers’ indemnity insurance. The Company
has also provided for directors’ and officers’ insurance to the
directors in connection with their duties and responsibilities.
Directors’ conflicts of interest
In accordance with the UK Companies Act and the
Company’s Articles of Association, the Board may authorise
any matter that otherwise may
involve any director
breaching his or her duty to avoid conflicts of interest. The
Board has adopted a procedure to address this requirement,
which includes the directors completing a detailed conflict
of interest questionnaires on appointment and reconfirm
these detailed declarations annually. The matters disclosed
in the questionnaires are reviewed by the Board as part of
the director’s appointment and annually thereafter and, if
considered appropriate, authorised in accordance with the
UK Companies Act 2006 and the Articles of Association.
Directors are also required to disclose any new conflicts of
interest to the Board, as soon as they arise, for consideration.
Compensation for loss of office
There are no agreements in place with any director or
employee that provide for compensation for loss of office
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 can be found in the Directors’ Remuneration
Report on pages 143 to 144.
AR
Remuneration
The Board has established a Remuneration Committee to
assist with discharging its responsibility in relation to Board
and executive remuneration. A report on the activities of the
Committee, including its composition and key responsibilities,
AR
is included from page 130.
MEDICLINIC | ANNUAL REPORT 2018
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Directors’ interests
The directors’ shareholding and share interests in the issued
shares of the Company are provided in the Directors’
Remuneration Report on page 155.
OTHER DISCLOSURES
Articles of Association
The Company’s Articles of Association may be amended
■ CHF0.1bn revolving facility, priced at Swiss Libor
plus a margin of 1.25%;
– South African senior bank loan totalling ZAR1.2bn at
an interest rate of JIBAR +1.69% with a three-year term
expiring in June 2019;
– South African unsecured preference share funding
totalling ZAR1.5bn at a rate of 73% of the prime
overdraft interest rate, with a four-year term expiring
in June 2020; and
by way of a special resolution of the members. At
– United Arab Emirates bank loans of US$54.5m and
the annual general meeting of the Company held on
US$100.0m at an interest rate of LIBOR +2.75% with
25 July 2017, shareholders approved certain amendments
respective four-year and five-year amortising terms,
to the Company’s Articles of Association by way of a
expiring in June 2020 and May 2021, respectively.
special resolution, available in the Governance section
of the Company’s website at www.mediclinic.com. The
amendments approved updated the dividend payment
provisions to give the Company greater flexibility to use the
most relevant payment mechanisms for the distribution of
dividends, including electronic methods, reflecting guidance
published by the ICSA Registrars’ Group in March 2014. No
changes to the Articles of Association are proposed at the
2018 AGM.
Significant agreements
The following agreements are considered significant 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 Company entered into an agreement with its principal
shareholder, Remgro, on 14 October 2015 (the “Relationship
Agreement”), which came into effect on 15 February 2016.
This agreement does not include a change of control
Subsequent to the refinancing, the impairment charges at
Hirslanden affected the calculation of the economic capital
covenant in the finance agreements. While the Group had an
unconditional contractual right through an equity cure, any
potential breach was actually avoided through a contractual
amendment agreed with the lending consortium.
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. As at 23 May 2018, the Remgro Group held
44.56% of the issued ordinary share capital of the Company.
Under the Relationship Agreement, Remgro undertakes
to comply with the following independence provisions, as
required under the Listing Rules:
•
transactions and arrangements between the Company
and Remgro (and/or its associates) are, and will be, at
provision, but does terminate if (i) the Company’s ordinary
arm’s length and on normal commercial terms;
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 finance agreements of the Group
are regarded as significant and contain change of control
provisions. The various facilities and finance agreements
• neither Remgro 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 Remgro 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.
of the Group are:
– In October 2017, the Group completed the refinancing
of Hirslanden’s secured long-term bank loans:
■ CHF1.5bn senior term loan facility with a partially
amortising repayment profile over six years and
priced at Swiss Libor plus a margin of 1.25%;
■ CHF0.4bn capex facility, priced at Swiss Libor plus
a margin of 1.25%, but which could increase funding
costs up to a maximum of Swiss Libor plus a margin
of 1.65% at the time of drawing, depending on the
loan-to-value at that time; and
The Company has complied with the above independence
provisions and, insofar as it is aware, Remgro complied
with the independence provisions and the procurement
obligation set out in the Relationship Agreement from the
effective 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, Remgro is entitled to
appoint one director to the Board, up to a maximum of three
directors, provided that the right to appoint a third director
108 MEDICLINIC | ANNUAL REPORT 2018
is subject to the requirement that the Board will, following
such appointment, comprise a majority of independent non-
executive directors.
Employees
The Group’s employees are a valuable asset. The employees’
trust and respect are vital to Mediclinic’s success. Listening
If Remgro’s shareholding reduces to below 10% of the
and responding to employee needs through effective
Company’s share capital (or 10% of the aggregate voting
communication and
sound
relations are
important
rights in the Company), the rights and obligations of Remgro
components in being regarded as an employer of choice
in terms of the Relationship Agreement shall terminate. The
among existing and prospective employees, and vital to
ordinary shares owned by Remgro rank pari passu with the
maintain an engaged, loyal workforce. Employee engagement
other ordinary shares in all respects.
AR
Related-party transactions
Details on all related-party transactions are contained in
note 33 of the Consolidated Financial Statements on
page 241.
Political donations
Political donations are generally prohibited in terms of
the Company’s Code of Business Conduct and Ethics and
Anti-bribery Policy, unless pre-approved by the Executive
Committee of the operating division and reported to the
Company’s Executive Committee. During the year, the
Company, including its subsidiaries, made no political
payments as contemplated in the UK Companies Act 2006
(the “Act”). Hirslanden has, however, made payments to a
number of political parties, institutions and associations in
Switzerland involved in certain political campaigns which
were of interest to the business. Contributing to political
campaigns through third-party contributions is a common
official and standard practice in Switzerland. Payments of
this kind made by Hirslanden totalled CHF30 000 (2017:
CHF8 000). These contributions are not considered political
payments as contemplated in Part 14 of the Act, as they are
not made to the political parties within the scope of the Act.
It is not the policy of the Company to make political donations
as contemplated in the Act. However, as a result of broad
definitions used in the Act, other normal business activities
of the Company, which might not be considered political
donations or expenditure in the normal sense, may possibly
be construed as political expenditure or as a donation to a
political party or other political organisation, and fall within
the restrictions of the Act. Sponsorships, subscriptions,
payment of expenses, paid leave for employees fulfilling
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 a resolution, as in the previous year and
in line with best practice, to authorise the Company to make
political payments up to an aggregate amount of £100 000
for shareholder consideration at the AGM.
is conducted through various methods, including leadership
video conferences, intranet, periodic employee surveys,
performance reviews, staff magazines, and staff wellness
and recognition programmes. Further details on the Group’s
employee engagement are included in the Sustainable
Development Report, available on the Company’s website at
www.mediclinic.com.
SDR
Continuous training and development of the Group’s
employees across all three operating divisions ensures
retention of staff, particularly in areas 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
page 73 and the Sustainable Development Report, available
on the Company’s website at www.mediclinic.com.
The distribution of the Group’s employees per operating
division is included on page 10, with only one employee
(Head of Investor Relations) based in the UK. A breakdown
by gender, age and, in respect of Southern Africa only, race
in Board and senior management roles as at year end is
illustrated in Figure 10. The proportion of female employees
in the Group at year end is illustrated in Figure 11.
AR
SDR
AR
The Group values diversity and provides equal opportunities
for its workplace and does not tolerate any form of unfair
discrimination, such as access to employment, career
development, training or working conditions, based on
gender, religion, nationality, race, language, HIV/AIDS status,
sexual orientation or other form of differentiation. Adequate
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 employment, Mediclinic will seek to provide,
wherever possible, continued employment on normal terms
and conditions. Adjustments will be made to the environment
and duties or suitable new roles within the Company will be
secured with additional training where necessary.
MEDICLINIC | ANNUAL REPORT 2018
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CORPORATE GOVERNANCE STATEMENT (CONTINUED)
FIGURE 10: RACE, GENDER AND AGE REPRESENTATION ON GOVERNANCE BODIES
RACE
(ONLY IN RESPECT OF SOUTH
AFRICA)
GENDER
AGE
(YEARS)
BLACK
WHITE
MALE
FEMALE
30 – 50
>50
NUMBER % NUMBER % NUMBER % NUMBER % NUMBER % NUMBER %
TOTAL
NUMBER
OF
MEMBERS
Mediclinic International
Board
Mediclinic International
Executive Committee1
Hirslanden Executive
Committee1
Mediclinic Southern Africa
Executive Committee1
Mediclinic Middle East
Executive Committee1
12
9
4
9
9
2 Board members
of colour (17%)
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
2
22%
7
78%
n/a
n/a
n/a
n/a
9
9
4
8
7
75%
100%
100%
89%
78%
3
–
–
1
2
25%
–
–
11%
22%
2
3
2
3
5
17%
10
83%
33%
50%
33%
56%
6
2
6
4
67%
50%
67%
44%
Note
1 The race, gender and age distribution of the direct reports to the Executive Committees of the Company and the divisions are included in
SDR
the Sustainable Development Report available on the Company’s website at www.mediclinic.com.
FIGURE 11: WORKFORCE COMPOSITION BY GENDER
Switzerland
Female
Male
Southern Africa
Female
Male
UAE
Female
Male
2018
2017
NUMBER
%
NUMBER
7 380
2 255
12 862
3 206
3 271
2 530
76.6%
23.4%
80.0%
20.0%
56.4%
43.6%
7 179
2 223
13 555
3 293
3 593
2 782
%
76.4%
23.6%
80.5%
19.5%
56.4%
43.6%
Directors’ report
The information set out in this section of the Annual Report,
AR
• Financial risk management objectives and policies –
together with the following disclosures incorporated by
refer to pages 44 to 49 and pages 191 to 193
reference, constitute the Directors’ Report of the Company
• Research and development activities – refer to various
for the year ended 31 March 2018, as contemplated in the UK
Companies Act 2006, and was duly approved by the Board
on 23 May 2018:
• Strategic Report – refer to pages 3 to 84
• Corporate Governance Statement – refer to pages
93 to 111
• Statement of Directors’ Responsibilities – refer to
page 160
• Shareholder Information – refer to pages 262 to 265
activities discussed in the Strategic Report, such as the
standardised patient experience index on pages 14 to 15;
the standardised employee engagement initiatives on
pages 16 to 17; and clinical research activities referred
to on pages 34 to 43 and the Clinical Services Report
available on the Company’s website at www.mediclinic.com
• Greenhouse gas emissions – refer to pages 77 to 78 and
the Sustainable Development Report available on the
Company’s website at www.mediclinic.com
• Corporate social responsibility and corporate social
The Strategic Report sets out those matters required to be
disclosed in the Directors’ Report which are considered to
be of strategic importance:
investment – refer to page 68 to 84 and the
Sustainable Development Report available on the
Company’s website at www.mediclinic.com
CSR
SDR
SDR
• Strategy and future developments – refer to pages
14 to 17
110 MEDICLINIC | ANNUAL REPORT 2018
Going concern status
The Group’s consolidated financial statements, as set out on pages 162 to 242 and approved by the Board on 23 May 2018,
were prepared on a going concern basis. The Directors considered the Company’s financial position, availability of funding,
AR
the principal risks and uncertainties, as well as the viability assessment, and accordingly considered it appropriate to adopt
the going concern basis of accounting in preparing the financial statements, further details of which are included in the
Audit and Risk Committee Report on page 124 and the Viability Assessment on pages 50 to 51.
AR
Events after the reporting period
Since year-end, no material events have taken place.
Overseas branches
The Company, having secondary listings on the JSE in South Africa and the NSX in Namibia, has established an overseas
branch in South Africa.
REQUIREMENTS OF THE LISTING RULES
Information required to be disclosed in terms of Listing Rule 9.8.4R, as applicable, is referenced below:
DETAIL
LOCATION IN ANNUAL REPORT
Long-term incentive schemes
Pages 130 to 159
Agreements with a controlling shareholder
Provision of services by a controlling shareholder
Interest capitalised
Waiver of emoluments by a director
Waiver of future emoluments by a director
Non-pre-emptive issues of equity for cash
None other than the Relationship Agreement referred to
on pages 108 to 109
None other than the services provided by the Remgro
Group described in note 33 of the Consolidated Financial
Statements on page 241
AR
AR
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Non-pre-emptive issues of equity for cash by any unlisted
major subsidiary
Not applicable
Parent company participation in a placing by a listed
subsidiary
Shareholder waiver of dividends
Shareholder waiver of future dividends
For and on behalf of the Board.
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Dr Edwin Hertzog
Non-executive Chairman
23 May 2018
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MEDICLINIC | ANNUAL REPORT 2018
111
NOMINATION COMMITTEE
REPORT
Dr Edwin Hertzog
Chairman of the Nomination Committee
Dear Shareholder,
AR
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As Chairman of the Nomination Committee (the “Committee”), it is my pleasure to report on the Committee’s activities for
the year ended 31 March 2018. The report provides an overview of the key focus areas considered during the year, together
with the Committee’s priorities for the 2019 fi nancial year. The Committee is governed by formal terms of reference, available
in the governance section of the Company’s website at www.mediclinic.com, and summarised on page 95 in the Corporate
Governance Statement.
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The current composition of the Committee meets the requirements of the UK Corporate Governance Code, with the majority
of members being independent non-executive directors. Biographical details of all Committee members are included on
pages 86 to 89. The composition and attendance of Committee meetings during the period under review are set out in
Figure 1 below. As announced on 29 March 2018, Prof Dr Robert Leu will retire as a director of the Company, and consequently
as a member of the Committee, at the conclusion of the Company’s annual general meeting on 25 July 2018 (“2018 AGM”).
The Company Secretary is secretary to the Committee and attends all meetings. The Company Secretary is available to
assist the members of the Committee, as required, ensuring that timely and accurate information is distributed accordingly.
Other attendees of Committee meetings may, from time to time and upon invitation by the Committee, include the CEO,
the Chief Human Resources Offi cer and the Talent Management General Manager.
FIGURE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
DATE OF
APPOINTMENT
(as committee member)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
NAME1
Dr Edwin Hertzog
(Committee Chairman)
DESIGNATION
Non-executive director
Mr Desmond Smith
Senior Independent Director
Mr Jannie Durand3
Non-executive director
15/02/2016
15/02/2016
15/02/2016
Prof Dr Robert Leu4
Independent non-executive director
15/02/2016
Mr Trevor Petersen
Independent non-executive director
15/02/2016
1 of 1
1 of 1
0 of 1
1 of 1
1 of 1
Notes
1
The composition of the Committee is shown as at 31 March 2018. The majority of members are independent non-executive directors.
The Committee Chairman, Dr Hertzog, is the Chairman of the Board.
2 The attendance refl ects the number of scheduled meetings held during the fi nancial year. Two additional ad hoc meetings were held during
the fi nancial year to deal with urgent matters; the majority of directors made themselves available at short notice for these meetings.
No Committee meetings were held between the Company's fi nancial year-end and the Last Practicable Date.
3 Mr Durand was unable to attend one Committee meeting owing to a prior commitment; Mr Pieter Uys, alternate director to Mr Durand,
attended the meeting in his place.
4 Prof Dr Leu will retire as a director of the Company, and consequently as a member of the Committee, at the conclusion of the Company’s
2018 AGM.
112 MEDICLINIC | ANNUAL REPORT 2018
KEY AREAS OF ACTIVITY
the Group CEO,
Succession planning
During the year, the Committee primarily focused on
the detailed planning for identifying a successor for
Mr Danie Meintjes,
the
announcement made by the Company on 25 July 2017
regarding his planned retirement. The identification of
potential candidates followed a rigorous global selection
process against an agreed set of criteria, and included the
appointment of Lomond Consulting, a senior management
and board-level search firm. Lomond Consulting adheres to
the Executive Search Firms’ Voluntary Code of Conduct and
is independent of the Company.
following
The Committee and the Board unanimously supported the
selection of Dr Ronnie van der Merwe, the current Group
Chief Clinical Officer, to succeed Mr Meintjes as CEO,
as announced on 27 November 2017. This decision reflected
Dr Van der Merwe’s extensive knowledge of the Company’s
international operations and strong track record of driving
enhancement, especially in the quality and effectiveness
of the Company’s clinical services. As announced on
29 March 2018, Dr Van der Merwe’s appointment as CEO and
a director of the Company will take effect from 1 June 2018.
Dr Van der Merwe will also become a member of the Clinical
Performance and Sustainability Committee and Investment
Committee with effect from 1 June 2018.
The Committee undertook a detailed review of the
succession plans for other members of the Board and
senior management team and for the executive committees
of each of the operating divisions, taking into account the
Board Diversity Policy mentioned below.
Board and committee composition
Following a review of the Board’s composition and structure,
the Committee continued to lead the search for two
additional independent non-executive directors to further
strengthen its Board and its Committees, to support the
pursuit of the Company’s strategy in the UAE and enhance
the clinical expertise on the Board. During the financial year,
following an extensive and rigorous process, the Board
approved the Committee’s recommendations regarding the
appointment of two additional independent non-executive
directors: Dr Felicity Harvey and Dr Muhadditha Al Hashimi.
The selection process that led to the appointment of
Dr Harvey as an independent non-executive director of
the Company and a member of the Clinical Performance
and Sustainability Committee from 3 October 2017 was
conducted with the assistance of Lomond Consulting.
in-depth understanding of the
Dr Harvey brings an
healthcare sector in the UK, as well as over 30 years of clinical
expertise and experience. Dr Al Hashimi, appointed as an
independent non-executive director of the Company from
1 November 2017, was identified through the Company’s
networks in the UAE. Dr Al Hashimi adds her extensive
experience and knowledge of the healthcare and higher
education sectors in the UAE, and strategic and tactical
expertise in operations and fiscal management.
In early 2018, the Committee conducted its annual review of
the structure, size, diversity and composition of the Board
and its Committees. As part of this process, the Committee
considered a skills matrix for the Board and the outcome of
the Board evaluation. The areas reviewed were the Board
members’ experience, independence, tenure, geographical
knowledge and knowledge of the Company as whole. As a
result of these reviews, Dr Harvey was appointed as a Chair
of the Clinical Performance and Sustainability Committee;
and Dr Al Hashimi was appointed as a member of the Clinical
Performance and Sustainability Committee, with effect from
1 April 2018.
As announced on 29 March 2018, Prof Dr Leu and
Ms Mandela notified the Company that they will retire as
directors of the Company at the 2018 AGM. Subsequently,
the Committee has commenced a search for an independent
non-executive director with knowledge of the Swiss
healthcare and political landscape.
Lastly, the Committee considered the appointment of
Mr Meintjes as a non-executive director after his retirement
as CEO and executive director of the Company. After careful
consideration, taking into account the wealth of knowledge
and experience he has gained in different capacities over
30 years of service to the Group, the Committee concluded
his appointment would be in the long-term interests of
the Group, its shareholders and other stakeholders and
recommended his continued involvement in the Company
as an executive director until 31 July 2018 and as a non-
executive director from 1 August 2018. The Board considered
and agreed with the Committee's recommendation and
agreed to recommend Mr Meintjes’ re-election at the AGM.
Diversity
During the year, the Committee reviewed the Board Diversity
Policy, which applies to the Board, the Company’s Executive
Committee and their direct reports, as well as the divisional
executive management committees of the Company’s
operating divisions. The Committee also received feedback
from the operating divisions on progress regarding their
diversity and inclusion goals and plans for continued
improvement in the 2019 financial year.
Diversity policy
The Board believes that diversity is not limited to gender, and
that a diverse Board membership will include and benefit
from the differences in each director’s skills; geographical,
industry
educational and professional backgrounds;
experience; age; race; gender; and other characteristics.
These factors will be considered
in determining the
optimum composition of the Board and, when possible, will
be balanced appropriately. When recruiting new directors,
MEDICLINIC | ANNUAL REPORT 2018
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NOMINATION COMMITTEE REPORT (CONTINUED)
consideration will also be given to ensuring that the size
of the Board does not grow unnecessarily, and that all
appointments are made on justifiable merit. The Committee
will continue to take cognisance of relevant prescribed
guidelines, and the performance of peer companies in
fulfilling their role regarding diversity.
The Board supports the principles of boardroom diversity
in general, and takes boardroom skills diversity seriously.
It actively considers these matters regularly at Board and
Committee meetings. The Board believes that maintaining
an appropriate balance of skills, knowledge, experience and
backgrounds is imperative for the long-term success of the
Group, and allows the Board to perform its role effectively.
The Board’s Diversity Policy contains four objectives to support
the Board’s commitment to diversity. These objectives and
progress towards their achievement are set out below:
Progress against objectives
OBJECTIVES
PROGRESS
The Board will not impose
quotas regarding diversity,
although it will remain
committed to achieving
diversity in the composition
of the Board and executive
management including
aspects such as age,
gender, education and
professional backgrounds,
ethnicity and geographical
background.
The Committee will
annually consider and
make recommendations, if
applicable, to the Board on
its diversity objectives in
respect of the Board and
executive management.
During the year, the Board appointed two female independent non-executive
directors, Dr Harvey and Dr Al Hashimi. The new directors offer diverse backgrounds
and experience spanning across the UK and the UAE, including clinical performance,
education, strategy, tactical expertise in operations and fiscal management within each
jurisdiction.
The Group CEO and divisional CEOs annually share their diversity goals and report
on their progress bi-annually to the Nomination Committee. The divisions have been
focussed on increasing diversity below Board level by encouraging and strengthening the
talent pipeline within the divisions through short and long term succession planning and
where the Company has been unable to promote within, has identified the desired criteria
for external candidates. Both of these activities ultimately have fed into to support the
Executive Committee with general diversity featuring as one of its key priorities
The Board recognises the importance of having a diverse Board and leadership team.
The Board and executive management continue to be committed to achieving diversity
and will continue to recommend appointments based on the skills, experience,
independence and knowledge required by the Board and the executive management.
The Committee reviewed the Company’s Diversity Policy in February 2018 and was
satisfied that the objectives remained relevant to the Company. The Committee
continues to be committed to progressing the objectives for the 2019 financial year.
In reviewing the
composition of the Board
and executive management,
the Committee will, in
addition to considering the
balance of skills, experience,
independence and
knowledge of the Board,
also consider the diversity
of the Board.
The Committee reviewed the composition of the Board and its committees, specifically
the balance of skills, experience, independence, knowledge and diversity. The Board
appointed two new directors from diverse backgrounds and experience as detailed above.
To assist with one of these appointments, the Committee engaged an independent external
recruitment consultant, Lomond Consulting, which adheres to the UK Executive Search
Firms' Voluntary Code of Conduct, based on recommendation of the Davies Report. The
Committee reviewed the progress made in each division and reported on these to the Board.
A detailed review of each division’s talent pipeline strategy was undertaken, including their
diversity focus, the progress made in that regard during the year, and plans for continued
improvement in the 2019 financial year.
As at the date of this report, the Company met the recommendation included in the
Parker Review Committee’s Report into the Ethnic Diversity of UK Boards, issued in
October 2017 (“Parker Report”), to have at least one director of colour by 2021. Good
progress has been made in increasing female representation on the Board of the Company,
in line with the target of 33% by 2020, as recommended in the report issued by the
Hampton-Alexander Review in November 2017 on improving the gender balance in FTSE
leadership (“Hampton-Alexander Report”). As at the date of the report the Company had
two directors of colour (as defined in the Parker Report) and 25% female representation on
the Board.
The Group’s workforce has 75% female representation overall. The Board and executive
management remain committed to creating a diverse and inclusive workplace.
The two new non-executive directors were identified from a diverse list of candidates
and were assessed and selected on merit, against an agreed set of criteria, reflecting the
role in question and the capabilities required for a particular appointment, while taking
into account the benefits of a diverse Board. The Committee considered each of the
candidate’s significant commitments, other directorships, skills, experience, knowledge,
gender, race, geographical location and other diversity considerations.
In identifying suitable
candidates for appointment
to the Board, the
Committee will assess
candidates on merit against
objective criteria and with
due regard to the benefits
of diversity of the Board.
114 MEDICLINIC | ANNUAL REPORT 2018
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Assessment of independence of
non-executive directors
The Committee and the Board are satisfied that the
commitments of the Chairman and other non-executive
directors, as shown in their biographies on pages 86 to 89, do
not conflict with their duties and commitments as directors of
the Company. Any conflicts identified are considered and, as
appropriate, authorised by the Board. The Company annually
reviews the directors’ conflicts of interests.
Corporate Governance Code
developments
The Committee reviewed and considered the Financial
Reporting Council’s proposed changes to the UK Corporate
Governance Code
for their potential
in preparation
implementation, insofar as they related to:
• establishing the preferred method for gathering the views
•
•
•
•
of the workforce;
reporting on how the Company has engaged with its
workforce, suppliers and other stakeholders and how
the interests of their stakeholders have influenced the
Board’s decision-making, pursuant to section 172 of the
Companies Act 2006;
the proposed changes to the independence criteria
for directors, their tenure and the requirement for the
Chairman of the Company to be independent at all times;
the continued emphasis on the promotion of diversity
through the design of appointment and succession
planning practices; and
the expansion of the Committee’s remit to include
the oversight of the development of a diverse pipeline
for succession planning for the Board and senior
management positions and related reporting obligations
for the Committee.
The Committee also took note of the recommendations
of the Parker Report on ethnic diversity and the Hampton
Alexander Report on gender diversity and adjusted its terms
of reference and Board Diversity Policy accordingly.
The Committee undertakes an annual review of its terms of
reference.
Committee evaluation
An external evaluation of the Committee’s performance
was conducted during the year by Lintstock, a specialist
consultancy which undertakes no other business for the
Company. The results of evaluation were considered by
the Committee and the Board. No significant issues were
identified that require improvement, thus the Committee
and the Board concluded that the Committee operated
effectively during the year.
Evaluation of the composition,
structure and functioning of the Board
With internal evaluations carried out in the previous
two years, an external evaluation of the Board and its
committees was conducted this year in keeping with the
guidance provided under the UK Corporate Governance
Code, facilitated by Lintstock. The evaluation focused on the
Board composition, including:
• diversity;
the Board’s role in setting strategy;
•
• an understanding of the risks facing the Group;
•
•
•
the effectiveness of the Group’s key performance
indicators;
succession planning; and
the effectiveness of the Board and its committees.
The Board regards the evaluation process as an important
way to monitor the progress made over the years. Further
detail on the Board effectiveness evaluation is included in
the Corporate Governance Statement on page 102.
AR
When considering the election or re-election of directors,
the Committee pays due regard to the outcome of the Board
evaluation process, and considers other factors such as the
individual director’s knowledge, skills and experience, the
independent judgement they bring to Board deliberations,
and their other commitments.
Dr Harvey and Dr Al Hashimi will stand for election at
the Company’s 2018 AGM, being the first annual general
meeting since their appointment as directors by the Board.
In accordance with the recommendation for FTSE350
companies set out in the UK Corporate Governance Code,
all other existing directors (other than Prof Dr Leu and
Ms Mandela) will stand for annual re-election at the meeting.
The biographical details of the directors can be found on
pages 86 to 89.
AR
The terms and conditions of appointment of the non-
executive directors, which include their expected time
commitment, are available for inspection at the Company’s
registered office.
PRIORITIES FOR THE COMMITTEE IN
2018/19
For the coming financial year, the Committee will, among
other matters, focus on the following:
•
•
•
•
the continued development of succession plans and the
talent pipeline;
the continuous review of the composition of the Board
and its committees in respect of skills, diversity, tenure
and commitments;
the development of the Company’s diversity strategy;
and
the monitoring the new UK corporate governance
developments.
Signed on behalf of the Nomination Committee.
Dr Edwin Hertzog
Chairman of the Nomination Committee
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
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CLINICAL PERFORMANCE
AND SUSTAINABILITY
COMMITTEE REPORT
Dr Felicity Harvey
Chair of the Clinical Performance
and Sustainability Committee
As the new Chair of the Clinical Performance and
• Dr Muhadditha Al Hashimi was also appointed as an
Sustainability Committee, it is my pleasure to report on the
additional member with eff ect from 1 April 2018, further
Committee’s activities for the year ended 31 March 2018.
enriching the Committee’s breadth, depth and diversity
The report provides an overview of the key areas of focus
considered during the year together with the priorities for
2018/2019. The Committee is governed by formal terms
of reference available in the governance section of the
Company’s website at www.mediclinic.com and summarised
on page 95 in the Corporate Governance Statement.
AR
COMMITTEE COMPOSITION AND
MEETING ATTENDANCE
The composition of the Committee and attendance of
meetings during the period under review are set out in
Figure 1. The Committee members are suitably skilled and
experienced.
A number of changes to the composition of the Committee
have taken place during the year and after the year-end:
• Dr Felicity Harvey was appointed as a member with
eff ect from 3 October 2017 and assumed the role of Chair
of skills, knowledge and experience; and
• Dr Ronnie van der Merwe (Chief Clinical Offi cer and CEO
Designate) will succeed Mr Danie Meintjes as the Group
CEO and a member of the Committee on 1 June 2018.
The Chief Clinical Offi cer and the Chief Corporate Services
Offi cer (who is responsible for the Group’s sustainable
development management), are invited on a permanent
basis to attend and speak at all Committee meetings. As
part of the Ward-to-Board clinical governance framework
detailed below, each of the divisional Chief Clinical Offi cers
will be invited to all meetings as well as the divisional Chief
Executive Offi cers (as required). Other relevant members
of management are invited to attend Committee meetings,
as required.
The Company Secretary is secretary to the Committee
and attends all meetings. The Company Secretary is
available to assist the members of the Committee, as
required, ensuring that timely and accurate information is
of the Committee on 1 April 2018. The appointment of
distributed accordingly.
Dr Harvey as a member enhanced the clinical and broader
healthcare sector knowledge of the Committee;
116 MEDICLINIC | ANNUAL REPORT 2018
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FIGURE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT
(as committee member)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
Dr Edwin Hertzog3
(Committee Chair)
Non-executive director
15/02/2016
Dr Felicity Harvey3, 4
Independent non-executive director
03/10/2017
Prof Dr Robert Leu5
Independent non-executive director
17/03/2017
Ms Nandi Mandela5
Independent non-executive director
15/02/2016
Mr Danie Meintjes
Chief Executive Officer
15/02/2016
4 of 4
2 of 2
4 of 4
4 of 4
4 of 4
The composition of the Committee is shown as at 31 March 2018.
Notes
1
2 The attendance reflects the number of scheduled meetings held during the year under review. Between the Company’s financial year-end
and the Last Practicable Date, one Committee meeting was held, which was attended by all Committee members, except Dr Al Hashimi.
3 Dr Hertzog stood down as Chair of the Committee on 1 April 2018, when Dr Harvey assumed the role of Chair of the Committee.
4 Dr Harvey was appointed as a member of the Clinical Performance and Sustainability Committee with effect from 3 October 2017 and
attended all subsequent meetings of the Committee.
5 Prof Dr Leu and Ms Mandela will resign from the Committee at the end of the Company’s annual general meeting on 25 July 2018.
COMMITTEE INDUSTRY SECTOR EXPERIENCE
COMMITTEE COMPOSITION
17%
17%
Healthcare
Academia
20%
Independent
non-executive directors
Non-executive director
67%
Infrastructure
20%
60%
Executive director
KEY AREAS OF ACTIVITY
The responsibilities and functions of the Committee are
CLINICAL PERFORMANCE
In relation to the Committee’s clinical performance functions,
governed by formal terms of reference, approved by the
the Committee is responsible for promoting a culture of
Board, which are subject to regular review, at least annually.
excellence in patient safety, quality of care and patient
As part of the implementation of the Ward-to-Board clinical
experience. During the year, the Committee focused, inter
governance framework, changes were made to the terms
alia, on the following:
of reference to align the Committee’s responsibilities more
closely to the new framework.
The Committee increased the frequency of its meetings from
Governance
The implementation of a Ward-to-Board clinical governance
three to four meetings a year, to enable more regular and
framework is designed to support and enhance the Patients
comprehensive discussions on clinical performance matters
First strategic objective by aligning the interests of patients
across the Group. In the year under review it met four times,
and care-providers and building a culture of performance
where the main focus was on the areas set out below.
reporting and accountability. This approach also ensures
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CLINICAL PERFORMANCE AND SUSTAINABILITY COMMITTEE REPORT
(CONTINUED)
that the information flows up and down the organisation
the Group Sustainable Development Policy, Group
more effectively and facilitates cross-division alignment
and collaboration. The framework has been successfully
implemented in Mediclinic Southern Africa and is in the
process of being rolled out in Mediclinic Middle East and
Hirslanden. This includes establishing a Clinical Performance
Committee
for each division and
replicating
this
appropriately at the hospital level. The divisional committees
will also include local independent clinical expert members
to provide a different perspective and avoid ‘group think’.
The Ward-to-Board framework will drive better quality and
more effective outcomes for patients, thereby creating
satisfaction and value for the Company and its stakeholders.
Clinical performance management
system
Another important area of focus has been the Group’s
Clinical Performance Management System, which
is
based on a clinical performance model consisting of
four components: patient safety, clinical effectiveness,
clinical cost efficiency and value-based care. A composite
performance indicator dashboard has been implemented
to evaluate the performance of the operating divisions
including their individual hospitals against internal and
external benchmarks. This will enable to the management
team and the Committee to analyse trends and prioritise the
corresponding clinical performance improvements.
The Committee continued their focus on the following areas:
• monitoring the clinical performance of the Group;
• evaluating patient safety,
infection prevention and
control, and quality improvement performance;
• evaluating compliance with the Company’s patient
safety and quality clinical care standards, policies and
procedures, and regulation and accreditation standards
at the operating divisions;
•
•
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CSR
reviewing clinical effectiveness and cost efficiencies; and
reviewing and approving the annual Clinical Services
Overview
in the Annual Report and the Clinical
Services Report available on the Company’s website at
www.mediclinic.com.
SUSTAINABLE DEVELOPMENT
In relation to its sustainability functions, the Committee is
responsible for ensuring that the Group remains a good
and responsible corporate citizen. During the year, the
Committee focused, inter alia, on the following:
•
reviewing and further aligning the Group’s policies to
the Group’s commitment to governance and reporting
of its sustainable development performance, including
118 MEDICLINIC | ANNUAL REPORT 2018
Environmental Policy and Code of Business Conduct
and Ethics, strengthening the Group’s position on non-
discrimination, respect for patient rights and human
rights. These are available on the Company’s website at
www.mediclinic.com;
• monitoring the sustainable development performance of
the Group with specific regard to stakeholder engagement
(which includes the outcomes from the patient experience
index and employee engagement index), health and public
safety, broad-based black economic empowerment in
South Africa, labour relations and working conditions,
reviewing and recommending to the Board the Company’s
statement on slavery and human trafficking in terms of the
Modern Slavery Act (available on the Company’s website
at www.mediclinic.com), training and skills development
of employees, management of the Group’s environmental
impacts, fraud and ethics, compliance (which includes the
governance of advertising and compliance with consumer
protection laws) and corporate social investment;
• considering and noting the paper on the Business and
Human Rights Resource Centre in respect of Modern
Slavery Act statements published by the FTSE 100 and
new initiatives being implemented to strengthen the
Group’s procurement practices and risk management;
• monitoring incidents of fraud and ethics, as well as
compliance throughout the Group, although also a
function of the Audit and Risk Committee;
• monitoring the results of the Company’s participation in
various sustainability indices and assessments, notably
the Company’s inclusion in the FTSE4Good Index as
well as the FTSE/JSE Responsible Investment Index,
which indices recognises Companies with strong ESG
(environmental, social and governance) practices;
• confirming
the
key
sustainability priorities,
as
recommended by management, reported on pages 70
to 84 and the Sustainable Development Report available
on the Company’s website at www.mediclinic.com; and
•
reviewing and approving
the annual Sustainable
Development Highlights included in the Annual Report
and the Sustainable Development Report published on
the Company’s website at www.mediclinic.com.
As referred to on page 119, 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.
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SDR
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COMPLIANCE
The Committee considered the compliance universe and
the risk and control self-assessments for the Group and
considered in detail new legislation and regulations coming
into force. A key area of focus has been a review of relevant
data protection law, including the European Union General
Data Protection Regulation (“GDPR”). Although a focus
of the Board directly, the Committee also monitored the
PRIORITIES FOR THE COMMITTEE
IN 2018/2019
For the coming financial year, the Committee will, among
other matters, focus on the following:
•
the implementation of the Ward-to-Board accountability
framework across the operating divisions;
•
the review of the clinical performance indicators and the
progress made with the project to ensure compliance with
identification of trends; and
data privacy legislation applicable to each of the operating
•
the continued monitoring of the Company’s sustainable
divisions in view of the volume and sensitivity of patient data.
development.
ASSURANCE
The Committee considered the need for external assurance
of the Company’s non-financial reporting, particularly
in relation to the Company’s sustainable development
performance. 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 in relation to the Group’s clinical performance and
Signed on behalf of the Clinical Performance and
Sustainability Committee.
Dr Felicity Harvey
Chairman of the Clinical Performance and
sustainable development. The Committee will continue to
Sustainability Committee
monitor whether additional forms of assurance are required
in future.
23 May 2018
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COMMITTEE EVALUATION
An external evaluation of the Committee’s performance was
conducted by Lintstock during the year, which results were
considered by the Committee and the Board. There were no
significant issues identified that required improvement and
the Committee and the Board concluded that the Committee
operated effectively during the year.
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 at the Company’s
annual general meeting on 25 July 2018 to this report by
SDR
the Committee, which should be read in conjunction with
the Sustainable Development Report available on the
Company’s website at www.mediclinic.com. Any specific
questions to the Committee may be sent to the Company
Secretary prior to the annual general meeting.
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119
AUDIT AND RISK
COMMITTEE REPORT
COMMITTEE REPORT
Desmond Smith
Chairman of the Audit and Risk Committee
Dear Shareholder,
As Chairman of the Audit and Risk Committee (the “Committee”), it is my pleasure to report on the Committee’s activities
for the year ended 31 March 2018.
This report provides an overview of the functioning of the Committee and the signifi cant matters it addressed during the
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year, together with its priorities for 2018/19. The Committee’s terms of reference are available in the governance section of
the Company’s website at www.mediclinic.com and are summarised on page 95 in the Corporate Governance Statement.
COMMITTEE COMPOSITION AND MEETING ATTENDANCE
The composition of the Committee complies with the UK Corporate Governance Code (the “Code”), which provides
that all members should be independent non-executive directors. The Board regards each member of the Committee as
having recent and relevant fi nancial experience for the purposes of the Code and the Financial Reporting Council’s (“FRC”)
Guidance on Audit Committees. The Board is satisfi ed that the Committee, as a whole, has the required sector-specifi c
competence and that the combined knowledge and experience of its members enables the Committee to exercise its duties
in an eff ective, informed and responsible manner. Figure 1 sets out the Committee’s composition and meeting attendance
during the period under review.
FIGURE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
QUALIFICATIONS
Mr Desmond Smith
(Committee Chairman)
Mr Alan Grieve
B.Sc., FASSA
B.A. (Hons), CA
Mr Seamus Keating
FCMA
Mr Trevor Petersen
B.Comm. (Hons), CA(SA)
DATE APPOINTED
(AS COMMITTEE
MEMBER)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
15/02/2016
15/02/2016
05/06/2013
15/02/2016
4 of 4
4 of 4
4 of 4
4 of 4
The composition of the Committee is shown as at 31 March 2018.
Notes
1
2 The attendance refl ects the number of scheduled meetings held during the fi nancial year. One additional ad hoc Committee meeting was
held during the fi nancial year and two Committee meetings were held between the Company’s fi nancial year-end and the Last Practicable
Date; all these meetings were attended by all Committee members.
120 MEDICLINIC | ANNUAL REPORT 2018
The Company Secretary is secretary to the Committee and
(Chief Clinical Officer and CEO Designate) was also invited to
attends all meetings, as does Mr Jurgens Myburgh (CFO).
attend Committee meetings held from 1 January 2018 onwards,
Other attendees differ from time to time and may include
as part of the transition to his appointment as CEO.
Mr Danie Meintjes (CEO), Dr Edwin Hertzog (Company
Chairman), Mr Pieter Uys (alternate to Mr Jannie Durand),
Mr Gert Hattingh (Chief Corporate Services Officer) and other
relevant management members. Representatives from the
internal auditors (Remgro Internal Audit) and external auditors
(PricewaterhouseCoopers LLP and PricewaterhouseCoopers
KEY AREAS OF ACTIVITY
The Committee continued to provide appropriate oversight
and challenge around the Company’s financial, accounting,
risk management, internal controls and assurance processes.
Its key areas of focus during the year ended 31 March 2018
Inc.) are invited to attend all meetings. Dr Ronnie van der Merwe
are set out below.
Financial reporting
The Committee considered the following key topics relating to
financial reporting during the year:
• Reviewed the interim dividend and recommended it for approval
by the Board
May 2017:
• Reviewed the external auditor's 2017 year-end audit report
and opinion
• Reviewed the financial performance of the Group and each
division, including debt covenants
• Reviewed the significant accounting policies, key accounting
items, areas of significant judgements and any material
assumptions or estimates
• Reviewed and confirmed the going concern status, the long-
term viability assessment and the supporting stress testing
analysis and recommended them for approval by the Board
• Reviewed the final dividend proposal and recommended it to
the Board for approval by the shareholders
• Approved the Audit and Risk Committee Report for inclusion in
the 2017 Annual Report
• Reviewed the 2017 Annual Report and Financial Statements,
including the confirmation of fair, balanced and understandable
reporting and recommended them for approval by the Board
• Reviewed the use of adjusted measures by the Group and
ensured their appropriateness (including the items of income or
cost included or excluded from their calculation)
• Reviewed the preliminary results announcement and investor
presentation and recommended them for approval by the Board
• Reviewed the 2017 Notice of Annual General Meeting and
recommended it for approval by the Board
• Reviewed the Group’s tax report and the Group Tax Strategy and
recommended the Group Tax Strategy for approval by the Board
• Continued to monitor the integration of the Al Noor business
into the Middle East division
September 2017:
• Reviewed the Group’s tax report
• Reviewed the external auditor’s interim review plan
• Reviewed the FRC’s summary of key developments for 2017/18
annual reports
November 2017:
• Reviewed the external auditor's half-year review findings
• Reviewed the financial performance of the Group and each
division, including debt covenants
• Reviewed the significant accounting policies, key accounting
judgement and any material
items, areas of significant
assumptions or estimates
• Reviewed the key tax considerations across the Group
• Reviewed and confirmed the going concern status and
recommended its adoption for approval by the Board
• Reviewed
the
results
announcement, including the confirmation of fair and balanced
reporting
interim financial statements and
• Reviewed the use of adjusted measures by the Group and
ensured their appropriateness (including the items of income or
cost included or excluded from their calculation)
March 2018:
• Reviewed the external auditor’s pre-year-end report on
accounting and auditing issues
• Reviewed the significant accounting policies
• Reviewed the preliminary going concern and long-term viability
assessment, together with the supporting stress testing analysis
• Reviewed the key tax considerations across the Group
• Conducted an annual review of the finance function
April 2018:
• Consideration of Hirslanden impairments
May 2018:
• Reviewed the external auditor's 2018 year-end audit report and
opinion
• Reviewed the financial performance of the Group and each
division, including debt covenants
• Reviewed the significant accounting policies, key accounting items,
areas of significant judgements, and any material assumptions or
estimates
• Reviewed and confirmed the going concern status, the long-term
viability assessment and the supporting stress testing analysis and
recommended them for approval by the Board
• Reviewed the final dividend proposal and recommended it to the
Board for approval by the shareholders
• Approved the Audit and Risk Committee Report for inclusion in
the 2018 Annual Report
• Reviewed the 2018 Annual Report and Financial Statements,
including the confirmation of fair, balanced and understandable
reporting and recommended them for approval by the Board
• Reviewed the use of adjusted measures by the Group and ensured
their appropriateness (including the items of income or cost
included or excluded from their calculation)
• Reviewed the preliminary results announcement and investor
presentation and recommended them for approval by the Board
• Reviewed the 2018 Notice of Annual General Meeting and
recommended it for approval by the Board
• Reviewed the Group’s tax report
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AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
The Committee maintained a strong focus on the financial performance of the Group’s operating divisions and the Group
as a whole, as well as the integrity of the Group’s financial reporting, including annual and half-year financial statements,
announcements and investor presentations. The Committee, with management and the external auditor, also considered
the impact of reporting recommendations published by the FRC, as well as the new accounting and reporting requirements
introduced by IFRS 9 Financial Instruments, IFRS 15 Revenue and IFRS 16 Leases and their impact on the Group’s financial
statements for the year ended 31 March 2018 and the year ending 31 March 2019.
The Committee received regular reports on tax matters for the Group, providing details of outstanding tax matters, any tax
risks and assurances received from the Company’s tax advisers as part of the year-end audit. During the year, the Committee
reviewed and recommended the Group Tax Strategy to the Board for approval. The strategy is published on Mediclinic’s
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website and a summary is available in page 31 of this Annual Report. The Committee monitored progress on compiling the
country-by-country tax report.
Significant accounting judgements and policies
The Committee follows a process for monitoring the integrity of the financial information provided in the annual and interim
reports, which includes the review of significant accounting policies, key accounting items and areas of significant judgement,
together with any material assumptions and estimates adopted by management and confirmed that these were appropriate.
The Committee considered the following significant issues identified by the management team and the external auditors in
relation to the Annual Report.
SIGNIFICANT
ISSUES
CONSIDERED
Impairment
assessments
(goodwill, trade
name and non-
financial assets)
and determination
of cash generating
units
STEPS TAKEN BY THE COMMITTEE
The Committee reviewed the following:
•
impairment test of the carrying amount of the Middle East goodwill;
impairment test of the carrying amount of the Swiss goodwill and the Hirslanden brand name;
•
• determination of Cash Generating Units (“CGUs”); and
• assessments if an indication exist that a non-financial asset or a CGU might be impaired and
consequent impairment tests.
Judgement is exercised in the identification of CGUs and the process of allocating goodwill to
the group of CGUs and in the assumptions underlying the impairment review. The Committee
reviewed management’s judgement in cases where individual hospitals were clustered together
within a supply region where the cash inflows cannot be distinguished between the individual
hospitals.
The Committee reviewed the key assumptions to the impairment tests performed, which
included the cash flows derived from the annual financial plans, long-term growth rates and the
discount rates. Long-term growth rates for periods not covered by the annual budgets were
challenged to ensure they were appropriate in the countries relevant to the operating divisions.
The Committee noted that a significant impairment had arisen in the Hirslanden operating
division because of the changes in the market and regulatory environment that affected key
inputs to the review. The Committee considered the sensitivities to changes in assumptions
and the related disclosures required by IAS 36 Impairment of Assets.
Based on its challenge of the key assumptions and associated sensitivities, the Committee
concurred with the impairment charges in respect of the Hirslanden properties, goodwill and
brand name. The Committee concurred with management’s conclusion that no impairment is
required in respect of the Middle East goodwill.
122 MEDICLINIC | ANNUAL REPORT 2018
SIGNIFICANT
ISSUES
CONSIDERED
Impairment
assessment
of equity investment
in Spire
Purchase price
allocation of Linde
acquisition
STEPS TAKEN BY THE COMMITTEE
The Committee reviewed the impairment tests of the equity investment in Spire.
The Committee reviewed the key assumptions which include the forecast cash flows, long-term
growth rates and the discount rate were based on a reputable consulting firm’s market analysis
and two global investment banks valuation work.
The Committee noted that a significant impairment had arisen on 30 September 2017 because
of updated guidance issued by Spire. The Committee further considered the updated full
year financial results, further announcements, guidance issued by Spire and considered
the sensitivities to changes in assumptions and the related disclosures required by IAS 36
Impairment of Assets.
Based on its challenge of the key assumptions and associated sensitivities, the Committee
concurred with the impairment charge on 30 September 2017 and that no further impairment
charge or reversal of impairment charge is required at 31 March 2018.
The Committee reviewed and was satisfied with the purchase price allocation performed in
respect of the Linde acquisition.
The Committee was presented with management’s considerations and feedback from the
external auditor on procedures performed.
The Committee was satisfied that a rigorous process was followed in identifying the significant
intangible asset and that this asset was reasonably valued applying appropriate judgment.
Swiss pension fund
liabilities
The Committee reviewed the appropriateness of the main valuation assumptions such as
discount rates, mortality and inflation applied in the valuation of the pension fund plan assets
and obligations, as well as the recognition of a past service cost credit.
Classification and
presentation of
exceptional items
The principal valuation assumptions prepared by external actuaries and adopted by
management were considered in the light of prevailing economic indicators and the view of
the external auditors. The approach adopted by management was accepted as appropriate.
The Group uses non-IFRS measures in evaluating performance and as a method to provide
clear and consistent reporting. Judgement is required in determining whether an item is
exceptional. For the year ended 31 March 2018, the exceptional items after taking related
tax and deferred tax into account, amounted to £713m (£782m before tax) of which £685m
(£753m before tax) relate to impairment charges. Refer to the Finance Review for details of the
exceptional items. Exceptional items have been evaluated as to their nature to assess whether
their classification and presentation are in line with the Group’s policy and guidance from the
Financial Reporting Council. The Committee have reviewed management’s application of the
policy for consistency with previous accounting periods. The Committee also assessed whether
the disclosures within the Finance review and Results Announcement provide sufficient detail
to understand the nature of these items. The Committee was satisfied that the amounts
classified as exceptional items are reasonable in all material respects and the related disclosure
of these items in the Financial Review and the Results Announcement is appropriate. The
Committee was satisfied that all adjusted measures were appropriately labelled and that they
were all clearly reconciled to the equivalent statutory measures.
Impact assessment
of IFRS 9 Financial
instruments
Key matters reviewed by the Committee included the detailed impact assessment of IFRS 9
such as the classification and measurement of financial instruments and the quantification of
the impairment provision of trade receivables under the expected loss model.
The quantification of the effect on the impairment provision and the approach taken in the
IFRS 9 transition project was accepted as appropriate.
Impact assessment
of IFRS 15 Revenue
from contracts with
customers
Key matters reviewed by the Committee included the detailed impact assessment of IFRS 15
such as the volume discounts to certain funders on attainment of certain admissions levels
in Mediclinic Southern Africa and Mediclinic Middle East, disallowances in Mediclinic Middle
East, Swiss tariff provision and the principal versus agent considerations in Switzerland. The
proposed treatment and consequent effect on the results of the Group post implementation
was considered appropriate.
MEDICLINIC | ANNUAL REPORT 2018
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AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
SIGNIFICANT
ISSUES
CONSIDERED
Viability assessment
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STEPS TAKEN BY THE COMMITTEE
The Committee reviewed the stress testing of the Group's principal risks and uncertainties
undertaken by management to support the going concern and long-term viability statement.
Based on careful analysis of all relevant matters, the Committee concluded that the Board
could reasonably expect the Group to continue to be in operation and meet its liabilities
as they fall due, over the course of the five-year assessment period. The Committee
recommended to the Board the going concern and long-term viability statement set out on
pages 50 to 51.
Fair, balanced and understandable reporting
The annual,
interim and other price-sensitive reports
published by the Company, are required to be fair, balanced
and understandable; and provide the information necessary
for shareholders to assess the Group’s position, performance,
business model and strategy.
Throughout the year, the Committee (or in certain instances,
the Board or the Disclosure Committee) reviewed the
interim results and other price-sensitive announcements
published by the Company and confirmed that they met
the above requirements. The Committee also reviewed the
use of adjusted measures by the Group and ensured their
appropriateness in aiding users of the Group’s financial
statements to better understand its performance year on
year (including the items of income or cost included or
excluded from their calculation).
The Committee considered a summary of management’s
approach to the preparation of the narrative sections and
financial statements; reviewed the 2018 Annual Report as a
whole, and recommended to the Board that, in its opinion,
the 2018 Annual Report, taken as a whole, meets the
aforementioned requirements.
Internal control system and risk management processes
The Committee considered the following key topics relating to
internal controls and risk management during the year:
May 2017:
• Reviewed and approved the Committee's report on internal
control system and risk management processes in the 2017
Annual Report
• Reviewed the principal risks and uncertainties and recommended
them for approval by the Board
• Reviewed the fraud and ethics report
• Reviewed cybersecurity risks and monitoring
September 2017:
• Reviewed the Enterprise-wide Risk Management (“ERM”)
framework and progress against risk management plans
• Conducted an in-depth review of IT-related risks, including the
governance and status of key IT projects
• Reviewed the fraud and ethics report
• Reviewed the Group compliance programme report (including
the GDPR)
November 2017:
• Reviewed the principal risks and uncertainties, including the
impact of Brexit, and recommended them for approval by the
Board
• Reviewed the Level 2 and 3 assurance processes conducted
or planned for the year and the next steps regarding any open
findings
• Reviewed the update on Level 2 and 3 assurance processes
regarding major IT projects
• Reviewed risks and obligations under data protection legislation
• Reviewed fraud and ethics report
• Reviewed and approved the Treasury Policy and Procedures
January 2018:
• Reviewed the combined assurance model
• Reviewed the new risk management and assurance reporting
dashboard
March 2018:
• Reviewed the Group tax risks
• Conducted a review of the Group's risk management systems and
principal risks and uncertainties, including: the ERM framework,
ERM Policy and risk appetite statement; top risks; other topical
risk areas; Group compliance policy and programme; and ERM
plan for FY19
• Reviewed the preliminary going concern and long-term viability
assessment, together with the supporting stress testing analysis
• Reviewed the Fraud Risk Management Policy and fraud and
ethics report
• Reviewed the Treasury Policy and Procedures
• Reviewed the Group's key insurance policies
April 2018:
• Reviewed progress on implementation of data privacy project
(including GDPR)
May 2018:
• Reviewed the report on internal control systems and risk
management processes included in the 2018 Annual Report and
recommended it for approval by the Board
• Reviewed the principal risks and uncertainties and recommended
them for approval by the Board
• Reviewed the fraud and ethics report
• Reviewed cybersecurity risks and monitoring
• Reviewed progress on implementation of data privacy project
(including GDPR)
124 MEDICLINIC | ANNUAL REPORT 2018
The Board is ultimately responsible for overseeing the
effective internal control systems and risk management
processes, which facilitate the delivery of and sustain the
Group’s financial, operational and strategic objectives.
In accordance with its terms of reference, the Committee
monitors these processes on a regular basis; reviews their
effectiveness; and makes appropriate recommendations to
the Board.
During the year, the Committee reviewed the ERM Policy,
framework and processes, including the Group’s risk appetite,
combined assurance model and action plans designed
to mitigate risks in line with the Group’s risk appetite
statement. The Committee concentrated in particular on
actions regarding certain areas highlighted by management:
• centralising and standardising business processes in the
Hirslanden operating division;
•
•
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integrating Al Noor into the business, operating practices
and finance, and accounting and internal control systems
of the Middle East operating segment;
implementing SAP and supporting policies and
procedures;
implementing a standardised financial consolidation and
reporting tool; and
• enhancing the assurance processes across the Group,
including ICT governance and compliance.
The Committee continued to monitor the standardisation of
the internal controls and risk framework across the Group,
processes, risk registers and reporting. The Committee
focused on integrating the reports received on financial,
operational and compliance internal controls and risk
management systems, corresponding key performance
indicators, internal and external assurances, mitigating
action plans, and progress on the delivery of these plans.
The Committee and management discussed areas for further
improvement and these were raised in the Committee’s
feedback to the Board.
Information and communications technology (“ICT”) risks
continued to be a key area of focus for the Committee.
The top five risks identified were cybersecurity, project
delivery, information protection, architecture and quality of
IT systems, and application control and change risks. Senior
management held regular presentations to the Committee
on these risks and their management and mitigation. The
presentations included an in-depth review of the governance
arrangements and status of the most complex IT projects
delivered within the Group.
The Group introduced an enhanced programme to track the
Group’s compliance with key legislation in the jurisdictions
in which it operates. The Committee received regular
updates on progress regarding the development of the
compliance programme and considered the implications
of forthcoming legislation, such as the EU General Data
Protection Regulation, effective in the UK from 25 May 2018;
data protection legislation being introduced in Switzerland
and South Africa; and new VAT legislation in the UAE.
The Committee examined the Group’s plans to address
the new requirements and monitored progress on their
implementation.
considered
The Committee
the Group’s hedging
arrangements in respect of interest rate movements and
supported management’s decision to discontinue hedging
the debt associated with the Hirslanden operating division for
the time being. Management maintained the decision under
review and presented regular reports to the Committee.
The Committee's overall conclusion and recommendation to
the Board was that the internal control and risk management
environment was effective in ensuring the consistent
achievement of key control objectives and no significant
failings or weaknesses had been identified.
The long-term viability statement on pages 50 to 51 is
underpinned by the Committee’s work on the Group's
financial reporting, internal controls and risk management
systems. Further details on the Group's internal controls
system and risk monitoring are provided on page 48.
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Internal audit
The Committee considered the following key topics relating to
internal audit during the year:
May 2017:
• Reviewed the FY17 internal audit report including annual
review of the effectiveness of the Group’s internal controls
and risk management processes
• Considered an external report on the internal auditor’s quality
assurance processes and reviewed the effectiveness of the
internal auditor
• Conducted a separate meeting between the Committee
members and the internal auditor, without the management
the Committee members and
team, and between
management, without the internal auditor
November 2017:
• Reviewed internal audit report and findings, with particular
focus on procurement
• Reviewed progress on appointment of Head of Internal Audit
January 2018:
• Reviewed internal audit processes, including overview of
mandate and approved work plan for FY18
• Considered outcome of process to appoint Head of Internal
Audit
March 2018:
• Reviewed the internal audit report, internal audit mandate and
internal audit function
• Conducted a separate meeting between the Committee
members and the internal auditor, without the management
team, and between
the Committee members and
management, without the internal auditor
May 2018:
• Reviewed the internal audit report for FY18 including annual
review of the effectiveness of the Group’s internal controls
and risk management processes
• Conducted a separate meeting between the Committee
members and management, without the external auditor, and
between the Committee members and the external auditor,
without management
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AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Remgro Internal Audit ("RIA") continued to undertake the
Group's internal audit function during the year. RIA regularly
attends Committee meetings and reports on the findings of
its internal audit reviews. RIA is responsible for evaluating the
Group's governance processes; assessing the effectiveness of
the internal financial control framework and risk management
processes; analysing and evaluating key business processes
and associated controls; and providing information on
identified instances of fraud, corruption, unethical behaviour
and irregularities. RIA’s responsibilities include conducting
an annual documented review of the key financial reporting
controls in identified financial systems and processes, and
providing an annual written assessment of the effectiveness
of the system of internal controls and risk management to
the Board.
During the year, the Committee regularly received and
considered internal audit reports from RIA, which focused
particularly on procurement, finance and governance
processes, and included their annual written assessment
of the effectiveness of the Group’s internal controls and
risk management processes. As part of this process, the
Committee reviewed the effectiveness of the internal audit
function based on discussions with RIA and key members of
management, supplemented by an external assessment of
RIA’s quality assurance process. The Committee confirmed
its satisfaction with the effectiveness and efficiency of the
function, reliability of financial reporting, and compliance with
applicable laws and regulations.
The Committee reviewed the internal audit function and
internal audit plan for the year ending
approved the
31 March 2019. The plan is set on a three-year rolling basis, and
the areas of focus are determined and updated in line with:
•
•
•
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the internal audit mandate;
the Group’s risk register;
strategic and operational initiatives aimed at growing and
preserving value;
the results of previous internal audits and reviews of the
effectiveness of internal controls and risk management
systems;
significant changes in the business, operations, ICT
programmes, systems and controls;
requests from management and the Committee;
•
• new developments in organisational governance; and
• emerging risks and trends.
•
During FY19, internal audit will focus on the human resources
and payroll cycle, key controls affected by major transformation
initiatives and projects and the internal financial control process
within each division, as well as governance and risk processes.
As reported in the 2017 Annual Report, the Company is in the
process of establishing an in-house internal audit function and
transition away from the current outsourcing arrangements
with RIA. As part of this plan, the Company appointed a Head
of Internal Audit with effect from 1 July 2018. Plans to ensure a
gradual and smooth transfer of responsibilities from RIA to the
new in-house function will be developed further during FY19.
126 MEDICLINIC | ANNUAL REPORT 2018
External audit
The Committee considered the following key topics relating to
the external audit during the year:
May 2017:
• Reviewed the external auditor's year-end audit report and opinion
• Evaluated the external auditor’s performance, with a focus on
their independence, and the objectivity and effectiveness of the
external audit process
• Considered and recommended the external auditor’s re-
appointment
• Reviewed the non-audit services expenditure for FY17
• Reviewed and approved the non-audit services thresholds
for FY18
• Conducted a separate meeting between the Committee members
and the external auditors, without the management team, and
between the Committee members and management, without the
external auditor
September 2017:
• Reviewed the external auditor’s interim review plan update
November 2017:
• Reviewed the external auditor's half-year review report
• Reviewed and approved the external audit plan for FY18, and
the corresponding engagement letter and fees
• Reviewed and approved the revised non-audit services
thresholds for FY18
• Held a separate meeting between the Committee members
and the external auditors, without the management team
March 2018:
• Reviewed the external auditor's pre-year-end report on
accounting and auditing issues
• Reviewed and approved the policy on the external auditor's
independence and non-audit services
• Reviewed the non-audit services expenditure for FY18 to date
• Reviewed the non-audit services thresholds for FY19
• Conducted a separate meeting between the Committee
members and the external auditors, without the management
team, and between
the Committee members and
management, without the external auditor
May 2018:
• Reviewed the external auditor's year-end audit report and
opinion
• Evaluated the external auditor’s performance, focusing on
their independence, and the objectivity and effectiveness of
the external audit process
• Considered and recommended the external auditor’s re-
appointment
• Reviewed the non-audit services expenditure for FY18
• Reviewed and approved the non-audit services thresholds
for FY19
• Conducted a separate meeting between the Committee
members and the external auditors, without the management
team, and between
the Committee members and
management, without the external auditor
PricewaterhouseCoopers LLP (“PwC”) has been the
Company’s external auditor since February 2016, as
approved by the Company’s shareholders in December 2015.
The lead audit engagement partner is Giles Hannam, who
was appointed in February 2016.
The external auditor is invited to all Committee meetings
and receives copies of all relevant Committee papers and
minutes of all Committee meetings.
External audit plan
During the year, the Committee reviewed and approved the
FY18 external audit plan, including the proposed materiality
threshold, the scope of the audit, the significant audit risks
and fees.
Effectiveness and independence
The Committee is committed to ensuring the Group
receives a high-quality and effective statutory audit. It is
responsible for monitoring the performance, objectivity and
independence of the external auditors and undertakes an
annual formal evaluation process.
external auditor, previously provided by PwC. Deloitte LLP
was appointed to provide tax advice to the Company and
its Southern African operations, and KPMG was appointed
to provide tax advice to the Company’s Swiss and Middle
Eastern operations.
The Committee determines the pre-approved monetary
thresholds for each category of non-audit services by the
external auditor at the beginning of each financial year. 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 in determining these
thresholds. From 1 April 2017, any individual assignment with
On completion of the FY18 year-end external audit, all
a fee exceeding £50 000 requires the Committee’s prior
members of the Committee, key members of the senior
approval.
management team, and those who regularly provide input
to the Committee or have regular contact with the external
auditors, were asked to complete a questionnaire to assess
the performance of the external auditor, with a strong focus
To help maintain the independence and objectivity of the
external auditor, the policy requires that a different partner
is appointed to lead any non-audit services.
on their independence and objectivity. The questionnaire
Fees
focused on
four key performance areas, namely:
The fees paid to PwC in respect of non-audit services
robustness of the audit process, quality of delivery, quality
amounted to approximately £588 000, or 26% of the
of reporting, and quality of people and service. As part
statutory audit fees. Approximately £350 000 of the
of the assessment, separate meetings were held between
non-audit services fees were in respect of reviews conducted
the Committee members and the external auditor without
in relation to the financial statements for the six months to
management, and between the Committee members and
30 September 2017. Therefore, excluding the half-year
management without the external auditor. The feedback
reviews, non-audit service fees as a percentage of statutory
from the questionnaire and the meetings with the external
audit fees amounted to 11%.
auditor and management was discussed by the Committee
at the meeting held in May 2018. The Committee was very
satisfied with the overall feedback on PwC and the external
audit process.
Under the FRC’s Revised Ethical Standard for Auditors,
PwC must inform the Company about any significant facts
and matters that may reasonably be thought to bear on
its independence or on the objectivity of the lead partner
and the audit team. The quality review partner, who reviews
the judgements of the audit team, rotates every seven
years and the lead partner and key audit partners at each
operating division every five years. The external auditor’s
independence is safeguarded by the non-audit services
policy discussed below.
Non-audit services
The Committee believes that it may be appropriate in certain
circumstances for the Company to engage its external
auditors to provide non-audit services. A policy governing
the provision of such services is in place to ensure non-audit
services provided by the auditor do not impair, and are not
perceived to impair, the external auditor’s independence or
objectivity. The policy was last reviewed and approved by
the Committee in March 2018.
With effect from 1 April 2017, the policy was amended
to, inter alia, exclude the provision of tax services by the
Refer to note 22 to the consolidated financial statements on
page 227 for detail on the fees paid to the Group’s auditors
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for audit and non-audit services during the year.
Re-appointment
The Committee concluded that the services provided by
the external auditor were of a high quality, that the external
audit process in respect of the 2018 financial statements
was effective, and that the auditor remains objective and
independent. Accordingly, it recommended to the Board
that the re-appointment of PwC as the Company’s external
auditors is proposed to shareholders at the Company’s
annual general meeting on 25 July 2018.
Audit tender
As a result of the UK’s implementation of the EU’s mandatory
audit firm 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 firm may serve as the Company’s external auditor
for a period exceeding 20 years. PwC was appointed as
the Company’s auditor with effect from February 2016, as
approved by the Company’s shareholders in December 2015.
It is intended that the external audit will be put out to tender
no later than for the financial year commencing 1 April 2023,
which is 10 years after the Company’s initial listing.
MEDICLINIC | ANNUAL REPORT 2018
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AUDIT AND RISK COMMITTEE REPORT (CONTINUED)
Competition and Markets Authority Statutory
Audit Services Order 2014 (“CMA Order”)
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As disclosed on page 127, during the financial year under
review, the Company complied with the mandatory
audit processes and the Committee complied with the
responsibility provisions set out in the CMA Order relating
to (a) putting the audit services engagement on tender
every 10 years; and (b) strengthening the accountability of
the external auditor to the Committee, including requiring
that only the Committee is permitted to agree to the
external auditor’s fees and scope of services; influence
the appointment of the audit engagement partner; make
recommendations regarding the appointment of auditors;
and authorise the auditors to carry out non-audit services.
Ethical conduct, governance and
compliance
The Committee considered the following key topics relating to
governance and compliance during the year:
May 2017:
• Harmonised operating practices across Mediclinic Middle East
• Reviewed the fraud and ethics report
• Considered relevant statutory, regulatory and good practice
developments
• Reviewed the non-audit services expenditure for FY17
• Reviewed and approved non-audit services thresholds for
FY18
• Reviewed the Group tax report
• Reviewed and approved the Group Tax Strategy and
recommended it for approval by the Board
September 2017:
• Reviewed the fraud and ethics report
• Reviewed Group compliance programme report (including
the EU General Data Protection Regulation)
November 2017:
• Reviewed the fraud and ethics report
• Reviewed the Group tax report
• Reviewed and approved the revised non-audit services
thresholds for FY18
• Considered relevant statutory, regulatory and good practice
developments
March 2018:
• Conducted the annual review of policies and procedures:
Terms of Reference of the Committee; Internal Audit Mandate;
Policy in respect of the Independence and the provision of
non-audit services by the External Auditors; ERM Policy and
Fraud Risk Management Policy
• Reviewed the fraud and ethics report
• Considered relevant statutory, regulatory and good practice
developments
May 2018:
• Reviewed the Regulatory Compliance Policy
• Reviewed the non-audit services expenditure for FY18
• Reviewed and approved non-audit services thresholds for
FY19
• Reviewed the Group tax report
• Reviewed and approved the Group Tax Strategy and
recommended it for approval by the Board
• Reviewed the fraud and ethics report
• Considered relevant statutory, regulatory and good practice
developments
128 MEDICLINIC | ANNUAL REPORT 2018
The Group is focused on conducting its business in an
honest, fair and ethical manner, a principle endorsed by
the Board and management. The Committee oversees the
Group’s processes for handling breaches of the Group’s Code
of Business Conduct and Ethics and Anti-bribery Policy.
During the year, the Committee received regular feedback
from the Group General Manager: Risk Management on all
material cases and incidents reported on the ethics lines,
how these were managed and the effectiveness of the lines.
The Committee adopted a Fraud Risk Management Policy,
which facilitates developing controls for the prevention of
fraud and corruption.
The Committee is responsible for ensuring Group-wide
compliance with relevant laws and regulations. During
2017, a compliance consultant was appointed to assist
the Group with implementing a standardised risk-based
compliance monitoring process across all business units.
Under the consultant's guidance, the Group established
an enhanced programme to track the Group’s compliance
with key legislation in the jurisdictions in which it operates.
The Committee regularly received updates on progress
regarding the development of the compliance programme
and considered the implications of forthcoming legislation,
such as the EU General Data Protection Regulation, data
protection
legislation being
introduced
in Switzerland
and South Africa, and new VAT legislation in the UAE.
The Committee examined the Group’s plans to address
the new requirements and monitored progress on their
implementation.
The Clinical Performance and Sustainability Committee
is also responsible for assessing the Group’s ethics and
compliance. Further details on the Company's policies in
respect of business conduct and ethics, anti-corruption
and anti-bribery matters are provided on page 82 of the
Strategic Report. Details of the Clinical Performance and
Sustainability Committee are provided on page 95 of the
Corporate Governance Statement.
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COMMITTEE EVALUATION
An external evaluation of the Committee’s performance was
conducted by Lintstock during the year, focused on the
Committee’s composition and time management, processes
and support, the work undertaken during the financial
year and any priorities for improving its performance over
the coming year. The Committee reviewed and discussed
the outcomes of the evaluation and certain actions were
agreed for implementation, aimed at further enhancing the
effectiveness of the Committee. The results were reported
to the Board at the March 2018 meeting. The Committee
will monitor progress on the agreed actions and their
outcomes, and these will be incorporated into the following
performance evaluation.
PROGRESS ON KEY PRIORITIES FOR THE COMMITTEE IN FY18
PRIORITIES
STATUS
•
Implementation of new IFRS standards
• Refer to the financial reporting section on pages 121 to 124 of this
• Review various ICT and other significant projects across the
Group
• Review of ongoing integration of Al Noor’s operations and
systems
• Monitor Group tax compliance matters
• Review internal audit work plan for FY18, which will focus on
the procurement and payment cycle and division projects and
their internal financial control process
• Monitor progress against the 2018 ERM plan
Audit and Risk Committee Report.
• Refer to the internal control systems and risk management
processes section on pages 124 to 125 of this Audit and Risk
Committee Report.
• Appoint Chief Internal Audit Executive
• Refer to the internal audit section on pages 125 to 126 of this
Audit and Risk Committee Report.
KEY PRIORITIES FOR THE COMMITTEE IN 2018/19
• Monitor establishment of in-house internal audit function
• Monitor progress against the FY19 internal audit plan and overall ERM plan
• Mature the integration of reporting to the Committee on financial, operational and compliance internal controls and risk
management systems
• Monitor the performance of recently implemented transformational IT projects
• Monitor the implementation of new IFRS standards
• Appoint a permanent compliance officer and monitor the entrenchment of compliance management
Approved and signed on behalf of the Audit and Risk Committee.
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Mr Desmond Smith
Chairman of the Audit and Risk Committee
23 May 2018
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MEDICLINIC | ANNUAL REPORT 2018
129
DIRECTORS’
REMUNERATION REPORT
Mr Trevor D Petersen
Chairman of the Remuneration Committee
LETTER FROM THE REMUNERATION COMMITTEE CHAIRMAN
Dear Shareholder,
On behalf of the Board, I am pleased to present the Mediclinic International Directors' Remuneration Report for 2018.
The Remuneration at a Glance section, which follows this introduction, highlights the key areas that will be of primary focus
to the reader, such as pay outcomes for the year and details of how our policy will be implemented in 2019.
Over the past year, the Remuneration Committee kept fully abreast of the evolving views of shareholders on pay and, in
particular, the UK Government consultation on corporate governance. We focused on ensuring that our approach to pay is
fair and that pay in the wider workforce is considered and refl ected in the Committee’s deliberations. The next UK Corporate
Governance Code is expected to increase the remit of the Committee to include a level of oversight for the wider workforce
and we are well placed to incorporate this additional responsibility. The Committee is regularly updated on wider workforce
pay and we make our decisions relating to the remuneration of senior executives and key management in the context of
relativity of reward practices across each operating division.
Chief Executive Offi cer transition
A key part of our work in the year has been supporting the Nomination Committee in the Chief Executive Offi cer succession
planning and ensuring that the approach to recruitment remuneration for our incoming CEO was appropriately fair, taking
into account our workforce practices and compliance with our policy and relevant share plan rules.
Mr Danie Meintjes will retire from the Company after a tenure of over 30 years of service, the last eight of which have been
as its CEO. Mr Meintjes played a vital role in the transformation of the Mediclinic Group during his tenure. The Committee is
currently considering the treatment of Mr Meintjes’ outstanding share-based awards when he steps down as an executive
director. Details will be disclosed to shareholders as soon as they have been fi nalised.
Dr Ronnie van der Merwe will take on the role of CEO from 1 June 2018. Dr Van der Merwe joined the Mediclinic Group in 1999
and the Executive Committee in 2008, where he most recently held the role of Chief Clinical Offi cer. Dr Van der Merwe is one
of Mediclinic's most experienced executives and ideally equipped to build on the foundations Mr Meintjes has left in place.
Dr Ronnie van der Merwe’s remuneration arrangements as CEO are in line with the Group remuneration policy and in line
with the package for Mr Meintjes in his fi nal full year as CEO. Dr Van der Merwe’s base compensation (inclusive of Board fees)
has therefore been set at £558 198, whilst his maximum short and long-term incentive opportunities have been set at 150%
and 200% of base compensation respectively. Whilst Dr Van der Merwe’s ’s base compensation is in line with Mr Meintjes for
his fi nal full year as CEO, it is recognised this level is positioned towards the bottom end of the market competitive range
for the CEO of a company of similar size and complexity to that of Mediclinic. The Committee therefore intends to keep the
remuneration arrangements for the CEO under review.
130 MEDICLINIC | ANNUAL REPORT 2018
Performance and reward over the
reporting period
2017 was the fi rst year of operation of our revised
Remuneration Policy, which was approved by shareholders
at the 2017 Annual General Meeting (“AGM”) (see chart
below for AGM voting outcomes) and applies for three years
from that date.
AGM VOTING OUTCOME 2017
Directors’
Remuneration
Policy
Directors’
Remuneration
Report
95.95%
96.25%
For
Against
For the year under review, on an adjusted basis, the Group
performed slightly ahead of expectations, driven by a
signifi cant second half improvement from the Middle East
division. The Southern Africa division delivered second
half revenue growth ahead of expectations with a stable
adjusted EBITDA margin for the year. In Switzerland,
Hirslanden was faced with a number of regulatory changes
that came into eff ect during the year, which impacted
divisional EBITDA performance.
The executive directors’ short-term incentive (“STI”) was
calculated on a Group achieved EBITDA measure defi ned
as Group adjusted EBITDA performance, calculated at
budgeted exchange rates and further adjusted to remove
the impact of employee bonus accruals and to amend for
other specifi c items subject to approval by the Remuneration
Committee. This is combined with detailed operating
metrics measured at the divisional level, which comprise
fi nancial and operational objectives, including measures of
clinical excellence. The bonus framework operates such that
the non-achievement of subset performance indicators (i.e.
those measured at a divisional level) give rise to a reduction
in the bonus that is payable. Based on performance delivered
in the year, as described in more detail on pages 150 and 151,
the overall bonus for executive directors was approved at
61.37% of maximum, which is refl ective of the fi nancial and
operating performance delivered in the year.
No long-term incentive awards were due to vest in the year,
therefore no such awards are included within the single
fi gure tables as set out on page 148.
Proposed remuneration
implementation 2019
Incentives
In line with the 2018 STI, the 2019 Group STI will continue
to be based on Group achieved EBITDA performance and
operating divisions’ subset performance indicators, which
include fi nancial and operational objectives. To further
support delivery of the Group’s “Patients First Strategy”
additional focus has been placed on improving clinical
performance through the introduction and/or enhancement
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of additional non-fi nancial performance measures, which
include clinical performance, patient experience, staff
engagement and patient safety measures.
In line with the commitment we made to investors ahead of
the introduction of our new policy in 2017, we have reviewed
the performance measures underlying our plans. The Board
is confi dent that a focus on adjusted earnings per share
(“EPS”) and total shareholder return (“TSR”) within our long-
term incentive plan (“LTIP”) remains appropriate for 2018, as
it is directly aligned with the value we deliver to shareholders.
The 2018 LTIP awards will therefore continue to be based
on adjusted EPS and TSR. Details on the underlying targets
are set out on page 152. The Board will continue to keep
the performance measures used for the purpose of the LTIP
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under review over the course of 2018.
Base compensation
In line with South African employment practices, the
Committee reviewed the base compensation for the current
CEO, Mr Danie Meintjes, for the coming year and approved
an increase of 4.7%, which was below the average increase
for other employees of Mediclinic Southern Africa of 5.6%.
The Committee also reviewed the base compensation
positioning for the Chief Financial Offi cer, Mr Jurgens Myburgh,
who was appointed on base compensation of £319 000 in
August 2016. On appointment to the role, in line with best
practice and in line with the positioning for the CEO, his base
compensation was positioned towards the bottom end of
the market competitive range to refl ect that this was his fi rst
role as CFO of a UK listed company. Taking into consideration
Mr Myburgh’s performance since his appointment and the
level of input he provides to the Executive Committee and
Board in delivering business performance, the Committee
agreed to a salary increase of 9.6%. Mr Myburgh’s new
salary of £411 486 will remain towards the lower end of
the market competitive range. This marks the fi rst salary
increase awarded to Mr Myburgh since his appointment in
August 2016. Whilst the Committee recognises that such
salary increases are not common in the current UK climate,
given Mr Myburgh’s performance since appointment and
taking into account wage increases in the South African
business, the Committee believes that the increase is in the
best interests of the business.
I trust the information presented in this report enables our
shareholders to understand how we have implemented our
remuneration policy over the year, and the rationale for our
decision-making. We continue to be committed to an open and
transparent dialogue with our investors and the Committee
welcomes any feedback or comments on this report or the
way in which we implement our Remuneration Policy.
Mr Trevor D Petersen
Chairman of the Remuneration Committee
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
131
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REMUNERATION
AT A GLANCE
This section summarises the remuneration outcomes for the 2017/18 financial year, including how the Remuneration Policy
was implemented during the year and the link between remuneration and our strategy.
OUR REMUNERATION PRINCIPLES
Our Remuneration Policy is designed to support our overall objective of generating long-term shareholder value. By
appointing, investing in and retaining competent staff, we strive to be an employer of choice in the local and international
markets in which our Company operates.
Our remuneration arrangements are simple in design and seek to balance the need to reward performance appropriately,
fairly and competitively – while remaining mindful of our responsibility to deliver value to shareholders.
Our remuneration structure comprises of two pay components – fixed and variable pay. To determine the shape, size and
variability of each element of pay, the Committee follows key remuneration principles as set out below:
PRINCIPLE
External equity
KEY
CHARACTERISTICS
PURPOSE
Competitive market
positioning and opportunity
To attract, retain and motivate the executive talent we need to achieve
our objectives, remuneration is determined with reference to the
location in which the executive director operates and the broader
international market.
To ensure a coherent approach across the Group, the structure
of the executive directors’ pay policy is in line with the policy for
remuneration of management within the Group.
The remuneration package is simple and fair in design so that it is
valued by participants.
The mix between fixed and variable pay and the balance between
rewarding short versus long-term performance are critical to ensure
they are appropriately balanced and reward behaviours that will
lead to the realisation of our overall objective, without encouraging
excessive risk-taking.
The performance measures selected to determine both our short-term
and long-term incentive plans have been carefully considered to focus
on a simple and effective selection of those key drivers of our strategy
and long-term value creation for our shareholders.
To ensure continued alignment of executive and shareholder interests,
the greatest potential pay opportunity for executive directors is via our
LTIP. Executive directors are incentivised and rewarded for the adjusted
financial performance of the Group and creating value for shareholders.
This is further reinforced with a requirement to hold shares to facilitate
executive directors to build a shareholding in the business and,
therefore, align management with shareholders’ interests and the
Group’s performance, without encouraging excessive risk-taking.
Internal equity
Fair and simple
Affordability
Pay aligned with
sustainable long-term
performance
Shareholder
alignment
Alignment of executive and
shareholder interests
132 MEDICLINIC | ANNUAL REPORT 2018
SUMMARY OF REMUNERATION FRAMEWORK
The overall remuneration framework applicable to the executive directors under the current policy is summarised in the
following table.
ELEMENT
OF PAY
PURPOSE AND LINK
TO STRATEGY
Base
compensation
To attract, retain and motivate
talented individuals who are
critical to the Group’s success
TERMS
With effect
1 April 2018
Annual STI
• To encourage and reward
delivery of the Group’s
annual financial and
operational objectives
• To align with shareholder
risk and reward
Level (on-target/
maximum
opportunity % of
base compensation)
Performance
condition
NEW CEO1
£558 198
CFO
£411 486
90%/150%
80%/133%
Group achieved EBITDA performance and
other financial and strategic objectives of
the three operating divisions
LTIP
Deferral portion
50% compulsory deferral in shares for
two years
• To balance performance pay
between achieving financial
performance objectives and
delivering sustainable stock
market out-performance
• To encourage share
ownership and align with
shareholders’ interests
Level (maximum
opportunity % of
base compensation)
Performance
condition
Deferral portion
200%
150%
Adjusted EPS weight of 60%
Relative TSR weight of 40%
50% compulsory deferral in shares for
two years
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Pension/
retirement
benefits
• To help recruit and retain
high-performing executive
directors
• To provide employees
with long-term savings via
pension provisions
Benefits
• To provide a market
competitive level of benefits
to ensure executive directors’
well-being
Contribution
(% of salary)
9%
Private medical
insurance, life
insurance of 5x
annual base salary as
personally selected
Private medical
insurance, life
insurance of 7x
annual base salary as
personally selected
Share
ownership
guidelines
• Alignment of executive
% of salary
225%
200%
directors’ interests with those
of shareholders
Note
1
New CEO’s arrangements, with effect from 1 June 2018. The departing CEO’s base compensation was set at £585 728 with effect
from 1 April 2018.
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MEDICLINIC | ANNUAL REPORT 2018
133
REMUNERATION AT A GLANCE (CONTINUED)
ILLUSTRATION OF REMUNERATION OUTCOMES IN THE PAST YEAR
The following chart show the 2017/18 actual remuneration against the maximum policy levels of remuneration for the
executive directors.
£2 574
43%
33%
24%
£1 126
45%
55%
£1 467
38%
34%
28%
Fixed pay
STI
LTIP
£715
43%
57%
38%
Actual
28%
Maximum
Actual
Danie Meintjes
Chief Executive Officer
28%
Maximum
100%
Jurgens Myburgh
Chief Financial Officer
Under the policy, the remuneration payable to each executive director is based on salaries at the start of 2017/18. The
elements of remuneration have been categorised into three components: (i) fixed guaranteed salary; (ii) STI; and (iii) LTIP.
In addition, for the purposes of comparison we have included the actual single figure remuneration paid in 2017/18.
134 MEDICLINIC | ANNUAL REPORT 2018
DIRECTORS’ REMUNERATION
POLICY
INTRODUCTION
This report sets out the Company’s policy on the remuneration of its executive and non-executive directors, which was
approved by the shareholders at the AGM on 25 July 2017. The policy took effect from this date and may operate for up
to three years. Our policy details can be accessed on the Company’s website at www.mediclinic.com, and are contained
in the 2017 Annual Report and Financial Statements on pages 86 to 94. However, in the interests of full disclosure, the
Remuneration Committee (the “Committee”) has included these below to be read alongside the remuneration outcomes
for the year ended 31 March 2018.
The policy was prepared in accordance with The Large and Medium-sized Companies and Groups (Accounts and Reports)
Regulations 2008 (as amended). The policy has been developed taking into account the principles of the UK Corporate
Governance Code and takes account of the views of our major shareholders and proxy agencies, as expressed during
previous engagements.
POLICY OVERVIEW
The Committee is responsible, on behalf of the Board, for establishing appropriate remuneration arrangements for the
executive directors and other senior management of the Group.
In setting the Remuneration Policy for the executive directors, the Committee will ensure that the structures are in the best
interest of 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;
to ensure total remuneration packages are simple and fair in design so that they are valued by participants;
to ensure that the fixed element of remuneration is determined with reference to the region in which the executive
operates and the broader international market, taking account of individual performance, responsibilities and experience;
and to ensure a significant proportion of the total remuneration package is linked to financial performance;
•
to balance performance pay between the achievement of the Group’s financial 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 profitability and returns; and
•
to provide performance-related pay linked to share price and with a requirement to hold shares to facilitate senior
management to build a shareholding in the business and, therefore, align management and shareholders’ interests and
the Group’s performance, without encouraging excessive risk-taking.
CONSIDERATION OF SHAREHOLDER VIEWS
The Company is committed to maintaining open and transparent dialogue with its shareholders. The Committee engages
regularly in a process of investor consultation.
The Committee considered shareholder feedback in relation to the Directors’ Remuneration Report for the prior year at its
first meeting following the AGM. This feedback, as well as any additional feedback received during any other meetings with
shareholders, was considered as part of the Company’s annual review of remuneration arrangements for the following year.
Where appropriate, the Committee will actively engage with shareholders and shareholder representative bodies, seeking
views which may be considered when making any decisions about changes to the Directors’ Remuneration Policy.
The Committee considers the AGM 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.
MEDICLINIC | ANNUAL REPORT 2018
135
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DIRECTORS’ REMUNERATION POLICY (CONTINUED)
SUMMARY OF THE DIRECTORS’ REMUNERATION POLICY
The following table sets out the key aspects of the Directors’ Remuneration Policy.
ELEMENT
OF PAY
Base
compensation
PURPOSE
AND LINK TO
STRATEGY
• To attract, retain
and motivate
talented
individuals
who are critical
to the Group’s
success
PERFORMANCE
CRITERIA
• Not applicable
OPERATION
• Normally reviewed
annually by the
Committee or in the
event of a change in an
individual’s position or
responsibilities. Typically
effective from 1 April
• Base compensation
•
levels are set to reflect
the experience and
capabilities of the
individual and the scope
and scale of their role
Increases to base
compensation
reflect individual
performance and the
pay and conditions in the
workforce
MAXIMUM
OPPORTUNITY
• There is no prescribed
maximum annual
increase
• The Committee
takes into account
remuneration levels
in comparable
organisations in
geographies in which
the Group operates and
in which it competes for
talent
• Ordinarily, annual salary
increases would be no
more than the average
annual increase of
the Company in the
same geographical
location in which the
director is domiciled.
However, in exceptional
circumstances, a
higher increase may be
awarded. For example:
assumed additional
responsibility: or an
increase in the scale
or scope of the role:
or, in the case of a
new executive, a move
towards the desired rate
over a period of time
where salary was initially
set below the intended
positioning
136 MEDICLINIC | ANNUAL REPORT 2018
ELEMENT
OF PAY
Annual STI1
PURPOSE
AND LINK TO
STRATEGY
• To encourage
and reward
delivery of the
Group’s annual
financial and
operational
objectives
• To align with
shareholder risk
and reward
MAXIMUM
OPPORTUNITY
• Maximum opportunity
of 150% of base
compensation
PERFORMANCE
CRITERIA
• At least 75% of the
STI will be based
on Group achieved
financial performance
and/ or the financial
performance of
the component
divisions of the
Group. May also
include non-financial
measures (e.g. clinical
excellence)
• 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
OPERATION
• Performance targets are
reviewed annually by the
Committee, are linked
to strategic objectives,
and are appropriately
demanding, taking
into account economic
conditions and
risk factors
• Half of the bonus paid
will be deferred in shares
for two years, subject to
continued employment
• Deferred shares may be
settled in cash. Where
awards are cash settled
and a director has not yet
met the share ownership
guidelines, this cash must
be used to purchase
shares in the Company
• Dividends that accrue
on the shares under the
deferred bonus will be
paid in cash at the time
of vesting
• Clawback and malus3
provisions will apply
for over-payments
due to misstatement,
misconduct or error
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MEDICLINIC | ANNUAL REPORT 2018
137
DIRECTORS’ REMUNERATION POLICY (CONTINUED)
ELEMENT
OF PAY
PURPOSE
AND LINK TO
STRATEGY
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
LTIP2
• To balance
• Annual awards
• Maximum opportunity
• Performance
of 200% of base
compensation
measures will include
adjusted EPS and
relative TSR which,
in combination, will
account for no less
than 75% of the
total award
• The Committee may
introduce a new
measure or measures
aligned with the
Company’s strategic
objectives. Any
such measures will
account for no more
than 25% of the total
award
• No more than 25% of
an award will vest for
achieving threshold
performance,
increasing pro rata
to full vesting for
achieving maximum
performance targets
performance
pay between
achieving
financial
performance
objectives
and delivering
sustainable stock
market out-
performance
• To encourage
share ownership
and align with
shareholders’
interests
denominated in shares
with vesting dependent
on the achievement of
performance conditions
over a three-year period
• Executive directors
will be required to
hold vested awards for
two years
• Awards may be settled
in cash, with the
cash payment taking
account of the share
price movement during
both the vesting and
holding periods
• Where awards are cash
settled and a director has
not yet met the share
ownership guidelines,
this cash must be used
to purchase shares in
the Company
• Performance targets
are reviewed annually
by the Committee and
are set according to
economic outlook and
risk factors prevailing
at the time, ensuring
that such targets
remain challenging
in the circumstances,
and realistic enough to
motivate and incentivise
management
• Dividends that accrue
during the vesting and
holding periods will
be paid in cash, to the
extent that awards
have vested
• Clawback and malus3
provisions apply for
over-payments due
to misstatement,
misconduct or error
• Participation in a
• Executive directors
• Not applicable
defined contribution
pension scheme
can receive a Company
contribution of up to
10% of base salary
Pension/
retirement
benefits
• To help recruit
and retain
high-performing
executive
directors
• To provide
employee
with long-
term savings
via pension
provisions
138 MEDICLINIC | ANNUAL REPORT 2018
ELEMENT
OF PAY
Benefits
PURPOSE
AND LINK TO
STRATEGY
• To provide
a market
competitive
level of benefits
to ensure
executive
directors’
well-being
Non-executive
directors’ fees
• Set to attract,
retain and
motivate
talented
individuals
through the
provision
of market-
competitive fees
OPERATION
• Benefits may include
but are not limited to
– private medical
insurance
– death and disability
insurance
– leave and long-
service awards
• Other ancillary benefits,
including relocation and
an allowance towards
reasonable fees for
professional services
such as legal, tax and
financial advice
• Reasonable business
expenses (e.g. travel,
accommodation and
subsistence) will be
reimbursed and, in
some instances, the
associated tax will be
borne by the Company
•
In consultation with
executive directors,
the Chairman of the
Board will review
periodically, or in the
event of a change in
an individual’s position
or responsibilities (as
appropriate)
• Fee levels are set
at market rates,
responsibility and time
commitments, and the
pay and conditions in
the workplace
• Reasonable business
expenses (e.g. travel,
accommodation and
subsistence) will be
reimbursed and, in
some instances, the
associated tax will be
borne by the Company
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• Actual value of benefits
• Not applicable
provided
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• Not applicable
• As for the executive
directors, there is no
prescribed maximum
annual increase.
The Chairman of
the Board and the
executive directors
are guided by the
general increase for the
broader workforce. In
certain circumstances,
the Chairman of the
Board may recognise
an increase, such as
additional responsibility,
or an increase in the
scale or scope of
the role
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MEDICLINIC | ANNUAL REPORT 2018
139
DIRECTORS’ REMUNERATION POLICY (CONTINUED)
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• Not applicable
• Not applicable
ELEMENT
OF PAY
Share
ownership
guidelines
PURPOSE
AND LINK TO
STRATEGY
• Alignment
of executive
directors’
interests
with those of
shareholders
OPERATION
• Executive directors are
expected to build and
maintain a shareholding
in the Company
• Where awards are
cash settled and a
director has not yet met
the share ownership
guidelines, this cash
must be used to
purchase shares in the
Company. Until this
threshold is achieved,
executive directors
are normally required
to retain no less than
50% of the net of tax
value from vested LTIP,
deferred STI or other
awards
– The level of
shareholding
guidelines will be
detailed in the
Annual Report
each year
– The Committee
will review
executive directors’
shareholding
annually in the
context of this policy.
Notes
1
The annual STI is focused predominantly on key financial performance indicators, to reflect the Group’s success in managing its operations.
The balance is determined based on executive directors’ performance against annual Group operational targets, including measures of
clinical excellence.
The executive directors’ STI is calculated on Group achieved EBITDA performance together with other financial and strategic business
targets of the three operating divisions, weighted relative to their respective adjusted EBITDA contribution.
The structure of the executive directors’ pay policy on annual STIs is generally in line with the policy for remuneration of management within
the Group, although the levels of award will be different. The performance measures that apply to operating division management are based
on the respective division's adjusted EBITDA performance, further adjusted to remove the impact of employee bonus accruals, specific costs
allocated by corporate and to amend for other specific items subject to approval by the Remuneration Committee and division specific
operational targets, including measures of clinical excellence. The annual STI awards for management are paid in cash with no deferral.
140 MEDICLINIC | ANNUAL REPORT 2018
2 The LTIP 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. 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 long-term incentive (“LTI”) arrangements for the executive directors and key senior management 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:
• number of participants;
• timing of the grant and/or payment of award;
• the size of an award (up to plan limits) and/or payment;
• discretion to reduce the number of awards vesting if certain performance underpins are not met;
• 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);
• the ability to adjust existing performance conditions for exceptional events to fulfil their original purpose; and
• the relative weighting between relative TSR and adjusted EPS are determined annually by the Remuneration Committee – for the current
reporting period adjusted EPS weight is 60% and relative TSR is 40%. This will remain the weighting for 2018/19.
The structure of the executive directors’ pay policy on LTIPs is generally in line with the policy for remuneration of key senior management
within the Group, although the levels of award are different. The LTIP awards for key senior management are denominated in shares, with
vesting dependent on the achievement of performance conditions over a three-year period. Awards may be settled in cash, with the cash
payment taking account of the share price movement during the vesting period. There is no award deferral for key senior management.
3 At the discretion of the Committee, awards may be adjusted before delivery (malus) or reclaimed after delivery (clawback)
if an adjustment event occurs. Such circumstances may include: a material misstatement of the Group’s audited financial results; a material
miscalculation of any relevant performance measure; a material failure of risk management or regulatory compliance by a relevant entity;
material reputational damage to the Group; or the participant’s material misconduct. Management within the Group is also subject to malus
and clawback provisions based on the adjustment events defined above.
PREVIOUS AWARDS
The Company has authority 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 the policy came into effect, including those granted
by companies in the Group prior to that company becoming part of the Group (such as the Mediclinic International Limited
Forfeitable Share Plan).
THE COMMITTEE CONSIDERS PAY AND EMPLOYMENT CONDITIONS
OF EMPLOYEES IN THE GROUP WHEN DETERMINING THE EXECUTIVE
DIRECTORS’ REMUNERATION POLICY
When considering executive directors’ base compensation, the Committee considers market-related salary levels, including
bonuses of appropriate comparable companies. Further, 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 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 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 directors’ Remuneration
Policy, although the Committee will keep this under review.
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MEDICLINIC | ANNUAL REPORT 2018
141
DIRECTORS’ REMUNERATION POLICY (CONTINUED)
REMUNERATION SCENARIOS FOR
THE EXECUTIVE DIRECTORS
The total remuneration for each executive director that
could result from the Remuneration Policy in 2018/19 is
shown below under three different performance levels,
being: below threshold (when only fixed pay is receivable),
on-target and maximum. The chart highlights how the
close alignment between the interests of shareholders and
management:
•
If a new executive director is appointed, the Committee
will seek to align the remuneration package with the
Remuneration Policy approved by shareholders.
• New executive directors will participate in the STI plan
and LTIP subject to the same limits as set out in the policy.
performance-related elements of the package comprise a
• Depending on the timing of the appointment, the
significant portion of total remuneration at on-target and
Committee may deem it appropriate to set different STI
maximum performance. Remuneration is earned in pounds
performance conditions to that of the current executive
sterling and South African rand. The rand portion of the
directors for the first performance year of appointment.
remuneration package is translated into pounds sterling at
• An LTIP award can be made following an appointment
a rate of £1: ZAR17.22.
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 ensuring
(assuming the Company is not in a closed period).
• Flexibility will be retained to set base compensation
at the level necessary to facilitate hiring 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
EXECUTIVE DIRECTOR REMUNERATION (£‘000)
£2 699
43%
33%
£1 914
38%
28%
£2 572
44%
33%
£1 824
39%
28%
£649
100%
100%
34%
24%
£619
100%
33%
23%
Minimum Target Maximum
Minimum Target Maximum
28%
Fixed Pay
STI
£1 623
LTIP
£1 176
34%
33%
£459
28%
100%
28%
39%
38%
34%
28%
100%
Minimum Target Maximum
38%
28%
Danie Meintjes
Chief Executive Officer
Ronnie van der Merwe
Chief Executive Officer
(1 June 2018)
Jurgens Myburgh
Chief Financial Officer
Assumptions
1 Salary levels apply as at 1 April 2018.
2 The value of taxable benefits is based on actual amounts as at 31 March 2018 of benefits and cash allowances.
3 The value of pension contribution is based on a Company contribution of 9% of base 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 63% of the maximum award opportunity is achieved under the LTIP; and at maximum, full
vesting occurs under both plans.
5 Share price movement and dividend accrual have been excluded from the above analysis.
142 MEDICLINIC | ANNUAL REPORT 2018
awards, the Committee will
look to replicate the
regard to the particular circumstances of the case. The
arrangements being forfeited as closely as possible and,
Committee may require notice to be worked or to make
in doing so, will take account of relevant factors including:
payment in lieu of notice or to place the director on garden
the nature of the deferred remuneration, performance
leave for the notice period. Such a decision is made to
conditions and the time over which they would have
protect the Company’s and shareholders’ interests.
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 be adjusted as relevant to
take into account the appointment. Any other ongoing
remuneration obligations existing prior to appointment
may continue.
• The Committee may agree that the Company will meet
certain relocation and incidental expenses as appropriate.
• For an overseas appointment, the Committee will have
discretion to offer cost-effective benefits and pension
provisions which reflect local market practice and relevant
legislation.
For the appointment of a new Chairman or non-executive
director, the fee arrangement will be set in accordance with
the approved Remuneration Policy at that time.
DIRECTORS’ SERVICE AGREEMENTS
AND PAYMENT FOR LOSS OF OFFICE
The Committee seeks to ensure that the contractual terms
In case of payment in lieu of notice or garden leave, the
salary, benefits and pension will be paid for the period of
notice served on garden leave or paid in lieu of notice. If
the Committee feels it would be in shareholders’ interests,
payments will be made in phased instalments. In the case
of payment in lieu of notice, payments 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.
Awards held under the deferred STI and LTI arrangements
are subject to the rules containing discretionary provisions
setting out the treatment of awards where a participant
leaves and is designated as a good leaver. 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
of the executive directors’ service agreements reflect
attached to the relevant awards. The awards may be scaled
best practice. It is the Company’s policy that all executive
back pro rata for the period of the vesting period worked by
directors have rolling contracts that can be terminated by
the director.
the employee in line with his service agreement. Executive
directors service agreements are terminable on six months’
notice. Consistent with the UK Corporate Governance Code,
all directors are subject to re-election by shareholders at
each AGM.
In circumstances of termination on notice, the Committee
will determine an equitable compensation package, having
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 or may pay any
statutory entitlements or any sums to settle or compromise
claims in connection with a termination (including, at the
discretion of the Committee, reimbursement for legal advice
and provision of outplacement services) as necessary.
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MEDICLINIC | ANNUAL REPORT 2018
143
DIRECTORS’ REMUNERATION POLICY (CONTINUED)
In the event of a change of control, all unvested awards under the deferred STI and LTIP arrangements will 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 performance period worked by the director. Executive directors may,
on nomination from Mediclinic International plc, take on outside appointments, however, all fees will be retained by the
Company. The dates of the executive directors’ service contracts are:
EXECUTIVE DIRECTOR
DATE OF SERVICE CONTRACT
Mr Danie Meintjes
Mr Jurgens Myburgh
Dr Ronnie van der Merwe
1 April 2016 – joined Group 1 August 1981
1 August 2016
1 June 2018
The service contracts are available for inspection during normal business hours at the Company’s registered office, and at
the AGM.
NON-EXECUTIVE DIRECTORS’ TERMS OF ENGAGEMENT
Non-executive directors do not have service contracts but instead have letters of appointment setting out the terms under
which they provide their services to the Company. The dates of their original appointment are shown in the table below.
Non-executive directors are normally appointed for an initial period of three years that, subject to review, may be subsequently
extended for further such terms. Any third term of three years would be subject to rigorous review. Non-executive directors’
appointment is terminable by three months’ notice on either side. In accordance with the UK Corporate Governance Code,
all directors are subject to annual election or re-election by shareholders at the Company’s annual general meetings.
In 2018 all non-executive directors, except Dr Edwin Hertzog and Mr Jannie Durand, were considered to be independent
of the Company. The terms of engagement are available for inspection during normal business hours at the Company’s
registered office, and at the AGM.
NAME
Dr Edwin Hertzog
Mr Desmond Smith
Dr Muhadditha Al Hashimi
Mr Jannie Durand
Mr Alan Grieve
Dr Felicity Harvey
Mr Seamus Keating
Prof Dr Robert Leu
Ms Nandi Mandela
Mr Trevor Petersen
DATE OF APPOINTMENT
EXPIRY OF
CURRENT TERM
15 February 2016
15 February 2016
1 November 2017
15 February 2016
15 February 2016
3 October 2017
5 June 2013
15 February 2016
15 February 2016
15 February 2016
14 February 2019
14 February 2019
30 October 2020
14 February 2019
14 February 2019
2 October 2020
4 June 2019
14 February 2019
14 February 2019
14 February 2019
144 MEDICLINIC | ANNUAL REPORT 2018
DIRECTORS’ REMUNERATION
REPORT
REMUNERATION FOR THE
REPORTING PERIOD
This part of the report was prepared in accordance with
Part 4 of The Large and Medium-sized Companies and
Groups (Accounts and Reports) (Amendment) Regulations
2013 and 9.8.6R of the Listing Rules. The report will be put
to an advisory shareholders’ vote at the 2018 AGM. Certain
AR
specified information on pages 148 to 155 was audited.
CONSIDERATION OF DIRECTORS’
REMUNERATION
The Committee
is responsible
for determining and
• oversee the operation of the Company’s incentive
schemes, including designing and setting performance
measures and targets for short-term and long-term
incentive schemes;
• consider major changes in employee remuneration in
the Group;
•
•
select and appoint consultants to advise the Committee;
report to shareholders through annual reports; and
• make recommendations to the Board on the fees
offered to the Chairman, after taking independent
professional advice,
all of which it carries out on behalf of the Board.
agreeing with the Board the policy on executive 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 ensures full compliance with the UK Corporate
Governance Code in relation to remuneration.
MEMBERS AND ACTIVITIES OF THE
REMUNERATION COMMITTEE
The composition of the Committee complies with the
Code, which provides that the Committee members
should comprise at least three independent non-executive
directors. Mr Petersen (Committee Chairman), Prof Dr Leu
and Mr Keating (all independent non-executive directors)
held office during the year. The Company Secretary acts as
The Committee’s main responsibilities are to:
secretary to the Committee.
• determine and agree with the Board the Company’s
Executive remuneration strategy and policy;
• determine individual remuneration packages and terms
of employment within that policy for the executive
directors, members of the Executive Committee and
others division executives;
None of the Committee members have day-to-day
involvement with the business, nor do they have any personal
financial interest in the matters to be recommended. When
considering the fees for non-executive directors, the
Chairman of the Board consults the executive directors.
The proposed fees of the Chairman of the Board were
considered by the Committee.
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MEDICLINIC | ANNUAL REPORT 2018
145
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
The Committee met seven times during the year. Including routine monitoring and approval activities, the material issues
discussed are summarised below:
AREA
DISCUSSIONS
Remuneration
Policy
Awards
The Committee proposes the Remuneration Policy for approval by the Board and for the
binding shareholder vote at the AGM.
The Committee reviewed and approved the STI targets and subset performance indicators for
the new financial year.
The Committee approved the final STI payment for the current financial year.
The Committee confirmed new allocations and performance criteria for the LTIP.
The Committee reviewed and approved operating division specific junior management bonus
scheme payments.
The Committee approved the remuneration package for the incoming CEO,
Dr Ronnie van der Merwe.
The Committee approved the executive individual salary increases for the executive directors
and each executive at Group level.
The Committee approved the overall salary increase of all employee groups of each operating
division.
The Committee approved the expansion of the LTIP eligibility to operating division executive
committee members and key senior employees.
The Committee approved the remuneration methodology for the appointment of expatriate
executive committee members.
The Committee reviewed regulatory and corporate governance developments.
Remuneration
of the CFO
Remuneration
levels
Regulatory and
governance review
The Committee Chairman presents a summary of material matters to the Board and minutes of Committee meetings are
circulated to all directors. The Committee reports to shareholders annually in this report and the Committee Chairman
attends the AGM to address any questions arising.
REMUNERATION COMMITTEE MEETING ATTENDANCE
The number of formal Committee meetings held during the financial year and the attendance by each member is shown in
the table below. The Committee also held informal discussions as required.
Mr Durand and/or his alternate Pieter Uys attend Committee meetings by invitation but are not voting members. The Committee
meetings are also attended by the CEO, Chief Human Resources Officer, the Group Executive: Reward, the Company Secretary
and representatives from New Bridge Street by invitation, all of whom provide material assistance to the Committee. None of
the aforementioned attend as a right, nor do they attend when their own remuneration is being discussed.
NAME1
DESIGNATION
DATE OF
APPOINTMENT
(as committee member)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
Mr Trevor Petersen
(Committee Chairman)
Prof Dr Robert Leu3
Mr Seamus Keating
Independent non-executive
director
Independent non-executive
director
Independent non-executive
director
15/02/2016
15/02/2016
17/03/2017
3 of 3
3 of 3
3 of 3
Notes
1 The composition of the Committee is shown as at 31 March 2018.
2 The attendance reflects the number of scheduled meetings held during the financial year. Four additional ad hoc Committee meetings were
held during the financial year to deal with urgent matters; the majority of members made themselves available at short notice for these
meetings. Three Committee meetings were held between the Company’s financial year-end and the Last Practicable Date; all three were
attended by all Committee members.
3 Prof Dr Leu will retire as a director of the Company, and consequently as a member of the Committee, at the conclusion of the Company’s
2018 AGM. It is the intention that the composition of the Committee will be reviewed in advance of his retirement, to ensure it continues to
meet the requirements of the Code.
146 MEDICLINIC | ANNUAL REPORT 2018
PERFORMANCE AND PAY
Performance graph and CEO pay
The graph below shows the value at 31 March 2018 of £100 invested in the Company on inception on 21 June 2013, 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 date of the Combination on 15 February 2016 and the financial year ends since.
The FTSE 100 was used as a comparator as this is the Company’s primary comparator group.
TOTAL SHAREHOLDER RETURN
Source: FactSet
)
d
e
s
a
b
e
r
(
)
£
(
l
e
u
a
V
£250
£200
£150
£100
£50
£0
21
June
2013
31
Dec
2013
31
Dec
2014
31
Dec
2015
15
Feb
2016
31
Mar
2016
31
Mar
2017
31
Mar
2018
Mediclinic International plc
FTSE 100
The table below shows the total remuneration for the CEO over the period since inception. Consistent with the calculation
methodology for the single figure for total remuneration, the total remuneration figure includes the total STI award based on
that year’s performance and the LTIP award based on the three-year performance period ending in the relevant year.
TOTAL CEO REMUNERATION
Year ended 31 December
Year ended 31 March
2012
2013
2014
2014
2015
1 Jan 2016 –
15 Feb 2016
15 Feb 2016 –
31 Mar 2016
2017
2018
Dr Kassem Alom
Mr Ronald Lavater
Mr Danie Meintjes
326
n/a
n/a
n/a
361
n/a
n/a
n/a
290
n/a
n/a
n/a
170
11.8%
100%
702
20.0%
n/a
65.4%
69.9%
2 165
n/a
n/a
n/a
79
78%
n/a
0%
1 029
56%
50%
0%
1 126
61%
50%
0%
Chief Executive
Officer
Total remuneration
£’000
STI %1
Deferred STI portion
LTIP vesting %1
Note
1 STI and LTIP percentages represent a percentage of the maximum potential award.
MEDICLINIC | ANNUAL REPORT 2018
147
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DIRECTORS’ REMUNERATION REPORT (CONTINUED)
SINGLE TOTAL FIGURES FOR DIRECTORS’ REMUNERATION
DIRECTORS’ REMUNERATION (AUDITED)
SALARY
AND
FEES
£’000
BENEFITS
£’000
ANNUAL
BONUS/
STI £’000
LTIP
£’000
PENSION
£’000
EXECUTIVE DIRECTORS1
Mr Danie Meintjes
Mr Jurgens Myburgh2
2017/18
2016/17
2017/18
2016/17
560
541
373
234
10
8
10
4
511
439
304
175
0
0
0
0
45
41
28
17
FEES
£’000
BENEFITS
£’000
NON-EXECUTIVE CHAIRMAN
Dr Edwin Hertzog
2017/18
2016/17
NON-EXECUTIVE DIRECTORS
Mr Seamus Keating
Mr Desmond Smith
Mr Trevor Petersen
Ms Nandi Mandela
Prof Dr Robert Leu
Mr Alan Grieve
Mr Jannie Durand3
Dr Felicity Harvey4
Dr Muhadditha Al Hashimi4
Total
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
2017/18
2016/17
250
250
87
77
100
76
85
85
66
66
77
70
77
77
66
66
33
0
25
0
866
767
8
3
0
0
6
3
6
4
7
4
4
2
1
0
2
2
0
0
1
0
35
18
TOTAL
REMUNE-
RATION
£’000
1 126
1 029
715
430
TOTAL
REMUNE-
RATION
£’000
258
253
87
77
106
79
91
89
73
70
81
72
78
77
68
68
33
0
26
0
901
785
Notes
1
South African rand remuneration was translated into pounds sterling at a rate of £1: ZAR17.221 at 31 March 2018 and £1: ZAR18.41 at
31 March 2017.
2 Mr Myburgh was appointed as a director on 1 August 2016 and his remuneration for 2016/2017 covers the period from employment date
to the end of the reporting period.
3 Mr Durand’s fees are paid to Remgro and include services rendered by Mr Durand or his alternate, Mr Pieter Uys.
4 Dr Harvey joined the Board from 3 October 2017 and Dr Al Hashimi joined 1 November 2017. Their remuneration for 2017/18 covers the period
from appointment date to the end of the reporting period.
148 MEDICLINIC | ANNUAL REPORT 2018
ADDITIONAL REQUIREMENTS IN
RESPECT OF THE SINGLE TOTAL
FIGURE TABLE (AUDITED)
The sections that follow provide further detail of the
AR
remuneration shown in the table on page 148.
SALARIES FOR THE REPORTING
PERIOD (AUDITED)
Base salaries are reviewed in April each year. The Committee
considers the remuneration packages in the context of other
BENEFITS AND PENSION FOR THE
REPORTING PERIOD (AUDITED)
The benefits of Mr Meintjes and Mr Myburgh include private
medical
insurance,
life
insurance and reimbursements
for reasonable business-related expenses (e.g. travel,
accommodation and subsistence). In some instances, the
associated tax was borne by the Company.
The executive directors participated in the Mediclinic
Southern Africa defined contribution fund and received a 9%
company pension contribution, in line with the Remuneration
London-listed companies of similar size and international
Policy.
footprint. Remuneration levels were set with reference to
local South African pay levels and a broader international
comparison, however, given the widening geographic
footprint of the Group, the Committee placed greater weight
on the international comparators.
None of the executive directors received any adjustments to
their salary over the reporting period.
None of the executive directors have prospective rights to a
defined benefit pension.
Non-executive directors were reimbursed for reasonable
business-related expenses (e.g. travel, accommodation and
subsistence) and, in some instances, the associated tax
was borne by the Company. They receive no other benefits
and do not participate in short-term or long-term reward
Mr Meintjes’ salary for the reporting period was £559 858
schemes.
and Mr Myburgh’s salary was £373 431. All figures were
converted to pounds sterling at a rate of £1: ZAR17.22 at
31 March 2018.
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149
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
SHORT-TERM INCENTIVE FOR THE REPORTING PERIOD (AUDITED)
Achieved bonuses were determined based on the Group achieved EBITDA performance and operating divisions subset
performance indicators, which comprise financial and operational objectives, including measures of clinical excellence.
Achieved EBITDA for the purposes of the executive directors’ STI comprises Group adjusted EBITDA calculated based on
budgeted foreign exchange rates (£12.0m) excluding the impact of STI bonus accruals for the Group's key management and
employees (£15.3m) and subject to further amendment by approval of the Remuneration Committee (£17.5m). In 2018, these
further amendments included adjustments for factors not incorporated into the budget at the start of the year, including for
instance the impact of new evolving regulatory changes and practices in Switzerland, the acquisition of Linde and the cost
associated with setting up a Group Purchasing Organisation in Hirslanden.
The target is based on the sum of the respective divisions approved budgeted adjusted EBITDA.
The Group achieved EBITDA performance which sets the initial bonus outcome percentage. The non-achievement of subset
performance indicators then gives rise to a reduction in this bonus percentage. The subset performance indicators relate to
the three operating divisions, weighted relative to each division’s respective adjusted EBITDA contribution.
The performance indicators, targets and performance against the targets are set out below.
MAIN PERFORMANCE INDICATOR
GROUP ACHIEVED EBITDA
Threshold
Maximum
Achievement
517 392
581 687
560 476
67.01% Achieved EBITDA Bonus
SUBSET PERFORMANCE INDICATORS
MEDICLINIC
SOUTHERN AFRICA
HIRSLANDEN
MEDICLINIC MIDDLE EAST
Cash conversion
FINANCIAL PERFORMANCE INDICATORS
Threshold: 99%
Maximum: 100%
Achievement: 100%
Threshold: 85%
Maximum: 110%
Achievement: 88%
(3.5% Penalty)
N/A
Debtors’ days
N/A
Employment costs
N/A
N/A
N/A
Threshold: 120 days
Maximum: 100 days
Achievement: 99 days
Threshold: 19.5%
Achievement: 19.01%
150 MEDICLINIC | ANNUAL REPORT 2018
OPERATIONAL, CLINICAL AND PATIENT QUALITY PERFORMANCE INDICATORS
Clinical care quality indicator Achievement: Partial
N/A
Employee engagement
Patient satisfaction
Employment equity
achievement against Never
Events and Hand Hygiene
Compliance indicators
(5% Penalty)
Achievement: Partial
achievement based on
employee responses to
“My team has effectively
followed through on actions
we agreed on during our
action planning session”
(2.5% Penalty)
Achievement: Partial
achievement based on
overall mean Patient
Experience Indicator score
(7.5% Penalty)
Achievement: Partial
achievement based on
appointments of open
positions
(2.5% Penalty)
Achievement: Partial
achievement against
Never Events, Surgical
Site Infections, Injectable
Administration Errors and
Patient Identification Errors
indicators
(1.88% Penalty)
N/A
N/A
Achievement: Full
achievement based on
overall mean Patient
Experience Indicator score
Achievement: Partial
achievement based
on Patient
Recommendation rate
(2.5% Penalty)
N/A
N/A
Penalty
Weighting of
Operating Division
17.50%
34.13%
Weighted Penalty
(5.97%)
3.50%
50.50%
(1.77%)
4.38%
15.37%
(0.67%)
Total Subset Penalty
(8.41%)
(8.41%) of a 67.01% EBITDA Bonus equates to a (5.64%) total bonus deduction
GROUP ACHIEVEMENT (ACHIEVED EBITDA BONUS LESS SUBSET OUTCOME): 61.37%
Note
The foreign exchange rate used for budget purposes was £1: ZAR17.17; £1: CHF1.25 and £1: AED4.56.
The STI achieved was 61.37% of the maximum bonus. The amount awarded to the executive directors is set out below:
EXECUTIVE
DIRECTOR
Mr Danie Meintjes
Mr Jurgens
Myburgh
ACTUAL
BONUS1 (£)
£511 113
£303 868
ACTUAL BONUS AS A
% OF ANNUAL BASE
COMPENSATION
92%
82%
MAXIMUM BONUS
OPPORTUNITY AS A
% OF ANNUAL BASE
COMPENSATION
150%
133%
Note
1
All figures are translated into pounds sterling at an exchange rate of £1: ZAR17.22 as at 31 March 2018.
The STI bonus payable for the reporting period will be paid in cash. 50% of the award will be deferred in shares for a period
of two years. Deferred shares will be settled in cash, subject to continued employment. This deferral is not subject to any
further conditions.
MEDICLINIC | ANNUAL REPORT 2018
151
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DIRECTORS’ REMUNERATION REPORT (CONTINUED)
LTIP AWARDS VESTING IN THE REPORTING PERIOD TO EXECUTIVE
DIRECTORS (AUDITED)
No LTIP awards to executive directors were due to vest in the reporting period.
LTIP AWARDS GRANTED IN THE REPORTING PERIOD TO EXECUTIVE
DIRECTORS (AUDITED)
2017 LTIP
CONDITIONAL SHARE AWARD
Award date
1 June 2017
Employment period
1 June 2017 to 31 May 2022
Performance period
1 April 2017 to 31 March 2020
Vesting date
The later of 1 June 2022 or the date upon which the Committee has satisfied themselves
that the performance condition has been met
DATE
OF
GRANT
NATURE
OF
AWARD
NUMBER
OF
SHARES1
FACE
VALUE
£’000
FACE
VALUE AS
A % OF
ANNUAL
BASE
SALARY
END OF
PERFOR-
MANCE
PERIOD
PERFOR-
MANCE
CONDITIONS
Mr Danie Meintjes
1 June 2017 Conditional
129 626
1 046
200%
31 March 2020 See table below
Share Awards
Mr Jurgens
Myburgh
1 June 2017 Conditional
65 263
527
150%
31 March 2020 See table below
Share Awards
Note
1
Number of shares granted was based on the average middle-market quotation of an LSE Share during a period of 5 dealing days ending
with the dealing day before the grant which was £8.07.
PERFORMANCE CONDITION
Adjusted EPS growth
WEIGHTING
60%
THRESHOLD
TARGET
(25% VESTING)
MAXIMUM
TARGET
(100% VESTING)
5% per annum
compounded
12% per annum
compounded
TSR ranked relative to constituents of the
40%
Median of peers
Upper quartile
FTSE 100 Index
(50th percentile)
of peers
(75th percentile)
At grant, vesting of 60% of the award was based on adjusted EPS growth and the remaining 40% was determined by TSR,
ranked relative to constituents of the FTSE 100 Index.
Adjusted EPS and relative TSR are considered to be the most appropriate measures of long-term performance, in that they
ensure the executive directors are incentivised and rewarded for the adjusted financial performance of the Company and
creating value for shareholders. The award is subject to clawback and malus provisions.
Adjusted EPS growth is measured by taking the compound annual percentage growth in adjusted EPS over the performance
period.
TSR ranked relative to constituents of the FTSE 100 Index is measured by ranking and comparing the Company’s TSR to the
relevant TSR targets.
152 MEDICLINIC | ANNUAL REPORT 2018
Awards are denominated in shares, with vesting dependent on the achievement of performance conditions over a three-year
period. Awards granted to the executive directors have a vesting period of five years from the date of grant. After this time,
the value will be calculated by alignment to share price movement but settled in cash. Where a director has not yet met the
share ownership guidelines, this cash must be used to purchase shares in the Company.
CHANGES TO THE BOARD
Dr Ronnie Van Der Merwe: New Chief Executive Officer
As announced on 27 November 2017, Dr Van der Merwe was appointed as the successor to the position of CEO designate
to succeed Mr Meintjes as CEO of the Company on 1 June 2018. This follows the announcement made on 25 July 2017 that
Mr Meintjes will retire from his position as CEO by no later than 31 July 2018.
As set out in the letter from the Remuneration Committee Chairman, Dr Van der Merwe’s remuneration arrangements as
CEO are in line with the Group remuneration policy and in line with the package for Mr Meintjes in his final full year as CEO.
Dr Van der Merwe’s base compensation (inclusive of Board fees) has therefore been set at £558 198. Whilst the base
compensation level is in line with Mr Meintjes for his final full year as CEO, it is recognised this level is positioned towards the
bottom end of the market competitive range for the CEO of a company of similar size and complexity to that of Mediclinic.
The Committee therefore intends to keep the remuneration arrangements for the CEO under review.
Dr Van der Merwe will be eligible to participate in the Company’s STI scheme and LTIP, designed to incentivise and reward
the successful delivery of the business strategy and sustained shareholders value creation. His maximum award opportunity
under the STI will be 150% of his annual salary, half of which will be subject to a compulsory deferral for a period of two years.
Awards under the LTIP are up to a maximum value of 200% of annual salary, with vesting subject to performance over
a three-year period and an additional two-year holding period required, following vesting and prior to their release. In
accordance with best practice, the STI and LTIP contain provisions that will allow the Company to recover or withhold
value in the event of certain defined circumstances. Dr Van der Merwe’s service agreement may be terminated on
six months’ notice by either him or the Company.
PAYMENTS TO FORMER DIRECTORS (AUDITED)
As reported in the 2017 Directors’ Remuneration Report on page 102 of the 2017 Annual Report, Mr Craig Tingle retired as
CFO on 15 June 2016.
In respect of the award made in 2014, under the Mediclinic International Limited Forfeitable Share Plan (“FSP”), where
performance was tested at the time of the Combination, 27 700 awards were released to Mr Tingle on 1 June 2017. The
value of the award vested was £220 057 which was calculated using the volume weighted average share price of the middle
market quotation on the JSE for the period five days prior to vesting (1 June 2017), which was £7.94 and translated at the
exchange rate at grant of £1: ZAR16.78 as at 1 June 2017. In respect of the award made in 2015, under the FSP, 19 816 awards
will be released to Mr Tingle on 1 June 2018.
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MEDICLINIC | ANNUAL REPORT 2018
153
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
PAYMENTS FOR LOSS OF OFFICE (AUDITED)
There were no payments for loss of office in the year.
PERCENTAGE CHANGE IN REMUNERATION LEVELS
The table below shows how the percentage change in the CEO’s salary, benefits and bonus in the reporting period compared
with the percentage change in the average of each of those components of pay for employees in South Africa in local
currency. The Committee selected employees in South Africa, as these provide the most appropriate comparator as they are
subject to the same inflationary conditions.
% CHANGE IN CEO SALARY, BENEFITS AND BONUS
CEO1
Salary
Benefits
Bonus
All employees
Salary
Benefits
Bonus
0.00%
8.25%
8.92%
5.61%
9.41%
132%
Note
1
The percentage change in the CEO’s salary, benefits and bonus is the annualised CEO’s 2017 local salary paid in ZAR as compared to the
2018 local salary, benefits and bonus paid in South African rand. The CEO received no adjustment to his salary over the reporting period.
RELATIVE IMPORTANCE OF THE SPEND ON STAFF COSTS
To place the directors’ remuneration in context with the Group’s finance, the Committee used the below comparison. The
table below shows the spend on staff costs for the reporting period compared to the spend on staff costs in the previous
reporting period, as disclosed in last year’s Directors’ Remuneration Report (page 102 of the 2017 Annual Report),
compared to returns to shareholders over the same period:
Staff costs
Returns to shareholders (dividends)
Note
There were no share buybacks or other significant use of profit during the year.
2017/18
£’000
1 293 000
58 000
2016/17
£’000
1 231 000
62 000
CHANGE
%
5.0%
(6.5%)
154 MEDICLINIC | ANNUAL REPORT 2018
DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)
The tables below set out the directors’ shareholding, including shareholding by persons connected to them, and share
interests. There were no changes in the directors’ shareholding between the financial year end and the Last Practicable Date,
being 23 May 2018. 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 executive directors are required to build up a minimum shareholding in Mediclinic, as explained in the Directors’ Remuneration
Report. Shares are valued for these purposes at the year-end-price, which was £6.02 per share as at 31 March 2018.
SHARE-
HOLDING
GUIDELINES
AS A % OF
ANNUAL
BASE
COMPEN-
SATION
SHARES
HELD
AS AT
31 MARCH
2017
SHARES
HELD
AS AT
31 MARCH
2018
% OF
ANNUAL
BASE
COMPEN-
SATION
OUTSTANDING
UNVESTED
LTIP AWARDS
WITH
PERFORMANCE
CONDITIONS1
OUTSTAN-
DING
UNVESTED
FSP AWARDS2
DEFFERED
STI
SHARES3
SHARE-
HOLDING
REQUIRE-
MENT MET
Mr Danie
Meintjes
Mr Jurgens
Myburgh
225%
123 900
173 323
223%
231 002
33 949
27 187
200%
14 000
60 000
97%
114 544
n/a
10 815
No
No
Notes
1
Unvested awards held under the LTIP are subject to performance conditions. Awards will be settled in cash and therefore are not taken into
consideration as part of determining whether shareholding requirements have been met.
2 Unvested awards held under the Mediclinic International Limited FSP where performance has been tested but shares have not yet been
released. Final vesting will take place on the original vesting date subject to continued employment. Awards are settled in JSE Shares.
3 Deferred STI shares, where performance has been tested, will be settled in cash and therefore are not taken into consideration as part of
determining whether shareholding requirements have been met.
The shareholding in Mediclinic by non-executive directors is shown below:
NON-EXECUTIVE DIRECTORS
AS AT 31 MARCH 2017
AS AT 31 MARCH 2018
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Dr Edwin Hertzog
Mr Desmond Smith
Mr Seamus Keating
Mr Trevor Petersen
Ms Nandi Mandela
Prof Dr Robert Leu
Mr Alan Grieve
Mr Jannie Durand
Mr Pieter Uys2
Dr Felicity Harvey3
Dr Muhadditha Al Hashimi3
407 5591
394 276
0
0
0
0
0
7 500
0
417
n/a
n/a
0
0
0
0
0
7 500
0
417
0
0
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Notes
1
As announced on 27 April 2018, on 8 and 10 January 2018, the Waledro Trust, a testamentary trust of which Dr Hertzog is the sole
trustee, transferred its entire holdings in the Company to the beneficiaries of the trust at the cost price. Dr Hertzog is not a beneficiary
of the trust.
2 Mr Uys is the alternate to Jannie Durand.
3 Dr Harvey joined the Board from 3 October 2017 and Dr Al Hashimi joined 1 November 2017.
There are no requirements for non-executive directors to hold shares, nor for any former director to hold shares once they
have left the Company.
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155
DIRECTORS’ REMUNERATION REPORT (CONTINUED)
SHARE SCHEDULE DILUTION LIMITS
The Company is committed to protecting its shareholders’ interests and ensuring that the dilution of shares remains within
a reasonable limit. In line with the Investment Association guidelines, the Company limits equity-based awards under its
employee share plans to 10% of the Company’s issued share capital over a 10-year calendar period. These limits are consistent
with the guidelines of institutional shareholders.
IMPLEMENTATION OF THE REMUNERATION POLICY FOR 2019
Base compensation
The Committee considers the remuneration packages in the context of other London-listed companies of similar size and
international footprint. Remuneration levels were set with reference to local South African pay levels and a broader international
comparison. Given the widening geographic footprint of the Group, the Committee placed greater weight on the international
comparators.
Base salaries were reviewed in accordance with the Remuneration Policy, taking into account Company and individual
performance, wider workforce comparisons, and market benchmarks of South African pay levels and London-listed companies
of similar size and international footprint.
In line with South African employment practices, the Committee reviewed the base compensation for the current CEO,
Mr Danie Meintjes, for the coming year and approved an increase of 4.7%, which was below the average increase for other
employees of Mediclinic Southern Africa of 5.6%.
The Committee also reviewed the base compensation positioning for Mr Myburgh, who was appointed on a base compensation
of £319 000 in August 2016. On appointment to the role, in line with best practice and in line with the positioning for the CEO,
his base compensation was positioned towards the bottom end of the market competitive range to reflect that this was his
first role as CFO of a UK listed company. Taking into consideration his performance since his appointment and the level of
input he provides to the Executive Committee and Board in delivering business performance, the Committee agreed to a salary
increase of 9.6%. Mr Myburgh’s new salary of £411 486 will remain towards the lower end of the market competitive range.
Whilst the Committee recognises that such salary increases are not common in the current UK climate, given his performance
since appointment and taking into account wage increases in the South African business, the Committee feels that the increase
is in the best interests of the business.
SALARY
FROM
1 APRIL
2018
£’000
586
411
SALARY
FROM
1 APRIL
2018
ZAR’0001
10 085
7 085
SALARY
FROM
1 APRIL
2017
£’000
523
351
SALARY
FROM
1 APRIL
2017
ZAR’0001
9 630
6 465
% INCREASE2
4.7%
9.6%
Mr Danie Meintjes
Mr Jurgens Myburgh
Notes
1
Salaries are translated into pounds sterling at a rate of £1: ZAR17.22 at 31 March 2018 and £1: ZAR18.41 at 31 March 2017 as previously reported.
2 The percentage increase was calculated on the South African rand base compensation to ensure exchange rate fluctuations are eliminated.
Between 70% and 80% of the total potential remuneration offered to executive directors is subject to meeting performance
conditions.
AR
Details of Dr Van der Merwe’s salary from date of appointment as CEO can be found on page 153.
156 MEDICLINIC | ANNUAL REPORT 2018
STI 2019
The executive directors have a maximum STI opportunity of 150% (CEO) and 133% (CFO) of annual salary.
For executive directors, 50% of the achieved award will be deferred in shares for two years. Deferred shares may be settled in
cash, subject to continued employment. Where awards are cash settled, and a director has not yet met the share ownership
guidelines, this cash must be used to purchase shares in the Company. Dividends that accrue on the deferred shares during
the vesting period may be paid in cash at the time of vesting.
The performance measure for the executive directors’ STI in 2018/19 will be calculated on the Group achieved EBITDA
performance.
We do not publish details of the financial targets in advance since these are commercially confidential. We will publish
achievement against these targets when we disclose bonus payments in the Annual Report, so that shareholders can
evaluate performance against those targets.
The award will be subject to malus and clawback provisions.
LTIP AWARDS TO BE GRANTED IN 2018
The Committee intends to grant an LTIP conditional award to the executive directors in 2018, over shares with a value
of 200% (CEO) and 150% (CFO) of salary.
Adjusted EPS and relative TSR are considered to be the most appropriate measures of long-term performance, in that they
ensure the directors are incentivised and rewarded for the adjusted financial performance of the Group and creating value
for shareholders.
Vesting of 60% of the award will be based on adjusted EPS growth and the remaining 40% will be determined by TSR
measured relative to the constituents of the FTSE 100 Index over three years. Executive directors will be required to hold
vested awards for two years. After this time, the value will be calculated by alignment to share price movement but settled
in cash. Where a director has not yet met the share ownership guidelines, this cash must be used to purchase shares in the
Company. Dividends that accrue during the vesting and holding periods will be paid in cash to the extent that awards have
vested. Adjusted EPS and relative TSR are considered to be the most appropriate measures of long-term performance,
in that they ensure the directors are incentivised and rewarded for the adjusted financial performance of the Group and
creating value for shareholders.
PERFORMANCE
CONDITION
Adjusted EPS growth
TSR ranked relative to
constituents of the
FTSE 100 Index
WEIGHTING
60%
40%
THRESHOLD
TARGET (25%
VESTING)
5% per annum
compounded
Median of peers
(50th percentile)
MAXIMUM TARGET
(100% VESTING)
12% per annum
compounded
Upper quartile of peers
(75th percentile)
An “underpin” applies, which allows the Committee to reduce or withhold vesting if the Committee is not satisfied with
the adjusted operational and economic performance of the Company. The underpin evaluation includes consideration of
environmental, social and governance factors, and financial performance.
Executive directors will be required to hold vested awards for two years. After this time, the value will be calculated by
alignment to share price movement but settled in cash. Where a director has not yet met the share ownership guidelines,
this cash must be used to purchase shares in the Company. Dividends that accrue during the vesting and holding periods
will be paid in cash to the extent that awards have vested.
The Committee will keep the performance measures under review and may change the performance conditions for future
awards if they are not considered to be aligned with the Company’s interests and strategic objectives. However, the
Committee will consult with major shareholders in advance about any proposed material change in performance measures.
The award will be subject to clawback and malus provisions.
MEDICLINIC | ANNUAL REPORT 2018
157
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DIRECTORS’ REMUNERATION REPORT (CONTINUED)
PENSION ENTITLEMENT
The executive directors participate in the Mediclinic Southern Africa defined contribution fund and will be eligible for a 9%
Company pension contribution, in line with the Remuneration Policy.
FEES FOR THE CHAIRMAN AND NON-EXECUTIVE DIRECTORS
The Board Chairman’s remuneration is determined by the Committee. 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. Each non-executive director
receives a fixed fee for their services based on their Board membership and membership of the Board committees. The
Board Chairman fee is an all-inclusive fee, which includes Board committees and membership fees, where applicable.
Non-executive directors’ fees were reviewed against median fees paid to non-executive directors in companies of similar
size and complexity to that of Mediclinic. In light of this review, the fee levels applicable from 1 April 2018 are shown in the
table below.
Whilst the Committee recognises that such salary increases for the Board Chairman are not common in the current UK
climate, the fees remain below the Committee's assessment of an appropriate market level. In line with granting no increases
to executive directors last year, there were also no adjustments to the Board Chairman fee and the non-executive directors’
fees in the reporting period. The fee increase from 1 April 2018 for the Board Chairman reflects our ongoing intention to
move the Board Chairman fee to a market median positioning.
BASE FEES
Chairman
Base Board fee
FEE FROM
1 APRIL 2017
FEE FROM
1 APRIL 2018
%
INCREASE
£250 000
£280 000
£60 000
£63 000
Audit and Risk Committee Chair
£15 000
£16 000
Remuneration Committee Chair
£15 000
£16 000
Nomination Committee Chair
£0
£0
Clinical Performance and Sustainability Committee Chair
£10 000
£10 000
Investment Committee Chair
£10 000
£10 000
Senior Independent Director
£25 000
£25 000
Committee member fees
Audit and Risk Committee
£10 000
£10 000
Remuneration Committee
£10 000
£10 000
Nomination Committee
£0
£7 000
Clinical Performance and Sustainability Committee
£6 600
£7 000
Investment Committee
£6 600
£7 000
158 MEDICLINIC | ANNUAL REPORT 2018
12%
5%
7%
7%
–
0%
0%
0%
0%
0%
–
6%
6%
SHAREHOLDER VOTING AT THE AGM
The Remuneration Policy and the Directors' Remuneration Report were approved with 95.95% and 96.25% votes in favour,
respectively, at the Company’s AGM on 25 July 2017. The Remuneration Policy incorporated a number of changes, taking
into account the principles of the UK Corporate Governance Code and the views of major shareholders and proxy agencies,
as expressed during previous engagements on remuneration matters.
The following votes were received from shareholders:
FOR
%
AGAINST
%
TOTAL
SHARES
VOTED
% OF
ISSUED
SHARES
VOTED
WITH-
HELD
Remuneration Policy
614 711 926
95.95%
25 915 697 4.05%
2 718 474
643 346 097
87.26%
Directors’
Remuneration Report
618 212 690
96.25% 24 075 900
3.75%
1 057 507
643 346 097
87.26%
ADVISOR TO THE COMMITTEE
During the year, the Committee and the Company retained an independent external advisor to assist them on various
aspects of the Company’s remuneration as set out below:
FEES PAID BY THE
COMPANY FOR
THESE SERVICES
PROVIDED IN THE
REPORTING
PERIOD
OTHER SERVICES
PROVIDED TO
THE COMPANY IN
THE REPORTING
PERIOD
£113 728 based on
time charges for
work completed
N/A
ADVISOR
New Bridge
Street (“NBS”),
a trading name
of Aon plc
APPOINTED/
SELECTED BY
SERVICES
PROVIDED
Appointed by
the Committee
following a
competitive
tendering process
and reviewed
annually by the
Committee
Member of the
Remuneration Consultants
Group and adheres to the
Voluntary Code of Conduct
in relation to executive
remuneration consulting in
the UK
General advice on
remuneration matters
Advice on UK market
practice and UK
shareholder perspectives
The Committee considered the independence and objectivity of NBS. NBS provided assurances to the Committee that it
has effective internal processes in place to ensure it is able to provide remuneration consultancy services independently
and objectively. NBS confirmed to the Company that it is a member of the Remuneration Consultants Group and, as such,
operates under the code of conduct in relation to executive remuneration consulting in the UK. The Committee is, following
its annual review, satisfied that NBS has maintained independence and objectivity.
In April 2018, following a robust selection process, the Committee appointed Deloitte LLP to replace NBS as its independent
advisor. In line with existing policy, this appointment is subject to an annual review. The Committee would like to thank NBS
for the advice and support received since they were first appointed.
Signed on behalf of the Remuneration Committee.
Trevor D Petersen
Chairman of the Remuneration Committee
23 May 2018
MEDICLINIC | ANNUAL REPORT 2018
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STATEMENT OF DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the Annual
The Directors consider that the Annual Report and
Report, including the financial statements, in accordance
Financial Statements, taken as a whole, is fair, balanced and
with applicable law and regulation.
understandable and provides the information necessary
The UK Companies Act requires the Directors to prepare
financial statements for each financial year. The Directors
for shareholders to assess the Group and Company’s
performance, business model and strategy.
prepared the Group and Company financial statements
Each of the Directors, whose names and functions are listed
AR
in accordance with
International Financial Reporting
Standards (“IFRS”), as adopted by the European Union.
The Directors should only approve the financial statements
if they are satisfied that they give a true and fair view of
the state of affairs of the Group and Company and of the
profit or loss of the Group and Company for the reporting
period. In preparing the financial statements, the Directors
are required to:
•
select suitable accounting policies and apply them
consistently;
on pages 86 to 89 of the Annual Report, confirm that to the
best of their knowledge:
•
the Group and Company financial statements, which were
prepared in accordance with IFRS, as adopted by the
European Union, give a true and fair view of the assets,
liabilities, financial position and profit of the Group; and
•
the Strategic Report includes a fair review of the
development and performance of the business and the
position of the Group and the Company, together with
a description of the principal risks and uncertainties that
•
state whether applicable IFRS have been followed, subject
it faces.
to any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going-concern
basis, unless it is inappropriate to presume that the Group
and Company will continue in business.
The Directors are responsible
for keeping adequate
accounting records that are sufficient to show and explain
the Group’s and Company’s transactions and disclose with
reasonable accuracy, at any time, the financial position of
AR
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the UK Companies Act and, in respect
of the Group’s consolidated financial statements, Article 4 of
the IAS Regulation.
DISCLOSURE OF INFORMATION TO
AUDITORS
Each of the directors confirms that:
•
to the best of their knowledge and belief, there is no
relevant audit information of which the Company’s
auditors are unaware; and
•
they have taken all reasonable steps to ascertain any
relevant audit information and to establish that the
Company’s auditors are aware of that information.
For and on behalf of the Board.
The Directors are responsible for safeguarding the assets of
the Group and Company and hence for taking reasonable
steps for the prevention and detection of fraud and other
DP Meintjes
Chief Executive Officer
PJ Myburgh
Chief Financial Officer
23 May 2018
23 May 2018
irregularities.
The Directors are responsible for the maintenance and
integrity of the financial and associated corporate information
published on the Company’s website at www.mediclinic.com.
Legislation in the United Kingdom governing the preparation
and dissemination of financial statements may differ from
legislation in other jurisdictions.
160 MEDICLINIC | ANNUAL REPORT 2018
CONTENTS
GROUP FINANCIAL STATEMENTS
162 Independent auditors’ report
171
Consolidated statement of fi nancial position
172 Consolidated income statement
173 Consolidated statement of other comprehensive
income
174 Consolidated statement of changes in equity
176 Consolidated statement of cash fl ows
177 Notes to the consolidated fi nancial statements
243 Annexure – Investments in subsidiaries, associates
and joint ventures
COMPANY FINANCIAL STATEMENTS
248 Independent auditors’ report
253 Company statement of fi nancial position
254 Company statement of changes in equity
255 Company statement of cash fl ows
256 Notes to the Company fi nancial statements
GENERAL INFORMATION
These fi nancial statements are consolidated fi nancial
for Mediclinic
statements
International plc (the
“Company”) and its subsidiaries, associates and joint
ventures (the “Group”). A list of subsidiaries, associates
and joint ventures is included from pages 243 to 247.
AR
Mediclinic International plc (the “Company”) is a
public limited company, 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 (“JSE”) and the
Namibian Stock Exchange (“NSX”). A wholly-owned
subsidiary, Hirslanden AG issued bonds listed on the SIX.
Registered Address:
6th Floor
65 Gresham Street
London
EC2V 7NQ
United Kingdom
The core purpose of the Group is to enhance the quality
of life of patients by providing value-based healthcare
services.
The fi nancial statements were authorised for issue by
the Directors on 23 May 2018. No authority was given
to anyone to amend the fi nancial statements after the
date of issue.
All press releases, fi nancial reports and other information
are available on our website: www.mediclinic.com.
MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
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161
FINANCIAL
STATEMENTS
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GROUP FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF MEDICLINIC INTERNATIONAL PLC
REPORT ON THE AUDIT OF 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 2018 and of its loss 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.
We have audited the financial statements, included within the Annual Report, which comprise: the consolidated statement of
financial position at 31 March 2018; the consolidated income statement and consolidated statement of other comprehensive
income; the consolidated statement of changes in equity; the consolidated statement of cash flows for the year then ended;
and the notes to the consolidated financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities,
and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the Group.
Other than those disclosed in note 22 to the financial statements, we have provided no non-audit services to the Group
in the period from 1 April 2017 to 31 March 2018.
Our audit approach
Overview
Materiality
profit before tax.
• Overall Group materiality: £15m (2017: £14.9m) based on approximately 5% of adjusted
Audit scope
• Our audit included full scope audits at four reporting units which accounted for 92%
of consolidated revenue, 83% of consolidated loss before tax and 94% of adjusted profit
before tax calculated on an absolute basis. We performed centralised procedures on the
equity accounted results of Spire Healthcare Group plc (“Spire”) based on its audited
financial statements at 31 December 2017.
Key audit
matters
•
•
Impairment of intangible assets, goodwill and non-financial assets
Impairment of the Group’s associate investment in Spire
• Purchase price allocation for the acquisition of Linde Holding Biel (“Linde”)
162 MEDICLINIC | ANNUAL REPORT 2018
The scope of our audit
As part of designing our audit, we determined materiality and assessed 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.
We gained an understanding of the legal and regulatory framework applicable to the Group and the industry in which it
operates and considered the risk of acts by the Group which were contrary to applicable laws and regulations, including
fraud. We designed audit procedures at Group and significant component levels to respond to this risk, recognising that the
risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error,
as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations or through collusion.
We designed audit procedures that focused on the risk that non-compliance related to, but not limited to, compliance with
the Companies Act 2006, the UK Listing Rules and taxation legislation gives rise to a material misstatement in the financial
statements. In assessing compliance with laws and regulations, our tests included, but were not limited to, checking the
financial statement disclosures to underlying supporting documentation, enquiries of management, review of related work
performed by component audit teams, review of relevant internal audit reports and discussions with external legal counsel.
There are inherent limitations in the audit procedures described above and the further removed non-compliance with laws
and regulations is from the events and transactions reflected in the financial statements, the less likely we would become
aware of it.
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 journal entries and post-
close adjustments based on risk, 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 occurrence of
revenue transactions. In addition, we incorporate an element of unpredictability into our audit work each year.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit
of the financial statements of the current period and include the most significant assessed risks of material misstatement
(whether or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit
strategy; the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any
comments we make on the results of our procedures thereon, were addressed in the context of our audit of the financial
statements as a whole and in forming our opinion thereon and we do not provide a separate opinion on these matters. This
is not a complete list of all risks identified by our audit.
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
AR
1. Impairment of intangible assets, goodwill
and non-financial assets
(refer to Audit and Risk Committee Report on
page 122 and notes 6 and 7 in the Group financial
statements)
The Group has £1 406m (2017: £2 156m) of
intangible assets. This balance consists
mainly of goodwill relating to the Mediclinic
Middle East operations of £1 245m (2017:
£1 401m), goodwill on the acquisition of the
Swiss operations of £nil (2017: £307m), Swiss
trademarks of £73m (2017: £341m) and the
Al Noor brand name of £nil (2017: £23m).
Deploying our valuation experts, we obtained management’s
impairment calculations and tested the reasonableness
of key assumptions, including cash flow 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.
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INDEPENDENT AUDITORS’ REPORT (CONTINUED)
KEY AUDIT MATTER
1. Impairment of intangible assets, goodwill
and non-financial assets (continued)
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
The Group is required to perform annual
impairment tests on goodwill. The Swiss
trademarks were classified as indefinite life
intangible assets at the time of the respective
acquisitions and the Group carries out annual
impairment tests on these assets based on value-
in-use calculations. These impairment tests are
undertaken at the operating division level being
the level at which management monitors goodwill
for impairment. The Group also performed
impairment assessments of individual cash
generating units (“CGUs”) which form part of
these operating divisions, focusing in particular
on the Swiss operating division where indicators
of impairment were identified at the reporting
date. Goodwill is not allocated to CGUs on the
basis that the rationale for the transactions
giving rise to the goodwill is to realise synergies
across the entire operating division and not just
within the acquired business. Assets subject to
impairment assessment at the CGU level primarily
comprise land and buildings.
In the current year, an impairment loss of
£300m was recorded to impair the goodwill on
the Swiss operations in full, £260m was recorded
to partially impair the Hirslanden brand name and
£84m was recorded to partially impair buildings
within one Swiss CGU.
The impairment losses recorded in the current
year are material to the financial statements.
The recoverable amounts determined in
impairment assessments 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 assumptions like discount rates or
growth rates change, that further impairment
losses will be required.
We focused on the impairment assessments of
goodwill, other indefinite life intangible assets and
non-financial assets as the impairment reviews
carried out by the Group contain a number of
significant judgements, including the level at
which goodwill is monitored for impairment and
the determination of CGUs within each operating
division, and estimates, including cash flow
projections, growth rates and discount rates.
Changes in these assumptions might lead to a
significant change in the recoverable values of the
related assets and therefore to the impairment
losses recognised.
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
evaluated in the context of current trading performance
against budget and forecasts, considering the historical
accuracy of budgeting and forecasting and understanding
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 or the level of
impairment required.
We evaluated management’s judgement regarding the
levels at which goodwill arising from the Swiss and Middle
East acquisitions are monitored for impairment review
purposes. We evaluated management’s judgement regarding
the determination of the respective CGUs in the Swiss
operating division where impairment triggers were identified,
focusing on the commercial rationale for combining certain
clinical facilities into supply regions while other facilities are
allocated to stand-alone CGUs. As part of this evaluation,
we met with commercial management at Hirslanden to
understand how these facilities are run operationally and the
level of integration between facilities in different regions of
Switzerland.
We compared management’s impairment models to
externally available data including analyst valuations. We
prepared independent valuations based on alternative
valuation methodologies and assumptions as part of
assessing the reasonableness of the approach and outputs
determined by management.
Based on our work performed, we concurred with
management that impairment charges are required for the
Swiss operations and that no impairment losses were required
for the goodwill on the Middle East operations at
31 March 2018. We have found the judgements and estimates
made by management in determining the impairment charges
for Hirslanden to be materially reasonable in the context of
the Group financial statements taken as a whole and the
related disclosures to be appropriate.
We noted that the impairment losses affected one financial
covenant calculation specified in Hirslanden’s external
financing agreement. We are satisfied that the Group has
made appropriate arrangements to avoid any potential
breach and to support continued classification of the debt
as non-current at 31 March 2018.
164 MEDICLINIC | ANNUAL REPORT 2018
KEY AUDIT MATTER
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2. Impairment of the Group’s associate
investment in Spire
(refer to Audit and Risk Committee Report
on page 123 and note 8 in the Group financial
statements)
At 31 March 2018, the carrying value of the
Group’s associate investment in Spire exceeded
the listed market value of the investment, which
could indicate a possible impairment. The Group
assessed the recoverable amount of the investment
based on a value-in-use calculation and concluded
that an impairment loss of £109m was required.
We focused on this area because of the
significance of the impairment loss recorded
in the current year and reflecting on the
extent of judgement and estimation involved
in the impairment assessment undertaken by
management. The recoverable value of the
associate is contingent on future cash flows
and there is a risk that the investment will be
impaired further if these cash flows do not
meet expectations.
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
We reviewed the share price performance of Spire over
the period since acquisition alongside its reported financial
results. 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 to understand Spire’s recent performance
trends. We reviewed the latest available financial reports
published by Spire. We obtained and reviewed analyst reports
to understand third party expectations of future share price
performance.
Deploying our valuation experts, we obtained management’s
impairment assessment and tested the reasonableness of
key assumptions underpinning management’s value-in-use
valuation of the Group’s investment, including cash flow
forecasts and the selection of growth rates and discount
rates. We challenged management to substantiate its
assumptions, including comparing relevant assumptions
to third party data and economic forecasts.
We evaluated management’s sensitivity analyses to
ascertain the impact of reasonably possible changes to key
assumptions on the level of impairment required.
Based on our work performed, we concurred with
management that an impairment is required in the current
year. We have found the judgements and estimates made by
management in determining the impairment charge to be
materially reasonable in the context of the Group financial
statements taken as a whole and the related disclosures to be
appropriate.
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INDEPENDENT AUDITORS’ REPORT (CONTINUED)
KEY AUDIT MATTER
3. Purchase price allocation for the
AR
acquisition of Linde
(refer to Audit and Risk Committee Report on
page 123 and note 29 in the Group financial
statements)
The Group acquired 99.62% of Linde for a total
consideration of £86m. The acquisition resulted
in the recognition at fair value of total net assets
amounting to £83m and goodwill of £3m. Net
assets assumed at fair value consisted mainly of
property, equipment and vehicles (£109m) and
a brand name (£17m) identified as part of the
purchase price allocation. Management performed
the purchase price allocation with the assistance
of an external expert.
We have focused on this area because judgement
and estimates are involved in allocating the
purchase price to the tangible and intangible
assets identified in the business combination and
because the valuation of intangible assets requires
specialist skills and knowledge.
HOW OUR AUDIT ADDRESSED
THE KEY AUDIT MATTER
We obtained the purchase price allocation prepared by
management. Based on discussions with management,
reading the purchase agreements and leveraging our
understanding of the business and industry, we critically
assessed the process followed for the identification of the
assets and liabilities acquired.
We obtained the third party valuations supporting the value
of the buildings acquired and assessed the competence,
capabilities and objectivity of the external valuation expert
used by management to value the buildings.
With the assistance of our own valuation experts, we
evaluated the valuation methodology adopted by
management to value the brand acquired. The underlying
assumptions, including the discount rate, terminal growth
rate and royalty relief rate used in management’s model
to value the brand were tested for reasonableness by
benchmarking the assumptions to industry average rates
and by independently recalculating the discount rate. We
evaluated the commercial rationale for the low residual
goodwill valuation.
We performed specified procedures on the opening balance
sheet of Linde prepared at 30 June 2017 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. We have reviewed
the assessment of the respective accounting policies and
practices of Mediclinic and Linde prepared by management
to ensure that the Group’s accounting policies have been
appropriately applied.
Based on our work performed, we have found the
judgements and estimates made by management to be
materially reasonable in the context of the Group financial
statements taken as a whole and the related disclosures to
be appropriate.
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 structure of the Group, its accounting processes and controls and the
industry in which it operates.
The Group financial statements are a consolidation of thirteen reporting units which include sub-consolidations of the
operations in each of the Group’s key markets. The Southern Africa, Switzerland and Middle East reporting units required
an audit of their complete financial information due to their size. An audit was also performed over the complete financial
information of the Mediclinic International plc parent company to give appropriate audit coverage. Taken together, reporting
units where we performed audit work over the complete financial information accounted for 92% of consolidated revenue,
83% of consolidated loss before tax and 94% of adjusted profit before tax calculated on an absolute basis.
166 MEDICLINIC | ANNUAL REPORT 2018
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.
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.
Recognising that not every business in each of the thirteen 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.
We visited our component teams in South Africa, Switzerland and the UAE, which included file reviews, attendance at key
audit meetings with local management and participation in audit clearance meetings at each reporting unit. We also had
regular dialogue with our component audit teams at each key reporting unit.
Further specific audit procedures over the Group consolidation and over the Group’s associate interest in Spire were directly
led by the Group audit team. Spire has a non co-terminous year-end to the rest of the Group and our work on Spire included
review of the audited financial statements of Spire for the year ended 31 December 2017 together with subsequent events
review procedures over the lag period of account.
Taken together, reporting units where we performed our audit work accounted for 92% of consolidated revenue, 95% of
consolidated loss before tax and 98% of adjusted profit before tax calculated on an absolute basis. Our audit covered all
reporting units that individually contributed more than 1% to consolidated revenue and more than 2% to consolidated loss
before tax and to adjusted profit before tax calculated on an absolute basis.
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 in aggregate, 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
£15m (2017: £14.9m).
How we determined it
Rationale for benchmark applied
Based on approximately 5% of adjusted profit before tax, calculated as
consolidated loss before tax adjusted for impairment losses, derecognition
of unamortised finance expenses, accelerated amortisation of brand name,
release of pre-acquisition provisions and loss on disposals of businesses.
We believe that adjusted profit before tax is the primary measure used by
the shareholders in assessing the performance of the Group. The adjusted
profit before tax measure removes the impact of significant items which
do not recur from year to year or which otherwise significantly affect the
underlying trend of performance from continuing operations. This is the
metric against which the performance of the Group is most commonly
assessed by management and reported to shareholders. We chose 5%, which
is consistent with the quantitative materiality thresholds used for profit-
oriented companies in this sector.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group materiality.
The range of materiality allocated across components was between £4.9m and £13.4m. Certain components were audited to a
local statutory audit materiality that was less than our Group audit materiality allocation.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above
£0.75m (2017: £0.74m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative reasons.
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INDEPENDENT AUDITORS’ REPORT (CONTINUED)
Going concern
In accordance with ISAs (UK) we report as follows:
REPORTING OBLIGATION
OUTCOME
We are required to report if we have anything material to add or draw attention
to in respect of the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of
accounting in preparing the financial statements and the directors’ identification
of any material uncertainties to the Group’s ability to continue as a going concern
over a period of at least twelve months from the date of approval of the
financial statements.
We have nothing material to add
or to draw attention to. However,
because not all future events or
conditions can be predicted, this
statement is not a guarantee as
to the Group’s ability to continue
as a going concern.
We are required to report if the directors’ statement relating to going concern
in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
•
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement
of the financial statements or a material misstatement of the other information. If, based on the work we have performed,
we conclude that there is a material misstatement of this other information, we are required to report that fact. We have
nothing to report based on these responsibilities.
• With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006,
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions
and matters as described below (required by ISAs (UK) unless otherwise stated).
STRATEGIC REPORT AND DIRECTORS’ REPORT
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report
and Directors’ Report for the year ended 31 March 2018 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Group and its environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
168 MEDICLINIC | ANNUAL REPORT 2018
THE DIRECTORS’ ASSESSMENT OF THE PROSPECTS OF THE GROUP AND OF THE
PRINCIPAL RISKS THAT WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE GROUP
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 99 of the Annual Report 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;
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or
mitigated; and
• The directors’ explanation on page 50 of the Annual Report 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 to report having performed a review of the directors’ statement that they have carried out a robust
assessment of the principal risks facing the Group and 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 UK Corporate Governance Code (the “Code”); and considering whether the statements are consistent with the
knowledge and understanding of the Group and its environment obtained in the course of the audit. (Listing Rules)
OTHER CODE PROVISIONS
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 160, that they consider the Annual Report taken as a whole to be
fair, balanced and understandable and provides the information necessary for the members to assess the Group’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the Group
obtained in the course of performing our audit;
• The section of the Annual Report on page 120 describing the work of the Audit and Risk Committee does not
appropriately address matters communicated by us to the Audit and Risk Committee; and
• The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 160, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give
a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Group’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Group or to cease operations or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
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MEDICLINIC | ANNUAL REPORT 2018
169
INDEPENDENT AUDITORS’ REPORT (CONTINUED)
Use of this report
This report, including the opinions, has been prepared for and only for the 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.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
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
• certain disclosures of directors’ remuneration specified by law are not made.
We have no exceptions to report arising from this responsibility.
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 18 March 2016
to audit the financial statements for the year ended 31 March 2016 and subsequent financial periods. The period of total
uninterrupted engagement is three years, covering the years ended 31 March 2016 to 31 March 2018.
OTHER MATTER
We have reported separately on the Company financial statements of Mediclinic International plc for the year ended
31 March 2018 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
23 May 2018
170 MEDICLINIC | ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
FINANCIAL POSITION
AS AT 31 MARCH 2018
ASSETS
Non-current assets
Property, equipment and vehicles
Intangible assets
Equity accounted investments
Other investments and loans
Deferred income tax assets
Current assets
Inventories
Trade and other receivables
Other investments and loans
Current income tax assets
Cash and cash equivalents
Assets classified as held for sale
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
Cash-settled share-based payment liabilities
Current liabilities
Trade and other payables
Borrowings
Provisions
Retirement benefit obligations
Derivative financial instruments
Current income tax liabilities
Liabilities classified as held for sale
Total liabilities
Total equity and liabilities
Notes
6
7
8
9
10
11
12
9
28.8
31
13
13
13
14
16
17
10
18
19
20
21
17
19
18
20
31
2018
£’m
5 382
3 590
1 406
357
7
22
961
90
607
1
1
261
1
6 343
74
690
(1)
5 057
(2 534)
3 286
87
3 373
2 445
1 866
467
86
23
2
1
525
424
71
15
10
–
5
–
2 970
6 343
2017
£’m
6 353
3 703
2 156
465
8
21
1 069
90
591
16
2
361
9
7 422
74
690
(2)
5 525
(2 201)
4 086
78
4 164
2 668
1 961
527
154
23
2
1
590
472
69
22
10
7
8
2
3 258
7 422
These financial statements and the accompanying notes were approved for issue by the Board of Directors on 23 May 2018
and were signed on its behalf by:
DP Meintjes
Chief Executive Officer
PJ Myburgh
Chief Financial Officer
Mediclinic International plc (Company no 08338604)
MEDICLINIC | ANNUAL REPORT 2018
171
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CONSOLIDATED INCOME
STATEMENT
FOR THE YEAR ENDED 31 MARCH 2018
Revenue
Cost of sales
Administration and other operating expenses
Impairment of properties
Impairment of intangible assets
Other administration and operating expenses
Other gains and losses
Operating (loss)/profit
Finance income
Finance cost
Share of net profit of equity accounted investments
Impairment of equity accounted investment
(Loss)/profit before tax
Income tax expense
(Loss)/profit for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
(Loss)/earnings per ordinary share attributable to the equity holders
of the Company – pence
Basic
Diluted
Notes
22
22
6 & 22
7 & 22
22
23
24
8
8
25
16
26
26
2018
£’m
2 870
(1 773)
(1 387)
(84)
(560)
(743)
2
(288)
9
(94)
3
(109)
(479)
5
(474)
(492)
18
(474)
(66.7)
(66.7)
2017
£’m
2 749
(1 696)
(689)
–
–
(689)
(2)
362
7
(74)
12
–
307
(64)
243
229
14
243
31.0
31.0
172 MEDICLINIC | ANNUAL REPORT 2018
CONSOLIDATED STATEMENT OF
OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2018
(Loss)/profit for the year
Other comprehensive (loss)/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
Remeasurements of retirement benefit obligations
Other comprehensive (loss)/income, net of tax
Total comprehensive (loss)/income for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Notes
27
27
27
27
2018
£’m
(474)
(309)
(310)
1
60
60
(249)
(723)
(742)
19
(723)
2017
£’m
243
388
388
–
34
34
422
665
635
30
665
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MEDICLINIC | ANNUAL REPORT 2018
173
CONSOLIDATED STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
Balance at 1 April 2016
Profit for the year
Other comprehensive income
for the year
Total comprehensive income
for the year
Transactions with non-controlling
shareholders
Dividends paid
Balance at 31 March 2017
(Loss)/profit for the year
Other comprehensive
(loss)/income for the year
Total comprehensive
(loss)/income for the year
Transfer to retained earnings
Non-controlling shareholders
derecognised on disposal of
subsidiaries
Share-based payment expense
Settlement of Forfeitable
Share Plan
Transactions with non-controlling
shareholders
Dividends paid
Share
capital
(note 13)
£’m
74
–
–
–
–
–
74
–
–
–
–
–
–
–
–
–
6
–
–
–
–
–
6
–
–
–
–
–
–
–
–
–
690
(3 014)
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
690
(3 014)
(2)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
(1)
Balance at 31 March 2018
74
6
690
(3 014)
Capital
redemption
reserve
(note 14)
£’m
Share
premium
reserve
(note 13)
£’m
Reverse
acquisition
reserve
(note 14)
£’m
Treasury
shares
(note 13)
£’m
Share-based
payment
reserve
(note 14)
£’m
Foreign
currency
translation
reserve
(note 14)
£’m
Hedging
reserve
(note 14)
£’m
Retained
earnings
£’m
Attributable
to equity
holders
of the
Company
£’m
Non-
controlling
interests
(note 16)
£’m
24
–
–
–
–
–
24
–
–
–
(23)
–
1
(1)
–
–
1
407
–
372
372
–
–
779
–
(311)
(311)
–
–
–
–
–
–
468
4
–
–
–
–
–
4
–
1
1
–
–
–
–
–
–
5
5 320
229
34
263
4
(62)
5 525
(492)
60
(432)
23
–
–
–
(1)
(58)
5 057
3 509
229
406
635
4
(62)
4 086
(492)
(250)
(742)
–
–
1
–
(1)
(58)
3 286
61
14
16
30
(4)
(9)
78
18
1
19
–
(1)
–
–
1
(10)
87
Total
equity
£’m
3 570
243
422
665
–
(71)
4 164
(474)
(249)
(723)
–
(1)
1
–
–
(68)
3 373
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174 MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
175
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CONSOLIDATED STATEMENT OF
CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
2018
£’m
Inflow/
(outflow)
Notes
2 809
(2 343)
466
9
(74)
(56)
345
(319)
(112)
(142)
(83)
2
(2)
5
13
26
(108)
(10)
(58)
6
(30)
(12)
(4)
–
(82)
361
(18)
261
28.1
28.2
28.3
28.4
28.5
29
30
8
16
28.6
28.7
28.7
16
28.8
(Re-
presented)*
2017
£’m
Inflow/
(outflow)
2 735
(2 243)
492
7
(77)
(45)
377
(201)
(101)
(131)
–
44
(1)
4
(16)
176
(169)
(9)
(62)
247
(327)
(3)
–
(15)
7
305
49
361
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
Acquisition of subsidiaries
Disposal of subsidiaries
Acquisition of investment in associate
Dividends received from equity accounted investment
Proceeds from/(acquisition of) money market funds
Net cash generated before financing activities
CASH FLOW FROM FINANCING ACTIVITIES
Distributions to non-controlling interests
Distributions to shareholders
Proceeds from borrowings
Repayment of borrowings
Refinancing transaction costs
Settlement of interest rate swap
Acquisition of non-controlling interest
Net (decrease)/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
* Refer to note 2.1.
176 MEDICLINIC | ANNUAL REPORT 2018
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2018
1.
DESCRIPTION OF BUSINESS
Mediclinic International plc is a private hospital group with three operating divisions, namely Switzerland, Southern
Africa (South Africa and Namibia) and the United Arab Emirates (“UAE”) and with an equity investment in the United
Kingdom. Its core purpose is to enhance the quality of life of patients by providing value-based healthcare services.
2.
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.
2.1. 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”) and
with the Companies Act 2006 applicable to companies reporting under IFRS. The financial statements are prepared
on the historical cost convention, except for the following items, which are carried at fair value or valued using
another measurement basis:
• Derivative financial assets and liabilities and available-for-sale financial assets are measured at fair value;
• Retirement benefit obligations that are measured in terms of the projected unit credit method; and
• Liabilities for cash-settled share-based payments are measured at 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 Company’s
accounting policies. The areas involving a higher degree of judgement or complexity, or areas where assumptions
and estimates are significant to the consolidated financial statements, are disclosed in note 4.
Functional and presentation currency
The consolidated financial statements and financial information are presented in pounds sterling (the presentation
currency), 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 Swiss franc, the South African rand
and UAE dirham. The UAE dirham is pegged against the United States dollar at a rate of 3.6725 per US Dollar.
Exchange rates
The Group uses the average of exchange rates prevailing during the period to translate the results and cash flows
of foreign subsidiaries, the joint venture and associated undertakings into pounds sterling and period-end rates
to translate the net assets of those undertakings. The following exchange rates were applicable for the period:
Average rates:
Swiss franc
South African rand
UAE dirham
Period end rates:
Swiss franc
South African rand
UAE dirham
2018
2017
1.29
17.22
4.87
1.34
16.57
5.15
1.29
18.41
4.80
1.25
16.74
4.59
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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.
Cash flow statement reclassification
The cash flow statement for the year ended 31 March 2017 has been re-presented to reclassify certain capital
expenditure cash flows from cash generated from operations to cash flows from investment activities. The impact
of the reclassification was a decrease in cash generated from operations from £509m to £492m and a decrease in
cash outflows from investment activities from £218m to £201m. This reclassification had no impact on reported cash,
profits or net assets.
MEDICLINIC | ANNUAL REPORT 2018
177
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.2 Consolidation and equity accounting
a)
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.
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. 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.
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.
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 IFRS.
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, 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, the difference is recognised directly in the income statement.
Goodwill is not amortised but is tested on an annual basis for impairment or more frequently if events or changes
in circumstances indicate a potential 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 other comprehensive income.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.2 Consolidation and equity accounting (continued)
c)
Investments in associates and joint ventures
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 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. Investments in
associates and joint ventures are accounted for using the equity method of accounting.
Under the equity method, the equity accounted investments 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.
Dividends received or receivable from equity accounted investments are recognised as a reduction in the carrying
amount of the investment. The Group’s investments in associates and joint ventures include goodwill identified on
acquisition. When the Group’s share of losses in an associate or joint venture equals or exceeds its interests in the
investment (which includes any long-term interests that, in substance, form part of the Group’s net investment), the Group
does not recognise further losses, unless it has incurred obligations or made payments on behalf of the entity.
Unrealised gains on transactions between the Group and its equity accounted investments are eliminated to the
extent of the Group’s interest in these investments. Unrealised losses are eliminated unless the transaction provides
evidence of an impairment of the asset transferred. Accounting policies of the equity accounted investments have
been changed where necessary to ensure consistency with the policies adopted by the Group.
If the ownership interest in an equity accounted investment is reduced but significant influence or joint control
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.
The Group determines at each reporting date whether there is any objective evidence that the equity accounted
investment is impaired. If this is the case, the Group calculates the amount of impairment as the difference between
the recoverable amount of the investment and its carrying value and recognises the amount adjacent to share of
profit or loss of the investment in the income statement.
2.3
Segment reporting
Consistent with internal reporting, the Group’s segments are identified as the three geographical operating divisions
in Switzerland, Southern Africa and Middle East. The United Kingdom and Corporate segments are additional
non-operating segments. The chief operating decision-maker, who is responsible for allocating resources and
assessing performance of the segments, has been identified as the Group Executive Committee that makes strategic
decisions. The Executive Committee comprises the executive directors and senior management as disclosed in the
AR
Annual Report on page 95.
2.4 Property, equipment and vehicles
Land and buildings comprise mainly hospitals and offices. All property, equipment and vehicles are shown at cost
less accumulated 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 less its residual value over its estimated useful life as follows:
• Buildings:
• Equipment:
• Furniture and vehicles:
10 – 100 years
3 – 10 years
3 – 8 years
The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of financial
position date.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.4 Property, equipment and vehicles (continued)
Refer to note 2.6 for impairment of property, equipment and vehicles.
An asset is derecognised on disposal or when no future economic benefits are expected from its use. Profit or loss on
disposals is determined by comparing proceeds with carrying amounts. These are included in the income statement.
2.5
a)
Intangible assets
Goodwill
Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining
control, plus non-controlling interest, less the fair value of the identifiable assets and liabilities of the acquiree.
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. Impairment 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. Management monitors goodwill for impairment at an operating segment level. Any impairment losses that are
recognised are allocated first to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce
the carrying amount of other assets in the CGU where the carrying amount is greater than the recoverable amount.
b)
Trade names
Trade names have been recognised by the Group as part of a business combination. No value is placed on internally
developed trade names. Trade names that are deemed to have an indefinite useful life are carried at cost less
accumulated impairment. Trade names that are deemed to have a finite useful life are capitalised at the cost to the
Group and amortised on a straight-line basis over its estimated useful lives of 1 to 75 years. Expenditure to maintain
trade names is accounted for against income as incurred.
c)
Computer software
Acquired computer software licences 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 to 5 years) using the straight-line method.
Internally developed computer software that is clearly associated with an identifiable and unique system, which
will be controlled by the Group and have a probable future economic benefit beyond one year, are recognised as
intangible assets. Costs associated with maintaining computer software or development expenditure that does not
meet the recognition criteria are expensed as incurred.
2.6
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 a potential impairment. Assets that are subject to
amortisation or depreciation are tested for impairment whenever events or changes in circumstances indicate a
potential impairment. An impairment loss is recognised for the amount by which the asset’s carrying value 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 and independent 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.
180 MEDICLINIC | ANNUAL REPORT 2018
2.
2.7
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Financial assets (continued)
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.
Loan 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 less provision for impairment.
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 are 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.
For financial assets carried at amortised cost, evidence of impairment may include indications that the receivables
or a group of receivables are 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. The amount of the provision for impairment is the difference
between the carrying amount of the asset and the present value of estimated future cash flows, discounted at the
original effective interest rate. The movement in the provision is recognised in the income statement.
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 investment is 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.
2.8 Offsetting of financial assets and liabilities
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
on a future event and is enforceable in the normal course of business even in the event of default, bankruptcy or
insolvency, and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously.
2.9
Inventories
Inventories are measured 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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.10 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 movement in the provision is recognised in the income statement.
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.
2.12 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 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 20. 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 qualifies as a cash flow
hedge is 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 or 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.
2.14 Treasury shares
Treasury shares are deducted from equity until the shares are cancelled, reissued or disposed. 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.
182 MEDICLINIC | ANNUAL REPORT 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.15 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 are 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.
2.16 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.
2.17 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.
Provisions are determined by discounting the expected future cash flows using a pre-tax discount rate that reflects
current market assessments of the time value of money and the risks specific to the liability.
2.18 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; and 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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.19 Employee benefits
a)
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.
Each member’s fund value is directly linked to the contributions and the related investment returns. 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 expenses when they are due.
Defined benefit plans
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)
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.
c)
Equity-settled share-based compensation
The Group operates an 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.
184 MEDICLINIC | ANNUAL REPORT 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.19 Employee benefits (continued)
d)
Cash-settled share-based compensation
The Group operates cash-settled share-based compensation plans. The Group recognises the value of the services
received (expense), and the liabilities to pay for those services, as the employees render service. The liabilities are
measured, initially, and at each reporting date until settled, at the fair value appropriate to the scheme, taking into
account the terms and conditions on which the rights were granted, and the extent to which the employees have
rendered service to date, excluding the impact of any non-market-related vesting conditions. Non-market-related
vesting conditions are included in the assumptions regarding the number of units expected to vest. These assumptions
are revised at the end of each reporting period. All changes to the fair value of the liability are recognised in the
income statement.
e)
Profit sharing and bonus plans
The Group recognises a liability and an expense where a contractual obligation exists 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.
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 medical 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 medical service is provided, based on the
amounts due from patients and/or medical funding entities. Fees are calculated and billed based on various tariff
agreements with funders.
In Switzerland, the cost of treating inpatients with basic health insurance is fixed by the government. The pricing
model is based on diagnostic related groups (“Swiss DRGs”) for inpatients and can be seen as a fixed fee arrangement.
Invoicing occurs when the patient is discharged. Revenue is recognised over the estimated length of stay of the
patient. In some cases, the pricing model for DRGs is based on provisional tariffs as delays occur in the agreement
of the tariffs between the healthcare providers and the funders. When the tariffs are provisional, revenue continues
to be recognised and the outstanding amount is claimed from the insurance. Tariff provisions are recognised as
adjustments in revenue to reflect any uncertainty about the collectability of the amounts invoiced and collected.
If a provisional tariff is changed, the insurer can claim the difference from the healthcare provider. The tariff provision
is recognised when it is probable that an outflow of resources will be required to settle the obligation towards
the insurer. The tariff provision is calculated based on historical experience of outcomes to negotiations between
healthcare providers and funders. This is regularly reassessed based on the actual outcome of tariff negotiations.
Swiss private and semi-private patients enter into supplementary insurance contracts for costs not covered by basic
health insurance. The pricing model is based on fee-for-service principles and the contract with Hirslanden includes
technical medical services (such as the nursing and infrastructure). The doctor fees are agreed directly between the
insurer and the relevant doctor. The revenue is recognised as the services are rendered over the period of the stay
of the patient.
For Switzerland outpatient cases, the pricing model is based on the TARMED rates. The applicable TARMED rate
varies depending on the relevant canton, procedure and patient. Invoicing occurs when the patient is discharged
directly after the treatment and revenue is recognised at the same time.
In Southern Africa and the Middle East (Dubai) a fee-for-service model is used with funders. Mediclinic will invoice
the funders for technical medical services (such as nursing, infrastructure, pharmaceutical goods, etc.). The revenue
is recognised as the services are rendered over the period of the stay of the patient.
Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain levels of
patient visits from Mediclinic Southern Africa and Mediclinic Middle East. These are accrued over the course of the
arrangement based on estimates of the level of business expected and are adjusted against revenue at the end
of the arrangement to reflect actual volumes.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.20 Revenue recognition (continued)
For certain procedures in Southern Africa and the Middle East (Abu Dhabi DRGs) the fixed fee contract model is
used with funders. In these scenarios, the transaction price is fixed and no adjustments can be made to the amount
invoiced to the funder. Invoicing occurs when the patient is discharged. Revenue is recognised over the estimated
length of stay of the patient. Efficiencies or inefficiencies is not charged to the funder and is absorbed by the
operating division.
Other income
Other income earned are recognised on the following bases:
•
Interest income is recognised on a time-proportioned basis using the effective interest rate method.
• 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.
2.21 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.
In the Middle East, rebates received from suppliers are recognised when all the conditions agreed with the suppliers
are met, the amount of cost of sales can be measured reliably and it is probable that the economic benefits associated
with the transaction will flow to the entity.
2.22 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 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
Final dividends are recorded in the Group’s financial statements in the period in which they are approved by the
Company’s shareholders. Interim dividends are recorded when paid.
2.24 Foreign currency transactions
Transactions and balances
Foreign currency transactions are translated into the respective Group entities’ functional currencies at exchange
rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of
such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at
year end exchange rates, are recognised in the income statement (except when recognised in other comprehensive
income as part of qualifying cash flow hedges).
Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are
translated using the exchange rate at the transaction date, and those measured at fair value are translated at the
exchange rate at the date that the fair value was determined. Exchange rate differences on non-monetary items are
accounted for based on the classification of the underlying items.
Translation differences on non-monetary financial assets 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”.
186 MEDICLINIC | ANNUAL REPORT 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.24 Foreign currency transactions (continued)
Group entities
The results and financial position of all foreign operations that have a functional currency 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 Standards, interpretations and amendments
Published standards, amendments and interpretations effective for the 31 March 2018 financial
period:
The following published standards, amendments and interpretations are mandatory for the accounting period
beginning on or after 1 April 2017 and have been adopted:
•
•
IAS 7 (amendment) – Disclosure initiative
IAS 12 (amendment) – Recognition of deferred tax assets for unrealised losses
• Annual improvements 2012 – 2014 cycle – Amendments and clarifications to existing IFRS standards
(1 January 2017)
The implementation of these standards and amendments had no material financial impact on the reported results
or financial position of the Group.
Published standards, amendments and interpretations not yet effective and not early adopted:
The following new standards, amendments and interpretations are expected to have an impact on the financial
statements in the period of initial application.
IFRS 9 Financial Instruments (1 January 2018)
The IASB issued the final version of IFRS 9 Financial Instruments that replaces IAS 39 Financial Instruments:
Recognition and Measurement. IFRS 9 brings together all three aspects of the accounting for financial instruments
project: classification and measurement, impairment and hedge accounting. IFRS 9 is effective for annual periods
beginning on or after 1 January 2018, with early application permitted. Except for hedge accounting, retrospective
application is required, but providing comparative information is not compulsory. For hedge accounting, the
requirements are applied prospectively.
The Group plans to adopt the new standard on 1 April 2018 and will not restate comparative information. During the
2018 financial year, the Group performed a detailed impact assessment of all three aspects of IFRS 9. The assessment
is based on currently available information and may be subject to changes arising from further reasonable and
supportable information being made available to the Group in the 2019 financial year. Overall, the Group expects no
significant impact on its statement of financial position and equity except for the effect of applying the impairment
requirements of IFRS 9. The Group expects an increase in the expected loss allowance resulting in a negative
impact on equity as discussed below. In addition, the Group will implement changes in classification of certain
financial instruments.
a) Classification and measurement
The Group does not expect a significant impact on its statement of financial position or equity on applying the
classification and measurement requirements of IFRS 9.
The equity shares in non-listed companies are intended to be held for the foreseeable future. These shares are
currently classified as available for sale with gains and losses recorded in other comprehensive income (“OCI”).
The Group will apply the option to continue to present fair value changes in OCI and, therefore, the application
of IFRS 9 will not have a significant impact. Unlike IAS 39, under IFRS 9 the cumulative fair value gains or losses
cannot be recycled to the income statement upon the derecognition or disposal of an equity investment.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.25 Standards, interpretations and amendments (continued)
Published standards, amendments and interpretations not yet effective and not early adopted:
(continued)
IFRS 9 Financial Instruments (1 January 2018) (continued)
a) Classification and measurement (continued)
Loans as well as trade receivables are held to collect contractual cash flows and are expected to give rise to
cash flows representing solely payments of principal and interest. The Group analysed the contractual cash flow
characteristics of those instruments and concluded that they meet the criteria for amortised cost measurement
under IFRS 9. Therefore, reclassification of these instruments is not required.
b)
Impairment
IFRS 9 requires the Group to record expected credit losses on all its loans and trade receivables, either on
a 12-month or lifetime basis. The Group will apply the simplified approach and record lifetime expected credit
losses on all trade receivables. Based on current estimates, the Group has determined that the provision for
impairment of receivables balance will increase by approximately 2%. The decrease in the trade receivables
balance in the statement of financial position is expected to be less than £1m. This decrease is after the effect of
reclassifying the disallowances in Mediclinic Middle East from operating expenses to revenue as discussed under
the IFRS 15 transition below.
c) Hedge accounting
The Group determined that all existing hedge relationships currently designated in effective hedging relationships
will continue to qualify for hedge accounting under IFRS 9. As IFRS 9 does not change the general principles
of how an entity accounts for effective hedges, applying the hedging requirements of IFRS 9 will not have a
significant impact on the Group’s financial statements. The Group currently has no hedge relationships that
are ineffective.
IFRS 15 Revenue from Contracts with Customers (1 January 2018)
IFRS 15 establishes a five-step model to account for revenue arising from contracts with customers. Under IFRS 15,
revenue is recognised at an amount that reflects the consideration to which an entity expects to be entitled in
exchange for transferring goods or services to a customer.
The new revenue standard will supersede all current revenue recognition requirements under IFRS. Either a full
retrospective application or modified retrospective application is required for annual periods beginning on or after
1 January 2018. Early adoption is permitted. The Group plans to adopt the new standard from 1 April 2018 using
the modified retrospective application method. During the 2018 financial year, the Group performed a detailed
impact assessment of IFRS 15. The assessment is based on currently available information and may be subject to
changes arising from further reasonable and supportable information being made available to the Group in the
2019 financial year.
Revenue primarily comprises fees charged for inpatient and outpatient hospital services. The recognition and
measurement of revenue does not differ materially from the principles applied by the Group under IAS 18.
In preparing to adopt IFRS 15, the Group considered the following:
a) Volume discounts
Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain admission
levels from Mediclinic Southern Africa and Mediclinic Middle East. These volume discounts are negotiated with
funders on an annual basis. Under IFRS 15, retrospective volume discounts give rise to variable consideration.
Variable consideration should be measured using the most likely outcome of the expected value. Currently, these
discounts are accrued over the course of the period based on estimates of the level of business expected. This
is adjusted at the end of the period to reflect the actual volumes. Volume discounts are recorded as a reduction
in revenue with a corresponding entry against accruals (as volume discounts are not settled on a net basis
with funders). Therefore, Mediclinic’s current treatment of volume discounts is in line with the requirements of
IFRS 15.
188 MEDICLINIC | ANNUAL REPORT 2018
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.25 Standards, interpretations and amendments (continued)
Published standards, amendments and interpretations not yet effective and not early adopted:
(continued)
IFRS 15 Revenue from Contracts with Customers (1 January 2018) (continued)
b) Disallowances
In the Middle East, the normal business process associated with transactions with insurers includes an amount
of claims disallowed (disallowance provision) which is not paid by the insurer. These disallowed claims could be
for various technical or medical reasons. Currently, revenue is recognised based on the contract with the insurers
and a provision for bad debt is recognised for the rejections based on historical trends. Disallowance write-offs on
rejected claims is a general practice by the insurers in the Middle East. Accordingly, Mediclinic Middle East accepts
and expects an amount of consideration that is less than what was originally claimed. These write-offs constitute
variable consideration under IFRS 15. Variable consideration is recognised as revenue to the extent that it is highly
probable that a reversal of revenue will not occur. Based on current estimates, the Group expects a reclassification
from operating expenses (bad debts) to revenue of approximately £17m to account for the difference in treatment
between the existing standard (IAS 18) and IFRS 15. The change will have no impact on net profit.
c) Tariff provision
In Switzerland, tariff provisions are recognised in revenue when the pricing model for DRGs is based on provisional
tariffs (see note 2.20). At the time of revenue recognition, the revenue based on the provisional tariff is billed
and claimed from the insurer or the canton. Subsequently, when the tariffs are finalised and payment made, the
insurer can claim from the healthcare provider if the tariffs are lower than the provisional tariffs billed.
Under the existing standard (IAS 37), tariff provisions are classified as a reduction in revenue, with a corresponding
entry to provisions in the statement of financial position. We concluded that the tariff adjustments should not be
adjusted against accounts receivable under IFRS 15 due to the fact that the original invoices are settled before
the finalisation of the tariffs (unlike in the Middle East). Tariff adjustments are therefore classified as provisions
as is the case under the current accounting treatment and not as a reduction in accounts receivable. This view is
supported by the fact that balances due to funders are not settled on a net basis.
d) Principal versus agent considerations
Hirslanden hospitals have affiliated doctors who are partners cooperating with Hirslanden under a contractual
agreement. The contracts with these affiliated doctors allow them to use the Hirslanden facilities and nursing
staff. The doctors are responsible for the treatment of the patient and Hirslanden is responsible for the technical
services such as the medical equipment and nursing. Swiss regulatory requirements require Hirslanden to
provide statistics to the government based on all the costs incurred for patient procedures, including doctors’
fees. Hirslanden therefore invoices its own technical services together with the doctors’ fees to the insurer and
subsequently refunds the amount of the doctors’ services to the affiliated doctors. The refund paid to the doctor
is recorded in revenue and thus revenue is shown on a net basis. For DRG procedures, the process is the same,
but the refund is calculated using a contractually agreed-upon percentage for doctors’ services.
The following indicators in IFRS 15 were considered in the assessment of whether Hirslanden is acting as a
principal or as an agent in these cases:
• The affiliated doctors are responsible for fulfilling the contract of treating the patient. Every affiliated doctor
needs own liability insurance for any claim against any human error of the doctor. The hospital is responsible
for any process failures at the hospital.
• Hirslanden does not have discretion in establishing prices. These are determined by contracts in place between
the doctor and the insurer or the relevant percentage of the total revenue for DRG procedures.
• An administrative cost contribution (a form of commission) is deducted from the doctors’ fees before the
transfer of these fees to the doctors.
Therefore, we have concluded that Hirslanden is acting as an agent in this scenario and revenue will be accounted
for on a net basis. The same conclusion was reached under the current revenue standard and thus there will be
no change in treatment upon implementation of IFRS 15.
e) Presentation and disclosure requirements
The presentation and disclosure requirements in IFRS 15 are more detailed than under the current IFRS standard.
The Group will disaggregate revenue recognised from contracts with customers into categories that depict how
the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.
2.25 Standards, interpretations and amendments (continued)
Published standards, amendments and interpretations not yet effective and not early adopted:
(continued)
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. In general, properties are owned by the
Group with the exception of the Middle East division where properties are leased. In the 2019 financial year, the Group
will evaluate the effect of IFRS 16 on its consolidated financial statements.
Other standards
The following new accounting standards, interpretations and amendments will have no material impact on the
financial statements:
•
•
•
•
IFRS 2 (amendment) – Classification and measurement of share-based payment transactions (1 January 2018)
IFRS 4 – Clarification on the implementation approach together with IFRS 9 (1 January 2018)
IAS 40 – Transfers of investment property (1 January 2018)
IFRIC 22 – Foreign currency transactions and advance consideration (1 January 2018)
• Annual improvements 2014 – 2016 cycle – Amendments and clarifications to existing IFRS standards (1 January 2018)
•
•
•
IAS 19 – Plan amendment, curtailment or settlement (1 January 2019)
IAS 28 – Long term interests in associates and joint ventures (1 January 2019)
IFRIC 23 – Uncertainty over income tax treatments (1 January 2019)
• Annual improvements 2015 – 2017 cycle – Amendments and clarifications to existing IFRS standards (1 January 2019)
•
•
IFRS 17 – Insurance contracts (1 January 2021)
IFRS 10 and IAS 28 (amendments) – Sale or contribution of assets between an investor and its associate or joint
venture (postponed)
3.
3.1
FINANCIAL RISK MANAGEMENT
Financial risk factors
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 the effect of potential adverse events on the Group’s financial performance.
a)
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.
Changes in the pounds sterling/Swiss franc, pounds sterling/South African rand and pounds sterling/UAE dirham
exchange rates 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 and is funded in their local currency.
In the case of corporate offshore transactions and or cross-border business combinations, generally forward cover
contracts are considered or taken out to minimize foreign currency risk. Currently there are no forward cover
contracts in place.
The impact of a 10% change in the sterling/Swiss franc, sterling/South African rand and the sterling/UAE dirham
exchange rates for a sustained period of one year is:
• profit for the period would increase/decrease by £12m (2017: increase/decrease by £14m) due to exposure to the
sterling/Swiss franc exchange rate;
• profit for the period would increase/decrease by £9m (2017: increase/decrease by £8m) due to exposure to the
sterling/South African Rand exchange rate;
• profit for the period would increase/decrease by £4m (2017: increase/decrease by £2m) due to exposure to the
sterling/UAE dirham exchange rate;
190 MEDICLINIC | ANNUAL REPORT 2018
3.
3.1
a)
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
Market risk (continued)
i) Currency risk (continued)
Investments in foreign operations (continued)
•
foreign currency translation reserve would increase/decrease by £152m (2017: increase/decrease by £196m) due
to exposure to the sterling/Swiss franc exchange rate;
•
foreign currency translation reserve would increase/decrease by £7m (2017: increase/decrease by £6m) due
to exposure to the sterling/South African rand exchange rate; and
•
foreign currency translation reserve would increase/decrease by £153m (2017: increase/decrease by £154m) due
to exposure to the sterling/UAE dirham 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’s interest rate risk arises from bank borrowings at variable interest rates. 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. Under the interest rate swaps, the Group agrees with other parties
to exchange, at specified intervals, the difference between fixed contract rates and floating-rate interest amounts
calculated by reference to the agreed notional amounts. At year end a portion of the South African borrowings was
hedged and the Swiss and Middle East borrowings was unhedged (refer to note 20). The unhedged borrowings are
evaluated on a regular basis to ensure interest rate risk is managed.
With the interest rate swap agreements the Group entered into to mitigate interest rate risk, the Group did not
consider there to be a significant concentration of interest rate risk.
Interest rate sensitivity
The sensitivity analyses below were determined based on the exposure to interest rates to net debt 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. The sensitivity of interest rates can be
summarised as follows:
• Switzerland – at 31 March 2018, the 3M Swiss LIBOR was -0.74% (2017: -0.73%). Interest rates would have
to increase by 74 basis points to have an impact on profit for the period with all other variables held constant.
An increase in the interest rate of 25 basis points would have no impact on profit for the period (2017: no impact);
• Southern Africa – profit for the period would increase/decrease by £1m (2017: increase/decrease by £2m) if the
interest rates had been 100 basis points higher/lower in Southern Africa with all other variables held constant; and
• Middle East – profit for the period would increase/decrease by £0.5m (2017: increase/decrease by £0.5m) if the
interest rates had been 50 basis points higher/lower in the Middle East with all other variables held constant.
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, 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.
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NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
3.
3.1
b)
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
Credit risk (continued)
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 represent the Group’s
maximum exposure to credit risk in relation to these assets. At 31 March 2017 and 31 March 2018, the Group did not
consider there to be a significant concentration of credit risk.
c)
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.
The Group’s unused overdraft facilities are:
In addition the Group has unused banking facilities of £342m (2017: £48m).
2018
£’m
125
2017
£’m
95
The following table details the Group’s remaining contractual maturity for its financial liabilities. The table has been
prepared 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
prepared based on undiscounted net cash inflows/(outflows) that settle on a net basis.
Financial liabilities
31 March 2018
Borrowings
Derivative financial
instruments
Trade payables
Other payables and
accrued expenses
31 March 2017
Borrowings
Derivative financial
instruments
Trade payables
Other payables and
accrued expenses
Carrying
value
Contractual
cash
flows
1 – 12
months
1 – 5
years
Beyond 5
years
1 937
2 766
2
210
144
2
210
144
2 030
2 279
9
227
167
9
227
167
146
1
210
144
153
7
227
167
990
1 630
1
–
–
–
–
–
2 048
78
2
–
–
–
–
–
192 MEDICLINIC | ANNUAL REPORT 2018
FINANCIAL RISK MANAGEMENT (continued)
3.
3.2 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 17, 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 13, 14 and 16 respectively. The Group’s Audit and Risk Committee
reviews the going concern status and capital structure of the Group bi-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 Group’s dividend policy is to target a pay-out ratio of between 25% and
30% of adjusted earnings. The Board may revise the policy at its discretion. The debt-to-adjusted capital ratios at
31 March 2018 and 31 March 2017 were as follows:
Borrowings
Less: cash and cash equivalents
Net debt
Total equity
Debt-to-equity capital ratio
2018
£’m
1 937
(261)
1 676
3 373
49.7%
2017
£’m
2 030
(361)
1 669
4 164
40.1%
The impairment charges at Hirslanden affected the calculation of the economic capital covenant in the finance
agreements. While the Group had an unconditional contractual right through an equity cure any potential breach was
actually avoided through a contractual amendment agreed with the lending consortium.
4.
CRITICAL ACCOUNTING ESTIMATES AND JUDGEMENTS
The Group makes estimates and assumptions concerning the future. Although these estimates and assumptions are
based on management’s best information regarding current circumstances and future events, actual results may
differ. The estimates and assumptions that have a risk of causing a material adjustment to the carrying amounts of
certain assets and liabilities within the next financial year are discussed below.
Critical accounting judgements
• Level at which management monitors goodwill for impairment testing (refer to note 7)
• Useful life assigned to the Swiss trade names (refer to note 7)
• Deferred tax on unremitted earnings (refer to note 10)
• Useful lives and residual values of property, equipment and vehicles (refer to note 6)
• Determination of CGUs for impairment testing (refer to note 6)
Key estimates
•
•
•
Impairment of properties (refer to note 6)
Impairment of goodwill and indefinite useful life intangible assets (refer to note 7)
Impairment of equity-accounted investments (refer to note 8)
• Recognition of deferred tax assets arising from tax losses (refer to note 10)
• Retirement benefits (refer to note 18)
• Purchase price allocation assessments (refer to note 29)
MEDICLINIC | ANNUAL REPORT 2018
193
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A
N
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A
L
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M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
5.
SEGMENTAL REPORT
The reportable operating segments are identified as follows: Switzerland, Southern Africa, and Middle East and
additional segments are shown for the United Kingdom and Corporate.
Year ended 31 March 2018
Revenue
EBITDA
EBITDA before
management fee
Management fees included
in EBITDA
Other gains and losses
Depreciation and
amortisation
Impairment of properties
Impairment of
intangible assets
Operating (loss)/profit
Income from associate
Impairment of associate
Finance income
Finance cost (excluding
intersegment loan interest)
Total finance cost
Elimination of intersegment
loan interest
Taxation
Segment result
At 31 March 2018
Investments in associates
Investments in joint ventures
Capital expenditure
Total segment assets
Total segment
liabilities (excluding
intersegment loan)
Total liabilities from
reportable segment
Elimination of
intersegment loan
Reportable operating segments
Other
Total
£’m
Switzerland
£’m
Southern
Africa
£’m
Middle
East
£’m
United
Kingdom
£’m
Corporate
£’m
2 870
1 349
522
522
–
2
(168)
(84)
(560)
(288)
3
(109)
9
(94)
(94)
–
5
(474)
352
5
245
6 343
251
254
(3)
9
(86)
(84)
(560)
(470)
–
–
1
(48)
(64)
16
46
(471)
2
–
101
3 448
2 970
1 985
3 827
2 842
(857)
(857)
877
189
194
(5)
–
(29)
–
–
160
–
–
7
(38)
(38)
–
(40)
89
2
5
62
747
672
672
–
643
85
88
(3)
(7)
(53)
–
–
25
–
–
1
(8)
(8)
–
–
18
–
–
80
1 757
309
309
–
–
–
–
–
–
–
–
–
–
3
(109)
–
–
–
–
–
(106)
348
–
–
348
–
–
–
1
(3)
(14)
11
–
–
–
–
(3)
–
–
–
–
16
(16)
(1)
(4)
–
–
2
43
4
4
–
194 MEDICLINIC | ANNUAL REPORT 2018
5.
SEGMENTAL REPORT (continued)
Reportable operating segments
Other
Total
£’m
Switzerland
£’m
Southern
Africa
£’m
Middle
East
£’m
United
Kingdom
£’m
Corporate
£’m
Year ended 31 March 2017
Revenue
EBITDA
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 (excluding
intersegment loan interest)
Total finance cost
Elimination of intersegment
loan interest
Taxation
Segment result
At 31 March 2017
Investments in associates
Investments in joint ventures
Capital expenditure
Total segment assets
Total segment liabilities
(excluding intersegment loan)
Total liabilities from reportable
segment
Elimination of intersegment
loan
2 749
1 321
509
509
–
(2)
(145)
362
12
7
(74)
(74)
–
(64)
243
461
4
251
7 422
277
279
(2)
–
(76)
201
–
–
(28)
(44)
16
(32)
141
2
–
128
4 258
3 258
2 235
4 163
3 140
(905)
(905)
780
165
170
(5)
–
(25)
140
–
7
(33)
(33)
–
(32)
82
–
4
70
676
650
650
–
648
71
74
(3)
1
(44)
28
–
–
(7)
(7)
–
–
21
–
–
53
1 987
372
372
–
–
–
–
–
–
–
–
12
–
–
–
–
–
12
459
–
–
459
–
–
–
–
(4)
(14)
10
(3)
–
(7)
–
–
(6)
10
(16)
–
(13)
–
–
–
42
1
1
–
The total non-current assets, excluding financial instruments and deferred
tax assets per geographical location are:
Switzerland
Southern Africa
Middle East
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
2018
£’m
2017
£’m
2 958
498
1 549
348
3 700
453
1 712
459
–
2 870
–
2 749
348
5 005
459
5 865
MEDICLINIC | ANNUAL REPORT 2018
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A
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E
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T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
6.
PROPERTY, EQUIPMENT AND VEHICLES
Land – cost
Buildings
Cost
Accumulated depreciation and impairment
Land and buildings
Capital expenditure in progress
Equipment
Cost
Accumulated depreciation
Furniture and vehicles
Cost
Accumulated depreciation
2018
£’m
864
2 184
2 509
(325)
3 048
181
306
810
(504)
55
224
(169)
2017
£’m
911
2 294
2 512
(218)
3 205
113
328
795
(467)
57
218
(161)
3 590
3 703
Land and
buildings
£’m
Capital
expenditure
in progress
£’m
Equipment
£’m
Furniture
and
vehicles
£’m
Net book value at 1 April 2016
Additions
Depreciation
Prior year capital expenditure
completed
Disposal of subsidiaries
Transfer to assets held for sale
Exchange differences
Net book value at 31 March 2017
Additions
Depreciation
Business combinations
Prior year capital expenditure
completed
Impairment
Transfer to assets held for sale
Exchange differences
Net book value at 31 March 2018
2 771
57
(37)
96
(5)
(3)
326
3 205
39
(39)
103
28
(84)
–
(204)
3 048
131
77
–
(118)
–
(3)
26
113
107
–
–
(32)
–
–
(7)
181
251
83
(60)
18
(5)
(2)
43
328
55
(70)
7
3
–
(1)
(16)
306
Total additions
To maintain operations
To expand operations
196 MEDICLINIC | ANNUAL REPORT 2018
46
22
(22)
4
–
–
7
57
22
(23)
–
1
–
–
(2)
55
2018
£’m
223
98
125
Total
£’m
3 199
239
(119)
–
(10)
(8)
402
3 703
223
(132)
110
–
(84)
(1)
(229)
3 590
2017
£’m
239
105
134
6.
PROPERTY, EQUIPMENT AND VEHICLES (continued)
Property, equipment and vehicles with a book value of £2 594m (2017: £2 731m) are encumbered as security for
borrowings (see note 17).
Included in equipment is capitalised finance lease equipment with a book value of £2m (2017: £1m).
Critical accounting estimates and judgements
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.
Rates of depreciation 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.
Property, equipment and vehicles are considered for impairment if impairment indicators are identified at an
individual CGU level. A CGU is the smallest identifiable group of assets that generates cash inflows that are largely
independent of the cash inflows from other assets or groups of assets. The Group defines CGUs as combined inter-
dependent hospitals and/or clinics or as individual hospitals depending on the geographical location or the degree
of integration.
The impairment assessment is performed at CGU level and any impairment charge that arises would be allocated
to the CGU’s goodwill first, followed by other assets (such as property, equipment and vehicles and other intangible
assets).
Impairment of properties in Swiss CGU
During the year, the CGUs in the Switzerland segment were tested for impairment due to changes in the market and
regulatory environment in which the CGUs operate (refer to note 7 for further information about these changes).
The recoverable amounts of the CGUs were based on their value in use calculations, which were determined by
discounting the future cash flows that are expected to be generated from continuing use of the CGUs. The recoverable
amount is the higher of the CGU’s fair value less costs to sell and value in use which amounted to £448m. In determining
the value in use for the CGUs, the cash flows were discounted at rates between 4.9% and 5.1%. Beyond five years,
the cash flows were extrapolated using a 1.6% (2017: 1.6%) growth rate. The carrying value of one CGU was determined
to be higher than its recoverable amount and as a result an impairment charge of £84m was recognised in the
income statement.
7.
INTANGIBLE ASSETS
Goodwill
Cost
Accumulated impairment
Trade names
Cost
Accumulated amortisation and impairment
Computer software
Cost
Accumulated amortisation
Leases
Cost
Accumulated amortisation
2018
£’m
1 253
1 553
(300)
83
386
(303)
48
91
(43)
22
24
(2)
2017
£’m
1 715
1 715
–
377
399
(22)
38
73
(35)
26
27
(1)
1 406
2 156
MEDICLINIC | ANNUAL REPORT 2018
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R
O
U
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F
N
A
N
C
A
L
S
T
A
T
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M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7.
INTANGIBLE ASSETS (continued)
Net book value at 1 April 2016
Additions
Amortisation
Disposal of subsidiaries
Exchange differences
Net book value at 31 March 2017
Additions
Amortisation
Business combinations
Disposal of subsidiaries
Impairment
Exchange differences
Net book value at 31 March 2018
Goodwill
£’m
Trade
names
£’m
Computer
software
£’m
Leases*
£’m
1 532
–
–
(33)
216
1 715
–
–
13
(3)
(300)
(172)
1 253
354
–
(16)
–
39
377
–
(24)
17
–
(260)
(27)
83
31
12
(9)
–
4
38
22
(11)
–
–
–
(1)
48
24
–
(1)
–
3
26
–
(1)
–
–
–
(3)
22
Total
£’m
1 941
12
(26)
(33)
262
2 156
22
(36)
30
(3)
(560)
(203)
1 406
*
Relates to favourable lease contracts on buildings. The leases are characterised by fixed annual rent with no
annual rent escalations for majority of the contract.
Critical accounting estimates and judgements
The Group tests annually whether goodwill and the indefinite useful life intangible assets, resulting from the Al Noor
and Hirslanden acquisitions, have suffered any impairment. The recoverable amounts of CGUs have been determined
based on value in use calculations. These calculations require the use of estimates in respect of growth and discount
rates and assume a stable regulatory environment. Regulatory environments are subject to uncertainties that can
have an impact on goodwill and the intangible assets’ carrying value.
IFRS requires the impairment assessment to be performed at the level at which goodwill and trade names are
monitored for impairment by management, provided that this level cannot be bigger than an operating segment.
Management assesses goodwill at a Hirslanden and Mediclinic Middle East operating division level. This means that
for the Mediclinic Middle East division, recoverability of goodwill is assessed by reference to the aggregated cash
flows of the legacy Middle East and Al Noor businesses. The Mediclinic Middle East goodwill originated mainly
from the Al Noor business combination with a portion originating from other UAE business combinations. The
initial commercial rationale for the acquisition of Al Noor included expected synergies from integrating the legacy
Al Noor business with the legacy MCME business that would be realised across the combined Middle East division.
In accordance with IFRS, goodwill shall be allocated to all CGUs, or groups of CGUs, that are expected to benefit
from the expected synergies.
The Hirslanden trade name cannot be allocated on a reasonable and consistent basis to the CGUs that consists of
individual hospitals (refer to note 6). As a result, it is viewed as a corporate asset and the carrying amount of the net
assets of the group of CGUs (including the allocation of trade name) is tested for impairment at Hirslanden operating
division level alongside the related goodwill.
The estimation of the indefinite useful life of the Hirslanden trade name was previously based on the expectation
that there is no foreseeable limit to the period over which the asset is expected to generate net cash flows for the
Group. The useful lives of both the Hirslanden trade name and the other Swiss trade names were considered as
part of the annual impairment test and were subsequently changed from indefinite useful lives to finite useful lives
effective 31 March 2018. The respective useful lives of the Hirslanden trade name and the other Swiss trade names
were determined based on an analysis of relevant factors, such as the effect of technological changes on the delivery
of healthcare services, patient attendance, the effect of regulatory changes in healthcare and the possible actions by
competitors. Based on the analysis, a useful life of 75 years was allocated to the remaining Hirslanden trade name and
a useful life of 25 years was allocated to the other Swiss trade names reflecting the relative significance, geographical
coverage and longevity of the Group’s trade names in Switzerland. The impact going forward is approximately an
additional £2m annual amortisation charge. This expectation requires a significant degree of management judgement.
198 MEDICLINIC | ANNUAL REPORT 2018
7.
INTANGIBLE ASSETS (continued)
Impairment testing of significant goodwill balances and indefinite useful life trade name
The Group tests goodwill and indefinite useful life trade names for impairment on an annual basis or more frequently
if there are indications that these assets may be impaired. The annual impairment assessment is performed at year
end when the budget process is finalised. The Group’s impairment assessment compares the carrying value of the
group of CGUs with its recoverable amount. The group of CGUs for goodwill impairment assessment purposes are
identified on a segmental or operating division level in terms of IFRS 8.
The recoverable amount of a group of CGUs is determined by its value in use which is derived from discounted cash
flow calculations. The key inputs to its calculations are described below.
Forecasts
The Group’s operating divisions are required to submit budgets for the next financial year and forecasts for the
following four years, which are approved by the Board. Future earnings in the value in use calculation are based
on these budgets and forecasts that is calculated on a per hospital basis and considers both internal and external
market information. These budgets and forecasts represent management’s best view of future revenues and
cash flows.
Growth rates
Growth rates are determined from budgeted and forecasted revenue. Terminal growth rates are country specific
and determined based on the forecast market growth rates and considers long term inflation. A stable regulatory and
tariff environment is assumed. Growth rates have been benchmarked against external data for the relevant markets.
Discount rates
The weighted average cost of capital (“WACC”) was determined by considering the respective debt and equity costs
and ratios. The discount rate is based on the risk-free rate for government bonds adjusted for a risk premium to reflect
the increased risk of investing in equities. Discount rates are lower for the operating divisions which operate in more
mature markets with low inflation and higher for those operating in markets with a higher inflation. Discount rates
reflect the time value and the risks associated with the segment or operating division cash flows. The assumptions
used in the calculation of the discount rate are benchmarked to externally available data.
The impairment calculations indicated that there was impairment in the carrying value of the Hirslanden goodwill
and the Hirslanden indefinite useful life trade name. The calculation for the Mediclinic Middle East goodwill indicated
no impairment.
Impairment of the Hirslanden goodwill and the Hirslanden indefinite useful life trade name
The recoverable amount of the Hirslanden group of CGUs was based on its value in use and amounted to £3 240m.
This was determined by discounting the future cash flows to be generated from the continuing use of the Hirslanden
group of CGUs. The recoverable amount is the higher of an asset’s fair value less costs to sell or value in use.
Regulatory changes implemented on 1 January 2018 (new TARMED tariffs and regulations that require enhanced
outmigration of medical treatments) as well as the changing market in Switzerland had a significant impact on the
Hirslanden value in use calculation both for the five year forecast period as well as the determination of the terminal
value. As a result, the carrying amount of the group of CGUs was determined to be higher than its recoverable
amount and an impairment of £300m and £260m was recognised against goodwill and the trade name, respectively.
Impairment testing of Hirslanden goodwill and indefinite useful life trade names
The Hirslanden goodwill of £nil (2017: £307m) originated mainly from the Hirslanden business combination and
other smaller business combinations (refer to note 29). The Hirslanden trade name of £37m (2017: £319m) originated
from the Hirslanden business combination. Key assumptions used for the value in use calculations for the annual
impairment testing were as follows:
Discount rates – The discount rate applied to cash flow projections is 5.0% (2017: 4.7%).
Growth rates – The terminal growth rate beyond five years are extrapolated using a 1.6% (2017: 1.6%) growth rate.
MEDICLINIC | ANNUAL REPORT 2018
199
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A
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E
G
C
R
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P
O
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G
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E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
7.
INTANGIBLE ASSETS (continued)
Impairment testing of Hirslanden goodwill and indefinite useful life trade names (continued)
Forecasts – In comparison with the prior year, forecasted cash flows were adjusted downwards as a result of changes
in the regulatory and market environment (including new TARMED tariffs and regulations that require enhanced
outmigration of medical treatments).
The carrying amount of the goodwill and Hirslanden indefinite useful life trade name was impaired during the year.
The impairment charge recognised in the income statement consisted of £300m for the impairment of goodwill and
£260m for the impairment of the Hirslanden indefinite useful life trade name.
Impairment testing of Mediclinic Middle East goodwill
The Mediclinic Middle East goodwill with a carrying amount of £1 245m (2017: £1 401m) originated mainly from the
Al Noor Hospital Group plc (Al Noor) business combination, with a portion originating from other UAE business
combinations. Key assumptions used for the value in use calculations for the annual impairment testing were
as follows:
Discount rates – The discount rate applied to cash flow projections is 8.7% (2017: 7.8%).
Growth rates – The terminal growth rate beyond five years are extrapolated using a 3.0% (2017: 2.5%) growth rate.
Sensitivity analysis – The recoverable amount calculated based on value in use exceeded the carrying value by
approximately £245m (2017: £259m). A fall in growth rate to 1.4% (2017: 1.6%) or a rise in discount rate to 9.6% (2017:
8.5%) would reduce the headroom to nil.
Al Noor trade name
On 15 February 2016, an intangible asset relating to the Al Noor trade name of £33m was recognised as part of the
acquisition of Al Noor. The useful life of the asset was determined to be five years. Up until the end of February 2017,
£7m of the trade name was amortised. Following the announcement on 21 February 2017 regarding the rebranding
of all Al Noor facilities to Mediclinic, the carrying value and the useful economic life of the trade name recognised
were reassessed. The rebranding of all the Al Noor hospitals and clinics was completed during the current year.
Accelerated amortisation of £7m was recognised in the previous financial year and the remainder of the balance of
£23m was amortised in the current year.
8.
EQUITY ACCOUNTED INVESTMENTS
Investment in associates
Investment in joint venture
8.1
Investment in associates
Listed investment
Unlisted investments
Reconciliation of carrying value at the beginning and end of the period
Opening balance
Additional investment in unlisted associate
Share of net profit of associated companies
Impairment of listed associate
Dividends received from associated companies
2018
£’m
352
5
357
348
4
352
461
2
3
(109)
(5)
352
2017
£’m
461
4
465
459
2
461
452
1
12
–
(4)
461
200 MEDICLINIC | ANNUAL REPORT 2018
8.
8.1
EQUITY ACCOUNTED INVESTMENTS (continued)
Investment in associates (continued)
Set out below are details of the associate which is material to the Group:
Country of incorporation
and place of business
%
ownership
Spire Healthcare Group plc (Spire)
United Kingdom
29.9%
Spire is listed on the London Stock Exchange. It does not issue publicly available quarterly financial information and
has a December year-end. The investment in associate was equity accounted for the 12 months to 31 December 2017
(2017: 31 December 2016). No significant events occurred since 1 January 2018 to the reporting date.
Non-contractual relationships with consultants (“NCRC”) were identified as part of the notional purchase price
allocation as the only significant intangible asset. The fair value of the total NCRC asset was determined as £225m
and the remaining useful life was assessed as 22 years. The Group’s 29.9% portion of the asset amounted to £68m at
the acquisition date.
During the year, an impairment loss was recognised on the Spire investment. The impairment charge decreased the
notional goodwill recognised to £nil (2017: £75m) and the remainder of the impairment charge of £34m decreased
the notional NCRC intangible. The carrying amount of the NCRC intangible will be amortised over its remaining
useful life. The amortisation charge for the current period is £2m (2017: £4m).
Summarised financial information in respect of the Group’s material associate is set out below.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
Summarised statement of financial position
Non-current assets
Current assets
Total assets
Non-current liabilities
Current liabilities
Net assets
Mediclinic’s effective interest
Mediclinic’s effective interest in net assets
Transaction costs capitalised
NCRC
Goodwill
Total carrying value of equity investment
Market value of listed investment at 31 March*
Summarised statement of comprehensive income
Revenue
Profit from continuing operations
Other comprehensive income
Total comprehensive income
As at
31 Dec
2017
£’m
As at
31 Dec
2016
£’m
1 555
179
1 734
(571)
(125)
1 038
29.9%
310
10
28
–
348
251
932
17
–
17
1 509
215
1 724
(567)
(122)
1 035
29.9%
310
10
64
75
459
389
926
54
–
54
*
The market value of the listed investment on 22 May 2018 was £304m.
Refer to the Annexure on page 247 for further details of investments in associates.
AR
MEDICLINIC | ANNUAL REPORT 2018
201
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
8.
8.1
EQUITY ACCOUNTED INVESTMENTS (continued)
Investment in associates (continued)
Critical accounting estimates and judgements
The Group tests whether equity accounted investments have suffered any impairment when indicators of impairment
are identified, in this case the significant and prolonged decline in the fair value of the investment below its carrying
value. The value in use calculation of the investment is based on a discounted cash flow model. These calculations
require the use of estimates in respect of growth and discount rates and it assumes a stable regulatory environment.
At 30 September 2017, the market value of the investment in Spire was £270m, which was below the carrying
value. An impairment test was performed by updating the key assumptions applied in the value in use calculation
performed at 31 March 2017. In particular, the Group adjusted the value in use calculation for the guidance announced
by Spire in September 2017 about the current financial performance and about the related impact on short- and
medium-term growth rates and revisited the other key assumptions in this context. As a result, an impairment loss of
£109m was recorded against the carrying value.
At year end, another impairment test, updated for latest guidance announced by Spire in March 2018, was performed
and indicated no further impairment losses. The following key assumptions were used in the calculation:
Discount rates – a discount rate of 5% was applied to the discreet period cash flow projections and a discount rate
of 7% was applied to the terminal year.
Growth rates – a terminal growth rate of 2.5% was applied in the calculation.
Sensitivity analysis – an increase in the discount rate or a decrease in the growth rate will likely give rise to further
impairment as there is little headroom to the current carrying value.
8.2
Investment in joint venture
Reconciliation of carrying value at the beginning and end of the period
Opening balance
Exchange differences
2018
£’m
4
1
5
2017
£’m
3
1
4
The Group has a 49.9% interest in Wits University Donald Gordon Medical Centre (Pty) Ltd. The unlisted joint
venture is accounted for by using its financial information for the 12 months ended 31 December 2017 (2017:
31 December 2016) since it has a different year-end.
AR
Details of the joint venture appear in the Annexure on page 247.
202 MEDICLINIC | ANNUAL REPORT 2018
9.
OTHER INVESTMENTS AND LOANS
Unlisted – no active market
Loans and receivables*
Available-for-sale: Shares
Other receivables**
Short-term deposits***
Non-current
Current
Total other investments and loans
Other investments and loans are held in the following currencies:
Swiss franc
South African rand
UAE dirham
2018
£’m
2017
£’m
7
1
–
–
8
7
1
8
1
7
–
8
5
2
1
16
24
8
16
24
2
5
17
24
Supported by the underlying business’ financial position, the credit quality of the loans is considered satisfactory.
*
** The other receivables relate to prepaid lease agreements in the UAE.
*** This related to fixed deposits in the UAE, the maturity date of these deposits were during July 2017.
10. DEFERRED TAX
The movement on the deferred tax account is as follows:
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
Opening balance
Income statement charge for the year
Provision for the year
Previously unused tax losses recognised
Exchange differences
Business combinations
Charged to other comprehensive income
Balance at the end of the year
Deferred income tax assets
Deferred income tax liabilities
2018
£’m
506
(59)
(59)
–
(38)
20
16
445
(22)
467
445
2017
£’m
430
21
24
(3)
46
–
9
506
(21)
527
506
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
203
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
10. DEFERRED TAX (continued)
The deferred tax relating to current assets and current liabilities contain temporary differences that are most likely
to realise in the next 12 months. The deferred tax balance comprises 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
Current
assets
£’m
Provisions
and others
£’m
Total
£’m
Deferred tax liabilities
At 1 April 2016
Charged/(credited) to the income statement
Exchange differences
At 31 March 2017
Set-off of deferred tax liabilities pursuant
to set-off provisions
Net deferred tax liabilities at the end
of the year
At 1 April 2017
Credited to the income statement
Business combinations
Exchange differences
At 31 March 2018
Set-off of deferred tax liabilities pursuant
to set-off provisions
Net deferred tax liabilities at the end
of the year
409
3
43
455
455
(10)
17
(30)
432
73
–
7
80
80
(55)
5
(7)
23
6
–
1
7
7
–
–
–
7
15
(1)
2
16
16
(1)
–
(1)
14
503
2
53
558
(31)
527
558
(66)
22
(38)
476
(9)
467
The impairment of the trade names (£260m) and the impairment of the properties (£84m) lead to the release of
deferred tax liabilities in the “Tangible assets” and “Intangible assets” categories of £55m and £13m respectively.
Refer to notes 6 and 7 regarding the impairment charge recognised.
Current
assets
£’m
Provisions
and others
£’m
Long-term
liabilities
£’m
Derivatives
£’m
Tax losses
carried
forward
£’m
Total
£’m
Deferred tax assets
At 1 April 2016
Charged to the income
statement
Charged to other
comprehensive income
Exchange differences
At 31 March 2017
Set-off of deferred tax assets
pursuant to set-off provisions
Net deferred tax assets at
the end of the year
At 1 April 2017
(Credited)/charged to the
income statement
Charged to other
comprehensive income
Business combinations
At 31 March 2018
Set-off of deferred tax assets
pursuant to set-off provisions
Net deferred tax assets at
the end of the year
204 MEDICLINIC | ANNUAL REPORT 2018
(2)
–
–
–
(2)
(2)
–
–
–
(2)
(7)
–
–
–
(7)
(7)
(2)
–
–
(9)
(31)
1
9
(4)
(25)
(25)
–
15
(2)
(12)
(4)
2
–
–
(2)
(29)
16
–
(3)
(16)
(2)
(16)
1
1
–
–
8
–
–
(8)
(73)
19
9
(7)
(52)
31
(21)
(52)
7
16
(2)
(31)
9
(22)
10. DEFERRED TAX (continued)
Critical accounting estimates and judgements
Recognition of deferred tax assets
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 the realisation of the related tax benefit
through future taxable profits 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 reconsidered at each balance sheet date.
At 31 March 2018, the Group had unutilised tax losses of approximately £96m (2017: £121m) potentially available for
offset against future profits. A deferred tax asset of £8m (2017: £16m) has been recognised in respect of losses based
on profitability from approved budgets and business plans. No deferred tax asset has been recognised in respect of
the remaining losses due to the unpredictability and availability of future profit streams in the relevant jurisdictions.
The majority of the unrecognised losses relate to the Mediclinic International plc in the United Kingdom, which have
no expiry, and the remainder relate to Switzerland, which expire after seven years. Their utilisation is dependent
on the profitability of the related 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 7. The rate of utilisation of
these losses will depend on the incidence and timing of profits within each entity which consequently impacts their
recognition as deferred tax assets.
Unused tax losses for the Group are as follows:
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
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
2018
£’m
–
18
5
40
63
2017
£’m
1
–
13
33
47
Deferred tax on unremitted earnings
The Group recognised a deferred tax liability of £1m (2017: £nil) in respect of temporary differences relating to
unremitted earnings. This liability relates to non-resident shareholder tax of the Group’s Namibian subsidiaries and
the amount is included in the “provisions and other” category of deferred tax liabilities above. No deferred tax liability
has been recognised for the other foreign subsidiaries and equity accounted investments of the Group where the
Group is able to control the timing of any distributions and it is not probable that any distributions will be made in
the foreseeable future. Similarly, tax is not provided where it is expected at the reporting date that such distributions
will not give rise to a tax liability. The gross timing difference in this regard amounts to £1 616m (2017: £1 518m).
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 neither
should there be any tax liability on the receipt of these dividends. 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 the South African resident shareholders on the South African share
register will be paid from the dividend access scheme. Refer to note 13 for details on the dividend access scheme.
MEDICLINIC | ANNUAL REPORT 2018
205
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
11.
INVENTORIES
Inventories consist of:
Pharmaceutical products
Consumables
Finished goods and work in progress
2018
£’m
80
10
–
90
2017
£’m
79
10
1
90
The cost of inventories recognised as an expense and included in cost of sales amounted to £683m (2017: £630m).
12.
TRADE AND OTHER RECEIVABLES
Trade receivables
Less provision for impairment of receivables
Trade receivables – net
Other receivables*
*
Included in other receivables are Swiss unbilled services of £79m (2017:
£79m). More than 92% will be recovered by Swiss insurance companies
and federal authorities (cantons). Swiss insurance companies are subject
to regular creditworthiness checks (e.g. minimum reserve levels).
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:
Swiss franc
South African rand
UAE dirham
Trade receivables to the value of £61m (2017: £53m) have been ceded as
security for banking facilities.
Included in the Group’s trade receivables balance are trade receivables with
a carrying value of £167m (2017: £165m) 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
Between 3 and 6 months
Over 6 months
2018
£’m
485
(45)
440
167
607
380
90
137
607
90
41
36
167
2017
£’m
466
(41)
425
166
591
379
83
129
591
106
40
19
165
206 MEDICLINIC | ANNUAL REPORT 2018
12.
TRADE AND OTHER RECEIVABLES (continued)
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
2018
£’m
41
23
(10)
(9)
45
2017
£’m
19
26
11
(15)
41
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 unprovided trade receivables to be high in light of the nature of these
trade receivables as described in note 3.1(b).
13.
SHARE CAPITAL
Issued share capital
Share capital
Share premium
Treasury shares
Ordinary Shares
Number of shares in issue
Nominal value
2018
£’m
74
690
(1)
763
2017
£’m
74
690
(2)
762
2018
2017
737 243 810
737 243 810
10p
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.
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
207
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
13.
SHARE CAPITAL (CONTINUED)
Treasury Shares
At 1 April 2016
Utilised by the Mpilo Trusts
At 31 March 2017
Vesting of Forfeitable Share Plan
At 31 March 2018
The balance of the treasury shares comprise:
Forfeitable Share Plan
Mpilo Trusts
Subscriber Shares – fully paid up
Number of shares in issue
Nominal value (pence)
Value: indicating nominal and share premium amount
Number
of shares
272 781
(1 161)
271 620
(137 948)
133 672
101 342
32 330
133 672
2018
–
–
Total
£’m
(2)
–
(2)
1
(1)
2017
10
10p
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.
The Subscriber Shares were cancelled during the year.
Dividend Access Scheme (“DAS”)
A wholly-owned subsidiary of the Company, Mediclinic International (RF) (Pty) Ltd, formed a Dividend Access
Trust to comply with a South African Reserve Bank requirement that dividends from a South African source due to
South African shareholders on the South African share register must be paid locally to avoid an outflow of funds
from South Africa.
The beneficiaries of the trust are the South African shareholders of the Company who hold their shares via the South
African share register on the relevant record date in respect of each distribution paid through the DAS. The Dividend
Access Trust does not participate in any profits.
When a dividend is declared by the Company, the Dividend Access Trust would receive a dividend from Mediclinic
International (RF) (Pty) Ltd, which in turn is paid over to the Company’s transfer secretaries in South Africa, who
arrange for the payment of the relevant amount to the South African shareholders (the beneficiaries of the trust)
through the usual dividend payment procedures, as if they were dividends received from Mediclinic International
plc. To the extent that the dividends due to South African shareholders are not ultimately funded from Mediclinic
International (RF) (Pty) Ltd, they receive those dividends as normal dividends from Mediclinic International plc.
The South African shareholders’ entitlement to receive dividends declared by Mediclinic International plc is reduced
by any amounts they receive via the trust.
208 MEDICLINIC | ANNUAL REPORT 2018
14.
OTHER RESERVES
Other reserves comprise of:
Equity-settled share-based payment reserves (refer to note 15)
Foreign currency translation reserve
Hedging reserve
Reverse acquisition reserve*
Capital redemption reserve**
Movements in other reserves
Equity-settled share-based payment reserves (refer to note 15)
Opening balance
Share-based payment expense
Settlement of Forfeitable Share Plan
Transfer to retained earnings
Foreign currency translation reserve
Opening balance
Currency translation differences
Hedging reserve
Opening balance
Fair value adjustments of cash flow hedges, net of tax
2018
£’m
1
468
5
(3 014)
6
(2 534)
1
24
1
(1)
(23)
468
779
(311)
5
4
1
2017
£’m
24
779
4
(3 014)
6
(2 201)
24
24
–
–
–
779
407
372
4
4
–
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
Reverse acquisition
During February 2016, Mediclinic completed the combination between Al Noor Hospitals Group plc (Al Noor)
and Mediclinic International Limited. The combination was classified as a reverse acquisition.
*
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.
•
The UK 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 was paid up capital of the Company.
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
209
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
15.
SHARE-BASED PAYMENTS
Equity-settled share-based payment reserve (refer to note 14 and 15.1)
Cash-settled share-based payment liability (refer to note 15.2)
Total share-based payment reserves and liabilities
15.1
Equity settled share-based payment arrangements
The balance of the equity-settled 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*
Expenses arising from equity-settled share-based payment transactions
Forfeitable Share Plan
2018
£’m
1
1
2
–
1
–
–
–
1
1
1
2017
£’m
24
1
25
1
1
(2)
17
7
24
–
–
*
During the financial year, the balance of the reserve relating to the executive share option scheme, the Al Noor
share option scheme, the Mpilo Trusts and the strategic South African black partners were transferred to retained
earnings. These share-based payment arrangements were settled in the previous financial years.
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 Al Noor, the performance conditions of FSP have
been finalised to the extent that the performance conditions were met as at 30 September 2015. The performance
conditions constitute a combination of: absolute total shareholder return (“TSR”) (40% weighting) and adjusted
diluted headline earnings per share (60% weighting). The vesting of the shares granted in 2015 are subject to
continued employment. The remaining shares will vest after the vesting period has lapsed in June 2018.
Opening balance
Granted
Shares sold
Vested
Closing balance
Weighted
average fair
value at
grant date
offer price
2018
Number
of shares
R87.41
239 290
–
–
(137 948)
101 342
2017
Number
of shares
239 290
–
–
–
239 290
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 for the headline earnings
per share performance condition, consensus forecasts have been used. The following assumptions were used with
the valuation of the scheme: risk-free rate of 7.49%, dividend yield of 1.0% and volatility of 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.
210 MEDICLINIC | ANNUAL REPORT 2018
SHARE-BASED PAYMENTS (continued)
15.
15.2 Cash-settled share-based payment arrangements
Long-term incentive plan (“LTIP”) awards
The LTIP awards are phantom shares awarded to selected senior management. This share-based payment
arrangement is accounted for as a cash-settled share-based payment transaction.
Under the LTIP, conditional phantom shares 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 adjusted earnings per share (60% weighting).
Opening balance
Share-based payment expense*
Benefits paid
Closing balance
* Amount is less than £0.5m.
A reconciliation of the movement in the LTIP award units is detailed below:
2018
£’m
1
–
–
1
2017
£’m
–
1
–
1
Opening balance
Granted
Vested
Lapsed
Closing balance
Valuation assumptions relating to the outstanding units:
Grant date
Vesting date
Outstanding units
Closing share price
Risk-free interest rate
Expected dividend yield
Volatility
Average
price
(pence)
781 – 1 059
809 – 1 000
2018
Number
of shares
284 011
593 492
(1 657)
–
875 846
2017
Number
of shares
–
287 694
(3 683)
–
284 011
2017 LTIP
allocation
2016 LTIP
allocation
1 June 2017
14 June 2016*
1 June 2020/2022*** 14 June 2019/2021**
593 492
601
271 579
601
0.82% – 1.01%
0.74% – 0.89%
0.0%
34.7%
0.0%
34.7%
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
* 49 281 units were allocated on 1 August 2016
** 101 376 units vests on 31 July 2018 and 49 281 units vests on 14 June 2021
*** 129 626 units vests on 31 July 2018 and 65 263 units vests on 1 June 2022
Certain awards were also granted to management that were subject only to service conditions. These awards were
granted on 1 September 2016 and vest on different dates between 1 September 2016 and 14 June 2019. The total
number of these awards granted was 16 115. Of these awards, 3 683 vested in 2017 and 1 657 units of these awards
vested in 2018.
I
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A
T
O
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I
MEDICLINIC | ANNUAL REPORT 2018
211
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
16. NON-CONTROLLING INTERESTS
Opening balance
Transactions with non-controlling shareholders*
Dividends to non-controlling shareholders
Non-controlling shareholders derecognised on disposal of subsidiaries
Share of total comprehensive income
Share of profit
Currency translation differences
Non-controlling interest
*
In the prior year, the statement of cash flows includes an amount of £15m
relating to the acquisition of non-controlling interest. Included in this
amount is £14m which relates to the acquisition of the minority share in
Al Madar Medical Centre LLC in the prior year.
Details of non-wholly-owned subsidiaries that have material non-controlling
interests (“NCIs”):
Mediclinic (Pty) Ltd**
Ownership interest held by NCI
Accumulated non-controlling interests in statement of financial position
Profit allocated to non-controlling interests
Curamed Holdings (Pty) Ltd (group)**
Ownership interest held by NCI
Accumulated non-controlling interests in statement of financial position
Profit allocated to non-controlling interests
** Place of business: South Africa
2018
£’m
78
1
(10)
(1)
19
18
1
87
3.6%
7
2
30.4%
22
4
2017
£’m
61
(4)
(9)
–
30
14
16
78
3.7%
7
2
30.4%
21
4
212 MEDICLINIC | ANNUAL REPORT 2018
16. NON-CONTROLLING INTERESTS (continued)
Summarised financial information in respect of the Group’s subsidiaries that has material NCIs is set out below.
The summarised financial information below represents amounts before inter-group eliminations.
Mediclinic (Pty) Ltd
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net cash inflow
Curamed Holdings (Pty) Ltd (group)
Non-current assets
Current assets
Non-current liabilities
Current liabilities
Revenue
Profit for the year
Other comprehensive income
Total comprehensive income
Net cash inflow from operating activities
Net cash outflow from investing activities
Net cash outflow from financing activities
Net cash outflow
17.
BORROWINGS
Bank loans
Preference shares
Listed bonds
Other liabilities
Non-current borrowings
Current borrowings
Total borrowings
2018
£’m
168
158
(36)
(161)
391
39
–
39
62
(15)
(45)
1
50
38
(3)
(12)
66
13
–
13
15
(14)
(8)
(7)
2018
£’m
1 559
200
176
2
1 937
1 866
71
1 937
2017
£’m
167
129
(32)
(150)
350
38
–
38
55
(27)
(27)
1
37
45
(3)
(12)
60
13
–
13
16
(9)
(7)
–
2017
£’m
1 642
199
189
–
2 030
1 961
69
2 030
MEDICLINIC | ANNUAL REPORT 2018
213
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17.
BORROWINGS (continued)
2018
£’m
Non-current
2018
£’m
Current
2017
£’m
Non-current
2017
£’m
Current
Swiss operations (denominated in Swiss franc)
Secured
bank loan
one1
These loans bear interest at
variable rates linked to the 3M
LIBOR plus 1.25% (2017: 3M LIBOR
plus 1.5% and 2.85%) and are
repayable by 16 October 2023.
The non-current portion includes
capitalised financing costs of £11m
(2017: £22m).
These loans were acquired as part
of the Linde acquisition and bear
interest linked to the 3M LIBOR plus
0.92% and are repayable during
May 2023.
This fixed interest mortgage
loan was acquired as part of
the Linde acquisition and bears
interest at 0.9% compounded
quarterly. The loan is repayable
by December 2023.
The listed bonds consist of
CHF145m 1.625% and CHF90m 2%
Swiss franc bonds. The bonds are
repayable on 25 February 2021 and
25 February 2025 respectively.
These liabilities bear interest at
variable rates ranging between 1%
and 12% (2017: 8% and 12%) and
are repayable in equal monthly
payments in periods ranging from
one to five years.
Secured
bank loan
two1
Secured
bank loan
three2
Listed
bonds
Secured
long term
finance3
Balance carried forward
1 085
26
1 138
40
13
7
176
–
–
–
–
–
189
–
–
–
1
1 282
1
27
–
1 327
–
40
1
The loan is secured by Swiss properties with a book value of £2 326m (2017: £2 483m) and Swiss bank accounts
with a book value of £64m (2017: £142m).
2 These loans are secured by mortgage notes on the properties and buildings of the Linde Group.
3 Equipment with a book value of £2m (2017: £1m) is encumbered as security for these loans.
214 MEDICLINIC | ANNUAL REPORT 2018
17.
BORROWINGS (continued)
Balance carried forward
Southern African operations (denominated
in South African rand)
Secured
bank loan
one4
The loan bears interest at the
3 month JIBAR variable rate plus
a margin of 1.51% (2017: 1.51%)
compounded quarterly, and is
repayable on 3 June 2019.
The loan bears interest at the
3 month JIBAR variable rate plus
a margin of 1.69% (2017: 1.69%)
compounded quarterly and is
repayable on 15 December 2020.
The loan bears interest at the
3 month JIBAR variable rate plus
a margin of 1.06% (2017: 1.06%)
compounded quarterly. The
remaining amount was repaid on
9 October 2017.
These loans bear interest at variable
rates linked to the prime overdraft
rate and are repayable in periods
ranging between one and
twelve years.
Dividends are payable monthly
at a rate of 69% of prime interest
rate (10.0%) (2017: 10.5%). The
outstanding balance will be
redeemed on 3 June 2019.
Dividends are payable semi-annually
at a rate of 73% of the prime
interest rate (10.0%) (2017: 10.5%).
The amount is repayable on
29 June 2020.
Secured
bank loan
two4
Secured
bank loan
three4
Secured
bank loan
four5
Preference
shares4
Preference
shares
Middle East operations (denominated in UAE
dirham)
Secured
bank loan
one6
The loan bears interest at variable
rates linked to the 3M LIBOR and
a margin of 2.50% (2017: 2.75%)
with respective 4-year and 5-year
amortising terms, expiring
in June 2020 and May 2021.
2018
£’m
Non-current
2018
£’m
Current
2017
£’m
Non-current
2017
£’m
Current
1 282
27
1 327
40
208
2
206
73
–
6
108
91
–
–
2
1
–
72
–
4
108
90
1
–
7
1
1
–
98
1 866
39
71
154
1 961
19
69
4
5
6
Property and equipment with a book value of £251m (2017: £231m) are encumbered as security for these loans.
Cash and cash equivalents of £34m (2017: £9m) and trade receivables of £60m (2017: £52m) have also been
ceded as security for these borrowings.
Property, equipment and vehicles with a book value of £15m (2017: £16m) are encumbered as security for these
loans. Net trade receivables of £1m (2017: £1m) have also been ceded as security for these loans.
Shares of investments in Emirates Healthcare Holdings Limited and Emirates Healthcare Limited are encumbered
as security for these loans as well as an account pledge on receivable collection accounts.
MEDICLINIC | ANNUAL REPORT 2018
215
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
17.
BORROWINGS (continued)
On 16 October 2017, Hirslanden signed a new facility agreement for the secured bank loans. The financing amounts to
£1.5bn (CHF2bn), including a £1.2bn (CHF1.5bn) term loan, £308m (CHF400m) capex facility and £77m (CHF100m)
revolving facility. The effective date for funding and closing is 31 October 2017.
The refinancing agreement in Hirslanden has been treated as an extinguishment of the original financial liability due
to the substantial modifications of the terms (including the term of the financing and the margin). As a result, the
original financial liability was derecognised and a new financial liability was recognised. The unamortised portion of
the capitalised finance cost of the original agreement of £19m was derecognised as a result of the extinguishment
of the liability (refer to note 24).
18.
RETIREMENT BENEFIT OBLIGATIONS
2018
£’m
2017
£’m
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 credited to the other comprehensive income:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end of service benefit obligation
4
40
52
96
96
(10)
86
34
6
9
49
(74)
–
(2)
(76)
73
35
56
164
164
(10)
154
23
5
8
36
(45)
–
2
(43)
Critical accounting estimates and judgements
The cost of defined benefit pension plans, post-retirement medical benefit liability obligations and the 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 and can
have a material impact on the valuations. Details of the key assumptions for each relevant obligation, together with
the sensitivities of the carrying value of the obligations, are disclosed below.
216 MEDICLINIC | ANNUAL REPORT 2018
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation
The Group’s Swiss operations has six 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)
• Privatklinik Linde AG; Pension fund at foundation Gemini (cash balance plan)
• Röntgeninstitut Cham AG; Pension fund at foundation Swisscanto (cash balance plan)
Swiss pension benefit obligation
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
The movement in the defined benefit obligation over the period
is as follows:
Opening balance
Current service cost
Interest cost
Past service cost
Employee contributions
Benefits paid
Business combinations
Actuarial gain
Exchange differences
Balance at the end of the 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
Business combinations
Interest income on plan assets
Return on plan assets greater than discount rate
Administration costs
Exchange differences
Balance at the end of the year
2018
£’m
2017
£’m
1 045
(1 041)
4
1 086
(1 013)
73
1 086
37
6
(4)
34
(35)
39
(45)
(73)
1 045
1 013
38
34
(35)
28
6
29
(1)
(71)
1 041
949
35
4
(13)
30
(16)
–
(3)
100
1 086
830
35
30
(16)
–
4
42
(1)
89
1 013
I
I
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R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
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E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
217
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
Swiss pension benefit obligation (continued)
Statement of financial position (continued)
Net pension liability reconciliation
Opening net liability
Expenses recognised in the income statement
Contributions paid by employer
Business combinations
Exchange differences
Actuarial gain
Closing net liability
Statement of other comprehensive income
Amounts recognised in other comprehensive income are as follows:
Actuarial loss – experience
Actuarial gain due to liability assumption changes
Return on plan assets greater than discount rate
Total other comprehensive income
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
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
2018
£’m
2017
£’m
73
34
(38)
11
(2)
(74)
4
(6)
51
29
74
37
(4)
6
(6)
1
34
35
0.75%
1.75%
0.00%
1.25%
9 168
844
119
23
(35)
–
11
(45)
73
(9)
12
42
45
35
(13)
4
(4)
1
23
46
0.55%
1.50%
0.00%
1.00%
8 969
744
218 MEDICLINIC | ANNUAL REPORT 2018
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
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
2018
£’m
352
247
28
138
765
4
13
207
52
276
2018
%
33.8%
23.7%
2.7%
13.3%
73.5%
0.4%
1.2%
19.9%
5.0%
26.5%
2017
£’m
338
255
60
98
751
3
12
181
66
262
2017
%
33.4%
25.2%
5.9%
9.7%
74.1%
0.3%
1.2%
17.9%
6.5%
25.9%
1 041
100.0%
1 013
100.0%
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Discount rate
Salary growth rate
Pension growth rate
0.75%
1.75%
0.00%
0.25%
0.50%
0.25%
Increase
Decrease
(2.6%)
0.8%
2.3%
2.7%
(0.8%)
0.0%
Life expectancy (mortality)
Change in assumption
1 year in expected life time
of plan participant
Increase by
1 year in
assumption
Decrease by
1 year in
assumption
2.0%
(2.0%)
The Group accounts for actuarially determined future pension benefits and provides for the expected liability in
the statement of financial position. The assumptions used to calculate the expected liability are based on actuarial
advice. The discount rate is based on market yields obtained on high quality corporate bonds that have durations
consistent with the term of the obligation. It has been assumed that salary growth rate will take place at a rate in line
with price inflation.
The above sensitivity analyses 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 credit 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.
MEDICLINIC | ANNUAL REPORT 2018
219
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F
N
A
N
C
A
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T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
Assumptions and sensitivity analysis (continued)
Expected employer contributions to be paid to the pension plans for the year ended 31 March 2018 are £32m and
it is anticipated that these contributions will remain at a similar level in the foreseeable future subject to change in
financial conditions.
The weighted average duration of the defined benefit obligation is 12.9 years (2017: 13.6 years). The maturity profile
of the defined benefit obligation is as follows:
31 March 2018
Defined benefit obligation
31 March 2017
Defined benefit obligation
<= 1 year
£’m
1 – 5 years
£’m
> 5 years
£’m
73
73
219
220
877
898
Total
£’m
1 169
1 191
Pension plan results
The assumptions underlying the valuation of the Swiss pension obligation were reassessed during the year and as
a result the following adjustments were made:
•
The discount rate used to value plan obligations has changed from 0.55% to 0.75%.
• The assumed underlying inflation rate was increased from 1.00% to 1.25%, impacting the salary increase rate.
•
The future mortality improvement rates have been based on the 2016 CMI mortality improvement rates with
a 1.25% long-term trend rate.
The change in the above mentioned assumptions coupled with an increase in the fair value of the plan assets resulted
in a decrease of the net liability after taking into account the additional defined benefit liability of £11m acquired
through business combinations (refer to note 29).
Additional information on Swiss defined benefit pension plans
Additional information are provided for the largest two Swiss defined benefit pension plans:
Pensionskasse Hirslanden
For employees of Hirslanden Group in Switzerland, the Pensionskasse Hirslanden (“PH”) Fund provides post-
employment, death-in-service and disability benefits in accordance with the Federal Law on Occupational Old-age,
Survivor’s and Disability Insurance (German: BVG). PH Fund is a foundation and an entity legally separate from
Hirslanden Group. The PH Fund’s governing body is composed of an equal number of employer and employee
representatives. This governing body determines the level of benefits and the investment strategy for the plan assets
based on asset-liability analyses performed periodically. The basis for these asset-liability analyses are the statutory
pension obligations, as these largely determine the cash flows of the PH Fund. In addition, the investment of the plan
assets is based on regulations developed by the governing body in accordance with the legal investment guidelines
(BVV2). The investment committee of the governing body is responsible for their implementation.
The investment strategy complies with the legal guidelines and is relatively conservative. Alternative investments and
unhedged foreign currency positions are rare.
The benefits of the pension plan are substantially higher than the legal minimum. They are determined by the
employer’s and employee’s contributions and interest granted on the plan members’ accumulated savings; the interest
rate is determined annually by the governing body in accordance with the legal framework (defined contribution,
as defined by the occupational pension law). The employee’s and the employer’s contributions are determined based
on the insured salary and range from 1.25% to 15.5% of the insured salary depending on the age of the beneficiary.
220 MEDICLINIC | ANNUAL REPORT 2018
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation (continued)
Additional information on Swiss defined benefit pension plans (continued)
Pensionskasse Hirslanden (continued)
If an employee leaves Hirslanden Group or the pension plan respectively before reaching retirement age, the
law provides for the transfer of the vested benefits to the new pension plan. These vested benefits comprise
the employee’s and the employer’s contributions plus interest, the money originally brought in to the pension plan
by the beneficiary. On reaching retirement age, the plan participant may decide whether to withdraw the benefits
in the form of an annuity or (partly) as a lump-sum payment. The pension law requires adjusting pension annuities
for inflation depending on the financial condition of the pension fund. Although the pension plan is fully funded
at present in accordance with the pension law, the financial situation of the PH Fund will not allow for inflation
adjustments.
The pension law in Switzerland envisages that benefits provided by a pension fund are fully financed through the
annual contributions defined by the regulations. If insufficient investment returns or actuarial losses lead to a plan
deficit as defined by the pension law, the governing body is legally obliged to take actions to close the funding gap
within a period of five years to a maximum of seven years. Besides adjustments to the level of benefits, such actions
could also include additional contributions from respective Group companies and the beneficiaries. The current
financial situation of the PH Fund does not require such restructuring actions. None of the Group companies benefit
from any plan surpluses.
VSAO
For employed physicians of Hirslanden Group in Switzerland, the VSAO Pension Fund provides post-employment,
death-in-service and disability benefits in accordance with the Federal Law on Occupational Old-age, Survivor’s
and Disability Insurance (German: BVG). VSAO Fund is a foundation and an entity legally separate from Hirslanden
Group. The Fund’s governing body is composed of an equal number of employer and employee representatives. The
investment of the plan assets is in accordance with the legal investment guidelines (BVV2).
The benefits of the pension plan are substantially higher than the legal minimum. They are determined by
the employer’s and employee’s contributions and interest granted on the plan members’ accumulated savings;
the interest rate is determined by the governing body in accordance with the legal framework (defined contribution,
as defined by the occupational pension law).
If an employee leaves Hirslanden Group or the pension plan respectively before reaching retirement age, the
law provides for the transfer of the vested benefits to the new pension plan. These vested benefits comprise
the employee’s and the employer’s contributions plus interest, the money originally brought in to the pension plan
by the beneficiary. On reaching retirement age, the plan participant may decide whether to withdraw the benefits
in the form of an annuity or as a lump-sum payment. The employee’s and the employer’s contributions are 14% of
the insured salary.
The pension law in Switzerland envisages that benefits provided by a pension fund are fully financed through
the annual contributions defined by the regulations. If insufficient investment returns or actuarial losses lead to
a plan deficit as defined by the pension law, the governing body is legally obliged to take actions to close the
funding gap within a period of five years to a maximum of seven years. Besides adjustments to the level of benefits,
such actions could also include additional contributions from respective Group companies and the beneficiaries.
The current financial situation of the VSAO Pension Fund does not require such restructuring actions. None of the
Group companies benefit from any plan surpluses.
MEDICLINIC | ANNUAL REPORT 2018
221
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18.
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 provides for the expected liability in
the statement of financial position. The assumptions used to calculate the expected liability are based on actuarial
advice. The discount rate is based on market yields obtained on high quality corporate bonds which have durations
consistent with the term of the obligation. It has been assumed that medical inflation will take place at a rate of 2.40%
in excess of consumer price inflation.
In the last valuation on 31 March 2018, an 8.10% (2017: 8.65%) medical inflation rate and a 9.10% (2017: 9.60%) discount
rate were assumed. The average retirement age was set at 63 years (2017: 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
Benefits paid
Exchange differences
Present value of unfunded obligations
Assumptions and sensitivity analysis
2018
£’m
2017
£’m
35
6
2
4
(1)
–
40
24
5
2
3
(1)
7
35
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase
Decrease
Discount rate
Medical inflation rate
9.10%
8.10%
0.50%
1.00%
(7.0%)
16.0%
8.0%
(13.0%)
Expected post-employment medical benefits payable for the year ended 31 March 2019 is £1m.
222 MEDICLINIC | ANNUAL REPORT 2018
18.
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 five 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 Group accounts for actuarially determined future end-of-service benefits and provides for the expected liability
in the statement of financial position. The assumptions used to calculate the expected liability are based on actuarial
advice. The discount rate is based on market yields obtained on high quality corporate bonds which have durations
consistent with the term of the obligation.
The following are the principal 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
Disposal of subsidiaries
Classified as held for sale
Exchange differences
Actuarial (gain)/loss recognised in other comprehensive income
Present value of unfunded obligations
Current portion of retirement benefit obligations
Non-current retirement benefit obligations
2018
3.4%
2.0%
60 years
10.3%
2017
4.0%
3.5%
60 years
9.3%
2018
£’m
2017
£’m
56
9
7
2
(6)
–
–
(5)
(2)
52
10
42
52
45
8
6
2
(4)
(1)
(1)
7
2
56
10
46
56
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
223
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
18.
RETIREMENT BENEFIT OBLIGATIONS (continued)
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase
Decrease
Discount rate
Future salary increases
3.35%
2.00%
1.00%
1.00%
(6.0%)
6.0%
7.0%
(6.0%)
Expected employer contributions to be paid to the UAE end-of-service benefit obligation for the year ended
31 March 2019 are £11m.
None of the Directors of Mediclinic International plc participate in Swiss pension benefits or the UAE end-of-service
benefit. One Executive Director of Mediclinic International plc participates in the South African post-retirement
medical benefit obligation.
19.
PROVISIONS
Non-current
Employee benefits
Tariff risks
Current
Employee benefits
Legal cases and other
Tariff risks
2018
£’m
23
14
9
15
2
5
8
38
2017
£’m
23
15
8
22
2
5
15
45
Opening balance at 1 April 2016
Charged to the income statement
Utilised during the year
Unused amounts reversed
Exchange differences
Closing balance at 31 March 2017
Charged to the income statement
Utilised during the year
Unused amounts reversed
Business combinations
Exchange differences
Closing balance at 31 March 2018
Employee
benefits
£’m
Legal cases
and other
£’m
Tariff risks
£’m
Total
£’m
15
3
(2)
–
1
17
2
(2)
–
–
(1)
16
2
7
(3)
(1)
–
5
2
(2)
(1)
–
1
5
26
7
(1)
(11)
2
23
4
(5)
(5)
2
(2)
17
43
17
(6)
(12)
3
45
8
(9)
(6)
2
(2)
38
224 MEDICLINIC | ANNUAL REPORT 2018
19.
PROVISIONS (continued)
(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 one year
After one year but not more than five years
More than five years
20. DERIVATIVE FINANCIAL INSTRUMENTS
Non-current
Interest rate swaps – cash flow hedges
Current
Interest rate swaps – cash flow hedges*
2018
£’m
15
16
7
38
2018
£’m
2
2
–
–
2
2017
£’m
22
16
7
45
2017
£’m
2
2
7
7
9
* Amount is less than £1m in current year.
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 2018, the Group had ten effective interest
rate swap contracts (2017: twelve) for borrowings specifically in Southern Africa. The value of borrowings hedged
by the interest rate derivatives and the rates applicable to these contracts are as follows:
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
225
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
20. DERIVATIVE FINANCIAL INSTRUMENTS (continued)
Borrowings
hedged
£’m
Fixed
interest
payable
Interest
receivable
Fair value
gain/(loss)
for the year
£’m
31 March 2018
1 to 3 years*
31 March 2017
222
6.9 – 7.7%
1 to 3 years*
184
5.5 – 8.1%
3 month
JIBAR/
69% of prime
interest rate
3 month
JIBAR/
69% of prime
interest rate
1
–
*
The interest rate swap agreement resets every three months on 1 June, 1 September, 1 December and 1 March with
a final reset on 3 June 2019 for £60m, 2 March 2020 for £30m, 1 June 2020 for £89m and on 1 September 2020
for £42m. There is no ineffective portion recognised in the profit and loss that arises from the cash flow hedges.
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 date when hedge
effectiveness could not be demonstrated, i.e. from 1 October 2014. During the financial year, as part of the refinance
of the Swiss debt, the swap contract was cancelled and an amount of £4m was agreed for the early redemption of
the swap.
Opening balance
Fair value adjustments booked through profit and loss (finance cost)
Settlement of swap
Exchange differences
Balance at the end of the period
21.
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accrued expenses
Social insurance and accrued leave pay
Value added tax
2018
£’m
(7)
4
4
(1)
–
2018
£’m
210
144
62
8
424
2017
£’m
(19)
13
–
(1)
(7)
2017
£’m
227
167
70
8
472
226 MEDICLINIC | ANNUAL REPORT 2018
22.
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
All other services
Cost of inventories
Depreciation (note 6)
Buildings
Equipment
Furniture and vehicles
Employee benefit expenses
Wages and salaries
Retirement benefit costs – defined contribution plans
Retirement benefit costs – defined benefit obligations (note 18)
Share-based payment expense (note 15)
Increase in provision for impairment of receivables (note 12)
Maintenance costs
Operating leases
Buildings
Equipment
Amortisation of intangible assets (note 7)
Impairments (note 6 and 7)
Impairment of properties
Impairment of goodwill
Impairment of trade names
Other expenses
Classified as:
Cost of sales
Administration and other operating expenses
Depreciation and amortisation is classified as:
Cost of sales
Administration and other operating expenses
2018
£’m
2017
£’m
0.4
2.0
2.4
0.4
–
0.2
3.0
665
132
39
70
23
1 293
1 228
15
49
1
23
52
57
54
3
36
644
84
300
260
255
3 160
1 773
1 387
3 160
112
56
168
0.3
1.8
2.1
0.5
0.4
0.1
3.1
630
119
37
60
22
1 231
1 181
13
36
1
26
50
56
53
3
26
–
–
–
–
244
2 385
1 696
689
2 385
107
38
145
Number of employees
31 504
32 625
MEDICLINIC | ANNUAL REPORT 2018
227
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R
O
U
P
F
N
A
N
C
A
L
S
T
A
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E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
23. OTHER GAINS AND LOSSES
Release of pre-acquisition Swiss provision
Loss on disposal of subsidiaries
Foreign exchange rate losses on corporate transactions
Fair value adjustments on derivative contracts
24.
FINANCE COST
Interest expenses
Interest rate swaps
Amortisation of capitalised financing costs
Derecognition of unamortised financing costs
Fair value gains on ineffective cash flow hedges
Preference share dividend
Less: amounts included in cost of qualifying assets
25.
INCOME TAX EXPENSE
Current tax
Current year
Previous year
Deferred tax (credit)/charge (note 10)
Taxation per income statement
Composition
UK tax
Foreign tax
2018
£’m
9
(7)
–
–
2
2018
£’m
55
6
5
19
(4)
15
(2)
94
2018
£’m
56
(2)
(59)
(5)
–
(5)
(5)
2017
£’m
–
–
(3)
1
(2)
2017
£’m
58
11
7
–
(13)
12
(1)
74
2017
£’m
46
(3)
21
64
–
64
64
228 MEDICLINIC | ANNUAL REPORT 2018
25.
INCOME TAX EXPENSE (continued)
Reconciliation of rate of taxation:
UK statutory rate of taxation
Adjusted for:
Benefit of tax incentives
Share of net profit of equity accounted investments
Non-deductible expenses1
Non-controlling interests’ share of profit before tax
Effect of different tax rates2
Effect of differences between deferred and current tax rates3
Non-recognition of tax losses in current year
Recognition/derecognition of tax losses relating to prior years
Prior year adjustment
Effective tax rate4
2018
2017
19.0%
0.1%
0.1%
(18.0%)
0.2%
0.7%
(0.6%)
(0.5%)
(0.2%)
0.3%
1.1%
20.0%
(0.2%)
(0.8%)
1.8%
(0.3%)
0.7%
–
0.9%
(0.5%)
(0.8%)
20.8%
1
2
3
4
The impact of the following non-deductible expenses on the tax rate was a decrease of 17.3% (£83m):
•
Impairment of goodwill of £300m was not deductible for tax purposes. The tax effect amounted to £61m
(decrease of 12.7% in effective tax rate).
Impairment of the listed associate of £109m was not deductible for tax purposes. The tax effect amounted to
£21m (decrease of 4.4% in effective tax rate).
•
• Loss on disposal of subsidiaries of £7m was not deductible for tax purposes. The tax effect amounted to £1m
(decrease of 0.2% in effective tax rate).
The effect of different tax rates can be attributed to the following items:
• Accelerated amortisation of £23m (2017: £7m) was recognised on the Al Noor trade names during the year.
The profits earned in the UAE are not subject to income tax. The tax effect amounted to £4m (decrease of 0.8%
in effective tax rate) (2017: £1m).
• The effect of different tax rates is mainly because of profit earned from South Africa, which is subject to an
income tax rate of 28%, reduced by profit earned from the UAE, which is not subject to income tax.
The impairment of the trade names (£260m) and the impairment of the properties (£84m) in Switzerland led
to the release of a deferred tax liability of £68m. A reconciling item arises because the tax rate applied in calculating
the deferred tax liabilities was lower than the current statutory rate of taxation.
If the impairment charges (and related deferred tax effect) discussed in point 3 above together with the items
listed in points 1 and 2 were excluded from the effective tax rate calculation, the adjusted effective tax rate would
be 20.8% (2017: 20.4%). The higher proportional contribution towards profits from the Southern Africa segment
increased the adjusted effective tax rate. The adjusted effective tax rate also decreased slightly with the higher
proportional contribution towards profits from the Middle East segment.
The income tax liability includes an amount of approximately £1m (2017: £3m) relating to unresolved tax matters.
The range of possible outcomes relating to this liability is not considered to be material.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
229
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
26.
EARNINGS PER ORDINARY SHARE
(Loss)/earnings per ordinary share (pence)
Basic (pence)
Diluted (pence)
Earnings reconciliation
(Loss)/profit attributable to equity holders of the Company
Adjusted for:
No adjustments
(Loss)/earnings for basic and diluted earnings per share
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
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 not yet released from
treasury stock
BEE shareholder*
Mpilo Trusts
Forfeitable Share Plan
2018
£’m
(66.7)
(66.7)
(492)
–
(492)
2017
£’m
31.0
31.0
229
–
229
2018
Number
of shares
2017
Number
of shares
737 243 810
737 243 810
(133 672)
–
(32 330)
(101 342)
(303 656)
(31 238)
(33 128)
(239 290)
737 110 138
736 940 154
737 110 138
736 940 154
133 672
–
32 330
101 342
303 656
31 238
33 128
239 290
737 243 810
737 243 810
*
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.
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 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.
230 MEDICLINIC | ANNUAL REPORT 2018
26. 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
04/2018 (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:
Headline earnings per share
(Loss)/earnings for basic and diluted earnings per share
Adjustments
Impairment of equity accounted investment
Impairment of properties and intangible assets
Loss on disposal of subsidiaries
Associate’s impairment of property, plant and equipment
Headline earnings
Headline earnings per share (pence)
Diluted headline earnings per share (pence)
27.
OTHER COMPREHENSIVE INCOME
Components of other comprehensive income
Currency translation differences
Fair value adjustments – cash flow hedges
Remeasurement of retirement benefit obligations
Other comprehensive income, net of tax
2018
£’m
(492)
109
576
7
3
203
27.6
27.6
2018
£’m
(310)
1
60
(249)
Attributable
to equity
holders of
Company
(before tax)
£'m
Tax charge
attributable
to equity
holders of
the Company
£'m
Attributable
to non-
controlling
interest
(after tax)
£'m
(311)
1
76
(234)
372
43
415
–
–
(16)
(16)
–
(9)
(9)
1
–
–
1
16
–
16
Year ended 31 March 2018
Currency translation differences
Fair value adjustments – cash flow
hedges
Remeasurement of retirement benefit
obligations
Other comprehensive income
Year ended 31 March 2017
Currency translation differences
Remeasurement of retirement benefit
obligations
Other comprehensive income
2017
£’m
229
–
–
–
229
31.0
31.0
2017
£’m
388
–
34
422
Total
£'m
(310)
1
60
(249)
388
34
422
MEDICLINIC | ANNUAL REPORT 2018
231
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
28.
CASH FLOW INFORMATION
28.1 Reconciliation of profit before taxation to cash generated
from operations
(Loss)/profit before taxation
Adjustments for:
Finance cost – net
Share of net profit of equity accounted investments
Other gains and losses
Share-based payments
Depreciation and amortisation
Impairment provision of trade receivables
Movement in provisions
Movement in retirement benefit obligations
Impairment of properties and intangible assets
Impairment of equity accounted investment
Loss on disposal of subsidiaries
Release of pre-acquisition Swiss provision
Operating income before changes in working capital
Working capital changes
Increase in inventories
Increase in trade and other receivables
Decrease in trade and other payables
28.2 Interest paid
Finance cost per income statement
Refinancing costs shown as financing activities
Non-cash items
Amortisation of capitalised financing fees
Derecognition of unamortised financing fees
Fair value gains on ineffective cash flow hedges
28.3 Tax paid
Liability at the beginning of the period
Provision for the period
Liability at the end of the period
28.4 Investment to maintain operations
Property, equipment and vehicles purchased
Intangible assets purchased
Movement in capital expenditure payables
232 MEDICLINIC | ANNUAL REPORT 2018
(Re-
presented)*
2017
£’m
307
67
(12)
2
1
145
26
(1)
(4)
–
–
–
–
531
(39)
(4)
(14)
(21)
492
74
(3)
(7)
–
13
77
8
43
51
(6)
45
105
6
(10)
101
2018
£’m
(479)
85
(3)
–
1
168
23
(7)
3
644
109
7
(9)
542
(76)
(3)
(61)
(12)
466
94
–
(5)
(19)
4
74
6
54
60
(4)
56
98
10
4
112
28.
CASH FLOW INFORMATION (continued)
28.5 Investment to expand operations
Property, equipment and vehicles purchased
Intangible assets purchased
Movement in capital expenditure payables
* Refer to note 2.1.
(Re-
presented)*
2017
£’m
134
6
(9)
131
2018
£’m
125
12
5
142
Date paid/
payable
Dividend
per share
(pence)
2018
£’m
2017
£’m
28.6 Dividends
Dividends declared
Year ended 31 March 2018
Interim dividend
Final dividend
18 December 2017
30 July 2018
Year ended 31 March 2017
Interim dividend
Final dividend
12 December 2016
31 July 2017
Dividends paid
Dividends paid during the period
3.20
4.70
7.90
3.20
4.70
7.90
24
35
59
58
23
35
58
62
Under IFRS, dividends are only recognised in the financial statements when authorised by the Board of Directors
(for interim dividends) or when authorised by the shareholders (for final dividends). The aggregate amount of the
proposed dividend expected to be paid on 30 July 2018 from retained earnings has not been recognised as a liability
on 31 March 2018.
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
233
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Net
derivative
financial
instruments
held to
hedge
borrowings
£’m
Total
borrowings
£’m
Total
£’m
2 039
6
(30)
(4)
(12)
5
19
(5)
25
(104)
1 939
9
–
–
(4)
–
–
–
(5)
–
2
2
17
1 858
–
–
–
(13)
5
9
247
(327)
7
(13)
267
2 039
2 030
6
(30)
–
(12)
5
19
–
25
(106)
1 937
1 841
247
(327)
7
–
262
2 030
28. CASH FLOW INFORMATION (continued)
28.7 Changes in liabilities arising from financing
activities
Year ended 31 March 2018
Opening balance
Cash flow movements
Proceeds from borrowings
Repayment of borrowings
Settlement of interest rate swap
Refinancing transaction cost
Non-cash items
Amortisation of capitalised financing fees
Derecognition of unamortised financing fees
Fair value changes
Business combinations
Exchange rate differences
Closing balance
Year ended 31 March 2017
Opening balance
Cash flow movements
Proceeds from borrowings
Repayment of borrowings
Non-cash items
Amortisation of capitalised financing fees
Fair value changes
Exchange rate differences
Closing balance
234 MEDICLINIC | ANNUAL REPORT 2018
28.
CASH FLOW INFORMATION (continued)
28.8 Cash and cash equivalents
For the purposes of the statement of cash flows, cash, cash equivalents and
bank overdrafts include:
Cash and cash equivalents
Cash, cash equivalents and bank overdrafts are denominated in the following
currencies:
Swiss franc*
South African rand**
UAE dirham***
Pounds sterling****
2018
£’m
2017
£’m
261
71
116
46
28
261
361
96
148
83
34
361
*
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 Baa3 credit rating by Moody’s.
*** The counterparties have a minimum BBB+ by Standard & Poor’s.
**** The counterparty has a Aa3 credit rating by Moody’s.
Cash and cash equivalents denominated in South African rand amounting to £34m (2017: £9m) and Swiss bank
accounts denominated in Swiss franc amounting to £64m (2017: £142m) have been ceded as security for borrowings
(see note 17).
29. BUSINESS COMBINATIONS
The following business combinations occurred during the current year:
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
Cash flow on acquisition:
Linde Holding Biel/Bienne AG
Rontgeninstitut Cham AG
2018
£’m
(74)
(9)
(83)
Linde Holding Biel/Bienne AG
With a public take-over offer on 30 June 2017, Hirslanden acquired within four closings a total of 99.62% of the share
capital of Linde Holding Biel/Bienne AG for £86m (CHF107m) and obtained control over the company. Lindenpark
Immobilien AG and Privatklinik Linde AG are both 100% subsidiaries of Linde Holding Biel/Bienne AG (Linde
Group). The revaluation of the trade name and equipment resulted in retrospective adjustments to the provisionally
determined PPA values that were disclosed at 30 September 2017.
The Linde Group is a leading private hospital in the Biel-Seeland-Bernese Jura region offering a wide range of medical
care, focusing on movement and sports medicine, interdisciplinary cancer treatment, breast cancer centre, obstetrics,
urology and radiology. Adherence to high quality standards is illustrated by numerous certifications. It provides the
Group with the opportunity to enter the hospital market of the Biel-region, including improved access to the private-
and semi-private patient market in the region. Furthermore, Linde Group will serve as an important referring hospital
to Hirslanden Bern AG and Hirslanden Klinik Aarau AG, facilitating recruitment of highly-specialised medicine patients
(heart surgery, thoracic surgery) from the growing area of the Espace Mittelland.
The goodwill of £3m (CHF3.6m) arising from the acquisition is attributable to the acquired workforce and economies
of scale expected from combining the operations of Hirslanden and the Linde Group. None of the goodwill recognised
is expected to be deductible for income tax purposes.
MEDICLINIC | ANNUAL REPORT 2018
235
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
29. BUSINESS COMBINATIONS (continued)
The following table summarises the consideration paid for the Linde Group, the fair value of assets acquired and
liabilities assumed at the acquisition date.
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
Deferred tax assets
Total assets
Liabilities
Borrowings
Provisions
Retirement benefit obligations
Deferred tax liabilities
Trade and other payables
Total liabilities
Total identifiable net assets at fair value
Non-controlling interest at fair value
Goodwill
Consideration transferred for the business
Cash flow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
2018
£’m
109
17
1
9
12
2
150
25
2
10
22
8
67
83
–
3
86
12
(86)
(74)
The fair value of trade and other receivables is £9m. The best estimate at acquisition date of the contractual cash
flows not expected to be collected are £0.1m.
From the date of acquisition, Linde Group has contributed £41m to revenue and £2m to the profit before tax of the
Group. If the combination had taken place at the beginning of the financial year, revenue from the Linde Group would
have been £58m and the profit before tax contribution would have been £3m.
236 MEDICLINIC | ANNUAL REPORT 2018
29. BUSINESS COMBINATIONS (continued)
Röntgeninstitut Cham AG
On 30 August 2017, Hirslanden acquired 85% of the share capital of Röntgeninstitut Cham AG for £9m (CHF11.5m).
As a result, the Group’s equity interest in Röntgeninstitut Cham AG increased from 15% to 100%, obtaining control of
the company.
Radiology is an integral part of a hospital and therefore, almost every one of the Group’s hospitals has its own
radiology unit. Röntgeninstitut Cham AG will provide radiology services for the patients of AndreasKlinik AG Cham.
The goodwill of £10m (CHF12.6m) arising from the acquisition is attributable to the acquired workforce and economies
of scale expected from combining the operations of Röntgeninstitut Cham AG and AndreasKlinik AG Cham. None
of the goodwill recognised is expected to be deductible for income tax purposes.
The following table summarises the consideration paid for Röntgeninstitut Cham AG, the fair value of assets acquired
and liabilities assumed at the acquisition date.
Recognised amounts of identifiable assets acquired and liabilities assumed
Assets
Property, equipment and vehicles
Trade and other receivables
Total assets
Liabilities
Retirement benefit obligations
Total liabilities
Total identifiable net assets at fair value
Non-controlling interest at fair value
Goodwill
Consideration transferred for the business
Fair value of the Group’s existing 15% portion
Cash flow on acquisition
Cash flow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
2018
£’m
1
1
2
1
1
1
–
10
11
(2)
9
–
(9)
(9)
Critical accounting estimates and judgements
Critical accounting estimates and assumptions were made in the purchase price allocation of the acquisitions in
accordance with IFRS 3 Business Combinations. The purchase consideration for the acquisition is allocated over the
net fair value of identifiable assets, liabilities and contingent liabilities with any excess consideration representing
goodwill. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are
measured at their fair values at the acquisition date. The determination of the fair value of the assets, liabilities and
contingent liabilities acquired requires significant estimates and assumptions. Any intangible assets acquired as part
of the business combination are recognised at fair value which is based on management’s judgement and includes
assumptions on the timing and amount of future cash flows generated by the assets as well as the selection of an
appropriate discount rate.
MEDICLINIC | ANNUAL REPORT 2018
237
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
30. DISPOSAL OF SUBSIDIARIES
The Group disposed of the following companies that were part of the Middle East segment during the year: Lookwow
One Day Surgery Company LLC and the following branches of Mediclinic Hospitals LLC: Mirfa, Ajman, Hamdan
Pharmacy, Sanaya and ICAD. During the prior year, the following companies were disposed of: Rochester Wellness
LLC, Emirates American Company for Medical Services LLC, Abu Dhabi Medical Services LLC and National Medical
Services LLC.
Analysis of assets and liabilities over which control was lost
2018
£’m
2017
£’m
Property, equipment and vehicles
Goodwill
Trade and other receivables
Cash and cash equivalents
Retirement benefit obligations
Trade and other payables
Non-controlling interest derecognised
Net assets disposed of
Consideration received
Cash and cash equivalents
Consideration receivable
Other non-cash items
Total consideration
(Loss)/gain on disposal of subsidiary
Consideration received
Net assets disposed of
(Loss)/gain on disposal
Net cash inflow
Total cash flow on disposal of subsidiary
Less: cash and cash equivalents disposed of
Net cash inflow on disposal
8
3
–
–
–
(1)
(1)
9
2
–
–
2
2
(9)
(7)
2
–
2
10
33
10
3
(1)
(4)
–
51
47
1
3
51
51
(51)
–
47
(3)
44
238 MEDICLINIC | ANNUAL REPORT 2018
31. DISPOSAL GROUPS HELD FOR SALE
During the 2017 financial year, management decided to sell the following clinics within the Mediclinic Middle East
segment: Mediclinic Beach Road LLC, Mediclinic Corniche Medical Centre LLC, Lookwow One Day Surgery Company
LLC, Lookwow One Day Pharmacy LLC, Al Noor Sanaiya Clinic and Pharmacy, Al Noor ICAD Clinic and Pharmacy,
Al Noor International Medical Centre (Sharjah), Al Noor Hamdan Street Pharmacy, Al Madar Ajman Clinic and
Pharmacy and Al Madar Diagnostic Centre-Al Ain.
All the clinics were disposed of during the year with the exception of the following: Mediclinic Beach Road LLC and
Mediclinic Corniche Medical Centre LLC were closed and the accordingly the assets of these clinics were written
off or transferred to other clinics within the Group where possible. The liabilities classified as held for sale relating
to these clinics were settled. The only remaining clinic that is classified as held for sale is Al Madar Diagnostic
Centre-Al Ain.
2018
£’m
2017
£’m
Analysis of assets and liabilities held for sale
Assets
Property, equipment and vehicles
Inventories
Total assets
Liabilities
Retirement benefit obligations
Trade and other payables
Total liabilities
32.
COMMITMENTS
Capital commitments
Incomplete capital expenditure contracts
Switzerland
Southern Africa
Middle East
Capital expenses authorised by the Board of Directors
but not yet contracted
Switzerland
Southern Africa
Middle East
These commitments will be financed from Group and borrowed funds.
1
–
1
–
–
–
2018
£’m
138
14
77
47
204
15
142
47
342
8
1
9
1
1
2
2017
£’m
170
13
61
96
227
19
153
55
397
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
I
N
F
O
R
M
A
T
O
N
I
MEDICLINIC | ANNUAL REPORT 2018
239
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
32. COMMITMENTS (continued)
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
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 2016 to March 2017
April 2017 to March 2018
April 2018 to March 2019
April 2019 to March 2020
April 2020 to March 2021
Contingent liabilities
2018
£’m
47
147
413
607
–
–
3
1
1
5
2017
£’m
45
166
366
577
4
1
–
–
–
5
Litigation
The Group is not aware of any pending legal claims that are not covered by the Group’s extensive insurance
programmes.
240 MEDICLINIC | ANNUAL REPORT 2018
33. RELATED PARTY TRANSACTIONS
Remgro Limited owns, through various subsidiaries (Remgro Healthcare (Pty) Ltd, Remgro Health Ltd and
Remgro Jersey GBP Ltd) 44.56% (2017: 44.56%) of the Company’s issued share capital.
The following transactions were carried out with related parties:
i)
Transactions with shareholders
Remgro Management Services Ltd (subsidiary of Remgro Ltd)
Managerial and administration fees
Internal audit services
V&R Management Services AG (subsidiary of Remgro Ltd)
Administration fees*
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 Zurich
Fees earned
Purchases
Spire Healthcare Group plc
Non-executive director fee*
Wits University Donald Gordon Medical Centre (Pty) Ltd
Fees paid
* Amount is less than £0.5m
34. FINANCIAL INSTRUMENTS
2018
£’m
2017
£’m
0.3
0.2
–
6
–
1
(2)
8
–
2
0.3
0.2
–
6
–
1
(1)
10
–
2
Financial instruments measured at fair value in the statement of financial position, are classified using a fair
value hierarchy that reflects the significance of the inputs used in the valuation. The fair value hierarchy has the
following levels:
• 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).
I
I
G
R
O
U
P
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
N
C
E
A
N
D
R
E
M
U
N
E
R
A
T
O
N
I
I
I
F
N
A
N
C
A
L
S
T
A
T
E
M
E
N
T
S
I
A
D
D
T
O
N
A
L
I
Financial instruments carried at fair value in the statement
of financial position
Financial assets
Other investments and loans (available-for-sale assets)
Financial liabilities
Derivative financial instruments
I
N
F
O
R
M
A
T
O
N
I
2018
£’m
1
(2)
2017
£’m
2
(9)
MEDICLINIC | ANNUAL REPORT 2018
241
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
34. FINANCIAL INSTRUMENTS (continued)
• Available-for-sale assets (part of other investments and loans): Fair value is based on appropriate valuation
methodologies being discounted cash flow or actual net asset value of the investment. These assets are grouped
as level 2.
• 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. Based on the
degree to which the fair value is observable, the interest rate swaps and forward contracts are grouped as level 2.
Financial instruments not carried at fair value in the statement
of financial position
Financial assets
Other investments and loans
Trade and other receivables
Cash and cash equivalents
Financial liabilities
Borrowings
Trade and other payables
2018
£’m
7
440
261
2017
£’m
22
425
361
(1 937)
(354)
(2 030)
(394)
• Cash and cash equivalents, trade and other receivables, trade and other payables and other investments and
loans: Due to the expected short-term maturity of these financial instruments, their carrying value approximate
their fair value.
• Borrowings: The fair value of long-term borrowings is based on discounted cash flows using the effective interest
rate method. As the interest rates of long-term borrowings are all market related, their carrying values approximate
their fair value.
35. EVENTS AFTER THE REPORTING DATE
No material events occurred between the reporting date and the date the financial statements were authorised
for issue.
242 MEDICLINIC | ANNUAL REPORT 2018
ANNEXURE – INVESTMENTS IN
SUBSIDIARIES, ASSOCIATES AND
JOINT VENTURES
SUBSIDIARIES
Company
Country of
incorporation
and place of
business
Principal activities
Al Noor Holdings Cayman Limited (“ANH Cayman”)
Cayman Islands
Intermediary holding company
ANMC Management Limited (“ANMC Management”)
Cayman Islands
Mediclinic CHF Finco Limited
Mediclinic Holdings Netherlands B.V.
Mediclinic International (RF) (Pty) Ltd
Mediclinic Middle East Holdings Limited
Group
Jersey
Netherlands
South Africa
Jersey
Intermediary holding company
and manager of Al Noor Golden
Treasury
Intermediary holding company
Intermediary holding company
Intermediary holding company
Interest in capital1
31 March
2018
%
31 March
2017
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
Indirectly held through Mediclinic CHF Finco Limited
Mediclinic Jersey Limited
Jersey
Intermediary holding company
100.0
100.0
Indirectly held through Mediclinic International (RF) (Pty) Ltd
Mediclinic Investments (Pty) Ltd
Mediclinic Group Services (Pty) Ltd (previously held through
Mediclinic Investments (Pty) Ltd)
Indirectly held through Mediclinic Investments (Pty) Ltd
Mediclinic Europe (Pty) Ltd
Mediclinic Middle East Investment Holdings (Pty) Ltd
Mediclinic Southern Africa (Pty) Ltd
Indirectly held through Mediclinic Group Services (Pty) Ltd
Mediclinic Management Services (Pty) Ltd
Medical Innovations (Pty) Ltd (previously held through Mediclinic
Southern Africa (Pty) Ltd)
Indirectly held through Mediclinic Southern Africa (Pty) Ltd
Curamed Holdings (Pty) Ltd
ER24 Holdings (Pty) Ltd
Hedrapix Investments (Pty) Ltd
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Intermediary holding company
Provision of group services
within the Mediclinic Group
Deregistered
Dormant
Intermediary holding company
Deregistered
Hospital equipment and
procurement
Intermediary holding company
Intermediary holding company
Dormant
Howick Private Hospital Holdings (Pty) Ltd* (50% plus 1 share)
South Africa
Intermediary holding company
Medical Human Resources (Pty) Ltd
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
South Africa
South Africa
South Africa
South Africa
Namibia
South Africa
South Africa
South Africa
South Africa
South Africa
Management of healthcare staff
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
Mediclinic Tzaneen (Pty) Ltd* (50% plus one share)
South Africa
Healthcare services
Indirectly held through Mediclinic Southern Africa (Pty) Ltd
Medipark Clinic (Pty) Ltd
Newcastle Private Hospital (Pty) Ltd* (50% plus one share)
Practice Relief (Pty) Ltd
South Africa
South Africa
South Africa
Dormant
Healthcare services
Provision of debt collection
and related services
Victoria Hospital (Pty) Ltd* (50% plus one share)
South Africa
Healthcare services
Indirectly held through Mediclinic Holdings (Namibia) (Pty) Ltd
Mediclinic Capital (Namibia) (Pty) Ltd
Mediclinic Otjiwarongo (Pty) Ltd
Mediclinic Properties (Swakopmund) (Pty) Ltd
Mediclinic Properties (Windhoek) (Pty) Ltd
Mediclinic Swakopmund (Pty) Ltd
Mediclinic Windhoek (Pty) Ltd
Namibia
Namibia
Namibia
Namibia
Namibia
Namibia
Investment holding company
Healthcare services
Property ownership and
management
Property ownership and
management
Healthcare services
Healthcare services
100.0
100.0
–
100.0
100.0
–
100.0
69.6
100.0
100.0
50.0
100.0
100.0
67.8
100.0
100.0
91.2
81.1
100.0
75.9
100.0
50.0
–
50.0
100.0
50.0
100.0
100.0
100.0
100.0
99.0
96.5
100.0
100.0
100.0
100.0
100.0
100.0
100.0
69.6
100.0
100.0
50.0
100.0
100.0
65.2
100.0
100.0
87.3
81.1
100.0
75.2
100.0
50.0
100.0
50.0
100.0
50.0
100.0
100.0
100.0
100.0
97.2
96.5
MEDICLINIC | ANNUAL REPORT 2018
243
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INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
(CONTINUED)
SUBSIDIARIES (continued)
Company
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
Indirectly held through Mediclinic (Pty) Ltd
Mediclinic Barberton (Pty) Ltd*
Mediclinic Ermelo (Pty) Ltd*
Mediclinic Hermanus (Pty) Ltd*
Mediclinic Kimberley (Pty) Ltd*
Mediclinic Limpopo (Pty) Ltd$*
Mediclinic Potchefstroom (Pty) Ltd*
Mediclinic Upington (Pty) Ltd*
Country of
incorporation
and place of
business
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Principal activities
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Dormant
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Hospital investment company
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Interest in capital1
31 March
2018
%
31 March
2017
%
98.9
90.9
99.0
75.5
99.4
83.0
97.3
98.5
99.1
100.0
100.0
91.8
99.6
99.4
79.5
98.7
99.2
77.4
93.0
94.0
81.8
72.7
98.5
92.9
91.0
97.3
77.0
52.2
53.2
89.4
50.0
86.1
50.0
98.9
92.8
99.0
75.6
99.4
84.1
97.2
98.6
99.2
100.0
100.0
93.1
99.6
99.4
79.0
98.7
98.7
76.4
95.0
92.9
81.8
90.8
99.0
93.1
91.4
97.3
77.0
50.1
53.2
89.4
50.0
86.8
50.0
Indirectly held through Howick Private Hospital Holdings
(Pty) Ltd
Howick Private Hospital (Pty) Ltd*
South Africa
Healthcare services
100.0
100.0
Indirectly held through Mediclinic Limpopo (Pty) Ltd
Mediclinic Limpopo Day Clinic (Pty) Ltd
Mediclinic Limpopo Investments (Pty) Ltd
Indirectly held through Mediclinic Durbanville Investments
(Pty) Ltd
South Africa
South Africa
Day clinic investment company
Investment holding company
60.2
100.0
60.2
100.0
Mediclinic Durbanville Day Clinic (Pty) Ltd
South Africa
Day clinic investment company
89.9
89.9
Indirectly held through Mediclinic Tzaneen (Pty) Ltd
Mediclinic Tzaneen Investments (Pty) Ltd
South Africa
Investment holding company
100.0
100.0
Indirectly held through Mediclinic Victoria Hospital (Pty) Ltd
Victoria Hospital Investments (Pty) Ltd
South Africa
Investment holding company
100.0
100.0
Indirectly held through Curamed Holdings (Pty) Ltd
Curamed Hospitals (Pty) Ltd
Curamed Properties (Pty) Ltd
Indirectly held through Curamed Hospitals (Pty) Ltd
South Africa
South Africa
Healthcare services
Property ownership and
management
100.0
100.0
100.0
100.0
Mediclinic Thabazimbi (Pty) Ltd
South Africa
Healthcare services
76.0
76.0
Indirectly Held through ER24 Holdings (Pty) Ltd
ER24 EMS (Pty) Ltd
ER24 Trademarks (Pty) Ltd
*
Controlled through long-term management agreements
244 MEDICLINIC | ANNUAL REPORT 2018
South Africa
South Africa
Emergency medical services
Intellectual property holding
company
100.0
100.0
100.0
100.0
Company
Indirectly held through Mediclinic Holdings Netherlands B.V.
Country of
incorporation
and place of
business
Principal activities
Interest in capital1
31 March
2018
%
31 March
2017
%
Mediclinic Luxembourg S.à.r.l
Luxembourg
Intermediary holding company
100.0
100.0
Indirectly held through Mediclinic Luxembourg S.à.r.l.
Hirslanden AG
Switzerland
Intermediary holding company
and operating company of the
Hirslanden group
100.0
100.0
Indirectly held through Hirslanden AG
AndreasKlinik AG Cham
Hirslanden Bern AG
Hirslanden Clinique La Colline SA
Hirslanden Freiburg AG, Düdingen
Hirslanden Klinik Aarau AG
Indirectly held through Hirslanden AG
Hirslanden Klinik Am Rosenberg AG
Hirslanden Lausanne SA
IMRAD SA
Klinik Belair AG
Klinik Birshof AG
Klinik St. Anna AG
Klinik Stephanshorn AG
Radiotherapie Hirslanden AG
Röntgeninstitut Cham AG
Linde Holding Biel/Bienne AG
Switzerland
Switzerland
Switzerland
Switzerland
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
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.0
100.0
99.7
100.0
100.0
100.0
100.0
99.7
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.0
100.0
99.7
100.0
100.0
100.0
15.0
–
Indirectly held through Hirslanden Klinik am Rosenberg AG
Klinik am Rosenberg Heiden AG
Switzerland
Healthcare services
99.2
99.2
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Indirectly held through Linde Holding Biel/Bienne AG
Hirslanden Klinik Linde AG (Previously Privatklinik Linde AG)
Lindenpark Immobilien AG
Indirectly held through Hirslanden Bern AG
Switzerland
Switzerland
Healthcare services
Healthcare services
Herzchirurgie Hirslanden Bern AG
Switzerland
Healthcare services
Indirectly held through Mediclinic Middle East Holdings Limited
Mediclinic International Co Limited
Emirates Healthcare Holdings Limited
United Kingdom
Dormant
British Virgin Islands
Intermediary holding company
Indirectly held through Emirates Healthcare Holdings Limited
Welcare World Holdings Limited
Emirates Healthcare Limited
British Virgin Islands
Healthcare services
British Virgin Islands
Healthcare services
Indirectly held through Emirates Healthcare Limited
American Healthcare Management Systems Limited
British Virgin Islands
Management services
Delah Cafe FZ LLC (incorporated in October 2016)
UAE
Food and catering
Emirates Healthcare Estates Limited
British Virgin Islands
Property management
Mediclinic Al Quasis Clinic LLC2
Mediclinic Beach Road LLC2
Mediclinic City Hospital FZ LLC
Mediclinic Clinics Investment LLC2
Mediclinic Ibn Battuta Clinic LLC2
Mediclinic Medical Stores Co LLC2
Mediclinic Mirdif Clinic LLC2
Mediclinic Parkview Hospital LLC2
Mediclinic Al Bahr Clinic LLC (previously named Manchester
Clinic LLC)
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Procurement
Healthcare services
Healthcare services
Healthcare services
Welcare Hospitals Limited (BVI)
British Virgin Islands
Healthcare services
Welcare World Health Systems Limited
British Virgin Islands
Healthcare services
Mediclinic Hospitals LLC4
Pharma Light Medical Store LLC
Indirectly held through Welcare Hospitals Limited (BVI)
Mediclinic Welcare Hospital LLC2
UAE
UAE
UAE
Healthcare services
Medical store/procurement
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100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
49.0
100.0
49.0
49.0
49.0
49.0
49.0
49.0
100.0
100.0
49.0
49.0
–
–
–
100.0
100.0
100.0
100.0
100.0
100.0
100.0
49.0
49.0
100.0
49.0
49.0
49.0
49.0
49.0
49.0
100.0
100.0
–
–
Healthcare services
49.0
49.0
MEDICLINIC | ANNUAL REPORT 2018
245
INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES
(CONTINUED)
SUBSIDIARIES (continued)
Company
Indirectly held through Welcare World Holdings Limited
Mediclinic Corniche Medical Centre LLC2
Mediclinic Pharmacy LLC2
Indirectly held through Welcare World Health Systems Limited
Mediclinic Middle East Management Services FZ LLC
Indirectly held through Al Noor Holdings Cayman Limited and
ANMC Management Limited
Al Noor Golden Commercial Investment LLC
(“Al Noor Golden”)3
Indirectly held through Al Noor Golden Commercial
Investment LLC
Al Noor Hospital Clinics – Al Ain9
Indirectly held through Mediclinic Hospitals LLC
Al Madar Medical Center LLC5 (previously Al Madar Group)
Al Madar Medical Center Pharmacy LLC10
Mediclinic Al Mamora LLC (previously named Al Noor Hospital
Family Care Centre – Al Mamoora LLC)6
Mediclinic Khalifa City Clinic LLC (previously named Al Noor
Hospital Medical Centre Khalifa City LLC)7
Mediclinic Aspetar LLC (previously named Aspetar Al Madar
Medical Center LLC)8
Mediclinic Pharmacy Aspetar LLC (previously named Aspetar
Al Madar Medical Pharmacy)11
Notes
Country of
incorporation
and place of
business
Principal activities
Interest in capital1
31 March
2018
%
31 March
2017
%
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
Healthcare services
Healthcare services (pharmacy)
49.0
49.0
49.0
49.0
Healthcare management
services
100.0
100.0
Intermediary holding company
49.0
49.0
Intermediary holding company
Healthcare services
Healthcare Services
Healthcare Services
Healthcare Services
Healthcare services
Healthcare services
99.0
73.0
49.0
99.0
49.0
49.0
49.0
–
73.0
49.0
100.0
49.0
49.0
49.0
1
2
3
The actual equity interest in the UAE entities are disclosed herein, with the beneficial interest further explained in the notes.
In terms of the constitutional and contractual arrangements the Group has full management control and an economic interest of 100% in these UAE entities.
Al Noor Holdings Cayman Limited (“ANH Cayman”) holds 48% and ANMC Management Limited (”ANMC Management”) holds 1% in the share capital of Al Noor
Golden Commercial Investment LLC (”Al Noor Golden”), collectively 49%. The remaining 51% is held by a third party shareholder, Al Noor Commercial Investment
Owner Al Nahda International Holdings – Sole Proprietorship LLC (”ANCI”). The constitutional documents of Al Noor Golden provide ANH Cayman with the right
to receive up to 98% of all distributions by Al Noor Golden, ANMC Management the right to receive 1%, and ANCI the right to receive the remaining 1%. In terms
of the Mudaraba Agreement, ANH Cayman has the right to receive 99% of ANCI’s right to receive 1% of the distributions of Al Noor Golden. Al Noor Cayman and
ANMC Management therefore, collectively, have an effective beneficial interest of 99% in Al Noor Golden.
Al Nahda International Holding LLC holds 100% share capital of Al Noor Commercial Investments Owner Al Nahda International Holding – Sole proprietorship
LLC. As per the Shareholders Agreement dated 17 May 2017, executed between Emirates Healthcare Limited, Al Nahda International Limited, Al Noor Commercial
Investment LLC and Mediclinic Hospitals LLC, the parties have agreed that Al Nahda International Holding LLC will become the sole shareholder of ANCI and the
local sponsor for the group (OPCO of Mediclinic Hospitals LLC and its subsidiaries and their respective registered branches and operational units from time to
time). In terms of this agreement ANCI holds 51% of the share capital of Mediclinic Hospitals LLC and Emirates Healthcare Limited BVI holds the remaining 49%.
By virtue of this shareholders agreement, the parties have agreed that ANCI and Mediclinic Hospitals LLC will be managed and controlled by EHL. Every dividend
declared by Mediclinic Hospitals LLC will be paid directly to Emirates Healthcare Limited. Accordingly, the management, voting rights and the dividend rights
have been assigned to Emirates Healthcare Limited. As per the termination agreement dated 21 August 2017, between Al Noor Golden Commercial Investment
LLC, Sheikh Mohamed Bin Butti Al Hamid, Al Noor Commercial Investment LLC, ANMC Management Limited, Al Noor Holdings Cayman and Emirates Healthcare
Limited whereby the parties agreed to terminate the following:
a) Relationship management agreement entered into between ANGCI, Sheikh Bin Butti and the OPCO on 20 May 2013 (“Relationship Agreement 1”);
b) The relationship agreement entered into between ANGCI, ANCI and OPCO on 20 May 2013 (“Relationship Management Agreement 2”);
c) The management agreement entered into between ANCI, ANMC Management on 20 May 2013 (“Management Agreement”); and
d) A shareholders agreement entered into between Sheikh Bin Butti, The First Arabian Corporation LLC, Al Noor Cayman, ANMC Management and ANCI on
20 May 2013 (“Shareholders Agreement”).
4
5
Emirates Healthcare Limited BVI holds 49% of the issued share capital of Mediclinic Hospitals LLC, with the remaining 51% held by ANCI. Emirates Healthcare
Limited BVI has the right to be appointed as the proxy of ANCI, to attend and to vote at all shareholder meetings of Mediclinic Hospitals LLC.
Mediclinic Hospitals LLC holds 73% of the issued share capital of Al Madar Medical Center LLC, with the remaining 27% interest held by ANCI. The Memorandum
of Association of the company provides that Mediclinic Hospitals LLC is entitled to receive 99% of distributions by the company and ANCI is entitled to receive
1%. The group’s effective beneficial interest in the entity is therefore 99%.
6 Mediclinic Hospitals LLC holds 99% and ANCI holds 1% in the issued share capital of Mediclinic Al Mamora LLC, collectively 100%.
7
Mediclinic Hospitals holds 49% of the issued share capital of Mediclinic – Khalifa City Clinic LLC, with the remaining 51% held by ANCI. The Memorandum of
Association of the company provides that Al Noor Golden is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. The
group’s effective beneficial interest in the entity is therefore 99%.
Mediclinic Hospitals LLC holds 49% of the issued share capital of Mediclinic Aspetar LLC, with the remaining 51% held by ANCI. The Memorandum of Association
of the company provides that Mediclinic Hospitals LLC is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. The group’s
effective beneficial interest is therefore 99%.
Al Noor Golden holds 99% of the issued share capital of Al Noor Hospital Clinics – Al Ain LLC, with the remaining 1% held by ANCI.
Mediclinic Hospitals holds 49% of the issued share capital of Mediclinic Pharmacy Aspetar LLC, with the remaining 51% interest held by ANCI. The Memorandum
of Association of the company provides that Mediclinic Hospitals LLC is entitled to receive 99% of distributions by the company and ANCI is entitled to receive
1%. The Group’s effective beneficial interest in the entity is therefore 99%.
Mediclinic Hospitals LLC holds 49% of the issued share capital of Aspetar Al Madar Medical Pharmacy LLC, with the remaining 51% held by ANCI. Mediclinic
Hospitals LLC holds 99% of the company interest with ANCI holding 1% of the company interest.
Controlled through long-term management agreements
Operating through trusts or partnerships
8
9
10
11
*
$
246 MEDICLINIC | ANNUAL REPORT 2018
JOINT VENTURES
Company
Country of
incorporation
and place
of business
Wits University Donald Gordon Medical Centre
(Pty) Ltd
South Africa
Principal
activities
Healthcare
services
Interest in capital
31 March
2018
%
31 March
2017
%
49.9
49.9
ASSOCIATES
Company
Listed:
Interest in capital
Book value of investment
31 March
2018
%
31 March
2017
%
31 March
2018
£’m
31 March
2017
£’m
Spire Healthcare Group plc (held through
Mediclinic Jersey Limited)
Unlisted:
Intercare Medical Proprietary Limited
Zentrallabor Zürich, Zürich
Baukonsortium, Cham*
EFG Parkierung Rigistrasse, Cham*
Centre de Reeducation et de Physiotherapie SA*
Centre de Physiotherapie du Sport S.à.r.l.*
CORTS AG, Maur*
29.9
29.9
348
459
34.0
50.0
24.0
25.0
20.0
23.0
30.0
–
53.0
24.0
25.0
20.0
23.0
–
2
2
–
–
–
–
–
–
2
–
–
–
–
–
352
461
The nature of the activities of the associates is similar to the major activities of the Group.
* Book value is less than £0.5m.
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MEDICLINIC | ANNUAL REPORT 2018
247
COMPANY FINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT
TO THE MEMBERS OF MEDICLINIC INTERNATIONAL PLC
REPORT ON THE AUDIT OF THE COMPANY FINANCIAL STATEMENTS
Opinion
In our opinion, Mediclinic International plc’s Company financial statements:
• give a true and fair view of the state of the Company’s affairs at 31 March 2018 and of its cash flows for the year
then ended;
• have been properly prepared in accordance with IFRSs as adopted by the European Union; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the statement of financial
position at 31 March 2018; the statement of cash flows; the statement of changes in equity for the year then ended; and the
notes to the financial statements, which include a description of the significant accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
Basis for opinion
We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law.
Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
Independence
We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and
we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were
not provided to the Company.
Other than those disclosed in note 22 to the consolidated financial statements, we have provided no non-audit services
to the Company in the period from 1 April 2017 to 31 March 2018.
Our audit approach
Overview
Materiality
•
Overall materiality: £13.4m (2017: £12m) based on 1% of total assets capped at 90% of overall
materiality applied as part of our Group audit.
• Our audit included substantive procedures of all material balances and transactions.
•
Impairment assessment of the Company’s investments in subsidiaries.
Audit scope
Key audit
matters
The scope of our audit
As part of designing our audit, we determined materiality and assessed 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.
We gained an understanding of the legal and regulatory framework applicable to the Company
and the industry in which it operates and we considered the risk of acts by the Company which
were contrary to applicable laws and regulations, including fraud. We designed audit procedures
to respond to the risk, recognising that the risk of not detecting a material misstatement due to fraud is higher than the
risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery
or intentional misrepresentations, or through collusion. We designed audit procedures that focused on the risk that
non-compliance related to, but not limited to, compliance with the Companies Act 2006, the UK Listing Rules and
UK taxation legislation gives rise to a material misstatement in the financial statements. In assessing compliance with laws
and regulations, our tests included, but were not limited to, checking the financial statement disclosures to underlying supporting
documentation, enquiries of management and review of relevant internal audit reports. There are inherent limitations in the
audit procedures described above and the further removed non-compliance with laws and regulations is from the events and
transactions reflected in the financial statements, the less likely we would become aware of it.
248 MEDICLINIC | ANNUAL REPORT 2018
As in all of our audits, we also addressed the risk of management override of internal controls, including testing journals and
evaluating whether there was evidence of bias by the directors that represented a risk of material misstatement due to fraud.
Key audit matters
Key audit matters are those matters that, in the auditors’ professional judgement, were of most significance in the audit of the
financial statements of the current period and include the most significant assessed risks of material misstatement (whether
or not due to fraud) identified by the auditors, including those which had the greatest effect on: the overall audit strategy;
the allocation of resources in the audit; and directing the efforts of the engagement team. These matters, and any comments
we make on the results of our procedures thereon, were addressed in the context of our audit of the financial statements as a
whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete
list of all risks identified by our audit.
KEY AUDIT MATTER
Impairment assessment of the Company’s
investments in subsidiaries
(refer to note 3 in the Company financial statements)
The Company holds investments in subsidiaries with a
historical cost of £5 916m.
Investments in subsidiaries are accounted for at cost
less impairment in the Company balance sheet at
31 March 2018. Investments are tested for impairment if
impairment indicators exist. If such indicators exist, the
recoverable amounts of the investments in subsidiaries
are estimated in order to determine the extent of the
impairment loss, if any. Any such impairment loss is
recognised in the income statement.
Impairment triggers were identified in connection with the
Company’s investments in Mediclinic Holdings Netherlands
B.V. and CHF Finco Limited (Jersey) due to a decline in
the expected recoverable value of the underlying Swiss
operations and following a reduction in the listed market
price of the underlying investment in Spire respectively. As
a result, an impairment loss of £1 169m was recognised in
the current year, reflecting a write-down of the investment
in Mediclinic Holdings Netherlands B.V. to its recoverable
value at 31 March 2018.
The impairment assessment performed by management
was considered a key audit matter given the size of the
underlying investment carrying values and recognising
the significance of the impairment charge that has been
recorded. The assessment requires the application of
management judgement, particularly in determining
whether any impairment indicators have arisen that trigger
the need for an impairment review and assessing whether
the carrying value of an asset can be supported by its
recoverable amount, which is determined by reference
to the key valuation assumptions for each investment.
How we tailored the audit scope
HOW OUR AUDIT ADDRESSED THE KEY
AUDIT MATTER
We evaluated management’s assumption whether any
indicators of impairment existed by comparing the
Company’s carrying value of investments in subsidiaries
to the Group’s market capitalisation at 31 March 2018
and to the valuations implied by other models, including
valuation models prepared for goodwill impairment
review purposes and for the Group’s associate
investment in Spire, which were subject to audit
procedures as part of our Group audit.
Deploying our valuation experts, we tested the
reasonableness of key assumptions underpinning
management’s value-in-use valuation of the Company’s
investments, focusing in particular on the Swiss
operations and the investment in Spire, including
cash flow forecasts and the selection of growth rates
and discount rates. We challenged management to
substantiate its assumptions, including comparing
relevant assumptions to third party data and
economic forecasts.
We evaluated management’s sensitivity analyses to
ascertain the impact of reasonably possible changes
to key assumptions on the level of impairment required.
Based on our work performed, we concurred with
management that an impairment is required in the
current year. We have found the judgements and
estimates made by management in determining the
impairment charge to be materially reasonable in
the context of the Company financial statements taken
as a whole and the related disclosures to be appropriate.
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 structure of the Company, its accounting processes and controls and the
industry in which it operates. Our audit included substantive procedures on all material balances and transactions recorded
in the Company’s financial statements.
MEDICLINIC | ANNUAL REPORT 2018
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INDEPENDENT AUDITORS’ REPORT (CONTINUED)
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 in aggregate, 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 materiality
£13.4m (2017: £12m).
How we determined it
Based on 1% of total assets capped at 90% of overall materiality applied as
part of our Group audit.
Rationale for benchmark applied
Mediclinic International plc is the ultimate parent company which holds the
Group’s investments. Therefore, the entity is not in itself profit-oriented. The
strength of the balance sheet is the key measure of financial health that is
important to shareholders, since the primary concern for the parent company
is the payment of dividends. Using a benchmark of total assets is therefore
most appropriate. However, materiality levels have been capped at 90%
of overall materiality applied as part of our Group audit.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit above
£0.75m (2017: £0.74m) as well as misstatements below that amount that, in our view, warranted reporting for qualitative
reasons.
Going concern
In accordance with ISAs (UK) we report as follows:
REPORTING OBLIGATION
OUTCOME
We are required to report if we have anything material to add or draw attention
to in respect of the directors’ statement in the financial statements about whether
the directors considered it appropriate to adopt the going concern basis of
accounting in preparing the financial statements and the directors’ identification
of any material uncertainties to the Company’s ability to continue as a going
concern over a period of at least twelve months from the date of approval of the
financial statements.
We have nothing material to add
or to draw attention to. However,
because not all future events or
conditions can be predicted, this
statement is not a guarantee
as to the Company’s ability to
continue as a going concern.
We are required to report if the directors’ statement relating to going concern
in accordance with Listing Rule 9.8.6R(3) is materially inconsistent with our
knowledge obtained in the audit.
We have nothing to report.
Reporting on other information
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The directors are responsible for the other information. Our opinion on the financial statements
does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise
explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing so,
consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained
in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material
misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the financial
statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that
there is a material misstatement of this other information, we are required to report that fact. We have nothing to report
based on these responsibilities.
250 MEDICLINIC | ANNUAL REPORT 2018
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the
UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act 2006
(CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report certain opinions
and matters as described below (required by ISAs (UK) unless otherwise stated).
STRATEGIC REPORT AND DIRECTORS’ REPORT
In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report
and Directors’ Report for the year ended 31 March 2018 is consistent with the financial statements and has been
prepared in accordance with applicable legal requirements. (CA06)
In light of the knowledge and understanding of the Company and its environment obtained in the course of the audit,
we did not identify any material misstatements in the Strategic Report and Directors’ Report. (CA06)
THE DIRECTORS’ ASSESSMENT OF THE PROSPECTS OF THE COMPANY AND OF THE
PRINCIPAL RISKS THAT WOULD THREATEN THE SOLVENCY OR LIQUIDITY OF THE
COMPANY
We have nothing material to add or draw attention to regarding:
• The directors’ confirmation on page 99 of the Annual Report that they have carried out a robust assessment of the
principal risks facing the Company, including those that would threaten its business model, future performance,
solvency or liquidity;
• The disclosures in the Annual Report that describe those risks and explain how they are being managed or
mitigated; and
• The directors’ explanation on page 50 of the Annual Report as to how they have assessed the prospects of the
Company, 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 Company 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 to report having performed a review of the directors’ statement that they have carried out a
robust assessment of the principal risks facing the Company and statement in relation to the longer-term viability
of the company. 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 UK Corporate Governance Code (the “Code”); and considering whether the statements are
consistent with the knowledge and understanding of the company and its environment obtained in the course of the
audit. (Listing Rules)
OTHER CODE PROVISIONS
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 160, that they consider the Annual Report taken as a whole to be fair,
balanced and understandable, and provides the information necessary for the members to assess the company’s
position and performance, business model and strategy is materially inconsistent with our knowledge of the
Company obtained in the course of performing our audit;
• The section of the Annual Report on page 120 describing the work of the Audit and Risk Committee does not
appropriately address matters communicated by us to the Audit and Risk Committee; and
• The directors’ statement relating to the Company’s compliance with the Code does not properly disclose a
departure from a relevant provision of the Code specified, under the Listing Rules, for review by the auditors.
DIRECTORS’ REMUNERATION
In our opinion, the part of the Directors’ Remuneration Report to be audited has been properly prepared in accordance
with the Companies Act 2006. (CA06)
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MEDICLINIC | ANNUAL REPORT 2018
251
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INDEPENDENT AUDITORS’ REPORT (CONTINUED)
Responsibilities for the financial statements and the audit
Responsibilities of the directors for the financial statements
As explained more fully in the Directors’ Responsibilities Statement set out on page 160, the directors are responsible for the
preparation of the financial statements in accordance with the applicable framework and for being satisfied that they give
a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the
preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, the directors are responsible for assessing the Company’s ability to continue as a going
concern, disclosing as applicable, matters related to going concern and using the going concern basis of accounting unless
the directors either intend to liquidate the Company or to cease operations or have no realistic alternative but to do so.
Auditors’ responsibilities for the audit of the financial statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material
misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance
is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect
a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually
or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of
these financial statements.
A further description of our responsibilities for the audit of the financial statements is located on the FRC’s website at:
www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report.
Use of this report
This report, including the opinions, has been prepared for and only for the 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.
OTHER REQUIRED REPORTING
Companies Act 2006 exception reporting
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 Company or returns adequate for our audit have not been
received from branches not visited by us; or
• certain disclosures of directors’ remuneration specified by law are not made; 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.
Appointment
Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 18 March 2016
to audit the financial statements for the year ended 31 March 2016 and subsequent financial periods. The period of total
uninterrupted engagement is three years, covering the years ended 31 March 2016 to 31 March 2018.
OTHER MATTER
We have reported separately on the consolidated financial statements of Mediclinic International plc for the year ended
31 March 2018.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
23 May 2018
252 MEDICLINIC | ANNUAL REPORT 2018
COMPANY STATEMENT OF
FINANCIAL POSITION
AS AT 31 MARCH 2018
Non-current assets
Investment in subsidiaries
Current assets
Cash and cash equivalents
Total assets
Equity
Share capital
Capital redemption reserve
Share premium
Retained earnings
Opening balance
(Loss)/profit for the year
Dividends paid
Share-based payment reserve
Treasury shares
Total equity
Current liabilities
Other payables
Amount due to related parties
Total liabilities
Notes
2018
£’m
2017
£’m
3
5
5
5
5
5
4
4 747
5 916
26
4 773
74
6
690
3 976
5 154
(1 120)
(58)
1
(1)
4 746
1
26
27
34
5 950
74
6
690
5 154
4 899
317
(62)
1
(2)
5 923
1
26
27
4 773
5 950
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These financial statements as set out on pages 253 to 260 were approved and authorised for issue by the Board of Directors
and signed on their behalf by:
DP Meintjes
Chief Executive Officer
23 May 2018
PJ Myburgh
Chief Financial Officer
23 May 2018
Mediclinic International plc (Company no 08338604)
The notes on pages 256 to 260 form an integral part of these financial statements.
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MEDICLINIC | ANNUAL REPORT 2018
253
COMPANY STATEMENT OF
CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2018
Share
capital
£’m
Capital
redemption
reserve
£’m
74
–
–
74
–
–
–
–
74
6
–
–
6
–
–
–
–
6
Share
premium
£’m
Retained
earnings
£’m
690
4 899
–
–
690
–
–
–
–
317
(62)
5 154
(1 120)
(58)
–
–
690
3 976
Share-
based
payment
reserve
£’m
Treasury
shares
£’m
1
–
–
1
–
–
1
(1)
1
(2)
–
–
(2)
–
–
–
1
(1)
Total
£’m
5 668
317
(62)
5 923
(1 120)
(58)
1
–
4 746
At 1 April 2016
Profit for the year
Dividends paid in the year
At 31 March 2017
Loss for the year
Dividends paid in the year
Addition to share-based
payment reserve
Settlement of share-based
payment reserve
At 31 March 2018
The notes on pages 256 to 260 form an integral part of these financial statements.
254 MEDICLINIC | ANNUAL REPORT 2018
COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2018
Operating activities
(Loss)/profit before tax
Adjustments for:
Finance costs
Other income
Impairment of investments
Settlement of share-based payments
Dividend income
Net cash used in operating activities before movements
in working capital
Change in balances with related parties
Change in other payables
Change in derivatives
Net cash (used in)/generated from operating activities
Investing activities
Dividend received
Net cash generated from investing activities
Financing activities
Repayment of bank loan
Interest paid
Dividend paid
Net cash 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 year
Notes
6
3
4
6
2018
£’m
(1 120)
–
(33)
1 169
1
(24)
(7)
–
–
–
(7)
24
24
–
–
(25)
(25)
(8)
34
26
2017
£’m
317
6
(27)
–
–
(303)
(7)
47
(2)
(1)
37
303
303
(265)
(6)
(35)
(306)
34
–
34
The notes on pages 256 to 260 form an integral part of these financial statements.
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MEDICLINIC | ANNUAL REPORT 2018
255
NOTES TO THE COMPANY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2018
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 Link Company Matters
Limited, 6th Floor, 65 Gresham Street, London, EC2V 7NQ. The registration 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 with three operating divisions in Switzerland, Southern Africa (South Africa and Namibia) and the
United Arab Emirates.
The activities of the subsidiaries are the operation of medical hospitals and clinics and the sale of pharmaceuticals,
medical supplies and related equipment.
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 the Company.
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 UK Companies Act not to present its
individual income statement as part of these financial statements.
a) 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.
b) Functional and presentation currency
The financial statements and financial information are presented in pounds sterling, rounded to the nearest million.
c) Going concern
The Company’s financial statements were prepared on a going concern basis. The Directors believe that the Company
will continue to be in operation in the foreseeable future.
3.
INVESTMENT IN SUBSIDIARIES
This investment is stated at cost less impairment.
Shares at cost
Less: impairment charge
Closing balance
2018
£’m
5 916
(1 169)
4 747
2017
£’m
5 916
–
5 916
256 MEDICLINIC | ANNUAL REPORT 2018
3.
INVESTMENT IN SUBSIDIARIES (continued)
The investments held by the Company are Al Noor Holdings Cayman Limited, ANMC Management Limited, Mediclinic
CHF Finco Limited, Mediclinic Holdings Netherlands B.V., Mediclinic Middle East Holdings Limited and
Mediclinic International (RF) (Pty) Ltd, each being wholly-owned subsidiaries.
The activities of the subsidiaries are the operation of medical hospitals and clinics and the sale of pharmaceuticals,
medical supplies and related equipment.
At the financial year end, the investment in Mediclinic Holdings Netherlands B.V. was impaired due to the impairment
of the carrying values of properties and intangible assets of its underlying investment, Hirslanden AG. An
impairment charge of £1 169m was recorded in the Company’s records. Refer to notes 6 and 7 of the consolidated
financial statements for more detail relating to the impairment calculation.
Refer to the Annexure to the notes to the consolidated financial statements on page 243 for a complete listing of
investments in subsidiaries, associates and joint ventures of the Group and details of the country of incorporation,
place of business, principal activities and interest in capital.
4.
RELATED PARTY BALANCES AND TRANSACTIONS
Related-parties comprise the subsidiaries, the shareholders, key management personnel and those entities over
which the parent, the directors or the Company can exercise significant influence or which can significantly influence
the Company.
2018
£’m
2017
£’m
a) Transactions with key management personnel
Key management includes the directors (executive and non-executive)
and members of the executive committee
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Salaries and other short-term benefits
b) Amount due to a related party:
Mediclinic Hospitals LLC
This amount included the transaction and operational expenses paid
by Mediclinic Hospitals LLC on behalf of the Company. This amount is
payable on demand.
Information regarding the Group’s subsidiaries and associates can be found
in the Annexure to the consolidated financial statements on pages 243
to 247.
c) Dividends received from related parties:
Mediclinic CHF Finco Limited
Mediclinic Holdings Netherlands B.V.
Mediclinic International (RF) (Pty) Ltd
Mediclinic Middle East Holdings Limited
1
26
4
8
–
12
24
1
26
49
7
78
169
303
MEDICLINIC | ANNUAL REPORT 2018
257
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NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)
5.
SHARE CAPITAL AND RESERVES
Issued and fully paid 737 243 810 (2017: 737 243 810) shares of
10 pence each
OTHER RESERVES
2018
£’m
74
As at 1 April 2016
Addition of share-based payment reserve
As at 31 March 2017
Addition to share-based payment reserve
Settlement of share-based payment reserve
As at 31 March 2018
Share-based
payment
reserve
£’m
Treasury
shares
£’m
1
–
1
1
(1)
1
(2)
–
(2)
–
1
(1)
2017
£’m
74
Total
£’m
(1)
–
(1)
–
–
–
6.
DIVIDENDS
The Company declared interim dividends for the 2017/18 period and final dividends for the 2016/17 period amounting
to £58m. The Company paid £25m (2017: £35m) of these dividends, the remainder of £33m (2017: £27m) was paid
by the Dividend Access Trust.
A wholly-owned subsidiary of the Company, Mediclinic International (RF) (Pty) Ltd, formed a Dividend Access
Trust to comply with a South African Reserve Bank requirement that dividends from a South African source due to
South African shareholders on the South African share register must be paid locally to avoid an outflow of funds
from South Africa.
The beneficiaries of the trust are the South African shareholders of the Company who hold their shares via the South
African share register on the relevant record date in respect of each distribution paid through the Dividend Access
Scheme. The Dividend Access Trust does not participate in any profits.
When a dividend is declared by the Company, the Dividend Access Trust would receive a dividend from Mediclinic
International (RF) (Pty) Ltd which in turn is paid over to the Company’s transfer secretaries in South Africa, who
arrange for the payment of the relevant amount to the South African shareholders (the beneficiaries of the trust)
through the usual dividend payment procedures, as if they were dividends received from Mediclinic International
plc. To the extent that the dividends due to South African shareholders are not ultimately funded from Mediclinic
International (RF) (Pty) Ltd, they receive those dividends as normal dividends from Mediclinic International plc.
The South African shareholders’ entitlement to receive dividends declared by Mediclinic International plc is reduced
by any amounts they receive via the trust.
Details on the final proposed dividend has been disclosed in note 28.6 to the consolidated financial statements.
258 MEDICLINIC | ANNUAL REPORT 2018
7.
AUDITOR’S REMUNERATION
The Company incurred an amount of £448 758 (2017: £337 900) to its auditor in respect of the audit of the
Company and Group’s financial statements for the year ended 31 March 2018. The fee includes an amount of £42 959
(2017: £nil) in respect of prior years.
Fees payable to the Company’s auditors for other services:
Tax advisory services
Audit-related and other services
Relates to services rendered across the Group.
2018
£’m
–
0.12
0.12
2017
£’m
0.25
0.10
0.35
8.
SHARE-BASED PAYMENT RESERVE
Forfeitable Share Plan
The Mediclinic International (RF) (Pty) Ltd 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. 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 is subject to continued employment and measured over a three-year period.
As at 1 April 2017 (2017: 1 April 2016)
Vested during the year
As at 31 March
2018
Number of
shares
239 290
(137 948)
101 342
2017
Number of
shares
239 290
–
239 290
A valuation has been determined and an expense recognised over a three-year period. The fair value of the total
shareholder return (“TSR”) performance condition has been determined by using the Monte Carlo simulation model
and the fair value of the headline earnings per share performance condition, consensus forecasts have been used.
The following assumptions were used with the valuation of the scheme: risk-free rate of 7.49%, dividend yield of 1.0%
and volatility of 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.
9.
TAXATION
At 31 March 2018, the Company had unutilised tax losses of approximately £40m (2017: £33m). No deferred tax
asset has been recognised in respect of these losses.
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MEDICLINIC | ANNUAL REPORT 2018
259
NOTES TO THE COMPANY FINANCIAL STATEMENTS (CONTINUED)
10.
FINANCIAL INSTRUMENTS
a) 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.
b) Financial risk management objectives
The Company is exposed to the following risks related to financial instruments: credit risk, liquidity risk and foreign
currency risk. The Company does not enter into or trade in financial instruments, investments in securities, including
derivative financial instruments, for speculative purposes.
c) Credit risk
The carrying amount of financial assets represents the maximum credit exposure. There is no material credit risk
involved on the Company’s financial statements. The Company's cash equivalents are placed with quality financial
institutions with a high credit rating.
d) Liquidity risk
Ultimate responsibility for liquidity risk management rests with the directors of the Company, who have built an
appropriate liquidity risk management framework for managing 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 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 2018
Other payables
Related-party payables
31 March 2017
Other payables
Related-party payables
Carrying
amount
£’m
Contractual
cash flows
£’m
1 year
or less
£’m
1
26
27
1
26
27
1
26
27
1
26
27
1
26
27
1
26
27
e) Foreign currency risk
The Company has an insignificant exposure regarding foreign currency, but a prudent approach towards foreign
cover is followed if applicable.
260 MEDICLINIC | ANNUAL REPORT 2018
ADDITIONAL
INFORMATION
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MEDICLINIC | ANNUAL REPORT 2018
MEDICLINIC | ANNUAL REPORT 2018
261
261
SHAREHOLDER
INFORMATION
SHARE CAPITAL AND SHAREHOLDERS
Structure
The Company’s ordinary issued share capital as at 31 March 2018 was 737 243 810 ordinary shares of £0.10 each which have
a primary listing on the LSE and secondary listings on the JSE in South Africa and the NSX in Namibia. The ordinary share
class represents 100% of the Company’s total issued share capital. Further information on the Company’s issued share
capital can be found in note 13 to the Consolidated Financial Statements on pages 207 and 208.
There are no known arrangements under which financial rights are held by a person other than the holder of the shares.
Shares acquired through the Company’s share schemes and plans rank equally with the other shares in issue and have
no special rights. Further details on the Company’s employee share scheme are included in the Directors’ Remuneration
Report from page 130.
AR
AR
Distribution of ordinary shareholders as at 31 March 2018
LSE register (registered)
JSE register (beneficial) comprising:
certificated
dematerialised
Total
Acquisition of own shares
Number of
share-
holders
Number
of shares
649
220 885 142
29 273
516 358 668
1 072
28 201
29 922
398 368
515 960 300
737 243 810
% of
issued
share
capital
29.96%
70.04%
0.05%
69.99%
100.00%
At the Company’s annual general meeting on 20 July 2016, it was resolved that the Company was authorised to purchase the
10 subscriber shares of 10 pence per share in the capital of the Company from Astro II SPV at a price of 10 pence per share,
which repurchase was concluded in April 2017.
The Company has no intention to complete a market purchase of its ordinary shares and will not seek this authority at the
Company’s annual general meeting on 25 July 2018.
Restrictions on the transfer of Company shares
The South African Broad-Based Black Economic Empowerment Act, 53 of 2003, as amended, (the “B-BEE Act”) was enacted
to establish a legislative framework for the promotion of broad-based black economic empowerment in South Africa and
is intended to encourage transformation by including black people in the economy. It covers aspects such as ownership,
management control, skills development, enterprise and supplier development and social-economic development. In 2005,
Mediclinic International (RF) (Pty) Ltd (previously Mediclinic International Limited) (“Mediclinic SA”) implemented a black
ownership initiative with MP1 Investment Holdings (Pty) Ltd (previously Circle Capital Ventures (Pty) Ltd) (“MP1”) and
Phodiso Holdings Limited (“Phodiso”) (collectively, the “Strategic Black Partners”).
Following the combination of Mediclinic SA with Al Noor Hospitals Group plc in February 2016, the Company entered into
arrangements with the Strategic Black Partners to formalise the basis on which the Strategic Black Partners hold their shares
in the Company, which are materially the same as the arrangements in existence prior to the combination. The arrangements
that originally applied to the holdings of the Strategic Black Partners in relation to their shares in Mediclinic SA before
completion of the combination continue to apply to their holdings of shares in the Company. The restrictions are:
•
in the case of the 24 582 960 shares held by Phodiso through its subsidiary, Mpilo Investment Holdings 2 (RF) (Pty)
Ltd (“Mpilo 2”), representing approximately 3.33% of the Company’s issued share capital, disposals of such shares are
restricted until 31 December 2018; and
262 MEDICLINIC | ANNUAL REPORT 2018
•
in the case of the 10 958 206 shares held by MP1 through its subsidiary, Mpilo 1 Newco (RF) (Pty) Ltd (“Mpilo 1”),
representing approximately 1.49% of the Company’s issued share capital, disposals of such shares are restricted until
31 December 2019.
The arrangements also contain pre-emptive rights in favour of the Company which provide that, if any of the shares in the
Company held by Mpilo 1 or Mpilo 2 are to be offered for sale, the Company will be offered the opportunity to purchase
such shares or to nominate another person to purchase such shares, in each case, at a discounted price of, in relation to the
Mpilo 1 shares, approximately 5% to the then market value and, in relation to the Mpilo 2 shares, approximately 10%.
Any exercise of a right to purchase such shares by the Company itself would require the approval of its shareholders.
Restrictions on voting rights
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 of the Company, or to exercise any other right
conferred by membership if:
• any call or other sum payable to the Company in 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 2006, has failed to do so within 14 days of such notice, for so long as the default continues.
Substantial shareholders
As at year end, and if subsequently changed also as at 23 May 2018, being the last practicable date, the following shareholders
notified the Company, in accordance with Disclosure Guidance and Transparency Rules, of their interest of 3% or more in the
Company’s issued share capital:
Remgro Limited (through wholly-owned subsidiaries)
328 497 888
44.56%
17/02/2016
Ordinary
shares
% voting
rights
Date
notified
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Public Investment Corporation SOC Limited:
as at year end
as at 23 May 2018
Genesis Asset Managers LLP
Coronation Asset Management (Pty) Ltd:
as at year end
as at 23 May 2018
Mpilo Investment Holdings 2 (RF) (Pty) Ltd
2018 annual general meeting
59 447 726
58 894 769
37 989 258
36 951 344
36 248 868
24 582 960
8.06%
7.99%
5.15%
5.01%
4.92%
3.33%
12/05/2017
06/04/2018
28/11/2017
26/10/2017
07/05/2018
13/05/2016
The Company’s annual general meeting (“AGM”) will take place at 15:00 (British Summer Time) on Wednesday,
25 July 2018 at The Lincoln Centre, 18 Lincoln's Inn Fields, London, WC2A 3ED, United Kingdom. All ordinary shareholders
have the opportunity to attend and vote, in person or by proxy. The Notice of Annual General Meeting can be found on the
Investor Relations section of the Company’s website at www.mediclinic.com, and is being posted in a separate booklet at
the same time as this Annual Report. The notice 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 meeting and the directors
encourage shareholders to participate at the event.
MEDICLINIC | ANNUAL REPORT 2018
263
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SHAREHOLDER INFORMATION (CONTINUED)
DIVIDENDS
The Board proposes a final dividend of 4,70 pence per ordinary share for the year ended 31 March 2018 for approval by the
Company’s shareholders at the AGM to be held on Wednesday, 25 July 2018. The salient dates for the dividend are as follows:
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
Shareholder approval at annual general meeting (London)
Final dividend payment date
Tuesday, 12 June 2018
Wednesday, 13 June 2018
Thursday, 14 June 2018
Friday, 15 June 2018
Wednesday, 25 July 2018
Monday, 30 July 2018
AR
AR
The Company’s dividend policy is dealt with in the Financial Review on page 32.
The tax treatment of the dividend for shareholders on the South African register are available on the Company’s website.
Details of the dividend access trust established for South African resident shareholders are provided in note 13 of the
Consolidated Financial Statements on page 208.
The dividends declared by the Company to its ordinary shareholders during the reporting period are summarised below:
Interim dividend
Final dividend
Total dividend
SHARE PRICE
2018
3.20
4.70
7.90
2017
3.20
4.70
7.90
The latest share price information can be found on the Company’s website at www.mediclinic.com or through your broker.
264 MEDICLINIC | ANNUAL REPORT 2018
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 Southern African register
South African transfer secretary
Computershare Investor Services (Pty) Ltd
Namibian transfer secretary
Transfer Secretaries (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue,
4 Robert Mugabe Avenue, Windhoek, Namibia
Rosebank, 2196, South Africa
Postal address: PO Box 61051,
Marshalltown, 2107, South Africa
Tel: +27 11 370 5000
Fax: +27 11 688 7716
Shareholders on the UK register
Computershare Investor Services plc
Postal address: PO Box 2401, Windhoek, Namibia
Tel: +264 61 227 647
Fax: +264 61 248 531
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ, United Kingdom
Tel: +44 370 703 6022
E-mail: WebCorres@computershare.co.uk
Lines are open during normal business hours from 08:30 to 17:30 GMT Monday to Friday and charged at the standard
rate. Shareholders can use Computershare’s website to check and maintain their records. Details can be found at
www.investorcentre.co.uk/contactus.
Share Dealing Service
Computershare offers a share dealing service which allows UK resident shareholders to buy and sell the Company’s shares.
Shareholders can deal in their shares on the internet or by telephone. Please contact Computershare for more details
on this service.
ShareGift
If a few shares are held, which low value makes them difficult to sell, you may make a donation to charity through ShareGift,
an independent charity share donation scheme. For further details please contact the Computershare or ShareGift at
telephone number +44 20 7930 3737 or visit their website at www.sharegift.org.
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265
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COMPANY
INFORMATION
COMPANY NAME AND NUMBER
INVESTOR RELATIONS CONTACT
Mediclinic International plc
Mr James Arnold
(incorporated and registered in England and Wales)
Head of Investor Relations
Company number: 08338604
14 Curzon Street, London, W1J 5HN, United Kingdom
REGISTERED OFFICE
Mediclinic International plc
6th Floor, 65 Gresham Street
London, EC2V 7NQ, United Kingdom
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
E-mail: info@mediclinic.com
Website: www.mediclinic.com
LISTING
FTSE sector: Health Care Equipment & Services
ISIN code: GB00B8HX8Z88
SEDOL number: B8HX8Z8
EPIC number: MDC
LEI: 2138002S5BSBIZTD5I60
Primary listing: London Stock Exchange (share code: MDC)
Secondary listing: JSE Limited (share code: MEI)
Secondary listing: Namibian Stock Exchange
(share code: MEP)
DIRECTORS
Tel: +44 20 3786 8180/1
E-mail: ir@mediclinic.com
REGISTRAR/TRANSFER SECRETARIES
United Kingdom
Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ
Tel: +44 370 703 6022
E-mail: WebCorres@computershare.co.uk
South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank, 2196
PO Box 61051, Marshalltown, 2107
Tel: +27 11 370 5000
Namibia
Transfer Secretaries (Pty) Ltd
4 Robert Mugabe Avenue, Windhoek
PO Box 2401, Windhoek
Tel: +264 61 227 647
CORPORATE ADVISORS
Auditors
PricewaterhouseCoopers LLP, London
Dr Edwin Hertzog (ne) (Chairman) (South African),
Danie Meintjes (Chief Executive Officer) (South African),
Jurgens Myburgh (Chief Financial Officer) (South African),
Dr Muhadditha Al Hashimi (ind ne) (Emirati),
Jannie Durand (ne) (South African), Alan Grieve (ind ne)
(British), Dr Felicity Harvey (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 (Senior
Independent Director) (South African), Pieter Uys
(alternate to Jannie Durand) (South African)
COMPANY SECRETARY
Corporate Broker and Sponsors
Joint corporate brokers (United Kingdom):
Morgan Stanley & Co International plc
and UBS Investment Bank
JSE sponsor (South Africa):
Rand Merchant Bank
(a division of FirstRand Bank Limited)
NSX sponsor (Namibia):
Simonis Storm Securities (Pty) Ltd
Legal Advisors
UK legal advisors: Slaughter and May
SA legal advisors: Cliffe Dekker Hofmeyr Inc.
Link Company Matters Limited (previously named
Capita Company Secretarial Services Limited)
Remuneration Consultant
New Bridge Street
Jayne Meacham/Caroline Emmet
Deloitte LLP has been appointed from the
6th Floor, 65 Gresham Street, London, EC2V 7NQ
2018/19 financial year
United Kingdom
Tel: +44 20 7954 9600
E-mail: MediclinicInternational@linkgroup.co.uk
Communication Agency
FTI Consulting
Tel: +44 20 3727 1000
E-mail: businessinquiries@fticonsulting.com
266 MEDICLINIC | ANNUAL REPORT 2018
GLOSSARY
TERM
MEANING
annual general meeting or AGM
Annual Report
Al Noor
Articles
the annual general meeting of the Company to be held on Wednesday, 25
July 2018, the notice of which have been distributed to shareholders by
Friday, 22 June 2018 and a copy of which is available on the Company’s
website
this annual report and financial statements for the reporting period ended
31 March 2018
the Al Noor Hospitals Group with operations mainly in Abu Dhabi,
which forms part of the Group’s operations in the United Arab Emirates
the Company’s Articles of Association as adopted in General Meeting on
20 July 2016
Board or Board of Directors
the board of directors of Mediclinic International plc
Brexit
CAGR (%)
the departure of the United Kingdom from the European Union, which is
planned from the end of March 2019
compounded annual growth rate
cash conversion (%)
cash generated from operations divided by adjusted EBITDA
CCU
CDLI
CEO
CFO
Company
DRG
EBITDA
EU
external auditor
FY18/period under review/reporting
period
critical care unit
Carbon Disclosure Leadership Index
Chief Executive Officer
Chief Financial Officer
Mediclinic International plc
diagnosis-related group
operating profit before depreciation and amortisation, excluding other
gains and losses
European Union
when referring to the Company’s external auditor, means
PricewaterhouseCoopers LLP
the financial year ended on 31 March 2018
FY19/next financial year
the financial year ending on 31 March 2019
FCA
GDP
GRI Standards
Group
group
HAI
Hirslanden
IFRS
the United Kingdom Financial Conduct Authority
gross domestic product
the GRI Sustainability Reporting Standards issued in 2016 by the Global
Sustainability Standards Board, which standards represent global best
practice for reporting publicly on a range of economic, environmental and
social impacts
Mediclinic International and its three operating divisions in Switzerland,
Southern Africa and the United Arab Emirates (“group” refers to one of the
Group’s operating divisions, as the context may indicate, as defined below)
one of the operating divisions 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
International Financial Reporting Standards, as adopted by the
European Union
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MEDICLINIC | ANNUAL REPORT 2018
267
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GLOSSARY (CONTINUED)
TERM
JCI
JSE
Last Practicable Date
Listing Rules
MEANING
Joint Commission International, an international quality measurement
accreditation organisation, aimed at improving quality of care
JSE Limited, the stock exchange of South Africa based in Johannesburg
the date of approval of the Annual Report by the Board, being 23 May 2018
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
Mediclinic Middle East
Mediclinic Southern Africa
NSX
operating division/s
the Group’s operations in the UAE, trading under the Mediclinic brand, with
(a) Emirates Healthcare Holdings Limited BVI as the intermediary holding
company of the Group’s operations in the UAE, mainly in Dubai; and
(b) Al Noor Golden Commercial LLC as the intermediary holding company
of the Group’s operations in the UAE, mainly in Abu Dhabi
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
the Namibian Stock Exchange based in Windhoek, Namibia
Hirslanden (Switzerland), Mediclinic Southern Africa and Mediclinic Middle
East and their subsidiaries and associated entities, or any one of them as the
context may indicate
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
268 MEDICLINIC | ANNUAL REPORT 2018
FORWARD-LOOKING
STATEMENTS
This Annual Report contains certain forward-looking statements relating to the financial condition, regulatory environment
in which the Group operates, 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 # 11834
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