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2019ANNUALREPORT
CONTENTS
4
At a glance
STRATEGIC REPORT
Business overview
10 Performance summary
12
16
Chairman’s Statement
Business model
GOVERNANCE AND REMUNERATION
103 Chairman’s Introduction
104 Board of Directors
110 Group Executive Committee
114 Corporate Governance Statement
136 Audit and Risk Committee Report
150 Clinical Performance and Sustainability
18 Our strategy, goals and progress
Committee Report
22
23
Investment case
Five-year summary
154 Nomination Committee Report
159 Directors’ Remuneration Report
Performance and future outlook
179 Statement of Directors’ Responsibilities
24 Chief Executive Officer’s Review
29 Financial Review
40 Value added statement
41
Clinical services overview
Risk management
55 Risk management, principal risks and uncertainties
60 Viability statement
Divisional reviews
62 Divisional Review – Switzerland
67 Divisional Review – Southern Africa
71
Divisional Review – UAE
Non-financial performance
76 Sustainable development overview
100 Non-financial information statement
FINANCIAL STATEMENTS
182 Group Financial Statements
280 Company Financial Statements
ADDITIONAL INFORMATION
296 Shareholder information
300 Company information
302 Forward-looking statements
303 Glossary
OVERVIEW
ADAPTING
MEDICLINIC TO THE
CHANGING GLOBAL
HEALTHCARE
ENVIRONMENT
is a priority with focus
throughout the Group to
invest across the continuum
of care
750 000
INPATIENT ADMISSIONS
across the Group as the demand
for quality healthcare services
remains strong
REVENUE UP
2%
to £2 932m; up 4%
in constant currency
ADJUSTED
EBITDA DOWN
4%
to £493m; down 2%
in constant currency
reflecting the financial
impact of regulatory
changes on Hirslanden
LOSS OF
£151M*
impacted by non-cash
Hirslanden and Spire
impairment charges and
other exceptional items
* Refer to loss attributable to equity
holders.
£232M
SIGNIFICANT
ONGOING
INVESTMENT
across the Group supporting
patient experience, clinical
excellence, maintenance,
upgrades and expansion
ADJUSTED EARNINGS
PER SHARE DOWN
10%
to 26.9 pence
TOTAL DIVIDEND FOR
THE YEAR
7.9 PENCE
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 1
2 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 financial results and the
economic, social and environmental performance of
Mediclinic for the financial year ended 31 March 2019
(the “reporting period”) and reports on the operations
of the Company’s subsidiaries in Switzerland, Southern
Africa and the United Arab Emirates (“UAE”) (collectively,
the “Group”).
REPORTING PRINCIPLES
This Annual Report contains information that is deemed
useful and relevant to stakeholders, with due regard to
their expectations through continuous engagement or
information that the board of Directors of Mediclinic
(the “Board” or the “Board of Directors”) believes may
influence stakeholders’ perception or decision-making.
Reporting] Regulations 2016 aimed at improving the
transparency of companies regarding non-financial 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 114
of this Annual Report. The Company’s reporting on
sustainable development included in this report
(supplemented by the Sustainable Development Report
which is available on the Company’s website at
www.mediclinic.com) was done in accordance with
the Global Reporting Initiative Sustainability Reporting
Standards 2016 (“GRI Standards”) and the non-financial
reporting regulations referred to above.
EXTERNAL AUDIT AND ASSURANCE
The Company’s annual financial statements and the
The information aims to provide stakeholders with an
Group’s consolidated annual financial statements were
understanding of the Group’s financial, economic, social
and environmental impacts to enable them to evaluate
the ability of Mediclinic to create and sustain value.
audited by the Group’s independent external auditor,
PricewaterhouseCoopers LLP (the “external auditor”), in
accordance with International Standards of Auditing (UK).
This Annual Report was prepared in accordance with
the International Financial Reporting Standards (“IFRS”),
the listing rules of the London Stock Exchange (“LSE”), the
listings requirements of the JSE Ltd (“JSE”), the United
Kingdom (“UK”) Corporate Governance Code and the
UK Companies Act 2006 (including the Companies,
The Group follows various other voluntary external
accreditation, certification 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 that this adds to the
transparency and reliability of information reported to
Partnerships and Group [Accounts and Non-Financial
its stakeholders.
CONTRIBUTION TO
REVENUE*
£677m
£1m
CONTRIBUTION TO
ADJUSTED EBITDA*
£88m
(£1m)
CONTRIBUTION TO
ADJUSTED EARNINGS*
£46m
£1 368m
£2 932m
£493m
£80m
£198m
£886m
£219m
£187m
£72m
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
Corporate
* The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance. Refer to the Financial Review on
page 31 for an explanation and for a reconciliation to the equivalent IFRS measures.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 3
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AT A
GLANCE
TO ENHANCE THE QUALITY OF LIFE.
Mediclinic is focused on providing specialist-orientated, multi-disciplinary services across the continuum of care in such
a way that the Group will be regarded as the most respected and trusted provider of healthcare services by patients,
medical practitioners, funders and regulators of healthcare in each of its markets.
UNITED KINGDOM
29.9% investment in Spire Healthcare Group plc.
For more information, please refer to page 38 and visit: www.spirehealthcare.co.uk
SWITZERLAND
With continuing regulatory changes during the year in Switzerland, Hirslanden is adapting
to the evolving outpatient environment while delivering ongoing cost management and
efficiency savings which, along with seasonal benefits, delivered an improved second-half
financial performance.
For more information, please refer to page 62 and visit: www.hirslanden.ch
UNITED ARAB EMIRATES
The new Mediclinic Parkview Hospital in Dubai was successfully opened in September 2018,
six months ahead of the original schedule. Revenue and EBITDA growth achieved during the
year are expected to continue over the medium term as the benefits from investments support
the operational delivery of the division.
For more information, please refer to page 71 and visit: www.mediclinic.ae
SOUTHERN AFRICA
Mediclinic’s continued strategic focus to invest across the continuum of care resulted in
the expansion of the division’s sub-acute hospital, day case and outpatient clinics during
the year. The investment in the Intercare group, completed in November 2018, supported
revenue and patient growth with a strong operational focus delivering broadly stable
EBITDA margins.
For more information, please refer to page 67 or visit: www.mediclinic.co.za
www.mhr.co.za
www.er24.co.za
4 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
United Kingdom
Switzerland
About Mediclinic
Mediclinic is an international private
healthcare services group, established
in South Africa in 1983, with divisions in
Switzerland, Southern Africa (South Africa
and Namibia) and the UAE.
The Group’s core purpose is to enhance the
quality of life.
The Company’s primary listing is on the
LSE in the UK, with secondary listings on
the JSE in South Africa and the Namibian
Stock Exchange (“NSX”) in Namibia. The
Group’s registered office is in London, UK.
Mediclinic also holds a 29.9% interest in Spire
Healthcare Group plc, a leading UK-based
private healthcare group listed on the LSE.
United Arab Emirates
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77
Hospitals
5
Sub-acute hospitals
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12
21
Day case clinics
Outpatient clinics
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32 398
Employees
11 359
Inpatient beds
445
Theatres
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 5
AT A GLANCE (CONTINUED)
“WE ARE ADAPTING THE BUSINESS
TO ADDRESS THE CHANGING
LANDSCAPE AND TO CAPITALISE
ON GROWING OPPORTUNITIES IN
THE GLOBAL HEALTHCARE
SERVICES SECTOR.”
Dr Ronnie van der Merwe
Chief Executive Officer
77 HOSPITALS
Switzerland
Southern Africa
South Africa
Namibia
UAE
5 SUB-ACUTE
HOSPITALS
18
52
49
3
7
12 DAY
CASE CLINICS
Switzerland
Southern Africa
UAE
21 OUTPATIENT
CLINICS
Southern Africa
5
Switzerland
UAE
2
8
2
3
18
11 359 INPATIENT
BEDS
Switzerland
Southern Africa
UAE
445
THEATRES
Switzerland
Southern Africa
UAE
1 916
8 517
926
112
296
37
32 398 EMPLOYEES
Switzerland
Southern Africa
UAE
Permanent
Full-time equivalents
10 442
15 804
6 152
19 646 (including agency employees)
8 303
EMPLOYEE ENGAGEMENT
(MAXIMUM SCORE OF 5)
CONTROLLABLE EMPLOYEE
TURNOVER
PATIENT EXPERIENCE
Switzerland
4.01
Group
6.9%
Switzerland
Southern Africa
3.94
Switzerland
7.6%
Southern Africa
UAE
4.02
Southern Africa
6.7%
UAE
Refer to page 85 for more information.
Refer to page 80 for more information.
Refer to page 43 for more information.
Refer to the Investments in Subsidiaries, Associates and Joint Ventures annexed to the consolidated annual financial statements for more
information on the Group’s ownership structure.
6 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
6 152
87.6%
82.2%
85.6%
Company culture
Mediclinic is committed to conducting its business with honesty and integrity. The Company’s Code of Business Conduct
and Ethics (“Ethics Code”) and its core values represent the basic beliefs to which it aspires.
Client orientation
Mutual trust
and respect
Teamwork
Performance driven
OUR VALUES
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 employees, makes considerable investment into its facilities and equipment and respects the
communities and environment in the areas in which it operates.
Diversity is valued and Mediclinic provides equal opportunities for all in the workplace. No form of unfair discrimination
is tolerated.
Mediclinic recognises its accountability to stakeholders and is committed to effectively and regularly engaging with them.
This 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 its sphere of influence
throughout its operations and relationships.
FURTHER INFORMATION
This Annual Report is published as part of a suite of reports, as listed below.
2019 Annual Report
2019 Clinical Services Report
2019 Sustainable Development Report
2019 Notice of Annual General Meeting
These reports are available on the Company’s website at https://investor.mediclinic.com/results-centre/results-
and-reports from the date of distribution of this Annual Report and the Company’s notice of annual general meeting
by no later than 21 June 2019.
GLOSSARY
Capitalised terms used in this report are defined in the glossary of terms on page 303.
APPROVAL OF THE 2019 ANNUAL REPORT
This Annual Report, including the Strategic Report herein, was approved by the Board on 22 May 2019. The Strategic
Report incorporates the following sections by reference: Report profile and At a glance (pages 3–7).
Dr Edwin Hertzog
Non-executive Chairman
22 May 2019
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 7
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8 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
STRATEGIC REPORT
“BETTER INTEGRATION
OF OUR SERVICE
OFFERING ACROSS ALL
THREE DIVISIONS WILL
NOT ONLY IMPROVE
THE EFFICIENCY OF
OUR OPERATIONS,
BUT ALSO ENABLE US
TO LEVERAGE OUR CORE
COMPETENCIES.”
Dr Ronnie van der Merwe
Chief Executive Officer
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MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 9
PERFORMANCE
SUMMARY
GROUP FINANCIAL RESULTS
REVENUE (£’M)
OPERATIONAL SUMMARY
Adapting to the changing healthcare landscape
2015
2016
2017
2018
2019
1 977
2 107
2 749
2 876
2 932
ADJUSTED EBITDA (£’M)
2015
2016
2017
2018
2019
403
428
501
515
493
OPERATING PROFIT/(LOSS) (£’M)
345
288
2015
2016
2017
2018
2019
(288)
81
ADJUSTED EPS (PENCE)
2015
2016
2017
2018
2019
29.8
30.0
26.9
OPERATING CASH FLOW (£’M)
2015
2016
2017
2018
2019
10 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
With trends of an ageing population and a growing disease
burden coupled with new medical technology, digital health
and greater consumerism, healthcare providers are facing
unprecedented developments. This also presents Mediclinic
with the opportunity to learn, adapt and grow, as it has done
in the past. One of the challenges in the industry will always
be the affordability of healthcare and Mediclinic maintains a
strong focus on cost management and efficiencies across
the Group. The Group is actively adapting and optimising
the way it delivers healthcare to help address the regulatory
trend of outmigration.
Benefits of international scale
Today’s healthcare industry remains fragmented, and
with only a few truly global healthcare service providers.
Mediclinic is focused on improving the integration of its
service offering across all three divisions to enhance the
efficiency of its operations, but also to enable the Group to
leverage its core competencies and unique approach to
knowledge sharing. As one of the largest Europe, Middle
East and Africa (“EMEA”) healthcare groups, with each
division recognised as a leader in its own market, Mediclinic
is well positioned to provide diversified services across the
continuum of care.
Patients First strategic objective
362
During the year, the Group’s commitment to delivering
high-quality, cost-effective healthcare services on a
sustainable basis supported the achievement of its core
strategic objective of putting Patients First. Mediclinic
deeply appreciates the 750 000 inpatients who chose it as
their preferred healthcare service provider and the growing
number of patients attending its expanding day case and
outpatient clinics. Progress continued this year in the key
areas of clinical performance, patient experience and
employee engagement.
Focused on cash flow generation and responsible
leverage
While recent profitability has challenged the achievement
of appropriate returns, the invested capital of the Group
remains underpinned by a philosophy of property
ownership. Strong cash flow generation and responsible
leverage are key to delivering on the long-term success
of the Group. Therefore, Mediclinic focuses on profitable
growth and disciplined capital allocation to generate returns
in excess of the bottom-up hurdle rates established for each
division. This year, the Group successfully refinanced debt
35.8
36.7
440
411
492
facilities in Southern Africa and the UAE. In Switzerland,
466
451
where Hirslanden has the highest value of fixed assets and
the lowest cost of borrowing, the Group proactively took
action to re-calibrate the covenants to reflect the impact of
regulatory changes on the profitability of the business.
KEY PERFORMANCE INDICATORS
FINANCIAL
Revenue1
Adjusted EBITDA2
Operating profit/(loss)
Reported loss3
Adjusted earnings2
Loss per share
Adjusted earnings per share2
Total dividend per share4
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
pence
pence
pence
£'m
£'m
£'m
£'m
£'m
2019
2 932
493
81
(151)
198
(20.5)
26.9
7.90
1 717
232
72
66
94
2018
% change
2 876
515
(288)
(492)
221
(66.7)
30.0
7.90
1 676
245
101
64
80
2%
(4%)
128%
69%
(10%)
69%
(10%)
0%
2%
(5%)
(29%)
3%
18%
Notes
1
An income statement reclassification has increased Mediclinic Southern Africa FY18 revenue and cost of sales by £6m. Refer to note 2.1
of the Group annual financial statements on page 197.
2 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 page 31.
3 Reported loss refers to loss attributable to equity holders.
4 The total dividend per share for the year ended 31 March 2019 in pound sterling comprises the final dividend of 4.70 pence per share
(2018: 4.70 pence) and the interim dividend of 3.20 pence per share, paid in December 2018 (2018: 3.20 pence).
Group results are subject to movements in foreign currency exchange rates. Refer to page 36 for exchange rates used
to convert the divisions’ results to pound sterling.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 11
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S
STATEMENT
“THE BOARD REMAINS
CONFIDENT THAT THE
GROUP’S OPERATIONAL
PERFORMANCE AND
STRATEGIC FOCUS WILL
SUPPORT AND ENHANCE
MEDICLINIC’S POSITION AS
AN INTERNATIONAL LEADER
IN THE PROVISION OF PRIVATE
HEALTHCARE SERVICES.”
Dr Edwin Hertzog
Non-executive Chairman
STRATEGIC DELIVERY IN A
CHANGING ENVIRONMENT
During the year under review (“FY19”) our commitment to
delivering high-quality, cost-effective healthcare services
on a sustainable basis supported the achievement of our
core strategic objective of putting Patients First. The year
also brought significant regulatory changes, particularly in
Switzerland, which we are adapting to but which negatively
impacted our financial performance.
Navigating the regulatory changes will continue to require
the Board and management team’s relentless focus in order
to achieve the Group’s strategic and financial goals.
Strategically, we will continue to seek improved operational
efficiencies, pursue attractive growth opportunities and
leverage our international scale, while also continuing to
invest in employees, information and communications
technology (“ICT”) and analytics. From a financial
perspective, we remain focused on improving the returns
of the business, generating good free cash flow and
maintaining a responsible approach to leverage. Prudent
capital allocation is a fundamental part of our strategy.
To this end, the Board remains diligent and scrutinises all
activities, aligning its output to the financial and strategic
goals of the Group and delivering value to shareholders
over the longer term.
12 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OUR PEOPLE AND PATIENTS
Through my 36 years of involvement with Mediclinic, the
one thing that has remained constant is the commitment
of our people to support the patients that put their trust in
us to deliver appropriate care. This is underpinned by our
strong values and purpose of enhancing the quality of life.
We believe that diversity across Mediclinic promotes better
performance and a stronger organisational culture. We
invest in leadership development and training programmes
at all levels of the organisation to support our goals and to
ensure that Mediclinic, as an employer of choice, remains
able to attract high-quality international talent. These skills,
along with the governance measures in place, allow us to
enhance clinical outcomes and the patient experience, both
of which are fundamental to the long-term success of the
Group. This culture must be instilled from the very top of
the organisation and we demonstrated this successfully
when Mediclinic ranked eighth out of the FTSE 100
companies in the Parker Review Committee’s Report
into the Ethnic Diversity of UK Boards (“Parker Report”),
issued in October 2017.
We deeply appreciate the 750 000 inpatients who chose
Mediclinic as their preferred healthcare service provider
during the year. As healthcare services continue to evolve,
more of the care we offer is delivered in an outpatient
setting. Already approximately 30% of the Group’s revenue
is generated by surgical day cases and outpatient
consultations and procedures. The demand for treatment
in these lower acuity, convenient care settings is expected
to grow and Mediclinic is positioning itself for this trend in
all its operational regions.
We clearly value the important roles each stakeholder has
to play in the successful delivery of our operations. One
important change is the formal appointment of a
designated non-executive Director with responsibilities for
employee representation on the Board. Mr Danie Meintjes
was selected as the most appropriate member of the
Board to fulfil this responsibility given his many years
of experience in human resources and his more recent
engagement with our people across all divisions through
his previous role as Chief Executive Officer (“CEO”). The
Board strongly encourages all employees to participate in
the annual Gallup® Employee Engagement Profile survey;
the collated information and subsequent implementation
of follow-up processes will be communicated to the Board
three divisions were reflected in the Group’s overall
financial performance.
At the Group level, in constant currency, FY19 revenue
was up 4% and adjusted earnings before interest, tax,
depreciation and amortisation (“EBITDA”) was down 2%.
However, after the translation effect of foreign currency
movements, FY19 revenue was up 2% at £2 932m
(FY18: £2 876m) and adjusted EBITDA decreased 4% at
£493m (FY18: £515m). This performance was driven by
marginal revenue growth in Switzerland with a lower
adjusted EBITDA margin impacted by regulatory changes
including tariff reductions and the outmigration of care
partly offset by ongoing cost management and efficiency
savings. In Southern Africa, there was modest revenue
growth with a stable adjusted EBITDA margin driven by a
continued focus on cost management and efficiencies
during a period of low volume growth. The Middle East
experienced mid-single digit revenue growth with a stable
adjusted EBITDA margin irrespective of the start-up losses
associated with the new Mediclinic Parkview Hospital in
Dubai. Adjusted earnings per share (“EPS”) for the Group
was down 10% to 26.9 pence (FY18: 30.0 pence).
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 £241m (FY18: £644m)
impairment charge on intangible assets and property. An
impairment test on Spire was carried out, which resulted in an
impairment charge of £164m (FY18: £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 £151m
(FY18: loss of £492m).
DELIVERING CLINICAL EXCELLENCE
I am pleased to report that during the year under review,
the majority of patient safety and clinical effectiveness
indicators showed improvement. Much of the progress
can be attributed to a strong collaborative effort between
the clinical services teams of the respective divisions
and the corporate centre. Highlights from across the
Group included:
At Group level:
• Integration of the Ward-to-Board accountability
continued in order to strengthen clinical service
formally. Mr Meintjes will be responsible for ensuring that
the Board is informed regularly of challenges, corrective
leadership across the Group, with a successful pilot
project completed in Southern Africa.
actions and progress.
FINANCIAL PERFORMANCE
Overall, the Group remains in a strong financial position.
• A Patient Safety Committee was established to
standardise and enhance collaboration across
the Group.
• An initiative commenced to coordinate collaboration
Challenging market and regulatory environments in all
of nursing services across divisions.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 13
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CHAIRMAN’S STATEMENT (CONTINUED)
• A clinical adverse event and clinical risk management
Over the years, we have invested in recruiting and training
solution suitable for the Group was sourced.
our people to ensure we have experienced and well-
Hirslanden:
• As part of the HIT2020 project, Hirslanden
progressed with its goal of rolling out an electronic
health record (“EHR”) and patient data management
system (“PDMS”).
• Fast-track orthopaedics was established in
three hospitals and rollout is planned at a further
two hospitals.
informed management teams who can successfully
navigate the changing regulatory landscape.
This year significant regulatory changes in Switzerland
impacted the financial performance of the division. These
included the national outpatient tariff (“TARMED”)
reductions effective from 1 January 2018 and the
outmigration of certain medical treatments from an
inpatient to an outpatient tariff, which has gradually
occurred in cantons across Switzerland for the past
• Following the successful opening last year of the first
dedicated day case clinic at Bellaria in Zürich, the
18–24 months, with official national implementation from
1 January 2019. Hirslanden continues to adapt its business
division opened its second unit at the train station at
model to address the current trends in inpatient and
St. Anna in Lucerne.
Mediclinic Southern Africa:
• Infection rates were further reduced through the
implementation of a comprehensive infection prevention
and control strategy.
• The first phase of the national stroke management
implementation plan was completed.
• As part of theatre management workshops, improved
employment methodology was rolled out to align
employee competencies and tasks with theatre slates
and utilisation.
Mediclinic Middle East:
• Rollout of an EHR commenced at one hospital and
one clinic and will continue during the coming year.
• The Department of Health in Abu Dhabi approved
research licences for all Mediclinic hospitals in the region
with 29 active projects, 45% of which are conducted in
collaboration with Mohammed Bin Rashid University of
Medicine and Health Sciences (“MBRUHS”) student
research.
• Mediclinic City Hospital entered into an agreement for
a paediatric residency training programme between
MBRUHS and Al Jalila Hospital.
REGULATORY LANDSCAPE
The affordability of healthcare remains an overarching
focus of governments, regulators, insurers and patients.
As healthcare is a unique sector where the demand for
services is predicted to continue growing, it is entirely
appropriate that the cost of healthcare services should
outpatient activity driven by the recent regulatory changes
while maintaining excellent clinical performance.
BOARD CHANGES AND
GOVERNANCE
The Board announced the appointment of
Dr Ronnie van der Merwe as the Company’s new CEO
in November 2017, following the planned retirement of
Mr Meintjes. The appointment became effective on
1 June 2018.
Dr Van der Merwe’s achievements during the year under
review to further enhance strong team alignment at the
executive management level and focus the divisions on the
need to deliver cost-effective quality healthcare services,
which expand more across the continuum of care, were
evident in the operational performance of the business.
After qualifying and practising as an anaesthesiologist,
Dr Van der Merwe joined Mediclinic in 1999 and has been
a member of the Group’s Executive Committee since 2008.
He established the Clinical Information, Advanced
Analytics, Health Information Management and Clinical
Services functions at Mediclinic and has been Group Chief
Clinical Officer since 2007. I believe Dr Van der Merwe’s
in-depth knowledge of the healthcare sector and long
history with the Company put Mediclinic in a strong
position to deliver on its operational performance and
strategic priorities.
I am pleased to announce that this year the Board made
one independent non-executive Director appointment that
further strengthens the Board’s clinical governance and
global healthcare experience.
be monitored against the clinical quality and patient
experience that providers deliver. That is why we believe
Dr Anja Oswald was appointed as an independent non-
executive Director and member of the Remuneration
in the need to deliver sustainable integrated healthcare
Committee and Nomination Committee on 25 July 2018.
services that offer value to all stakeholders. Different care
Qualified as an orthopaedic surgeon along with an
settings are required to align with the migration of care.
MBA degree, she is currently the CEO of Klinik
Across Mediclinic, we have employed a variety of different
Sonnenhalde, a well-established private clinic for
approaches for this which will continue to evolve over time.
psychiatry and psychotherapy with inpatients, day-care
14 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
clinics and outpatients in Riehen, Switzerland. She is also
President of the Association of Private Hospitals in Basel,
as well as a board member of Integrierte Psychiatrie
Winterthur in Canton Zürich and of the Alliance for a Free
Health Care System in Switzerland. Prior to this, she was
Head of Medical and Pharmaceutical Services and Deputy
Medical Officer in the Department of Health of the
Cantonal Government in Basel and a member of various
cantonal, regional and national committees.
I was very pleased to welcome Dr René Toua to the Group
Executive Committee. She replaced Dr Van der Merwe as
Chief Clinical Officer and has been an integral part of
Mediclinic’s successful clinical team in Stellenbosch.
We all wish her well in her new role. Additionally,
Mr Daniel Liedtke was appointed as the new CEO of
Hirslanden in January 2019 and I welcome him to the
Group Executive Committee.
Mr Desmond Smith will retire as an independent non-
executive Director and as Senior Independent Director with
effect from the conclusion of the annual general meeting
on 24 July 2019. Mr Smith will be succeeded as Senior
Independent Director and as Chairperson of the Audit and
Risk Committee from that date by Mr Alan Grieve.
Various other changes were made to Board committee
memberships: Mr Trevor Petersen stepped down as
a member of the Nomination Committee, with
Dr Felicity Harvey appointed as a new committee
member. Mr Meintjes stepped down as a member of the
Clinical Performance and Sustainability Committee, with
Mr Seamus Keating and Dr Van der Merwe appointed as
new committee members. Mr Seamus Keating stepped
down as a member of the Investment Committee, with
Dr Van der Merwe appointed as a new committee member.
DIVIDEND
For FY19, 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
(FY18: 7.9 pence per share). This represents a 29% pay-out
ratio to adjusted earnings per share, in line with the Group’s
policy of 25–30%.
LOOKING AHEAD
The global healthcare industry continues to evolve with
the affordability of healthcare remaining the primary focus
of governments, regulators, insurers and patients.
Mediclinic has always been aware of this and will continue
to move promptly and decisively to adapt to changes in
the healthcare landscape. The Board remains confident
that the Group’s operational performance and strategic
focus will support and enhance Mediclinic’s position as
an international leader in the provision of private
healthcare services.
APPRECIATING YOUR CONTINUED
SUPPORT
It is those people who play an instrumental role in the
day-to-day delivery of our business who I once again wish
to thank. It is your dedication, drive and continued focus
on our clients that ensure we remain a healthcare partner
of choice across all our divisions. To our patients and
supporting medical professionals, we deeply appreciate
that you have chosen Mediclinic as your preferred
healthcare service partner. We will continue to work
tirelessly to ensure that our clinical performance and
customer experience exceed your expectations.
Finally, I would like to thank our valued shareholders for
their continued trust and support.
We enter the new financial year with confidence in our
ability to retain our leading market positions that will
deliver sustainable long-term shareholder value.
Dr Edwin Hertzog
Non-executive Chairman
22 May 2019
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 15
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION BUSINESS
MODEL
PURPOSE
Mediclinic’s purpose is to
ENHANCE
THE QUALITY
OF LIFE.
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 as
a leader in the global
healthcare industry.
OUR ASSETS AND RESOURCES
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 on page 29 for more information.
Facilities and technology
The Group provides high-quality healthcare facilities and continuously invests in
the expansion and maintenance of these facilities, as well as in new technology.
See the Divisional Reviews from page 62 for more information.
Engaged employees
The Group employs more than 32 000 employees. Mediclinic believes that client
experience depends highly on interaction with its employees; those working with
and for the Group are highly valued. Fair labour practices are followed and
competitive remuneration, training and development opportunities are offered.
Continuous investment in the training and development of employees creates a
highly trained, client-oriented workforce and talent pipeline.
The Group’s overall employee engagement grand mean score, as measured by the
Gallup® Employee Engagement Profile survey, increased meaningfully in all divisions
during the 2018 survey. The improvement in the central themes indicated a positive
return on the resources invested in supporting initiatives and this approach will be
continued based on the most recent results. The participation rate also increased
from 77% in the previous financial year to 82% in this reporting period.
See the Sustainable development overview on page 76 for more information.
Operational expertise
Mediclinic has an experienced Board and management team. The Group’s clinical
expertise is a critical element of its business, enabling it to provide quality
healthcare services. Deep operational expertise delivers a seamless patient
experience, underpinned by high-quality nursing care.
See the Clinical services overview on page 41 for more information.
Sound relationships
Mediclinic is committed to ensuring a high standard of ethics, social responsibility,
accountability, cooperation and transparency. The Group maintains excellent
relationships with key stakeholders through regular engagement with employees,
funders, patients, supporting medical practitioners, suppliers, government and
communities.
Any initiative to improve the quality of clinical care needs the support and
engagement of the treating medical practitioners. For this reason, the Group
openly acknowledges its supporting medical practitioners as a key stakeholder
and is actively involved with various programmes to engage with them.
See the Corporate Governance Statement on page 114 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 facilities and continuously
strives to reduce water consumption and carbon emissions, with an increasing
number of its facilities certified to the ISO 14001 standard.
See the Sustainable development overview on page 76 for more information.
16 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OUR STRATEGY TO DELIVER VALUE
WHAT WE DELIVER
2019 STRATEGIC OBJECTIVES
Putting Patients First
Patients are at the core of everything Mediclinic does. The Group
strives to deliver superior clinical performance through efficient
structures, processes and outcomes, in accordance with its clinical
performance framework.
Improving efficiencies
By using the Group’s combined international capacity and effective
collaboration, it is able to achieve efficiencies through the principles
of simplification, standardisation and centralisation.
Continuing to grow
Mediclinic has a record of investing in carefully selected capital
projects and has demonstrated the ability to integrate and extract
value from acquisitions and expansions of existing facilities.
Adapting to a changing business environment
By positioning itself to effectively respond to changes in
the business environment, the Group is able to minimise its
risk exposure.
KEY STRATEGY ENABLERS
• Invest in employees
• Invest in ICT
• Invest in analytics
See Our strategy, goals and progress on page 18 for
more information.
RISK MANAGEMENT
The Group has established an integrated and effective risk
management framework wherein important and emerging risks are
identified, assessed and managed. The framework is aligned to and
supports the Group’s strategy.
See Risk management, principal risks and uncertainties on
page 55 for more information.
Mediclinic’s business model is aimed
at delivering quality healthcare
services, in particular, and at
sustaining growth and creating value
for its stakeholders, in general.
Quality healthcare services
During the year, the clinical performance across
the Group made good progress and several
patient safety and clinical effectiveness
indicators showed improvement. In addition,
many initiatives in support of clinical
performance and quality improvement were
launched and completed.
See the Clinical services overview on page 41
for more information.
Shareholder value
Mediclinic seeks to deliver sustainable long-
term shareholder value through return on
invested capital. While recent profitability has
challenged the achievement of appropriate
returns, the invested capital of the Group
remains underpinned by a philosophy of
property ownership.
The Company’s diligent approach to financial
management across the Group presents
Mediclinic with medium-term sustainability and
flexibility to invest in incremental growth
propositions across the continuum of care;
manage the level of debt to covenants across
all divisions; and improve shareholders returns.
See the Financial Review on page 29 for
more information.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 17
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR STRATEGY,
GOALS AND PROGRESS
GOALS AND PROGRESS IN THE 2019 FINANCIAL YEAR
During the reporting period, Mediclinic focused on creating long-term shareholder value through:
• putting Patients First;
• improving Group and operational efficiencies;
• pursuing attractive growth opportunities; and
• leveraging the Group’s international scale; while
• continuing to invest in employees, ICT and analytics.
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS 2019 FINANCIAL YEAR
PUTTING
PATIENTS FIRST
More information on this
priority is included in the
Clinical services
overview on page 41 and
the more detailed Clinical
Services Report available
on the Company’s
website at https://
investor.mediclinic.com/
results-centre/
results-and-reports
SUPERIOR
CLINICAL
PERFORMANCE
IN A SAFE
CLINICAL
ENVIRONMENT
The Group strives to deliver
superior clinical
performance through
efficient structures,
processes and outcomes in
accordance with the Group
clinical performance
framework.
IMPROVE
PATIENT
EXPERIENCE
The Group strives to deliver
superior patient experience
before, during and after
treatment, through efficient
structures, processes and
outcomes to identify and
respond to the needs of
patients, family members
and visitors.
• Further strengthened clinical
leadership at hospital and
corporate levels across all divisions
and the Group.
• Established a formal Clinical
Performance Committee for
Mediclinic Southern Africa.
• Strengthened the application of
health technology assessment as
the cornerstone of making clinical
investment and process decisions
to the benefit of the Group.
• Established an Internal Audit
function for clinical services.
• Managed the patient experience
indices and worked toward
improvement targets across
the Group.
• Maintained the patient experience
index overall mean score for
Hirslanden at 87.6% (2018: 87.8%)
and for Mediclinic Southern African
at 82.2% (2018: 81.9%). The index
overall mean score for Mediclinic
Middle East improved from 82.7% in
2018 to 85.6% in 2019.
DELIVER
INTEGRATED
AND
COORDINATED
CARE
The Group strives to
become a horizontally
integrated healthcare
system provider by focusing
on effective collaboration
with associated medical
practitioners and allied
healthcare professionals.
• Strengthened relationships with
medical practitioners to reduce
fragmentation and enhance the
patient value proposition across
the Group.
• Initiated the rollout of an
EHR at Hirslanden and
Mediclinic Middle East.
• Strengthened research initiatives
across the Group, especially at
Mediclinic Middle East where 45%
of the research projects are due to
a collaboration with MBRUHS.
Refer to the Divisional Reviews from
page 62 for more information.
IMPROVING GROUP AND OPERATIONAL
EFFICIENCIES
More information on this priority is included
in the Chief Executive Officer’s Review on
page 24.
The Group strives to use
combined international
capacity and effective
collaboration to achieve
Group efficiencies through
the principles of
simplification,
standardisation and
centralisation.
18 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
STRATEGIC PRIORITIES
DESCRIPTION
PROGRESS 2019 FINANCIAL YEAR
CONTINUING TO GROW
More information on this priority is included
in the Chief Executive Officer’s Review on
page 24.
CONTINUING TO ADDRESS THE
BUSINESS ENVIRONMENT
More information on this priority is included
in the Chief Executive Officer’s Review on
page 24.
INVESTING IN EMPLOYEES
More information on this priority is included in
the Sustainable development overview
(material issue 1) on page 76 and the more
detailed Sustainable Development Report
available on the Company’s website at https://
investor.mediclinic.com/results-centre/
results-and-reports
The Group strives to
increase the performance of
the business by identifying
and pursuing growth
opportunities.
In order to minimise risk to
the business, the Group
positions itself to effectively
respond to changes in the
business environment.
The Group strives to provide
human resources services to
attract, develop, engage and
retain a diverse workforce
that effectively enables its
objectives and performance.
Refer to the Divisional Reviews from
page 62 for more information.
Engaged continuously with regulators
to monitor and influence the
regulatory environment in all divisions.
• Increased the overall participation
rate in the annual Your Voice
Gallup® employee engagement
programme to 82% (2018: 77%),
higher than the Gallup® Healthcare
(peer) overall participation rate
of 78%.
• Increased Your Voice employee
engagement grand mean scores
across all divisions and,
consequently, across the Group.
• Significantly improved the ratio of
Engaged to Actively Disengaged
employees to 4.5:1 (2018: 3.33:1).
• Continuously entrenched trackable
action planning by line managers
toward improving employee
engagement.
INVESTING IN ICT
ICT solutions and support
across the Group should
effectively enable business
objectives and performance.
• Progressed with the rollout of SAP
at Hirslanden (enabling business
process standardisation and
centralisation).
• Completed phase 1 rollout of the
SAP SuccessFactors-based HR
system across the Group.
• Progressed with EHR systems
across the Group, especially at
Mediclinic Middle East where
implementation is in progress.
• Completed the rollout of
a Group-wide digital
marketing platform.
• Progressed with a Group-wide data
privacy programme based on the
principles and standards of the
General Data Protection Regulation
(“GDPR”).
• Further enhanced the information
security capabilities of the Group.
• Strengthened the central clinical
data warehouse and continued
improving clinical performance
measurement and benchmarking
across the Group.
• Continued developing machine
learning capabilities to the benefit
of the Group.
INVESTING IN ANALYTICS
More information on this priority is included in
the Clinical services overview on page 41 and
the more detailed Clinical Services Report
available on the Company’s website at https://
investor.mediclinic.com/results-centre/
results-and-reports
The Group strives to provide
analytics solutions and
support that effectively
enable business objectives
and performance.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 19
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR STRATEGY, GOALS
AND PROGRESS (CONTINUED)
OUR STRATEGY
Future objectives
During the year under review, the Group Executive Committee collectively examined the operational, market and
regulatory environments across the Group. The focus of this project was to define the evolution needed to support the
future direction and success of the business. As a result, Mediclinic’s strategic goals have been refined so it is specifically
geared toward anticipating market developments and counteracting potential risks.
Amended objectives came into effect on 1 April 2019 and are closely aligned with the Group’s refined strategic goals,
as described below. These objectives – and progress against them – will be disclosed in detail in the 2020 annual report.
STRATEGIC GOALS
Refined strategic goals, with effect from 1 April 2019
TO ENHANCE THE QUALITY OF LIFE
1
2
3
4
5
To improve
our client value
proposition
significantly
To become an
integrated healthcare
provider across the
continuum of care
To transform our
healthcare services
and client engagement
through digitalisation
To grow in
existing markets
and to expand into
new markets
To achieve
superior
long-term
financial returns
BY:
BEING
ANALYTICS DRIVEN
BEING THE
EMPLOYER OF CHOICE
BEING CLIENT CENTRED
IN EVERYTHING WE DO
20 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Refined strategic goals, with effect from 1 April 2019
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
G
O
V
E
R
N
A
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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
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M
E
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T
S
I
A
D
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O
N
A
L
I
I
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O
R
M
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T
O
N
I
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 21
INVESTMENT
CASE
IN PURSUIT OF MEDICLINIC’S VISION TO BE PREFERRED LOCALLY AND RESPECTED
INTERNATIONALLY, THE COMPANY OFFERS AN ATTRACTIVE INVESTMENT CASE THAT ALIGNS
WITH SEEKING TO ACHIEVE LONG-TERM VALUE CREATION:
STRONG MARKET
FUNDAMENTALS
Continued growth in demand for healthcare services:
• Ageing population
• Growing disease burden
• Technological advances
• Consumerisation of services
DIVERSIFIED
PRESENCE
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 the UAE
LEVERAGING
INTERNATIONAL
SCALE
ATTRACTIVE
GROWTH
OPPORTUNITIES
EXPERIENCED
MANAGEMENT
TEAM WITH
PERFORMANCE
MINDSET
Competitive advantage created from efficient integration of
international divisions:
• Internationally recognised clinical expertise
• Sustainable and efficient operating practices
• Intellectual property of highly skilled and engaged human capital
• International 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 record of operating international private healthcare services for more
than 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 Ltd
• Dividend pay-out ratio:1 25–30% of adjusted EPS
Note:
1
Given the anticipated impact of IFRS 16 accounting changes, the Board deemed it appropriate to proactively adjust the future payout
ratio to 25%–35% of adjusted earnings.
22 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
FIVE-YEAR
SUMMARY
The Five-year summary is presented in pound sterling, rounded to the nearest million. Financial information of
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
Revenue1
Operating profit/(loss)
(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 (%)
2019
£'m
2 932
81
(130)
330
493
198
2019
pence
(20.5)
(20.5)
26.9
26.9
7.90
2019
£'m
5 337
1 091
6 428
3 151
115
3 266
2 576
586
3 162
6 428
2019
451
91%
2018
£'m
2 876
(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%
Note:
1
An income statement reclassification has increased Mediclinic Southern Africa 2018 revenue and cost of sales by £6m. Refer to note 2.1 of
the Group annual financial statements on page 197.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 23
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE
OFFICER’S REVIEW
“WE ARE ADAPTING
THE BUSINESS TO
ADDRESS THE CHANGING
LANDSCAPE AND TO
CAPITALISE ON GROWING
OPPORTUNITIES IN THE
GLOBAL HEALTHCARE
SERVICES SECTOR.”
Dr Ronnie van der Merwe
Chief Executive Officer
INTRODUCTION
Upon my appointment as CEO Designate in
November 2017, I purposefully set out to consult widely
across the organisation in preparation for my official
appointment in June 2018; I met with members of the
Board as well as with the top 40 organisational leaders
and presented each of them with the same list of
questions. We discussed business challenges and
opportunities at length. Their feedback provided me with
valuable insight and helped me more clearly define the
Group’s core competencies, identify common areas of
concern and align our focus to meet strategic priorities.
I also carefully considered the nature of the relationship
between Mediclinic and those who make use of our services
within an evolving healthcare landscape. A patient is a person
awaiting or receiving medical care; a client is a person who
receives advice. The latter implies a level of trust and a
long-term relationship that extends beyond mere treatment.
We would like our patients to interact with Mediclinic beyond
the conventional treatment process, rather as a client who
turns to us to enhance their quality of life.
Throughout this process, I was reminded of what a valuable
role we have to play in the lives of our patients and their
families; what a privilege it is to know that they have trust
in our expertise. We exist to care for them when they are at
their most vulnerable. And therein lies our true value:
harnessing the exceptional talent, compassion and energy
of Mediclinic employees and partners to ensure that our
patients receive cost-effective, quality care and
outstanding client experiences.
24 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
GROUP FINANCIAL OVERVIEW
Each division functions in its own unique macro, political,
second half of the year resulting in a 16.0% adjusted
EBITDA margin for the full year.
social, disease and healthcare regulatory environment
The combination of the Hirslanden Clinique La Colline and
which influences the performance of the respective
Clinique des Grangettes in Geneva was announced in
businesses to varying degrees.
Regulatory and operational disruptions impacted the
Group’s financial performance this year. The largest
contributor to the Group financial performance is
Hirslanden in Switzerland. The previously announced
regulatory tariff reductions and outmigration of care
requirements have significantly impacted the entire
healthcare market in this country. This process has
gradually occurred in cantons across Switzerland for the
past 18–24 months, with official national implementation
from 1 January 2019. In addition, the growth in outpatient
volumes was offset by the significant TARMED reductions
effective from 1 January 2018. Hirslanden revenue was up
2%, while adjusted EBITDA was down 10.0% with a
decrease in the adjusted EBITDA margin, as guided, to
16.0% (FY18: 18.3%).
At Mediclinic Southern Africa, performance was stable in
this mature healthcare market which lacks macro-
economic tailwinds. Revenue was up 5%, adjusted EBITDA
was up 4% and the margin was broadly stable at 21.2%
(FY18: 21.3%) driven by a continued focus on cost
management and efficiencies during a period of low
volume patient growth.
At Mediclinic Middle East, which remains the medium-
term growth driver for the Group, revenue was up 7%
(compared to the adjusted FY18 IFRS 15 revenue),
adjusted EBITDA was up 7% and the adjusted EBITDA
margin remained stable at 13.0% (FY18: 13.0% IFRS 15
September 2018 and consolidated from 1 October 2018.
The combination, which included a cash consideration of
CHF77m for a 60% controlling interest in the combined
entity, strengthens Hirslanden’s leading market position in
Geneva and will deliver enhanced services for patients.
As part of the plan to adapt to and address the growing
outmigration trend, progress continues on delivering the
Hirslanden 2020 strategic project. The focus of this project
is to standardise, centralise and simplify the existing
operating business, delivering future efficiencies and
cost savings. In addition, the project addresses the
outpatient delivery model in Switzerland to capture the
growing requirement for outpatient procedures in an
affordable manner.
Due to the changing circumstances in Switzerland, the
Group Executive Committee and senior management
invested significant time and resources to support the local
management team as they adapt the operating model to
more efficiently address the rapidly changing healthcare
landscape. This integrated approach of sharing knowledge
and competency internationally is only possible due to the
Group’s breadth, scale and more than 35 years of
experience in the healthcare industry. The way in which the
organisational leadership has embraced this collaborative
approach gives me confidence in our collective ability to
improve Hirslanden’s performance and returns over the
medium term.
adjusted), which includes the ramp-up costs associated
Through all this, it is easy to lose sight of the bigger picture
with the new Mediclinic Parkview Hospital which opened
and it would be remiss of me to not commend the progress
in September 2018.
As a result, Group revenue increased by 2% to £2 932m
(FY18: £2 876m), while adjusted EBITDA decreased by 4%
to £493m (FY18: £515m), with an adjusted EBITDA margin
of 16.8% (FY18: 17.9%).
HIRSLANDEN
Hirslanden’s performance was disappointing during the
year with all Swiss public and private operators impacted
by regulatory changes. The greatest impact on Hirslanden’s
financial performance resulted from the rapidly
made as part of the Hirslanden 2020 strategic project, with
local management’s success in attracting new medical
practitioners. The patients who put their trust in Hirslanden
will continue to receive a world-class healthcare service;
their quality of care will never be compromised, but we are
making necessary adjustments to the efficiency and setting
of the care that they receive to better align with the new
tariff environment.
MEDICLINIC SOUTHERN AFRICA
Investments made over the years in our people and
implemented outpatient tariff reductions and outmigration
facilities in Southern Africa, and in building strong
of care. Steps were taken to improve the financial
relationships with medical practitioners, funders and
performance including accelerated cost-saving initiatives,
patients, continue to reinforce the division’s long-term
driving efficiency savings and securing additional revenue.
ambition of growing medical practitioners by expanding
As these plans started to take effect, it moderated
across the continuum of care. This landscape offers unique
the financial impact of the regulatory changes in the
opportunities for developing and delivering appropriate
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 25
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)
care settings and modalities for patients and offering
burden coupled with new medical technology, digital
medical practitioners the convenience of combining the
health and greater healthcare consumerism. This also
quality they have come to expect with the ability to treat
presents Mediclinic with the opportunity to learn, adapt
and address an expansive list of medical needs – all under
and grow, as we have done in the past.
the roof of a single healthcare provider.
One of the counter balances in the industry will always be
Through its acquisition of a stake in the Intercare group –
the affordability of healthcare and we maintain a strong
a local healthcare provider with one specialist hospital,
focus on cost management and efficiencies across the
four sub-acute hospitals, four day case clinics and
Group. Today our industry is fragmented, with only a few
21 outpatient clinics – Mediclinic Southern Africa has
truly global healthcare service providers. Better integration
already expanded its clinical service offering. Further
of our service offering across all three divisions will not
investment in the Welkom Medical Centre and building
only improve the efficiency of our operations, but also
three co-located day case clinics at its own facilities (with
enable us to leverage our core competencies. As one of the
six more to be opened in the next two financial years)
largest EMEA healthcare groups, I believe that what will set
strengthens its pursuit to position the division as not
Mediclinic apart from the rest of the industry is an ability to
only a leading acute hospital group, but also one of the
provide diversified services across the continuum of care
most extensive providers of primary care and day surgery
in the region.
with leading market positions, as well as a unique approach
to knowledge sharing. Ultimately, this is what will deliver
MEDICLINIC MIDDLE EAST
The performance of Mediclinic Middle East was supported
by our established market-leading Dubai business, which
continues to grow on its foundation of sustainable,
high-quality healthcare service delivery. In 2016, we
expanded into Abu Dhabi through the Al Noor
combination. It is here where we expect gradual progress
over the coming years as we start to reap benefits from the
selective investment in upgrades and expansion and
long-term success for the Group.
In order to identify what is necessary to unlock and
support the creation of organisational value in this
changing healthcare landscape, the Group Executive
Committee collectively examined the operational, market
and regulatory environments across the Group. The focus
of this strategic project was to define the evolution needed
to support the future direction and success of the business.
As a result, our strategic goals have been refined to meet
current market needs and to ensure we are in the best
operational changes made since the Al Noor combination.
position to provide exceptional value to our clients
Our 182-bed Mediclinic Parkview Hospital in Dubai
was successfully opened in September 2018, more than
six months ahead of schedule, and will be a key contributor
to the medium-term growth. The facility took two and a
every day.
More detail on the refined strategic goals can be found in
Our strategy, goals and progress on page 18. Building
on these goals, the Group Executive Committee will
half years to complete and at approximately AED680m it is
continue to review the strategic priorities and objectives
the largest greenfield construction project by value that
which must ensure that we deliver improved financial
the Group has ever undertaken. The hospital offers patients
returns for our shareholders.
a range of comprehensive consultant-led primary,
secondary and tertiary level healthcare services. Since
opening, its performance has exceeded original
expectations and I look forward to seeing this upward
ACHIEVEMENTS DURING THE YEAR
Throughout this Annual Report, you will find details
relating to achievements made during the year. However, I
trajectory continue as it ramps up over the coming few
would like to highlight a few points of specific interest.
years. In addition, we continue to make progress with the
expansion of Abu Dhabi’s Mediclinic Airport Road Hospital
which includes a Comprehensive Cancer Centre that is due
to open in the first half of the 2020 calendar year.
ADDRESSING THE CHANGING
HEALTHCARE LANDSCAPE
The global healthcare landscape continues to change.
In June 2018, we hosted a Capital Markets Day for analysts
and investors where a detailed overview of the Group and
divisional strategies was presented by members of the
Group Executive Committee. I appreciated the opportunity
to formally meet and engage with stakeholders in the
capital markets for the first time since becoming CEO.
We discussed our unique and diversified service offering,
growth opportunities, regulatory environments and our
Service providers are facing unprecedented developments
financial strategy which sought to enhance the capital
with trends of an ageing population and a growing disease
markets’ knowledge and understanding of the Group.
26 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Across all three divisions, there are opportunities to expand
Mediclinic employees are empowered to be positive and
across the continuum of care to ensure that Mediclinic
productive within an environment that reflects and rewards
offers patients, medical practitioners, insurers and
good performance, diversity and innovation.
regulators the full spectrum of clinical services required
of a truly integrated healthcare provider. This year, in the
Middle East we invested in the UAE-based Bourn Hall
International MENA (Pty) Ltd (“Bourn Hall International”)
in vitro fertilisation (“IVF”) business and Majid Al Futtaim
day case and outpatient clinics, and in Southern Africa
and Switzerland day case clinics have been developed or
acquired. Further detail can be found in the Divisional
Reviews from page 62.
Through the diligent stewardship of Mr Jurgens Myburgh,
Chief Financial Officer (see the Financial Review on
page 29), the long-term financial strength of the business
will and must remain a key priority for the Board and me. In
line with our strategic approach to responsible leverage, we
successfully refinanced the debt facilities of Mediclinic
Southern Africa and Mediclinic Middle East. This came in
addition to the prior year refinancing of Hirslanden’s
secured debt facilities and ensures that we have long-
The Mediclinic Airport Road Hospital Comprehensive
dated maturity profiles across all our divisions’ borrowing
Cancer Centre and 100-bed expansion is an important
facilities. Our proactive approach to financial management
next stage in the continued growth we expect to see at
across the Group was also evident when we agreed
Mediclinic Middle East. The project is running on schedule
and is expected to be completed in the first half of the
covenant amendments in Hirslanden’s borrowing facilities
to take account of the recent impact of the local healthcare
2020 calendar year.
regulatory changes.
Another investment which supports our long-term growth
includes the EHR system that is being rolled out across
Hirslanden and Mediclinic Middle East. Once completed,
this will enable operational improvements relating to the
accuracy, efficiency and availability of record-keeping
which drives clinical performance, revenue cycle
management and client experience. In addition, the EHR
system is a critical enabler of future healthcare direction
and innovation.
OUTLOOK
In closing, the Group has proven its resilience in the past.
We have learned valuable lessons and absorbed the impact
of a number of significant regulatory changes across
Switzerland and the Middle East over the past few years.
But, in order to thrive, we can no longer continue by
simply doing more of the same. We are adapting the
business to address the changing landscape and to
capitalise on growing opportunities in the global healthcare
I am proud of our more than 25 000 employees across all
services sector.
divisions who completed the 2018 Gallup® Employee
Engagement Profile survey, the results of which showed
improved scores in 96% of the measured categories and an
increase in the overall engagement index. Highlights
include that employees feel their work expectations are
clearly defined and they are provided with all the necessary
tools to contribute to the Company’s success. Ensuring
employees are not only equipped, but also motivated and
supported as we pursue the Group’s purpose requires
continuing commitment and investment. I will continue to
work with the Group Executive Committee, the Board and
senior management across all divisions to ensure that
Strengthened by the support and knowledge of our
experienced Board, exceptional employees and valued
partners, I am confident in our management team’s ability
to deliver on our goals and promise of creating stakeholder
value. I truly believe Mediclinic’s future is an exciting one
and look forward to the year ahead.
Dr Ronnie van der Merwe
Chief Executive Officer
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 27
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CHIEF EXECUTIVE OFFICER’S REVIEW (CONTINUED)
Career timeline
1986
1990
1994
1996
MBChB, Stellenbosch University
Diploma in Anaesthesia,
College of Anaesthesiologists
of South Africa
Fellowship in Anaesthesia,
College of Anaesthesiologists
of South Africa
Appointed Senior Manager:
Managed Healthcare and
Information, Sanlam Health
Registrar, Department of
Anaesthesia, University
of the Witwatersrand
Recipient of
Jack Abelsohn Medal
Chief Anaesthesiologist,
Vaalmed Health Maintenance
Organisation and
private practice
2007
2001
Appointed as
Chief Clinical Officer,
Mediclinic International Ltd
Appointed as Clinical Services
Director, Mediclinic Ltd
1999
Joins Mediclinic Ltd
as Senior Manager:
Clinical Services
2010
2013
2017
2018
Appointed to the
Wits Donald Gordon
Medical Centre (Pty) Ltd
Board of Directors
Advanced Management
Programme, Harvard
Business School
Appointed as CEO Designate,
Mediclinic International plc
Appointed as CEO,
Mediclinic International plc
Mediclinic career highlights
Establishing the
Advanced
Analytics,
International Data
Warehouse and
Health
Information
Management
departments
Developing the
Developing the
clinical and
clinical
cost-related
grouping system
that created a
competitive
advantage
performance
model consisting
of a clinical
governance
foundation
supporting a
clinical
performance
framework
28 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Leading and
initiating the
measurement of
international
procurement
Establishing an
Establishing an
international
Group
coordination
function
clinical outcomes
initiative
to international
standards and
the public
reporting thereof
– a first for
Southern Africa
FINANCIAL
REVIEW
“STRONG CASH FLOW
GENERATION IS KEY
TO DELIVERING ON THE
LONG-TERM SUCCESS OF
THE GROUP.”
Jurgens Myburgh
Chief Financial Officer
INTRODUCTION
During the year under review, the changes in the regulatory
environment, particularly in Switzerland, and its impact on
the operating profit of the business, have tested the resolve
of the financial strategy and the Group’s approach to
maintaining responsible leverage.
The role of the Finance function at Mediclinic is to support
the Group’s strategic position as an international leader in
the provision of private healthcare services while ensuring
we deliver sustainable long-term shareholder value through
return on invested capital. While our recent profitability has
challenged the achievement of appropriate returns, the
invested capital of the Group remains underpinned by our
philosophy of property ownership. Mediclinic as a group
has a stated preference of, where possible, owning the
properties at which it operates. In Switzerland, we own
15 of the 18 hospital properties; in Southern Africa,
50 of the 51; and in the Middle East, we own both Mediclinic
City and Mediclinic Parkview hospitals in Dubai that are
situated in so-called free zone areas. As highlighted
previously, our preference is premised on both operational
and financial benefits:
• From an operational perspective, the ongoing ability to
adapt our hospitals to the changing care settings driven
by the needs of medical practitioners and patients, and
facilitated by information, communication and medical
technology, puts us at an advantage regarding the
quality and speed of execution.
• From a financial perspective, our property portfolio
offers security to our debt financing, providing capital to
the Group at competitive borrowing rates. We manage
our leverage on a responsible basis with respect to both
the cost and maturity/refinance risk of the borrowings.
All divisions have been recently re-financed on medium-
to long-term maturity profiles with options for further
extension. Further, the possible inflexibility of lease
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 29
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C
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R
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M
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R
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N
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I
F
N
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C
A
L
S
T
A
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E
M
E
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FINANCIAL REVIEW (CONTINUED)
agreements and charges through business cycles can
EBITDA was 4% lower at £493m (FY18: £515m), with
potentially impact the operating cash flows and restrict
adjusted EBITDA margins declining from 17.9% to 16.8%.
ongoing investment and upgrades that support the
sustainability and future growth of the business.
Adjusted depreciation and amortisation was up 12% to
£163m (FY18: £145m), in line with the continued investment
On the balance sheet, the Group carries the value of its
to upgrade and expand the asset base, supporting future
land and buildings at cost less accumulated depreciation
growth, enhancing patient experience, and clinical quality
and impairment. Cost was based on fair value at the
and driving efficiencies.
acquisition date, as appropriate. In Switzerland, there is an
annual independent valuation performed on behalf of the
banks on the property portfolio for covenant compliance
purposes by independent real estate experts, Wüest &
Partner. They apply a consistent methodology across key
The Group recorded an operating profit of £81m in FY19
(FY18: operating loss of £288m). Adjusted operating profit
decreased by 11% to £330m (FY18: £370m). Operating
profit was adjusted for the following exceptional items:
assumptions to determine the rental charges based on
• recognition of an impairment charge to Hirslanden
appropriate and market-related metrics, which is
property, equipment and vehicles. Non-financial assets
discounted using a market-related discount rate to
are considered for impairment when impairment
determine the value of the properties.
Strong cash flow generation is key to delivering on the
long-term success of the Group. Supporting this is our
focus on profitable growth and disciplined capital
allocation to generate returns in excess of the bottom-up
hurdle rates we establish for each division. Through our
structured annual financial planning process, we ensure
that the appropriate capital is allocated to each division to
maintain, upgrade and expand. We will continue to
prioritise investment in our existing divisions because we
believe that this is where we have a greater line of sight on
risks and returns and where we are able to leverage
existing infrastructure. In doing so, we will improve the
overall return on invested capital.
Having completed a multi-year investment in the Middle
East with the opening in September 2018 of the AED680m
Mediclinic Parkview Hospital, re-calibrated the annual
maintenance and expansion capital investment in
Hirslanden to align with the new regulatory environment
indicators are identified at an individual cash-generating
unit (“CGU”) level. During the year, the CGUs in
Hirslanden were tested for impairment. For certain
CGUs, the carrying value was determined to be higher
than its recoverable amount and as a result an
impairment charge of £186m was recognised in the
income statement;
• recognition of an impairment charge to the Hirslanden
trade name and the Linde trade name. As part of the
CGU impairment testing, the carrying amounts of these
trade names were determined to be higher than their
recoverable amounts and, as a result, impairments of
£39m and £16m respectively were recognised in the
income statement;
• accelerated depreciation of £5m in Hirslanden relating
to abandoned building project cost aligned with the
disciplined approach to capital allocation; and
• a loss on disposal of certain non-core businesses at
Mediclinic Middle East of £1m.
and nearing completion of a multi-year maintenance
Adjusted net finance costs decreased by 19% to £57m
upgrade cycle in Southern Africa, we expect to deliver an
(FY18: £70m), benefiting from the refinance in all divisions
improvement in the free cash flow generation of the Group
during the current and prior years.
over the medium term.
In conclusion, with the current challenging healthcare
environment, our diligent approach to financial
management across the Group presents Mediclinic with
medium-term sustainability and flexibility to invest in
incremental growth propositions across the continuum of
care, manage the level of debt to covenants across all
divisions and improve shareholder returns.
GROUP FINANCIAL PERFORMANCE
Group revenue increased by 2% to £2 932m
The Group’s reported effective tax rate is significantly
skewed by exceptional non-deductible expenses which
include: impairment of properties and trade names;
impairment of the equity investment and accelerated
depreciation. A prior year adjustment relating to a change
in the basis of estimating deferred tax on the Swiss
properties led to the recognition of a tax credit of £17m.
Adjusted taxation was £57m (FY18: £64m), with an
adjusted effective tax rate for the period decreasing to
20.4% (FY18: 20.8%) reflecting a lower average tax rate in
Switzerland. After adjusting for the amortisation of
(FY18: £2 876m) for the reporting period. In constant
intangible assets recognised in the notional purchase price
currency terms, FY19 revenue was up 4% in a challenging
allocation of the equity investment, the FY18 income from
environment.
associates was £2.7m (FY18: £2.8m).
30 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
The Group recorded an earnings loss of £151m in FY19
(FY18: £492m). Adjusted earnings decreased by 10% to
£198m (FY18: £221m). Adjusted EPS were 10% lower at
26.9 pence (FY18: 30.0 pence). Earnings were adjusted for
the following exceptional items:
• non-IFRS measures are used by management in
presentations and discussions with investment analysts;
and
• non-IFRS measures are used by the directors in
evaluating management’s performance and in setting
• recognition of an impairment charge on the equity
management incentives.
investment in Spire of £164m. During the year, the Group
performed an impairment test updating the key
assumptions applied in the value-in-use calculation
performed at 31 March 2018. In particular, the Group
adjusted the value-in-use calculation for the guidance
announced by Spire in September 2018 on the current
financial performance and on the related impact on
short- and medium-term growth rates, and revisited
other key assumptions in this context. As a result, an
impairment loss of £164m was recorded against the
carrying value; and
• a change in the basis of estimating deferred tax on the
Swiss properties giving rise to a tax credit of £17m.
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 charges from reported earnings. Historically,
EBITDA and adjusted EBITDA were disclosed as
supplemental non-IFRS financial performance measures
because these are regarded as useful metrics to analyse
the performance of the business from period to period.
Measures like adjusted EBITDA are used by analysts and
investors in assessing performance.
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;
The Group’s policy is to adjust, inter alia, the following
types of significant income and charges from the reported
IFRS measures to present adjusted results:
• cost associated with major restructuring programmes;
• profit/loss on sale of assets and transaction costs
incurred during acquisitions;
• past service cost charges/credits in relation to pension
fund conversion rate changes;
• accelerated depreciation and amortisation charges;
• mark-to-market fair value gains/losses relating to
derivative financial instruments, including ineffective
interest rate swaps;
• impairment charges and reversal of impairment charges;
• insurance proceeds; and
• tax impact of the above items, prior year tax
adjustments and significant tax rate changes.
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
used by the Group are not necessarily comparable with
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 is important to allow shareholders to
better understand the Group’s trading performance for the
• non-IFRS measures are used by management for
reporting period. It is the Group’s intention to continue to
budgeting, planning and monthly financial reporting;
consistently apply this definition in the future.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 31
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL REVIEW (CONTINUED)
EARNINGS RECONCILIATIONS
2019 STATUTORY
RESULTS
Revenue
Operating profit/(loss)
(Loss)/profit attributable
to equity holders
Reconciliations
Operating profit/(loss)
Add back:
Other gains and losses
Depreciation and
amortisation
Impairment of properties,
equipment and vehicles
Impairment of
intangible assets
EBITDA
Exceptional items
No adjustments
Adjusted EBITDA
Operating profit/(loss)
Exceptional items
– Impairment of
properties, equipment
and vehicles
– Impairment of
intangible assets
– Accelerated
depreciation and
amortisation
– Fair value adjustments
on derivative contracts
– Loss on disposal of
businesses
Adjusted operating
profit/(loss)
Total
£'m
2 932
81
(151)
Hirslanden
£'m
Southern
Africa
£'m
1 368
(123)
(102)
886
157
72
Middle
East
£'m
677
49
43
81
3
168
186
55
493
493
81
186
55
5
2
1
(123)
157
–
101
186
55
219
219
(123)
186
55
5
–
–
(1)
31
–
–
187
187
157
–
–
–
–
–
49
3
36
–
–
88
88
49
–
–
–
2
1
330
123
157
52
Spire
£'m
Corporate
£'m
–
–
(161)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(2)
(3)
(2)
1
–
–
–
(1)
(1)
(2)
–
–
–
–
–
(2)
32 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
EARNINGS RECONCILIATIONS (continued)
2019 STATUTORY
RESULTS
Total
£'m
Hirslanden
£'m
Southern
Africa
£'m
Middle
East
£'m
Spire
£'m
Corporate
£'m
Reconciliations
(Loss)/profit attributable
to equity holders
Exceptional items
– Impairment of
properties, equipment
and vehicles
– Impairment of
intangible assets
– Accelerated
depreciation and
amortisation
– Fair value adjustments
on derivative contracts
– Loss on disposal
of businesses
– Impairment of associate
– Tax adjustment related
to Hirslanden properties
– Tax on exceptional
items
Adjusted earnings
Weighted average
number of shares
(millions)
Adjusted earnings per
share (pence)
(151)
(102)
72
43
(161)
(3)
186
55
5
–
–
–
(17)
(47)
80
–
–
–
–
–
–
–
–
–
–
–
2
1
–
–
–
72
46
–
–
–
–
–
164
–
–
3
–
–
–
–
–
–
–
–
(3)
186
55
5
2
1
164
(17)
(47)
198
737.2
26.9
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 33
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL REVIEW (CONTINUED)
EARNINGS RECONCILIATIONS (continued)
2018 STATUTORY
RESULTS
Revenue
Operating (loss)/profit
(Loss)/profit attributable
to equity holders
Reconciliations
Operating (loss)/profit
Add back:
Total
£'m
2 876
(288)
(492)
Hirslanden
£'m
Southern
Africa
£'m
1 349
(470)
(471)
883
160
72
Middle
East
£'m
643
25
17
(288)
(470)
160
Other gains and losses
(2)
Depreciation and
amortisation
Impairment of properties,
equipment and vehicles
Impairment of intangible
assets
EBITDA
Exceptional items
168
84
560
522
(9)
86
84
560
251
– Past service cost credit
(4)
(4)
– 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, equipment
and vehicles
– Impairment of
intangible assets
– Accelerated
depreciation and
amortisation
– Release of pre–
acquisition Swiss
provision
– Loss on disposal of
businesses
Adjusted operating
profit/(loss)
(3)
515
(288)
(4)
(3)
84
560
23
(9)
7
–
247
(470)
(4)
–
84
560
–
(9)
–
–
29
–
–
189
–
–
189
160
–
–
–
–
–
–
–
370
161
160
34 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Spire
£'m
Corporate
£'m
–
–
(106)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(3)
(4)
(3)
–
–
–
–
(3)
–
–
(3)
(3)
–
–
–
–
–
–
–
(3)
25
7
53
–
–
85
–
(3)
82
25
–
(3)
–
–
23
–
7
52
EARNINGS RECONCILIATIONS (continued)
2018 STATUTORY
RESULTS
Total
£'m
Hirslanden
£'m
Southern
Africa
£'m
Middle
East
£'m
Spire
£'m
Corporate
£'m
(492)
(471)
72
Reconciliations
(Loss)/profit attributable
to equity holders
Exceptional items
– Past service cost credit
– Pre–acquisition fair
value adjustment to
debtors
– Impairment of
properties, equipment
and vehicles
– Impairment of
intangible assets
– Accelerated
depreciation and
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
–
–
–
–
–
–
–
–
–
–
–
17
–
(3)
–
–
23
–
7
–
–
–
–
(106)
(4)
–
–
–
–
–
–
–
–
–
109
–
3
–
–
–
–
–
–
–
–
–
–
–
(4)
72
44
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 35
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL REVIEW (CONTINUED)
FOREIGN EXCHANGE RATES
Although the Group reports its results in pound 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 of financial position.
The resulting currency translation difference, which is the
amount by which the Group’s interest in the equity of the
divisions increased because of spot rate movements,
amounted to £142m (2018: decrease of £310m) and
was credited (2018: debited) to the statement of
comprehensive income. The main reason for the increase
was the strengthening of the period-end Swiss franc
and UAE dirham rates against the pound sterling.
Foreign exchange rate sensitivity:
• The impact of a 10% change in the £/CHF exchange
rate for a sustained period of one year is that profit
for the period would increase/decrease by £8m
(2018: increase/decrease by £12m) due to exposure
to the £/CHF exchange rate.
• The impact of a 10% change in the £/ZAR exchange
rate for a sustained period of one year is that profit
for the period would increase/decrease by £7m
(2018: increase/decrease by £9m) due to exposure
to the £/ZAR exchange rate.
• The impact of a 10% change in the £/AED exchange
rate for a sustained period of one year is that profit
for the period would increase/decrease by £5m
(2018: increase/decrease by £4m) due to exposure
to the £/AED exchange rate.
During the reporting period, 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
2019
2018
1.30
18.01
4.82
1.30
18.90
4.79
1.29
17.22
4.87
1.34
16.57
5.15
CASH FLOW
The Group continued to deliver strong cash flow and
converted 91% (FY18: 90%) of adjusted EBITDA into cash
generated from operations.
Cash from operations (a)
Adjusted EBITDA (b)
Cash conversion ((a)/(b)
x 100)
2019
£’m
451
493
91%
2018
£’m
466
515
90%
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings increased from £1 937m at
31 March 2018 to £1 982m at 31 March 2019 to fund expansion.
Borrowings
Less: cash and cash
equivalents
Net debt
Total equity
Debt-to-equity
capital ratio
2019
£’m
1 982
(265)
1 717
3 266
53.1%
2018
£’m
1 937
(261)
1 676
3 373
49.7%
36 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
ASSETS
Property, equipment and vehicles decreased from £3 590m
at 31 March 2018 to £3 524m at 31 March 2019. This
included an increase of £204m 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 £20m as a result
of the Clinique des Grangettes acquisition. In addition to
the depreciation charge, the balance was further reduced
by the impairment charge of £186m recognised on
property, equipment and vehicles in Hirslanden and
increased by the change in the closing exchange rate.
Intangible assets increased from £1 406m at 31 March 2018
to £1 587m at 31 March 2019. This included the recognition
of goodwill of £99m resulting from the Clinique des
Grangettes acquisition and on other smaller business
combinations of £8m, as well as an increase of £28m on
capital projects. In addition to the amortisation charge, the
balance was further reduced by the impairment charge
of £55m recognised on trade names in Hirslanden. The
closing balance increased by the change in the closing
exchange rates.
Adjusted depreciation and amortisation was calculated
as follows:
Depreciation and
amortisation
Accelerated depreciation
and amortisation
Adjusted depreciation
and amortisation
2019
£’m
168
(5)
163
2018
£’m
168
(23)
145
TRADE AND OTHER RECEIVABLES
Trade and other receivables increased from £607m at
31 March 2018 to £732m at 31 March 2019. The increase in
the balance was largely due to the effect of HIT2020
billing system implementation and the acquisition of
Clinique des Grangettes.
SWISS PENSION BENEFIT
OBLIGATION
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,
classified as defined benefit plans. Since the funds are
obliged to take some investment and longevity risk in
terms of Swiss legislation. The IAS 19 pension liability was
valued by the actuaries at the end of the year and
amounted to £52m (2018: £4m), included under
“Retirement benefit obligations” in the Group’s statement
of financial position. The increase in the pension liability
was largely due to the decrease in the discount rate from
0.75% to 0.45%, as well as changes in actuarial
assumptions.
DERIVATIVE FINANCIAL
INSTRUMENTS
Through the acquisition of Clinique des Grangettes, the
Group entered into a put/call agreement over the
remaining 40% interest of Clinique des Grangettes and
Hirslanden Clinique La Colline. At the end of the year, the
fair value of the redemption liability, related to the written
put option amounted to £88m (2018: nil).
DEFERRED TAX LIABILITIES
The deferred tax liability balance decreased from £467m in
the prior year to £423m at 31 March 2019. The impairment
of the trade names and properties in Hirslanden led to the
release of deferred tax liabilities of £12m and £35m
respectively. A prior year adjustment relating to a change
in the basis of estimating deferred tax on Swiss properties
led to the recognition of a tax credit of £17m.
FINANCE COSTS
Adjusted net finance costs decreased by 19% to £57m
(FY18: £70m), benefiting from the refinance in all divisions
during the current and prior years.
Finance cost
Finance income
Net finance cost
Derecognition of
unamortised financing
costs
Fair value gains on
ineffective cash flow
hedges
Adjusted finance cost
2019
£’m
66
(9)
57
–
–
57
2018
£’m
94
(9)
85
(19)
4
70
INCOME TAX
The Group’s effective tax rate changed significantly for the
taking into account the recommendations of independent
period under review to 5.4% (FY18: 1.1%), mainly due to
qualified actuaries. Because of the strict definition of
exceptional non-deductible expenses which include the
defined contribution plans in IAS 19, these plans are
impairment of properties and trade names, impairment of
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 37
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION FINANCIAL REVIEW (CONTINUED)
the equity investment and accelerated depreciation. In
addition, a prior year adjustment relating to a change in the
basis of estimating deferred tax on Swiss properties led to
the recognition of a tax credit of £17m. Excluding these
exceptional items, the effective tax rate would be 20.4%
(FY18: 20.8%) for the reporting period.
REFINANCING OF DEBT
The borrowing facilities in Mediclinic Southern Africa and
Mediclinic Middle East were refinanced during the year. In
both instances, the terms of the loans were extended with
favourable pricing. The effective date for the funding and
the closing was 26 September 2018 and 29 August 2018
Adjusted income tax was calculated as follows:
respectively. In Mediclinic Middle East, a new term loan of
2019
£’m
2018
£’m
Income tax credit
Tax on exceptional items
– Past service cost credit
– Impairment of
properties
– Impairment of intangible
assets
– Tax adjustment relating
to Swiss properties
– Release of unutilised
pre–acquisition Swiss
provision
– Derecognition of
unamortised finance
expenses
Adjusted income tax
expense
(7)
64
–
35
12
17
–
–
57
(5)
69
(1)
13
55
–
(2)
4
64
TAX STRATEGY
The Group is committed to conduct its tax affairs
consistent with the following objectives:
• complying with relevant legislation, rules, regulations,
and reporting and disclosure requirements in whichever
jurisdiction it operates; and
• maintaining mutual trust and respect in dealings with all
tax authorities in the jurisdictions the Group does
business.
While the Group aims to maximise the tax efficiency of 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
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.
£192m (AED920m) and revolving loan facility of £38m
(AED184m) were put in place.
In Switzerland, an amendment to the financing agreement
was entered into in March 2019, adjusting the covenants to
reflect the impact of the recent regulatory changes on the
profitability of the business. There was no change to the
interest margin of the debt facility.
SPIRE HEALTHCARE GROUP
Mediclinic has a 29.9% investment in Spire.
Spire’s underlying performance for the 12 months to
31 December 2018 resulted in underlying revenue
decreasing 1.3%, underlying EBITDA decreasing 23.3% and
the underlying EBITDA margin decreasing to 13.4%.
Adjusted basic earnings per share (excluding exceptional
and tax one-off items) decreased by 52.1%. Underlying
inpatient and day case admissions declined 4.6%, driven by
volume declines more than offsetting growth in self-pay.
Mediclinic’s investment in Spire is equity accounted. Spire
reported profit after tax of £11.3m for the financial year
ended 31 December 2018 (31 December 2017: £16.8m).
Spire’s adjusted profit after tax for the year was £27.5m
(31 December 2017: £57.9m). After adjusting for the
amortisation of intangible assets recognised in the notional
purchase price allocation of the equity investment, the
FY19 income from associate was £2.7m (FY18: £2.8m). The
underlying and adjusted measures referenced above have
been extracted from Spire’s results announcement for the
year ended 31 December 2018.
As at 30 September 2018, the market value of the
investment in Spire was £169m, 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 2018. The impairment
test was prepared based on the Group’s updated
expectations of Spire’s future trading performance and
considered external sources of information, including
investor analyst valuations and target prices published.
Key assumptions related to cash flow growth rates in the
short- and medium-term were adjusted in the value in use
calculation. As a result, an impairment loss of £164m was
38 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
recorded against the carrying value in the first half year.
At year-end, another impairment test (updated for latest
guidance announced by Spire in March 2019) was
performed and no further impairment charge was required.
OUTLOOK
The Group provides the following guidance for FY20
before the effect of adopting IFRS 16, which remains
unchanged since the April 2019 Trading Update:
• Hirslanden: In FY20 Hirslanden expects modest revenue
growth from an increase in average bed capacity for the
year, reflecting the continued integration of Clinique des
Grangettes. Under the current regulatory environment,
Hirslanden will be impacted by a further nine months’
comparative effect in FY20 from the national
outmigration care programme that was implemented
from 1 January 2019. The anticipated cost management
and efficiency savings are likely to be more than offset
by reductions in tariffs and the operational effects of
outmigration, with the FY20 EBITDA margin expected
to be around 15%. Over the medium-term, and assuming
no further regulatory changes are implemented, the
operating performance is expected to be supported by
benefits from the Hirslanden 2020 strategic project and
structural efficiencies being implemented in the division.
• Mediclinic Southern Africa: In FY20 Mediclinic Southern
Africa expects volume growth of around 1% reflecting
the additional capacity from the Intercare day case
clinics that were consolidated from December 2018. In
line with the Group’s strategic objectives and a
continued focus on improving clinical quality and
patient experience, further investment will be made
in employees and ICT during FY20. This, together with
the expected lower margin contribution from Intercare
and the ramp up of the new Mediclinic Stellenbosch
facility, is anticipated to result in an EBITDA margin of
around 20%.
• Mediclinic Middle East: In FY20 the Middle East division
is expected to deliver revenue growth of around 10%
supported by the continued ramp-up of the
new Mediclinic Parkview Hospital. A gradual
improvement in the EBITDA margin is expected in FY20
to around 14% incorporating the ramp-up of
the Mediclinic Parkview Hospital and investment in the
hospital expansion and new cancer centre at Mediclinic
Airport Road Hospital, which is scheduled to open in the
first half of calendar year 2020. The division continues
to target an EBITDA margin of around 20%.
• The Group’s capital expenditure budget, in constant
currency, for FY20 is expected to decrease by 12% to
£207m (FY19: £232m). This comprises £70m in
Hirslanden (FY19: £72m), £71m in Mediclinic Southern
Africa (FY19: £65m), £66m in Mediclinic Middle East
(FY19: £94m) and £nil (FY19: £1m) in Corporate. The
decrease largely results from the conclusion in FY19 of
the major new Mediclinic Parkview Hospital project in
the Middle East and continued focus on capital
allocation in Switzerland to reflect the current
regulatory environment. Average FY19 exchange
rates used: CHF1.30; ZAR18.01; and AED4.82.
The Group will adopt the new IFRS 16 accounting standard
(addressing 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) from 1 April 2019 and comparatives will not be
restated. The EBITDA margin guidance for FY20 under
IFRS 16 is set out below, together with the indicative
corresponding margin for FY19:
• Hirslanden: around 17% (FY19: 18.1%)
• Mediclinic Southern Africa: around 21% (FY19: 21.7%)
• Mediclinic Middle East: around 17% (FY19: 16.1%)
DIVIDEND POLICY AND PROPOSED
DIVIDEND
The Group’s existing Dividend Policy targets a pay-out
ratio of between 25%–30% of adjusted earnings. The
Board may revise the policy at its discretion. Given the
impact of IFRS 16 accounting changes, the Board deems
it appropriate to adjust the future payout ratio to 25%–35%
of adjusted earnings.
The Board proposes a final dividend from retained
earnings of 4.70 pence per ordinary share for the year
ended 31 March 2019 for approval by the shareholders at
the Company’s 2019 annual general meeting (“AGM”) on
Wednesday, 24 July 2019. Together with the interim
dividend of 3.20 pence per ordinary share for the
six months ended 30 September 2018 (paid on
18 December 2018), the total proposed dividend for
the year reflects a 29% distribution of adjusted Group
earnings attributable to ordinary shareholders.
Shareholders on the South African register will be paid the
South African rand cash equivalent of 86.24500 cents
(68.99600 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 South African rand cash
equivalent has been calculated using the following
exchange rate: £1: ZAR18.35, being the five-day average
ZAR/£ exchange rate (Bloomberg) on Friday, 17 May 2019
at 15:00 GMT.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 39
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION VALUE ADDED
STATEMENT
The Value added statement depicts the economic benefit created by the Group and how that is distributed among 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
2019
£’m
2 932
(1 222)
9
3
1 722
1 233
68
21
66
59
1 447
136
139
275
%
100.0
71.7
3.9
1.2
3.8
3.4
84.0
7.9
8.1
16.0
2018
£’m
2 876
(1 028)
9
3
1 860
1 293
75
18
94
58
1 538
159
163
322
%
100.0
69.5
4.0
1.0
5.1
3.1
82.7
8.5
8.8
17.3
7.9%
71.7%
2019
3.9%
1.2%
3.4%
3.8%
8.1%
2018
4%
1%
3.1%
5.1%
8.8%
8.5%
69.5%
Employees
Non-controlling
interests
Future growth
Tax
Finance cost
Maintain and
replace assets
Distribution
to shareholders
40 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
CLINICAL SERVICES
OVERVIEW
“OUR ORGANISATIONAL
VALUE IS ULTIMATELY
REALISED AT HOSPITAL
LEVEL WHERE MEDICLINIC
EMPLOYEES AND
PARTNERS WORK
TIRELESSLY TO ENHANCE
THE QUALITY OF LIFE
OF OUR CLIENTS AND
THEIR FAMILIES.”
Dr René Toua
Chief Clinical Officer
INTRODUCTION
Mediclinic provides a wide range of clinical services
throughout its divisions. These include outpatient
consultation services, pre-hospital emergency services,
hospital-based emergency centres, day case surgery, acute
care inpatient services and highly specialised services.
Support services include laboratories, radiology, radiation
oncology and nuclear medicine.
During the year under review, the clinical performance
across the Group made good progress and several patient
safety and clinical effectiveness indicators showed
improvement. In addition, many initiatives in support of
clinical performance and quality improvement were
launched and completed. The restructuring and
strengthening of clinical services leadership at hospital and
corporate levels continued across the Group, as did the
refinement of methodologies to accurately measure and
report on the effect of quality improvement initiatives on
clinical outcomes and sustainable clinical performance.
To ensure complete and comparable results, a time lag is
allowed for the collection of some clinical data. All
indicators are therefore reported on calendar year.
A key focus area of Mediclinic is its commitment to
superior clinical performance which encompasses the
quality of clinical processes and outcomes. This is done
through a simple, yet powerful clinical performance
framework built on a sound clinical governance
foundation – collectively, the clinical management model
(Figure 1). The model supports a structured approach to
clinical management through a clinical governance
foundation layer that provides the structures and
processes required for clinical performance.
The Company made a significant investment in the
improvement of clinical performance; it believes this to be
crucial to future success. Clinical performance is
quantified and reported on in line with the framework,
including detailed monthly reporting with external
oversight at both divisional and Board levels.
This report provides an overview of the Group’s clinical
performance for the year under review. The detailed
Clinical Services Report, available on the Company’s
website at https://investor.mediclinic.com/results-
centre/results-and-reports, provides a more in-depth
description.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 41
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
FIGURE 1: THE MEDICLINIC CLINICAL MANAGEMENT MODEL
SUPERIOR CLINICAL PERFORMANCE
VALUE-BASED CARE
CLINICAL COST EFFICIENCY
CLINICAL EFFECTIVENESS
PATIENT SAFETY
CLINICAL GOVERNANCE
I
Q
U
A
L
I
T
Y
O
F
C
L
I
N
C
A
L
P
R
O
C
E
S
S
E
S
A
N
D
O
U
T
C
O
M
E
S
Statistical significance is determined by performing a
hypothesis test. A difference is deemed to be statistically
significant if the p-value exceeds a 5% critical limit. The
indicators reported represent the means of their respective
distributions and the hypothesis test examines if the means
for successive years are from the same distribution (null
hypothesis) or not (alternative hypothesis). This result
allows us to conclude if a difference is significant or not.
The test statistic for the hypothesis test and the distribution
of the test statistic are dependent on the type of data
being reported on.
Figure key
Where variation in current year data is found to be
statistically insignificant when compared to prior
reporting periods, the data in the graph is presented
as
/
/
.
Where variation in current year data is found to be
statistically significant when compared to prior reporting
periods, the data in the graph is presented as
and an explanation is provided, if available. In these
instances it is unlikely that the changes in the numbers
are due to chance.
42 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
GROUP
Clinical performance
Never events
The implementation of the safe surgical checklist remains a
key focus area. Mediclinic only reports on a subset of
surgical and procedural never events at present focussing
on the correct identification of patients, procedures and
sites and the prevention of retained foreign objects. In
The case mix index of Mediclinic Middle East was the
lowest of the three divisions at 1.08 for 2018 due its
younger patient population. In keeping with its low case
mix index, the inpatient length of stay was 2.90 days
(measured in calendar days).
FIGURE 3: LENGTH OF STAY AND CASE
MIX INDEX
future, the list will be expanded to include a wider
Hirslanden
1.45
definition of never events.
FIGURE 2: NEVER EVENTS
Rate per 1 000 Patient Days
(Number of events in brackets)
Hirslanden
0.006 (3)
0.004 (2)
Mediclinic
Middle East
0.00 (0)
1.61
0.02 (3)
Mediclinic
Southern
Africa
0.01 (17)
0.01 (17)
4.78
4.77
0.96
Mediclinic
Southern
Africa
Mediclinic
Middle
East
1.20
1.08
3.80
3.76
2.94
2.90
0.73
2017 Inpatient length of stay
/
2018 Inpatient length of stay
/
2018 CCRG case mix
4.78
4.77
0.96
2017
/
2018
Length of stay and case mix index
The case mix indexes of the divisions are calculated by
using the internally developed clinical and cost-related
groupings (“CCRG”) system.
Internal audit
During the reporting period, an internal clinical audit
function was established; the audit programme is
supported by the Internal Audit department. The audit
process will be refined and standardised across the Group
in the coming year.
Patient experience
The case mix index of Hirslanden was 1.45 for 2018. This is
mainly due to its high load of complex and technologically
advanced cases in an older population. In keeping with a
high case mix index, Hirslanden’s inpatient length of stay
was 4.77 days (measured in calendar days).
The case mix index of Mediclinic Southern Africa was
1.20 for 2018. The inpatient length of stay was 3.76 days
Mediclinic benchmarks and publicly reports on patient
experience on a divisional level through Press Ganey®,
an internationally recognised leading provider of patient
experience measurement for healthcare organisations
across the continuum of care. Patients are surveyed after
discharge and this valuable feedback helps Mediclinic
better understand patients’ needs and adapt care services
accordingly. A comparative report will be included in the
(measured in calendar days).
2020 Clinical Services Report.
TABLE 1: 2018 PRESS GANEY® RESULTS FOR THE 2018 CALENDAR YEAR
HIRSLANDEN MEDICLINIC SOUTHERN AFRICA MEDICLINIC MIDDLE EAST
Participating since
February 2017
Total participating hospitals
Total surveys collected
1 January 2018–
31 December 2018
Overall mean score
17
34 180
87.4
October 2014
51 (Jan–June 2018)
50 (July–Dec 2018)
40 143
82.0
October 2014
6
2 345
85.6
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 43
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
CLINICAL SERVICES OVERVIEW (CONTINUED)
Performance overview
PROGRESS AGAINST OBJECTIVES
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
Patients First at Mediclinic
• Clinical performance
• Patients were
• A master data management
• The corporate clinical
surveyed on quality of
life before and after
joint replacement as
part of the patient-
related outcome
measurement.
• A continuous patient
experience survey for
all inpatients who
participate in the
Press Ganey® survey
was introduced.
measures and
operational dashboards
were refined.
• A patient safety sub-
committee was
established to
standardise and enhance
collaboration across
the Group.
• An initiative was started
to coordinate
collaboration of nursing
services across divisions.
• A collaborative forum
was established for
clinical risk management
across the Group.
• A clinical adverse event
and clinical risk
management solution
suitable for the Group
was obtained.
programme was
implemented to compile
and govern data relating to
affiliated medical
practitioners.
• Specific training initiatives
were implemented to
promote best practice with
specific clinical procedures
that required review.
• Action plans aligned with
the national hand hygiene
strategy were implemented
to further improve hand
hygiene compliance.
• Action plans were
developed to improve
medication safety.
• Additional clinical
performance measures
were refined.
• Additional mechanisms were
developed to share clinical
information with medical
practitioners.
• Infection rates were further
reduced through the
implementation of a
comprehensive infection
prevention and control
(“IPC”) strategy.
structure was reviewed
and implemented to
ensure that the Clinical
Services department can
effectively execute its
mandate and
responsibilities across the
different geographical
locations.
• The clinical committees
were re-aligned to
support the new
corporate clinical
structure.
• The implementation of
a standardised
performance appraisal
process for medical
practitioners continued.
• A scope and project plan
for the nursing
performance
management system was
finalised.
• A Joint Commission
International (“JCI”)
re-accreditation plan was
formulated.
• The quality and patient
safety strategy was
updated.
• A strategy was
developed to manage
quality indicators (as
defined by the
regulators).
44 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Performance overview (continued)
PROGRESS AGAINST OBJECTIVES
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
• Initiatives have
commenced to
coordinate health
technology assessments
centrally. These
initiatives will be refined
further.
Value-based care
• The policy on
indication quality and
the introduction of
indication boards was
completed and
distributed. Hospitals
offering oncology
treatment are running
preoperative (pre-
treatment) tumour
boards.
• Fast-track
orthopaedics was
established in three
hospitals and rollout
at a further two
hospitals is planned.
• A common structure
for highly specialised
medicine services was
introduced.
• Additional Hospital Clinical
Managers were appointed.
• Implementation of the new
clinical performance,
oversight and governance
model continued (in
collaboration with
supporting medical
practitioners).
• A new clinical pathway for
obstetric care was
developed (in collaboration
with supporting medical
practitioners).
• The first phase of the
national stroke management
implementation plan was
completed.
• The affiliation agreement
with MBRUHS was
expanded. Mediclinic City
Hospital is an accredited
external training facility
for medical students; the
third intake of medical
students enrolled in
September 2018.
• Mediclinic City Hospital
entered into an
agreement for a
paediatric residency
training programme
between MBRUHS and
Al Jalila Hospital.
• Clinical processes at
Mediclinic City Hospital’s
breast cancer and
metabolic centres were
further streamlined.
• The centralisation and
consolidation strategy of
laboratory services
continued.
• The Mediclinic City
Hospital laboratory was
successfully re-
accredited by the College
of American Pathologists.
• The laboratories in the
Abu Dhabi, Al Ain and
Western Region obtained
ISO certification.
• A 30% stake in Bourn
Hall International was
acquired.
• Existing clinical pathways
are being reviewed and
additional pathways and
guidelines are being
developed to prepare for
the implementation of
diagnostic-related
grouping (“DRG”) and
the new EHR system.
• The clinical strategy for
certain key service lines
has been finalised.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 45
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
Performance overview (continued)
PROGRESS AGAINST OBJECTIVES
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
Clinical information systems
• Specific service providers
were engaged to evaluate
potential solutions for the
market in Southern Africa.
Mediclinic Southern Africa is
in the final stages of
finalising a proposal for
implementation.
• EHR rollout commenced
at Mediclinic Parkview
Hospital and Mediclinic
Ibn Battuta.
• Continued collaboration
and support were
provided to Hirslanden
with the implementation
of its EHR system.
• Thought leadership,
oversight and close
collaboration were
provided in the selection
of an EHR system for
Mediclinic Southern
Africa and Mediclinic
Middle East.
• Future documentation
for catheterisation
laboratories and
emergency
departments was
defined.
• The re-evaluation of
the radiology
information system
was completed and a
new system was
selected. The pilot
project at Hirslanden
Klinik Im Park is nearly
completed and the
go-live for Klinik
Hirslanden is
scheduled for 2019.
• The integration of
medical source data
was reviewed and this
project was added to
the Hirslanden
transformation
exercise. Zürich
hospitals will be used
for the pilot phase.
46 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Performance overview (continued)
FUTURE OBJECTIVES
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
• Implement a clinical
adverse event and
clinical risk management
system across the Group.
• Further refine and
optimise the clinical
performance model and
clinical performance
indicators.
• Further drive
collaboration on nursing
across the Group.
• Support the divisions in
eradicating never events
and decreasing the
number of serious
adverse events.
• Refine and optimise the
medication management
process across the
Group.
• Refine and optimise the
clinical governance
structure to enforce the
Ward-to-Board
accountability framework
across the Group.
Patients First at Mediclinic
• Further rollout of the
• Develop action plans in
patient-related
outcome
measurement.
• Patient Safety Policy
compliance audit in
2019.
• Determine adherence
to the safe surgery
checklist through
unheralded
inspections in 2019.
collaboration with medical
practitioners to prevent
adverse events.
• Improve nursing skills mix
and reposition the Nursing
Unit Managers to improve
clinical outcomes.
• Develop hospital-specific
action plans aimed at
improving clinical
performance.
• Identify patient
• Improve the overall patient
pathways that qualify
for standardisation,
especially in terms of
fast-track
orthopaedics.
experience.
• Enhance the national hand
hygiene strategy to further
improve hand hygiene
compliance.
• Implement additional
components of the
antimicrobial stewardship
strategy.
• Develop additional action
plans to improve medication
safety.
• Review and refine the
comprehensive IPC strategy.
• Implement the Ward-to-
Board accountability
framework.
• Define and align the
clinical risk management
strategy to the Group.
• Continue the
implementation of the
adverse events
management strategy.
• Host the second
Mediclinic Middle East
Annual Research Day
in 2019.
• Define a clear strategy
for establishing centres
of excellence.
• Refine hospital-level
clinical structures.
• Refine the clinical
strategy for Abu Dhabi
and Al Ain.
• Continue to implement
the standardised
appraisal process for
medical practitioners.
• Further develop and
implement a quality
management framework.
• Implement trauma and
urgent care centres.
• Implement a 24-hour
paediatric service at
Mediclinic Welcare
Hospital and Mediclinic
Parkview Hospital.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 47
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
Performance overview (continued)
FUTURE OBJECTIVES
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
Value-based care
• The fulfilment criteria
• Appoint additional Hospital
• Define a strategy for
• Centrally advise and
coordinate clinical
research across the
Group.
of the system provider
model will be defined.
Subsequently,
evaluation criteria
will be determined for
the level of adherence
to the model at
hospital level.
Clinical Managers.
• Continue with the
implementation of the new
clinical performance,
oversight and governance
model in collaboration with
supporting medical
practitioners.
• Implement clinical initiatives
aimed at further improving
obstetric care.
• Complete the final phase of
the national stroke
management
implementation plan.
benchmarking medical
practitioners.
• Continue the
centralisation and
consolidation strategy
for laboratories.
• Further develop and
expand coordinated care
initiatives.
• Continue to develop the
obesity surgery service
at Mediclinic Airport
Road Hospital and
prepare for its
accreditation.
• Investigate a robotic
pharmacy system.
• Develop clinical model
for Cost per Event and
DRG use.
• Improve the use of
generics.
• Continue EHR rollout.
• Comply with the
Department of Health
Abu Dhabi’s Health
Information Exchange
requirements.
• Continue to collaborate
• Continue rollout of
• Finalise a feasible proposal
Clinical information systems
for the implementation of an
EHR and continue with
action plans aimed at
improving readiness for the
implementation plan.
with and provide support
to Hirslanden and
Mediclinic Middle East
with the implementation
of their EHR systems.
• Continue to provide
thought leadership,
oversight and close
collaboration in the
selection of an EHR
system at Mediclinic
Southern Africa.
• Establish a machine
learning capability.
• Develop an integrated
clinical digital roadmap,
including artificial
intelligence, machine
learning and
telemedicine.
the radiology
information system
in a second hospital
in 2019.
• Introduce a
standardised
documentation
approach for medical
practitioners in the
EHR. The approach is
already defined and
will be tested at two
hospitals in Zürich
in 2019.
• Continue rollout of
the PDMS. The
division is preparing
for the rollout at two
hospitals in Zürich.
• Conceptualise the
integration of the
PDMS and the EHR.
48 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
HIRSLANDEN
Most cases are elective in nature; services such as
advanced neonatal critical care and major trauma are
provided by the cantonal and university-teaching facilities.
Most admitting medical practitioners are self-employed,
but medical practitioners working in the fields of
hospital-based specialities, such as anaesthetics and
internal medicine, are employed at certain hospitals.
Radiology, nuclear medicine and radiation oncology
services are, in most instances, owned and operated by
the hospitals.
Clinical performance
Patient safety
An important aspect of improving the quality and safety of
patient care is preventing adverse events that could harm
patients, including medication errors, falls and hospital-
associated pressure ulcers (Figure 4).
FIGURE 4: ADVERSE EVENTS –
HIRSLANDEN
Rate per 1 000 patient days
Infection prevention and control
The rate of healthcare-associated infections (“HAI”) and
related conditions remained stable in 2018. As these
conditions are rare, a single infection causes a high rate
based on small denominators.
FIGURE 5: DEVICE-ASSOCIATED
INFECTIONS – HIRSLANDEN
Catheter-
associated
urinary
tract
infections
Central
line-
associated
bloodstream
infections
Ventilator-
associated
pneumonia
Rate per 1 000 device days
0.43
0.91
0.40
0.35
0.38
0.23
2.27
1.60
2016
2017
/
2018
4.78
4.77
2.36
2.52
2.45
4.17
1.41
4.78
4.77
2.36
2.52
2.45
Figure 5 reflects a decrease in all device-associated
infections. The ventilator-associated pneumonia (“VAP”)
rate per 1 000 device days decreased by 61.59% from 4.17
in 2017 to 1.60 in 2018, a statistically significant change.
Improvement across all device-associated infection rates is
largely due to a renewed focus on implementation of and
Medication
errors1
Falls
Hospital-
associated
pressure
ulcers
0.96
0.73
0.95
2016
2017
/
2018
Note
1
The reporting of medication errors is new to the division and data
collection is still being optimised.
The 2.84% decrease in fall rate per 1 000 patient days from
2.52 in 2017 to 2.45 in 2018 is not statistically significant.
The prevention of falls is a focus area for the hospitals;
Hirslanden Klinik Linde is testing a new device to detect
unattended stand-up of at-risk patients.
The hospital-associated pressure ulcer rate per 1 000
patient days increased by 30.17% from 0.73 in 2017 to 0.95
in 2018, a statistically significant change. Analysis revealed
several challenges in the correct collection of the indicator.
Introducing a business partner model in quality
management whereby hospital-level Quality Managers
report directly to corporate-level quality management will
provide further alignment and accountability.
adherence to IPC bundles.
Clinical effectiveness
Mortality
FIGURE 6: INPATIENT MORTALITY RATE –
HIRSLANDEN
Percentage of admissions (%)
2016
2017
2018
0.95
0.95
0.97
Figure 6 reflects a 1.72% increase in the inpatient mortality
rate from 0.95% in 2017 to 0.97% in 2018, however, the
variation is not statistically significant and remains in line
with the 2016 and 2017 rates.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 49
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
Re-admission and re-operation rate
FIGURE 7: RE-ADMISSION AND
RE-OPERATION RATE – HIRSLANDEN
Re-
admission
rate
Re-
operation
rate (%)
1.24
1.51
4.77
1.61
1.45
1.62
1.53
2016
2017
/
2018
The re-admission rate is reported as a 15-day unscheduled
re-admission rate as defined by the International Quality
Indicator Project. The 6.58% increase in the re-admission
rate from 1.51 in 2017 to 1.61 in 2018, as reflected in Figure 7,
is not statistically significant.
The 5.11% decrease in the re-operation rate from 1.62 in 2017
to 1.53 in 2018, as reflected in Figure 7, is not statistically
significant.
MEDICLINIC SOUTHERN AFRICA
Most of the hospital cases are elective in nature, but a
significant portion is unscheduled, emergency and trauma
related. Admitting medical practitioners, excluding
emergency medicine practitioners within certain
emergency centres, are self-employed and practise
independently. Radiology, laboratory and oncology
services are also provided by independent practices.
Clinical performance
Patient safety
FIGURE 8: ADVERSE EVENTS –
MEDICLINIC SOUTHERN AFRICA
Medication
errors
Falls
Rate per 1 000 patient days
1.18
1.58
1.21
1.07
1.02
1.05
Hospital-
associated
pressure
ulcers
0.27
0.22
0.24
2016
2017
/
2018
50 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Medication errors per 1 000 patient days reduced by
23.26% from 1.58 in 2017 to 1.21 in 2018. The values returned
to 2016 levels after quality improvement initiatives were
implemented.
Neither the 2.65% increase in the fall rate per 1 000 patient
days from 1.02 in 2017 to 1.05 in 2018 nor the 7.89% increase
in hospital-associated pressure ulcer rate per 1 000 patient
days from 0.22 in 2017 to 0.24 in 2018 are statistically
significant.
Infection prevention and control
Southern Africa has a high burden of infectious disease,
unlike Hirslanden and Mediclinic Middle East where
infectious disease is less of a concern. As such, the
identification of infectious diseases and community-
acquired infections on admission and the prevention
of HAI remains a priority for Mediclinic Southern Africa.
Hand hygiene compliance results showed a 15.06%
improvement from 65.74% in 2017 to 75.64% in 2018, a
statistically significant increase. Hospitals continue to focus
on interventions to improve hand hygiene compliance.
There is a huge drive to ensure that employees understand
the important correlation between hand hygiene
compliance and HAI rates.
FIGURE 9: DEVICE-ASSOCIATED
INFECTIONS – MEDICLINIC SOUTHERN
AFRICA
Catheter-
associated
urinary
tract
infections
Central
line-
associated
bloodstream
infections
Ventilator-
associated
pneumonia
Rate per 1 000 device days
2.41
2.54
2.29
2.35
2.43
2.48
4.78
4.77
2.36
2.52
2.45
4.74
4.90
3.89
2016
2017
/
2018
The catheter-associated urinary tract infections (“CAUTI”)
rate decreased by 10.00% from 2.54 in 2017 to 2.29 in 2018,
mainly due to improved care bundle compliance and a
targeted focus and appropriate interventions after detailed
system analysis where it has been identified as a problem.
The 1.96% increase in the rate of central line-associated
blood stream infections (“CLABSI”) from 2.43 in 2017 to
2.48 in 2018 is not statistically significant. A system analysis
is done of each CLABSI case to understand the underlying
contributing factors and to implement targeted
interventions. The VAP rate decreased by 20.66% from
4.90 in 2017 to 3.89 in 2018, mainly due to regular review of
evidence-based care bundle implementation and
compliance (e.g. the importance of subglottic suctioning in
continuous ventilation).
Re-admission rate
Mediclinic Southern Africa reports on a 30-day all-cause
Antimicrobial stewardship
re-admission rate.
Considering the high burden of infectious disease in
Southern Africa, effectively managing antimicrobial
resources and preventing multidrug resistance are critical.
Antimicrobial resistance increases with increasing
utilisation of antimicrobials, therefore Mediclinic Southern
Africa monitors total antimicrobial utilisation in Defined
Daily Doses. The total antimicrobial usage and utilisation
decreased by 1.95% in 2018.
Clinical effectiveness
Mortality
The inpatient mortality index decreased by 7.73% from 0.94
in 2017 to 0.87 in 2018, a statistically significant change.
FIGURE 10: INPATIENT MORTALITY –
MEDICLINIC SOUTHERN AFRICA
Mortality rate (%)
1.22
0.95
1.28
4.78
4.77
1.61
0.94
0.96
1.72
2016
2017
2018
FIGURE 11: RE-ADMISSION RATE –
MEDICLINIC SOUTHERN AFRICA
2016
2017
2018
12.49%
12.50%
12.68%
The 1.43% increase in the re-admission rate from 12.50% in
2017 to 12.68% in 2018, as depicted in Figure 11, is not
statistically significant.
MEDICLINIC MIDDLE EAST
At Mediclinic Middle East, the relationship between the
hospitals and clinics is in the form of a hub-and-spoke
model, where the multidisciplinary clinics deliver primary
care and specialist consultation services, as well as
1.54
0.87
/
/
Crude mortality rate
/
/
Expected mortality rate
/
/
Mortality index
1.77
follow-up from and referrals to the hospitals. Each hospital
has a few clinics reporting into the hospital structure and
they function as a cluster. This enables closer collaboration
and improved oversight of activities between the hospitals
and clinics. Traumatology is limited to the state health
facilities and patients with major trauma are stabilised and
transferred to state facilities.
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STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
Clinical performance
Patient safety
FIGURE 13: DEVICE-ASSOCIATED
INFECTIONS – MEDICLINIC MIDDLE EAST
A patient safety culture is well entrenched at Mediclinic
Middle East. It is a “just culture” (Frankl framework) with
full support from senior management.
FIGURE 12: ADVERSE EVENTS –
MEDICLINIC MIDDLE EAST
Catheter-
associated
urinary
tract
infections
Central
line-
associated
bloodstream
infections
Rate per 1 000 device days
0.44
0.37
0.34
4.78
4.77
1.47
2.36
1.27
2.52
1.80
2.26
3.51
3.20
Ventilator-
associated
pneumonia
0.54
0.33
Rate per 1 000 patient days
1.30
0.44
0.51
0.41
0.19
0.40
0.17
Medication
errors
Falls
Hospital-
associated
pressure
ulcers
2016
2017
/
2018
At Mediclinic Middle East both outpatient and inpatient
medication errors are reported and are classified as
prescription, dispensing and administration errors. The
medication error rate per 1 000 patient days decreased by
8.65% from 3.51 in 2017 to 3.20 in 2018, a statistically
significant change (Figure 12). There is a continued focus
on medication management.
The 20.96% decrease in the fall rate per 1 000 patient days
from 0.51 in 2017 to 0.41 in 2018, as reflected in Figure 12, is
statistically significant. The hospital-associated pressure
ulcer rate per 1 000 patient days decreased by 57.77% from
0.40 in 2017 to 0.17 in 2018, a statistically significant change
(Figure 12). Various quality improvement projects were
initiated, specifically in the critical care unit where the
patient population has higher acuity levels with multiple
co-morbidities.
Infection prevention and control
Preventing HAI remains a key patient safety objective for
Mediclinic Middle East. This includes standardising
processes around infection control (based on international
best practices), implementing care bundles around SSI,
VAP, CLABSI and CAUTI, and running a surveillance project
with multilayer methodology.
52 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2016
2017
/
2018
Figure 13 reflects an 8.44% decrease in the CAUTI rate
from 0.37 in 2017 to 0.34 in 2018 and a 41.67% increase in
the CLABSI rate from 1.27 in 2017 to 1.80 in 2018. The VAP
rate decreased by 39.68% from 0.54 in 2017 to 0.33 in 2018.
All three changes are statistically significant, however, the
changes are largely driven by small numbers of events.
A change in the Centres for Disease Control and Prevention
definition of HAI, especially for VAP, contributed
significantly to the decrease in the rate.
Clinical effectiveness
Mortality
The inpatient mortality rate for the division remains low in
comparison to the other divisions.
FIGURE 14: INPATIENT MORTALITY RATE –
MEDICLINIC MIDDLE EAST
Percentage of admissions (%)
2016
2017
2018
0.24
0.23
0.31
The mortality rate increased by 33.00% from 0.23% in 2017
to 0.31% in 2018, as reflected in Figure 14, mainly due to
the establishment of a Comprehensive Cancer Centre in
the north wing adjacent to Mediclinic City Hospital in
Dubai, as well as legislative changes made to allow natural
death in the UAE.
Re-admission rate
FIGURE 15: RE-ADMISSION RATE –
MEDICLINIC MIDDLE EAST
2016
2017
2018
0.98%
1.10%
1.33%
The 21.32% increase in the 30-day re-admission rate from
1.10% in 2017 to 1.33% in 2018, as reflected in Figure 15, is
statistically significant. Chemotherapy administration,
wound care, false labours, maternity-related conditions,
lithotripsies, dialysis and removal of an implant are
excluded in the 30-day re-admission calculation as the
rate refers to unplanned re-admissions.
The increase in the unplanned re-admission rate has been
identified as one of the top clinical risks for this division.
To effectively manage this risk, a revised reporting
framework is planned for categorising all the re-admission
cases in a standardised format per department, per
diagnosis, and per individual medical practitioner to
identify potential improvement areas.
CLINICAL ETHICS SUMMARY
Advanced care planning, end of life
and terminal care
Clinical governance structures exist to report, audit and
address concerns.
Billing, care management
Operational and clinical management in each hospital are
responsible for ensuring the ethical conduct of medical
practitioners and employees. An ethics line exists for
reporting of fraud committed by medical practitioners
and employees.
Competence, scope of practice
Clinical governance structures exist to monitor and address
any concerns. Recruiting the correct skills and continuous
employee skills assessment are key focus areas. Strategies
to ensure employee competency (e.g. formal training, short
courses, and clinical facilitators) are followed.
Disclosure, reporting of adverse
events
Each hospital has a formal adverse event reporting system.
A “just culture” (Frankl framework) is promoted. The
reporting system is non-punitive and the recorded adverse
events are discussed at the hospitals’ Clinical Hospital
Committees. To prevent future incidents of a similar nature,
learning from incidents is a key focus area.
Ethical conduct
Operational and clinical management in each hospital
are responsible for ensuring ethical conduct of
medical practitioners and employees. Human resource
policies exist to address issues of misconduct and
criminal behaviour.
Euthanasia
Euthanasia is neither practised nor condoned in any
Mediclinic facility. All hospitals have control measures in
place to ensure compliance with local legislation.
Falsification of documentation,
diagnosis, sick leave certificates
Operational and clinical management in each hospital are
responsible for ensuring the ethical conduct of medical
practitioners and employees. Documentation and clinical
coding audits ensure compliance with legal, ethical and
operational requirements. An ethics line exists for reporting
of fraud committed by medical practitioners and
employees.
Forced female circumcision
Control measures are in place to ensure compliance with
the respective legislation. Informed consent for any
medical or surgical intervention or procedure is upheld by
the profession and is entrenched in local legislation.
Illegal practice
Existing policies manage illegal practice, compliance to
which are confirmed through audits and accreditation.
Inappropriate care
Appropriate care is a key focus area across the Group and
is managed by indication boards at Hirslanden and cost per
event at Mediclinic Southern Africa and Mediclinic Middle
East. Cost reporting, management process and structures
are in place. Complex cases are discussed with treating
medical practitioners.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 53
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL SERVICES OVERVIEW (CONTINUED)
Medical practitioner cover, availability
and response
On-call rosters are compiled and available at emergency
centres. A management process and reporting system exist
to deal with non-compliant independent medical
practitioners. Employed medical practitioners are dealt
with via an established human resources process.
Medical research
Drug trials and medical research are aligned with the
Declaration of Helsinki and local legislation.
All requests for clinical drug trials are approved by an
independent, accredited Ethics Committee before it is
accepted for evaluation and approval by the respective
divisional committees. All approved trials are recorded on a
registry and no unofficial drug testing is allowed.
Medical research and experiments are managed by a
Clinical Research Approval Committee and related policy.
Clinical governance structures exist to prevent untested
and experimental treatments.
The Group deals with medical ethical issues on a daily
basis. Most of these are covered by formal policies, but
some are still elusive and quite complex to deal with by
way of policy. In all instances, response and reaction are
governed by local legislation and regulations.
Misrepresentations of qualifications
and monitoring of medical
practitioner performance
Accreditation involves a formal process which confirms
registration, qualifications and credentials. In addition, an
informal process is undertaken to solicit performance
information of the medical practitioner from peers.
Medical practitioners are monitored through annual
validation of registration; investigations of deteriorating
hospital clinical quality indicators; mortality audits; SAE
investigations; investigation of patient, medical practitioner
and employee complaints; medico-legal investigations;
ethics line reports; feedback from Clinical Hospital
Committee meetings; direct reporting by medical
practitioners; and informal feedback from employees
regarding recurring concerns.
Patient protection
Occupational health specialists provide a service at each
hospital. On acceptance of employment, all healthcare
employees are screened for pulmonary tuberculosis, and
screened and vaccinated against Hepatitis B if they do not
have sufficient antibodies. In the event of an increase in the
incidence or an outbreak of Methicillin-resistant
Staphylococcus aureus, healthcare employees are screened
and decolonised, if necessary. Flu vaccines are offered
annually to employees. Other vaccines, e.g. diphtheria and
measles, are offered when there is an indication; when
there is an increase in cases in a specific area; or as
post-exposure. In Hirslanden, radiation exposure and
compliance with prevailing acceptable exposure limits are
monitored centrally.
Pharmacy
Pharmacy policies, procedures and audits ensure
compliance with legislation, ethical and operational
requirements.
Organ trade
The organ donation and receipt process is carefully
documented and complies with relevant legislation.
Remuneration, kickbacks
Perverse incentives are prohibited. Corporate Office and
hospital management ensure strict compliance with
established rules.
Termination of pregnancy
Strict control measures exist to ensure legal compliance. In
addition, the Group allows employees freedom of choice as
to whether they wish to refrain from participating in any
terminations of pregnancy for moral, religious, ethical or
related reasons.
54 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
RISK MANAGEMENT,
PRINCIPAL RISKS AND
UNCERTAINTIES
The Board is ultimately accountable for the Group’s risk
Commission framework. The policy defines the risk
management processes and system of internal control. It has
management objectives, methodology, risk appetite, risk
delegated responsibility to the Audit and Risk Committee
identification, assessment and treatment processes, and
for overseeing and reviewing the efficacy of the:
the responsibilities of the various risk management
• risk management processes and system of internal
control;
• Group’s internal auditors; and
• Group’s external auditor.
The Board receives regular updates on the activities of the
Audit and Risk Committee.
RISK MANAGEMENT
The Group’s Enterprise-wide Risk Management (“ERM”)
Policy is reviewed annually and follows the international
role-players in the Group. Any policy amendments are
subject to the approval of the Audit and Risk Committee.
The objective of risk management in the Group is to
establish an integrated and effective risk management
framework wherein important and emerging risks are
identified, quantified and managed. An ERM software
application supports the Group’s risk management process
in all three divisions and at Group level. The Group’s
principal risk items (grouped by category, business process
and strategic priorities), the movement in risk during the
reporting period, together with key measures taken to
Committee of Sponsoring Organisations of the Treadway
mitigate these risks, are listed in the table below.
Key:
REFERENCE
CATEGORY
BUSINESS PROCESSES
A
B
C
D
E
F
G
Strategic and business environment risks
• Strategy formulation and implementation
• Strategic investments and strategic projects
Financial and reporting risks
Operational risks
• Revenue cycle
• Procure-to-pay cycle
• Financial management and control
• Treasury
• Health information (including coding)
• Infrastructure
• Marketing and corporate communication
• Operations
Information technology risks
• ICT and related projects
Regulatory compliance risks
• Legal and secretarial
• Governance, risk and compliance
• Environmental management
Clinical risks
People risks
• Clinical
• Nursing
• Pharmacy
• Coding
• ICT
• Human resources
• Payroll cycle
Risk exposure has increased due to change in business environment, increased investments, increased
dependency of operations on information technology, information sensitivity and cost involved.
Proactive and continuous monitoring, favourable results of negotiations, effective treasury and risk
management processes have resulted in lowering of risk exposure.
Risk exposure has not changed much as the operating and regulatory environments have remained
stable and enhanced risk mitigation measures have kept the risk at same level.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 55
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK MANAGEMENT, PRINCIPAL RISKS
AND UNCERTAINTIES (CONTINUED)
The principal risks are determined through
a strategic risk review process where each
division’s executive committee, as well as
the Group Executive Committee re-assess
the top risks which could impact on the
achievement of strategic objectives.
Related risks are aggregated and grouped
to determine the principal risks.
New risks added:
• Business projects
• Disruptive innovation and digitalisation
HIGHER
d
o
o
h
i
l
e
k
i
L
5
9
4
8
6
7
3
1
2
10
11
12
PRINCIPAL RISK
MOVEMENT IN 2019 DESCRIPTION OF RISK
MITIGATION OF RISK
LOWER
HIGHER
Impact
1. Regulatory
and compliance
risks
E
The increasing risk
relates to the
continued healthcare
reform and the
introduction of new
regulations.
2. Information
systems security
and cyber risk
D
The increased risk
relates to the
continued external
threats arising from
cyberattacks and
breaches.
3. Business
investment and
acquisition risks
A
B
The investment and
governance process
were strengthened
during the year.
These risks relate to adverse
changes in legislation and
regulations impacting on the
Group or the failure to comply
with legislation and regulations
which may result in losses, fines,
penalties or damage to
reputation.
The risks include healthcare
reform by regulators aimed at
reducing the cost of healthcare,
broadening the access to quality
healthcare and increasing the
monitoring of quality standards
by regulators.
Information systems security risk
and cyber risk relate to the
unauthorised access to
information systems through
external or internal attack or
unauthorised breach resulting in
the unavailability of systems,
failure of data integrity and data
confidentiality breaches.
These risks relate to increased
financial exposure relating to
major strategic business
investments and acquisitions.
The risk includes the sensitivity of
the assumptions made when
capital is allocated and the
effective implementation of major
investment decisions.
• Proactive engagement with
stakeholders
• Health policy units created to
conduct research and to provide
strategic input into reform processes
• Active industry participation across
all divisions
• Company secretarial, legal and
compliance functions support
operational management, monitor
regulatory developments and, where
necessary, obtain expert legal advice
for the effective implementation of
compliance initiatives
• Compliance risks identified and
assessed as part of compliance
management processes
• Comprehensive information systems
identity access management,
change and physical access controls
• Regular security reviews
• Disaster recovery planning
• Group information security and data
privacy policies
• Group ICT Security Committee
• Strategic planning processes
• Due diligence processes
• Investment mandates
• Board oversight
• Post-acquisition management
processes
56 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
PRINCIPAL RISK
MOVEMENT IN 2019 DESCRIPTION OF RISK
MITIGATION OF RISK
New
4. Business
project risks
A
D
5. Economic and
business
environment
risks
A
Economic growth in
the Middle East and
Southern Africa
remained low,
resulting in increased
risk exposure.
6. Competition
risks
A
Healthcare providers
market continued to
grow.
7. Clinical risks
F
Clinical processes
across all operating
divisions remained
a key focus area for
the Group.
Risk exposure
remained at a
comparable level to
the previous year.
The Group plans to adapt to the
evolving regulatory, industry and
market environment.
• Effective project governance
practices, methodologies and
reporting
• Experienced project management
teams
• Proactive monitoring and oversight
• Systems to monitor developments
and trends in the economic and
business environments and early
warning indicators
• Proactive monitoring and
negotiation by the Group’s Funder
Relations departments
• Focus on quality and continuum of
care to reinforce the Group’s market
position
• Proactive monitoring
• Strategic planning processes
• Quality and value of care processes
These risks refer to issues or
occurrences that may potentially
interfere with successful
completion of projects, including
timeliness, cost and quality.
These risks relate to the
downturn in the general
economic and business
environments impacting on the
affordability of healthcare for
funders and self-paying patients.
The business environment risks
include the potential negative
impact on tariffs and fees
resulting from the shift of the
relative positioning away from
healthcare service providers
toward funders.
These risks relate 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 relate to all clinical
risks associated with the
provision of clinical care resulting
in undesirable clinical outcomes.
• Refer to the Clinical Services
Report for a detailed analysis of the
strategies to manage and monitor
clinical risks
• A Group-wide clinical risk register
implemented per division
• Accreditation processes
• Clinical governance processes
• Monitoring of clinical performance
indicators
• Focus on quality management
processes
• Stakeholder engagement and
disclosure strategies
• Clinical audits
Clinical risks at the Group’s
facilities are managed daily.
High-priority clinical risk areas
include patient safety culture,
adverse obstetric outcomes,
medication errors, surgical and
procedural adverse events and
multidrug resistant organisms.
Such risks may also result in
damage to Mediclinic’s reputation
and impact on brand equity.
Brand equity refers to the
commercial value derived from
the consumer perception of the
Group’s brand names rather than
the services provided under
those brand names.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 57
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION RISK MANAGEMENT, PRINCIPAL RISKS
AND UNCERTAINTIES (CONTINUED)
PRINCIPAL RISK
MOVEMENT IN 2019 DESCRIPTION OF RISK
MITIGATION OF RISK
New
8. Disruptive
innovation and
digitalisation
risks
D
9. Availability,
recruitment and
retention of
skilled resources
and medical
practitioners
G
Vacancies and
turnover ratios in
respect of skilled
resources and
medical practitioners
are expected to
remain at similar
levels to the prior
year.
Disruptive innovation and
digitalisation risks include the
disintermediation and erosion of
the Mediclinic business model
due to the impact of
technological development. It
refers to the extent and speed
that new technologies (and
combinations thereof) change
and transform industries and to
what extent an organisation is
able to exploit these
opportunities and also being able
to respond and innovate, while
managing associated risks.
The availability and support of
admitting medical practitioners,
whether independent or
employed, are critical to the
Group’s services.
There is a shortage of skilled
labour, particularly a shortage of
qualified and experienced nursing
staff in Southern Africa.
10. Availability
and cost of
capital risks
(Including
financing and
liquidity risks)
B
Interest rates are
expected to remain
at comparable
levels during 2019.
Long-term financing
arrangements are
in place.
These risks relate to the cost,
terms and availability of capital to
finance strategic expansion
opportunities and/or the
refinancing or restructuring of
existing debt affected by
prevailing capital market
conditions.
11. Operational
and credit risks
B
C
The operational and
credit risks did not
change significantly
and remained stable.
Operational risk refers to diverse
types of operational events with
a 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.
• Strategic planning processes
• Proactive monitoring
• Systems to monitor developments
and trends in the economic and
business environments and early
warning indicators
• Systems to monitor satisfaction,
movement and profiles of medical
practitioners
• Details on the relationship with
medical practitioners provided in the
Sustainable Development Report
• The employment, recruitment and
retention strategies explained in the
Sustainable Development Report
• Extensive training and skills
development programme and
foreign recruitment programme,
explained in the Sustainable
Development Report
• Long-term planning of capital
requirements and cash-flow
forecasting
• Scrutiny of cash-generating
capacity within the Group
• Proactive and long-term agreements
with banks and other funders
relating to funding facilities
• Systems to monitor compliance with
requirements of debt covenants
• Further details on capital risk
management and the Group’s
borrowings contained in the
annual financial statements
• Preservation of a sound internal
financial control environment
• Effective operational risk
management processes
• Effective monitoring and oversight
of operations
• Regulated minimum solvency
requirements for funders.
• Monitoring of approved funders
• Treasury policy
58 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
PRINCIPAL RISK
MOVEMENT IN 2019 DESCRIPTION OF RISK
MITIGATION OF RISK
12. Quality and
stability of
operational
services risks
C
The quality and
operational services
risks did not change
significantly and
remained stable.
These risks refer to the quality of
service and the stability of the
operations. It includes:
• incidents of poor service or
where operational
management fail to respond
effectively to complaints;
• operational interruptions
which refer to any disruption
of the facility and may include
the threat of disrupted
electricity or water supply; and
• fire and allied perils causing
damage or business
interruption.
• Patient satisfaction surveys (both
internal and external)
• Complaints monitoring
• Training programmes and
supervision of service levels
• Emergency backup electricity
generation
• Emergency and disaster planning
• Extensive fire-fighting and detection
systems, including comprehensive
maintenance processes
• Comprehensive insurance to deal
with financial impact of potential
disasters
Brexit
Mediclinic continues to monitor the developments around Brexit and the potential implications for the Group. The future
terms under which the UK and EU will function in a post-Brexit environment remain unclear. The Group does not expect
that Brexit will have a material impact on any of its divisions in Switzerland, Southern Africa and the UAE. However,
Mediclinic may be indirectly impacted through its 29.9% investment in Spire, whose core operations are located in the UK.
The Board of Spire has reported a possible no-Brexit deal as one of its principal risks and has communicated to the market
its position and assessment thereof in its annual report. The areas considered to have the biggest potential impacts on
Spire are related to:
• supply-chain risks where more than 80% of the goods (other than blood) that Spire uses to operate its hospitals come
into the UK from or via the EU. Its supply chain currently operates on short ordering times and low inventories;
• the impact on employees where Spire reported that less than 10% of its employees are EU citizens; and
• the risk of increased costs which may occur due to EU imports being subject to customs charges and tariffs.
Another indirect impact which may arise from Brexit is the macroeconomic consequences it may have on European (and
Swiss) markets. Due to the significant uncertainties relating to the relationship and trading arrangements between the UK
and the EU following Brexit, Mediclinic is not able to quantify the potential impacts that could affect its Swiss operations.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 59
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION VIABILITY
STATEMENT
The assessment of viability is an extension of the risk
management and annual financial planning processes
which translate into each of the divisional business plans.
The business plans reflect the current Group strategies and
their associated risks and the Directors’ best estimations of
their prospects. Fundamental to the assessment of the
Group’s prospects is the long-term business model of
quality service delivery and revenue growth under
acceptable risk tolerance.
The annual financial planning process includes a detailed
bottom-up approach per division for the budget year
(performed by each clinic and hospital) and the extension
of the key assumptions to the forecast period. The budgets
are subject to review and, if necessary, re-budgeting. The
five-year plans, including the strategic Group goals and
objectives, are reviewed and approved by the divisional
executive committees, the Group Executive Committee
and the Board.
refinanced broadly in line with the terms and conditions of
the existing facilities.
The Group successfully refinanced Mediclinic Southern
Africa and Mediclinic Middle East’s borrowings in
August 2018 and September 2018 respectively. In
Switzerland, an amendment to the financing agreement
was entered into in March 2019, adjusting the covenants
to reflect the impact of the recent regulatory changes on
the profitability of the business.
The Audit and Risk Committee monitors the Group’s robust
risk management process and system of internal control, as
mandated by the Board (see page 136). The principal risks
as detailed on pages 56 – 59 were identified by these
systems and, for the purposes of the viability assessment,
severe but plausible scenarios reflecting the risks that
could impair the viability of the Group were identified for
each of the divisions to form the basis for stress testing.
The Board has adopted a five-year time frame for the
assessment, in line with the Group’s business planning
period which largely reflects the impact of investments
made in the present period. The five-year period extends
beyond the maturities of a material portion of the Group’s
borrowings in each division. Under current operating and
market circumstances, as well as the existing levels of debt
the assumption is that these borrowings would be
On a divisional level, the potential impact of each scenario
and certain scenarios in combination were modelled and
assessed on EBITDA or profit after tax (as appropriate), net
debt and debt covenants over the five-year forecast period.
The principal risks and related key assumptions underlying
each of the divisions’ business plans that were stress tested
are set out below:
KEY ASSUMPTION STRESS TESTED
PRINCIPAL RISK
DIVISION STRESS TESTED
Reductions in tariffs and fees
Reduction in volumes
• Economic and business
environment
• Regulatory and compliance risk
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
• Competition
• Economic and business
environment
• Regulatory and compliance risk
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
Deterioration in insurance mix
• Regulatory and compliance risk
Hirslanden
Increases in interest rate
• Availability and cost of capital
Hirslanden
Downturn in the macro-economic and
business environment
• Economic and business
environment
Mediclinic Southern Africa
Mediclinic Middle East
60 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
KEY ASSUMPTION STRESS TESTED
PRINCIPAL RISK
DIVISION STRESS TESTED
Shortage and availability of qualified
and experienced healthcare
employees
• Availability, recruitment and
Mediclinic Southern Africa
retention of skilled resources and
medical practitioners
Adverse regulatory changes
• Regulatory and compliance risk
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
Efficiency improvements and cost
savings not fully realised
Investment in Group initiatives not
being successfully implemented
• Operational and credit risk
Hirslanden
• Information systems security and
Hirslanden
availability risk
Delays in expansion projects and
disruptive impact of EHR rollout into
busy established units
• Information systems security and
availability risk, including project
delivery risk
Mediclinic Middle East
Deterioration in accounts receivable
collection
• Operational and credit risk
Mediclinic Middle East
This analysis showed that the business, in its
geographically diverse portfolio, would be able to
withstand any individual and certain combinations of the
severe but plausible scenarios, ceteris paribus, by taking
management action with the key mitigating steps being a
reduction in discretionary investment, cost management
initiatives, drawdown of overdraft facilities and
improvement in net working capital days. The Directors
therefore have a reasonable expectation that the Group
will be able to continue in operation and meet its liabilities
as they fall due, in the ordinary course of business, over
the five-year period of their detailed assessment, ending
in 31 March 2024. In making their assessment, the
Directors have assumed that there will be no material
change in the business and regulatory environments as
such assumptions are subject to a level of uncertainty
and judgment for which outcomes cannot be projected
and foreseen.
Except for the covenant calculations which were based on
the existing accounting framework (IAS 17), as this is the
bases on which borrowing covenants have been agreed
with the Group’s lenders, the analysis did consider the
adoption of IFRS 16.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 61
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
SWITZERLAND
18
NUMBER OF HOSPITALS
2
NUMBER OF DAY CASE
CLINICS
1 916
NUMBER OF BEDS
112
NUMBER OF THEATRES
+2%
REVENUE CHF1 778M
(10%)
ADJUSTED EBITDA CHF285M
+4%
INPATIENT ADMISSIONS
87.6%
PATIENT EXPERIENCE INDEX
CEO’S STATEMENT
“Over the course of the last 18 months, all Swiss hospital
operators have been affected by rapidly implemented
regulatory changes related to outpatient tariff reductions
and outmigration of care. We took clear steps to improve
our performance including accelerated cost-saving
initiatives with regard to hospital administration, support
processes and driving efficiencies. In addition, Hirslanden
has sustainably pursued its growth strategy with the
acquisition of Clinique des Grangettes, strengthening our
market position in the Geneva area. Supporting our
Grow2020 strategy was also the strong attraction and
retention of independent medical consultants as partners
and key resources to the business, which enables
Hirslanden to continue to broaden its service offering.
Adapting Hirslanden to the changing healthcare regulatory
environment remains a priority. Progress continues on
delivering the Hirslanden 2020 strategic project. The focus
of this project is to standardise, centralise and simplify the
existing operating business, delivering future efficiencies
and cost savings in hospital administration and support
processes. In addition, the project addresses the day case
delivery model in Switzerland to capture the growing
requirement for day case procedures in an affordable
manner which is expected to support the medium-term
performance at Hirslanden.”
Daniel Liedtke
Chief Executive Officer: Hirslanden
62 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
FINANCIAL REVIEW
10 442
NUMBER OF EMPLOYEES
4.01
EMPLOYMENT ENGAGEMENT
(grand mean score based on a 1–5 rating scale)
(2.2%)
AVERAGE REVENUE PER
INPATIENT CASE
70.4%
BED OCCUPANCY
As at the end of the reporting period, Hirslanden
operated 18 hospitals, two day case clinics and three
project, is expected to support Hirslanden’s operating
performance over the medium term.
Including the contributions from Klinik Linde (consolidated
from 1 July 2017) and Clinique des Grangettes
(consolidated from 1 October 2018), Hirslanden revenue
increased 2% to CHF1 778m (FY18: CHF1 735m). Inpatient
revenue was up 2%. Outpatient revenue, which contributed
some 19% to total revenue in the period, was up 7%
reflecting the contribution from Clinique des Grangettes
and additional cases from the outmigration of certain
treatments to an outpatient tariff offset by the TARMED
tariff reduction. Inpatient revenue per case was down 2.2%
as a result of the less favourable insurance mix (proportion
of general insured patients FY19: 48.7% compared to FY18:
47.9%). The average length of stay decreased by 2.4% to
4.5 days while occupancy rates were 70.4% (FY18: 73.3%).
Revenue contribution in FY19 from Klinik Linde and
Clinique des Grangettes was CHF127m (FY18: CHF52m).
Underlying inpatient admissions at Hirslanden (excluding
Klinik Linde and Clinique des Grangettes) were flat on the
prior year as the hospitals admitted additional patients to
compensate for capacity created by fewer inpatient cases
due to the outmigration of care.
With cost savings and efficiency gains, the significant
effect of the tariff reductions and less favourable insurance
mix resulted in adjusted EBITDA declining 10% to
CHF285m (FY18: CHF318m). In line with revised earnings
outpatient clinics with a total of 1 916 inpatient beds and
guidance, the FY19 adjusted EBITDA margin was lower at
10 442 employees (8 303 full-time equivalents). It is the
16.0% (FY18: 18.3%). Given the significant decline in EBITDA
largest private acute care hospital group in Switzerland
margin in the first half of the year to 14.3% (1H18: 17.4%),
servicing approximately one third of inpatients treated in
actions taken moderated the financial impact of the
Swiss private hospitals. Hirslanden accounted for 47% of
regulatory changes in the second half of the year with the
the Group’s revenue (FY18: 47%) and 44% of its adjusted
EBITDA margin at 17.6% (2H18: 19.1%).
EBITDA (FY18: 48%).
Adjusted depreciation and amortisation increased by 13%
The entire Swiss healthcare environment, both public and
to CHF124m (FY18: CHF110m), reflecting the incorporation
private, has been affected by a number of regulatory
of Klinik Linde, Clinique des Grangettes and ongoing fixed
changes over the last 18 months. The greatest impact to
asset investments. Adjusted operating profit decreased by
Hirslanden’s financial performance resulted from the
22% to CHF161m (FY18: CHF208m).
rapidly implemented TARMED reductions and the
outmigration of identified clinical treatments transferring
from an inpatient to an outpatient tariff across all cantons.
The outmigration of care, which commenced in July 2017,
continued to unfold during 2018 and culminated with the
Federal list and its more restrictive exclusion criteria being
implemented from 1 January 2019. As previously
communicated, Hirslanden designed and implemented
actions to adapt the business to the new operating
environment to mitigate the financial impact of
Adjusted net finance costs decreased by 11% to CHF51m
(FY18: CHF57m). This was mainly as a result of the
refinancing, including the redemption of an interest rate
swap agreement which was completed in October 2017. An
amendment to the financing agreement was entered into in
March 2019, adjusting the covenants to reflect the impact
of the recent regulatory changes on the profitability of the
business. There was no change to the interest margin of
the debt facility.
outmigration. These actions helped to moderate the
Hirslanden contributed £80m to the Group’s adjusted
financial impact in the second half of FY19 and, combined
earnings (representing 40%), compared to £106m
with the benefits from the Hirslanden 2020 strategic
(representing 48%) in the prior year.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 63
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
SWITZERLAND (CONTINUED)
Hirslanden converted 97% (FY18: 81%) of adjusted EBITDA
regulators in Switzerland, seeking to offer the most
into cash generated from operations.
appropriate care and services.
In line with the requirements of IFRS, non-financial assets
The recent tariff reductions as a result of these regulatory
are considered for impairment when impairment indicators
changes required Hirslanden to accelerate, in the near-
are identified at an individual CGU level. In Switzerland, the
term, the cost-reduction project to drive further
changes in the market and regulatory environment
operational efficiencies. Having generated CHF9m savings
continued to affect key inputs to the review and gave rise
to budget in the first half of the year, a further CHF12m was
to impairment charges recorded against properties and
achieved in the second half. These cost-saving initiatives,
trade names at the half year of £43m and £55m
focused on supply costs, employee efficiencies and general
respectively, with an additional £143m against property
administration expenses, will continue into FY20.
equipment and vehicles at the year-end (FY18: impairment
charges on property and intangible assets of £84m and
£560m respectively). The impairment charges are non-
cash and excluded from the adjusted earnings metrics. The
remaining trade name will be amortised over its estimated
useful life. The impairment calculations remain sensitive
to reasonably possible changes in key assumptions,
including cash flow projections and long-term growth
and discount rates.
ADAPTING TO THE CURRENT
MARKET AND REGULATORY TRENDS
On 1 January 2018, the previously announced reductions to
the TARMED became effective. After mitigating actions,
including improved utilisation and increased efficiencies,
the annualised impact on adjusted EBITDA was as guided
at around CHF25m. No further tariff adjustments are
known of.
On 1 January 2019, the Federal Government implemented a
national framework for the outmigration of six clinical
procedure groups from an inpatient to an outpatient tariff
with defined exclusion criteria being applied across all
cantons which take account of factors including age and
co-morbidities. In FY20, Hirslanden will therefore be
impacted by a further nine months from the
implementation of the national framework.
However, Hirslanden has been impacted by outmigration
since July 2017, when the canton of Lucerne first
introduced a more extensive list of 13 clinical procedure
groups. Similar measures were implemented in four
further cantons (Zürich, Zug, Schaffhausen and Aargau)
on 1 January 2018, and in Basel on 1 July 2018. Out of the
control of the division, Hirslanden has been further
impacted by several insurance companies in Switzerland
already applying elements of the framework in some
cantons that had not yet officially implemented
outmigration.
Hirslanden continues to implement further actions to adapt
to the changing Swiss healthcare environment. Through
the Hirslanden 2020 strategic project, changes to the
service model and cost structure of the division will
support the medium-term performance of the division. In
FY20, this project is in the final year of peak operating and
capital investment spend before savings and efficiency
benefits from standardising, centralising and simplifying
the business are expected to be realised. To adapt the
service model to the outmigration trend, in addition to the
two day case clinics already opened with two further to be
opened in FY20, optimised day case processes have been
established in the majority of remaining Hirslanden
hospitals. This will ensure that day case procedures are
delivered in a cost-efficient manner and the division
benefits from the Group’s experience of establishing similar
day case and outpatient clinics across Southern Africa and
the Middle East. The dedicated Hirslanden outmigration
project team is evaluating a number of opportunities to
ensure the division is well positioned to benefit from the
growing outpatient trend over the coming years.
Supporting the division’s Grow2020 strategy, Hirslanden
has been successful in retaining and attracting independent
consultants as partners to the business. During FY19, more
than 250 net additional independent consultants practised
at Hirslanden and the division continues to leverage its
leading market position and strong reputation to attract
highly qualified medical professionals and supplementary
insured patients. In addition, further initiatives to improve
service differentiation will be implemented where
appropriate. In February 2019, the Hirslanden Préférence
programme was launched, specifically targeting the
semi-private insured patient market.
INVESTING FOR FUTURE GROWTH
During the year, Hirslanden invested a total of CHF95m in
maintenance and expansion capex (FY18: CHF129m),
aligning the division’s investment plans to the Swiss
Hirslanden continues to adapt its business model to
healthcare regulatory environment. In FY19, Hirslanden
address the current trends in inpatient and outpatient
invested CHF55m (up 17% on FY18) in expansion capital
activity driven by the recent regulatory changes to the
projects and new equipment and CHF40m (down 51% on
healthcare market, while maintaining excellent clinical
FY18) on the replacement of existing equipment and
performance, and continues to engage with insurers and
upgrade projects. During the period, the division continued
64 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
to invest in the HIT 2020 project to standardise the
CHF77m for a 60% controlling interest in the combined
organisational structure, support processes and underlying
entity, strengthens Hirslanden’s leading market position in
ICT and systems across the division. Hirslanden also
Geneva and will deliver enhanced services for patients in
completed several new outpatient projects including the
addition to being earnings accretive. The hospital is
day case clinic at St. Anna Im Bahnhof, the outpatient clinic
supported by around 450 affiliated independent medical
at Clinique Bois-Cerf, medical practitioners’ offices at Klinik
practitioners and attracts a high proportion of
Hirslanden and Stephanshorn, and the new sports medicine
supplementary insured inpatients while providing an
centre at Clinique La Colline.
extensive outpatient service.
Capital discipline remains a key focus of the Group and
there will be an ongoing review of capital allocation and
portfolio efficiencies at Hirslanden during this period of
regulatory changes, while ensuring clinical standards and
the quality of patient care remain appropriate. In FY20,
Hirslanden expects to invest CHF37m and CHF55m on
expansion and maintenance capex respectively. This
includes the ongoing investment in the Hirslanden 2020
strategic project, in addition to new day case clinics
opening at St. Gallen and Bois-Cerf.
MARKET OVERVIEW
Switzerland has a reputation for having one of the best
quality healthcare systems in the world supported by both
public and private providers. Compulsory health insurance
operates in Switzerland and the healthcare market is mature
and stable with a wealthy ageing population. A gradual
change in the insurance mix occurred over time with the
proportion of basic insured patients in Switzerland
marginally increasing each year. Outpatient activity is
growing strongly in Switzerland, driven in part by the
The combination of the Hirslanden Clinique La Colline and
outmigration of care regulation implemented nationally
Clinique des Grangettes in Geneva was announced in
since 1 January 2019. Hirslanden continues to engage with
September 2018 and consolidated from 1 October 2018.
insurers and regulators in Switzerland, seeking to offer the
The combination, which included a cash consideration of
most appropriate care and services for this growing market.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 65
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
SWITZERLAND (CONTINUED)
Largely as a result of recent acquisitions, Hirslanden’s
leading market position strengthened during the year. With
its increase in inpatient beds and inpatient admissions,
Hirslanden now holds 18.7% and 34.3% of these respective
categories in the Swiss private market. In the larger,
combined public and private market, Hirslanden now
represents 4.4% and 6.9% respectively.
highly efficient day case clinics for each delivery region.
The day case clinics concentrate the volume of outpatient
surgeries from the hospitals located in the region. This
allows Hirslanden to supplement the service offering of the
hospitals with adequate structures in order to ensure
cost-effectiveness on the one hand and to be able to have
a comprehensive integrated range of services for patients
According to the Euro Health Consumer Index 2018,
Switzerland is the Gold medallist out of all the healthcare
systems in Europe, scoring very high for Accessibility and
Outcome (893 of 1000 possible points), overtaking the
Netherlands. As it is quoted in the study, “the top position
of the Swiss healthcare system is to a great extent a
product of an even performance across the sub disciplines,
very good medical quality and excellent accessibility”.
Hirslanden continues to drive for improved quality and
patient experience. As with all other divisions at Mediclinic,
the internationally recognised Press Ganey® group is
used to measure patient satisfaction. Last year, 91.5% of
33 899 people indicated that they would likely recommend
Hirslanden.
Since 2012, Hirslanden has participated in the Initiative on
Quality Medicine. The initiative collects and measures
performance indicators and clinical outcomes from over
380 hospitals in Switzerland and Germany. This transparent
benchmark highlights the clinical quality of Hirslanden with
all the division’s hospitals scoring above the last recorded
benchmark of 74%, the majority excelling with a score of
between 85–100%. Refer to the Clinical Services Report on
the Company’s website at www.mediclinic.com for a more
in-depth description.
OUTLOOK
The current operating environment is challenging with all
on the other. Hirslanden has recently opened two
standalone day case clinics in the regions Zürich and
Central Switzerland. In FY20 Hirslanden plans to open
further day case clinics across the delivery regions.
In addition to the outpatient strategy, Hirslanden plans to
expand and invest across the continuum of care by
evaluating joint ventures in the field of primary care and
new digital solutions. Combined with the benefits of the
Hirslanden 2020 strategic project, these and other
initiatives are expected to support Hirslanden’s
performance over the medium term.
Hirslanden is committed to treating patients with general
health insurance in accordance with the national criteria for
effectiveness, expediency and cost-effectiveness and thus
makes a clear contribution to cantonal health care and
affordability of health care in general. At the same time,
Hirslanden continues to focus on first-class patient care in
the supplementary insurance area to improve service
differentiation where appropriate. To make it easy for
patients to see what benefits they can expect according to
their insurance class, Hirslanden has developed uniform
packages that clearly define what benefits patients with
basic and supplementary insurance can expect from
registration through to being discharged. Hirslanden thus
sets standards for basic and supplementary insurance
treatment, and offers its services in a uniform, transparent
and premium-based manner. However, regardless of the
public and private hospital operators across Switzerland
patient's insurance class, Hirslanden ensures the clinical
financially impacted by the recent TARMED tariff
reductions and outmigration of care. The shift from
outcome is always the same. In addition to the existing
Hirslanden Privé programme for private patients,
inpatient to outpatient medical treatment continues with
Hirslanden launched a further programme for semi-
the national framework implemented on 1 January 2019,
privately insured patients in February 2019, Hirslanden
which states that six clinical procedure groups will only be
Préférence. Given the positive experiences with the existing
reimbursed on an outpatient tariff basis. Adapting to this
Hirslanden Privé programme, it is expected that the
growing outpatient trend and in order to define and
benefits of the new programme will support the attraction
strengthen the care regions, Hirslanden strives to have
of important semi-privately insured patients.
66 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
DIVISIONAL REVIEW
SOUTHERN AFRICA
CEO’S STATEMENT
“Mediclinic Southern Africa delivered good operational and
financial results for the period under review with relatively
weak patient volumes. We have continued to make good
progress with the rollout of further strategic initiatives to
improve the value proposition that we offer to our patients,
focusing on patient safety initiatives, improving patient
experience and initiatives to improve collaboration with our
supporting medical practitioners. We have continued to
invest in the maintenance and upgrade of our facilities and
will add six new day case clinics to our portfolio in the next
two financial 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, specifically the Health Market Inquiry and
National Health Insurance developments.”
Koert Pretorius
Chief Executive Officer: Mediclinic Southern Africa
52
NUMBER OF HOSPITALS
8
NUMBER OF DAY CASE
CLINICS
5
NUMBER OF SUB-ACUTE
HOSPITALS
8 517
NUMBER OF BEDS
296
NUMBER OF THEATRES
+5%
REVENUE R15 960M
+4%
ADJUSTED EBITDA R3 385M
+0.6%
BED DAYS SOLD
82.2%
PATIENT EXPERIENCE INDEX
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 67
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
SOUTHERN AFRICA (CONTINUED)
FINANCIAL REVIEW
15 804
NUMBER OF EMPLOYEES
3.94
EMPLOYMENT ENGAGEMENT
(grand mean score based on a 1–5 rating scale)
+4.3%
AVERAGE REVENUE PER BED DAY
69.2%
BED OCCUPANCY
In Southern Africa (including South Africa and Namibia),
as at the end of the reporting period, Mediclinic operated
52 hospitals, five sub-acute hospitals and eight day case
clinics with a total of 8 517 beds and 15 804 employees
(19 646 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 30% of the Group’s revenue
(FY18: 31%) and 38% of its adjusted EBITDA (FY18: 37%).
Revenue increased by 5% to ZAR15 960m
(FY18: ZAR15 204m) with a continued weak
macroeconomic environment and flat private medical
insurance membership. Bed days sold increased by 0.6%
and average revenue per bed day increased by 4.3%. The
number of admissions remained unchanged. The average
length of stay increased by 0.7% while occupancy rates
were 69.2% (FY18: 69.7%).
The revenue contribution in FY19 from the majority
investment in the Intercare group of four day case clinics,
four sub-acute hospitals and one specialist hospital since
1 December 2018 was ZAR60m (FY18: nil). Underlying bed
days sold (excluding Intercare) were down 0.1% on the
prior year.
Adjusted EBITDA increased by 4% to ZAR3 385m
(FY18: ZAR3 245m), resulting in the adjusted EBITDA
margin decreasing to 21.2% from 21.3% as lower patient
volumes were offset by cost-management and efficiency
initiatives.
68 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Depreciation and amortisation increased by 12% to
ZAR556m (FY18: ZAR495m), mainly resulting from recent
major facility upgrades. Operating profit increased by 3%
to ZAR2 829m (FY18: ZAR2 749m).
Net finance costs decreased by 2% to ZAR513m
(FY18: ZAR526m), supported by lower interest rates and
interest received on cash balances. Mediclinic Southern
Africa contributed £72m to the Group’s adjusted earnings
(representing 36%), compared to £72m (representing 33%)
in the comparative period.
The division converted 96% (FY18: 103%) of adjusted
EBITDA into cash generated from operations.
INVESTING TO SUPPORT LONG-TERM
GROWTH
Mediclinic Southern Africa invested ZAR506m on
expansion capital projects and new equipment at existing
hospitals, ZAR107m on acquisitions and ZAR672m on the
replacement of existing equipment and upgrade projects.
Expansion at existing hospitals included expansion at
Mediclinic Potchefstroom, Mediclinic Medforum, Mediclinic
Legae, Mediclinic Klein Karoo and the establishment of a
new day case clinic at Mediclinic Newcastle. Furthermore,
the Welkom Medical Centre and Intercare group were
acquired, while Mediclinic Barberton was sold. The total
number of licensed beds increased during the year to
8 517 (FY18: 8 131).
In August 2017, Mediclinic Southern Africa announced it
had agreed to an investment in Intercare. The Intercare
group was founded in 2000 and currently manages
21 multi-disciplinary outpatient clinics (which includes
15 dental centres), as well as four day case clinics,
four sub-acute hospitals and the Medfem fertility hospital
in Sandton. The investment in Intercare comprises: a
minority shareholding in the multi-disciplinary outpatient
clinics which was completed in October 2017; and a
controlling shareholding in the day case clinics,
sub-acute hospitals and Medfem fertility hospital
which received Competition Commission approval in
August 2018 and was completed in November 2018.
Intercare will continue to manage all its facilities under
the Intercare brand.
In FY20, Mediclinic Southern Africa expects to invest
ZAR562m and ZAR727m on expansion and maintenance
capex respectively. Several existing hospital and day case
clinic projects are due for completion in FY20 and FY21,
which are expected to add some 162 additional operational
beds. In line with its commitment to provide quality clinical
care, Mediclinic Southern Africa expects to invest in
additional resources to deliver further improvements across
the division during the year.
The division’s day case clinic rollout is premised on
co-locating the facilities with the main hospitals to adapt to
the outmigration of care trend in Southern Africa where
admissions have been impacted by declining day cases.
Mediclinic plans to open six day case clinics during FY20
and FY21 at Mediclinic Nelspruit, Mediclinic Stellenbosch,
Mediclinic Pietermaritzburg, Mediclinic Cape Gate,
Mediclinic Winelands (also in Stellenbosch) and Mediclinic
Bloemfontein, which will add an additional 13 theatres to
the Southern African operations.
The proposed acquisition of a controlling shareholding in
Matlosana Medical Health Services (Pty) Ltd, based in
Klerksdorp in the North West Province of South Africa, was
prohibited by the Competition Tribunal. Mediclinic has
appealed against this decision and it is expected that the
case will be heard by the Competition Appeal Court during
the second half of the 2019 calendar year.
CONTINUED FOCUS ON EFFICIENCY
AND VALUE
Mediclinic Southern Africa progressed with several
improvements to its business processes during the period
under review. A particular focus on optimising nurse
utilisation without compromising on the quality of care
enabled the division to manage nursing cost particularly
well during the period under review, especially in light of
continued volume pressure.
that further engagements with the inquiry panel may still
take place, with the final report now due for publication on
30 September 2019.
The South African Government continues to explore the
introduction of a National Health Insurance system. On
21 June 2018, the National Health Insurance Bill (“NHI Bill”)
was published for comment by interested stakeholders.
Mediclinic submitted comprehensive comments on the
NHI Bill. At the same time, there were proposed
amendments to the Medical Schemes Act, No. 131 of 1998,
which are aimed at amending the functioning of the
medical schemes and member benefits. Mediclinic also
submitted comments thereon. Mediclinic fully supports the
principle of Universal Health Coverage and improving
access and affordability of healthcare to all South Africans
and will continue to contribute constructively toward
achieving these goals. Mediclinic believes that an enhanced
healthcare system can be achieved through greater
collaboration across the public and private sectors to find
common solutions and looks forward to the opportunity to
contribute in this regard.
MARKET OVERVIEW
The South African private medical insurance market
remained stable with continued political uncertainty, low
economic growth and high unemployment. The solvency
ratios of the schemes remain very sound with the average
ratio at 32.2% compared to a required level of 25% in
In addition, through the successful employee engagement
South Africa.
strategy, the division further improved its engagement
score during the year to 3.94 (2018: 3.85) (the grand mean
score based on a 1–5 rating scale).
The market offers very limited incremental growth
opportunities to expand existing hospitals. A select number
of opportunities exist to invest across the continuum of
As part of its commitment to deliver value to patients, the
care, including the establishment of day case clinics, given
division continued with various initiatives to improve the
the continued outmigration of care trend. The gradual
patient experience, as measured by Press Ganey®. The
increase in network arrangements with insurers continues
results this year, which are published online, reported a
and Mediclinic has been successful in maintaining
stable overall mean score of 82.2% (2018: 82.1%).
relationships with many insurers through these
REGULATORY UPDATE
The Competition Commission is still continuing with 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 published its Provisional Findings and
Recommendations Report on 5 July 2018. Although the
process was set to be finalised during 2018, the
Commission extended the timeframe to accommodate
arrangements, continuing to provide patients across South
Africa with an extensive footprint of available Mediclinic
facilities. Mediclinic Southern Africa also seeks to provide
care to those without insurance. In February 2019, the
division launched a transparent, easy-to-use, fixed fee
service that is aimed at providing affordable care across an
extensive list of diagnostic and surgical procedures.
OUTLOOK
Mediclinic Southern Africa remains well positioned for
future success in the current market and regulatory
further seminars and research. Mediclinic submitted its
environment. The private healthcare industry has reached
responses to the provisional report on 15 October 2018 and
maturity with limited opportunities for material growth in
during April 2019 participated in seminars addressing
the large multi-disciplinary acute care hospital environment
specific competition topics. An updated timetable advises
given Mediclinic Southern Africa’s extensive footprint.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 69
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
SOUTHERN AFRICA (CONTINUED)
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
Future growth will focus more on related business
experience, and the cost of care. The division will also
opportunities across the continuum of care and on the
continue to focus on opportunities to develop an
ability to manage care across different care settings,
integrated Southern African private healthcare delivery
supported by an enabling digital platform and the use of
model through collaboration with medical practitioners.
technology. A full evaluation of an EHR system will be
At the same time, Mediclinic Southern Africa remains
carried out during 2019.
The focus in the coming year will be on further developing
Mediclinic Southern Africa’s strategy to position itself for
committed to improving its operational efficiency and to
attracting, retaining and engaging qualified employees,
especially nursing employees and medical practitioners.
future value-based contracting opportunities. The division
Mediclinic Southern Africa is also committed to embed a
will continue to focus strategically on the value that it
transformation strategy that encompasses diversity and
delivers to patients, by continuing to improve the safety
inclusivity to meet business imperatives, while ensuring
and quality of its clinical care, the quality of the patient
legislative compliance.
70 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
DIVISIONAL REVIEW
UNITED ARAB EMIRATES
CEO’S STATEMENT
“The performance this year at Mediclinic Middle East
demonstrates that the division has entered a new growth
phase. The highlight this year was the opening in
September of the 182-bed Mediclinic Parkview Hospital in
Dubai, both ahead of schedule and below budget. Our
future growth will be underpinned by the performance in
the established Dubai business, continued improvement in
the Abu Dhabi business, ramp up of new facilities,
successful integration of new investments and benefits
from expansion and upgrades to existing facilities.”
David Hadley
Chief Executive Officer: Mediclinic Middle East
7
NUMBER OF HOSPITALS
2
NUMBER OF DAY CASE
CLINICS
18
NUMBER OF OUTPATIENT
CLINICS
926
NUMBER OF BEDS
37
NUMBER OF THEATRES
+7%
REVENUE AED3 262M
(FY18: AED3 050M)
+7%
ADJUSTED EBITDA
AED425M
+5%
NUMBER OF INPATIENT
ADMISSIONS
85.6%
INPATIENT EXPERIENCE
INDEX
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 71
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
UNITED ARAB EMIRATES (CONTINUED)
FINANCIAL REVIEW
6 152
NUMBER OF EMPLOYEES
4.02
EMPLOYMENT ENGAGEMENT
(grand mean score based on a 1–5 rating scale)
+2.7%
AVERAGE REVENUE PER
ADMISSION
49.8%
BED OCCUPANCY
Mediclinic Middle East, as at the end of the reporting
period, operated seven hospitals, two day case clinics
and 18 outpatient clinics with a total of 926 beds and
6 152 employees (6 152 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 23% of the Group’s revenue
(FY18: 22%) and 18% of its adjusted EBITDA (FY18: 16%).
The Middle East remains a long-term growth market for the
provision of high-quality private healthcare services, driven
by the expatriate market and ageing local population
facing an increased incidence of lifestyle-related medical
conditions. The regulatory environment is maturing with an
increasing focus on quality and clinical outcomes measures.
Mediclinic has confidence in its Middle East growth
strategy, which includes the ramp-up of new hospitals;
the integration of new investments; and expansion and
upgrades to existing facilities.
In FY19, revenue was up 7% to AED3 262m (FY18:
AED3 050m after adjusting for the impact of IFRS 15),
despite a lack of tariff increases. Inpatient and outpatient
volumes were up 5.2% and 2.0% respectively. In Abu Dhabi,
Thiqa and Enhanced insurance volumes combined
increased during the year by 14% and 10% for inpatients
and outpatients respectively, while Basic insurance volumes
continued to reduce consistently with expectations.
72 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Mediclinic Parkview Hospital in Dubai was successfully
opened in September 2018 and has performed well.
Despite the hospital being in the early ramp-up stage,
revenue in FY19 was AED88m.
Including the loss associated with the start-up of the
Mediclinic Parkview Hospital, adjusted EBITDA increased
by 7% to AED425m (FY18: AED397m), with the adjusted
EBITDA margin flat at 13.0% (FY18: 13.0% after adjusting for
the impact of IFRS 15). Excluding the loss associated with
the start-up of Mediclinic Parkview Hospital, adjusted
EBITDA increased by 13% to AED447m (FY18: AED398m),
with the adjusted EBITDA margin increasing to 14.1%.
Adjusted depreciation and amortisation increased by 15%
to AED171m (FY18: AED149m), mainly due to Mediclinic
Parkview Hospital and the acquisition of the Majid Al
Futtaim clinics.
Net finance costs decreased by 11% to AED31m (FY18:
AED34m), supported by the successful refinance in
September 2018. The division contributed £46m to the
Group’s adjusted earnings (representing 23%) compared to
£44m (representing 20%) in the prior year.
The division converted 70% (FY18: 74%) of adjusted
EBITDA into cash generated from operations. This was
impacted by the late receipt from one major insurer and
the increase in VAT receivable.
INVESTING FOR FUTURE SUCCESS
Mediclinic Middle East continually reviews investment and
expansion opportunities across the continuum of care to
support the future success and strength of the division and
build on its market-leading clinical expertise and patient
experience. At Mediclinic City Hospital in Dubai, Mediclinic
opened its first Comprehensive Cancer Centre, with a
second planned for the first half of 2020 in Abu Dhabi at
Mediclinic Airport Road Hospital. Mediclinic is the only
private hospital operator in the UAE to offer gated
radiotherapy services. During the year, Mediclinic
performed the first robotic knee surgery in the Middle East
and was the first private hospital group in the UAE to
become an academic training institution.
Supported by continued business and operational
improvements in Abu Dhabi and the ramp-up benefits from
investments into new facilities, expansions and upgrades,
Mediclinic Middle East is expected to deliver an increase in
revenue and gradual improvement in EBITDA margins.
However, the current macro environment in the UAE and
below-inflation regulated tariff increases in 2018 and 2019
are impeding revenue growth and margin expansion.
In Abu Dhabi, the business is benefiting from continued
investment in medical practitioners, services and facilities.
While the recruitment of medical practitioners continues to
support the growing business, vacancies have normalised
In May 2018, Mediclinic Middle East completed the
and the focus has shifted to supporting medical
acquisition of the Dubai-based City Centre clinics Deira and
practitioners to grow their practices. At Mediclinic Airport
Me’aisem from Majid Al Futtaim, the leading shopping mall,
Road Hospital, inpatient and outpatient volumes were
retail and leisure pioneer across the Middle East and North
down 6% and 4% respectively during the year, but the
Africa. Under the terms of the agreement, Mediclinic Middle
average revenue per patient was up 11% and 10%
East has acquired City Centre Clinic Deira, a large day case
respectively due to the improvement in the insurance mix.
clinic specialising in 18 medical disciplines with one theatre
The divestment of non-core assets continued during the
which opened in 2013 and City Centre Clinic Me’aisem, a
year to optimise the portfolio of assets.
smaller community outpatient clinic focusing on a smaller
In Dubai, the ongoing performance of the existing business
will benefit from significant growth at the new 182-bed
Mediclinic Parkview Hospital which opened in September
2018 and performed well in the second half of the year. The
hospital, the Group’s largest greenfield construction project
by value, was completed in two and a half years, ahead of
schedule, and within the AED680m original budget. Initially
opened with 100-beds and supported by 80 medical
number of core disciplines. The clinics serve strategic
geographic locations and offer the opportunity to refer
higher acuity inpatient cases to existing hospitals.
Significant potential also exists to attract additional
medical practitioners and to, over time, grow patient
volumes and revenues as well as allow Mediclinic the
opportunity to partner with Majid Al Futtaim in the future.
In November 2018, Mediclinic announced the acquisition of
practitioners, the hospital will ramp up to full capacity over
a minority stake in Bourn Hall International, the holding
the coming years. The hospital is strategically located to
serve the population expansion that has occurred to the
south of Dubai and provides comprehensive maternity,
Level III neonatal intensive care, 24/7 paediatric specialities,
company for the Bourn Hall Fertility Centre in the UAE, a
pioneering fertility centre established in the Middle East in
2010 and currently the only fertility centre in the Middle
East to be accredited by the JCI. The acquisition lays the
and accident and emergency care.
In FY19, Mediclinic Middle East invested AED376m (up 5%
on FY18) on expansion and AED76m (up 145% on FY18) on
maintenance capex. Expansion capex in the period largely
related to the costs associated with Mediclinic Parkview
Hospital and the EHR implementation. The EHR is being
systematically rolled out across Mediclinic Middle East
during FY19 and FY20, and successfully went live during
the year at Mediclinic Parkview Hospital and Mediclinic Ibn
Battuta, with a further three clinics going live in Dubai in
April 2019. Rollout in Abu Dhabi will begin in June 2019 and
foundation for a partnership focused on a long-term
MENA-focused expansion in the field of assisted
reproduction. As part of the initial stage, Bourn Hall
Fertility Centre has taken over operations of Mediclinic’s
existing IVF clinic located at Mediclinic Al Ain Hospital and
is operating it under the Bourn Hall brand. Bourn Hall will
continue to operate and manage its IVF business
independently and under its existing brand. The small
investment was made from Mediclinic Middle East’s
available cash and debt and is not expected to have a
material impact on the earnings of the division in the
it is anticipated that the project will be completed across
short term.
the division by the end of the 2020 calendar year. The EHR
is expected to deliver seamless care and improved service
quality for patients, as well as improved administration
efficiency for the division. Work continued during the year
REGULATORY UPDATE
The division continues to maintain an active dialogue
with government authorities on regulatory changes within
on the ground floor and mezzanine renovations at
the UAE healthcare sector. Preparations are ongoing for
Mediclinic Al Noor Hospital, which is expected to be
the implementation of DRGs for inpatient procedures in
completed by the end of the 2019 calendar year, with
Dubai which are now expected to be implemented in
continued progress on the plans to address the long-term
September 2019. Mediclinic continues to test the systems
changes required to enhance the hospital. As part of the
through a shadow billing process which has been operating
division’s strategic expansion phase, Mediclinic Airport
since July 2018. The Dubai Health Authority is following a
Road’s 100-bed expansion and cancer centre project is
collaborative approach in the design and implementation
progressing as planned and is scheduled to open in the
of the DRGs and, in addition to sharing and discussing the
first half of the 2020 calendar year. Plans to construct a
test version of the DRG methodology with the market, it
small 40-bed hospital in the Western Region of Abu Dhabi
also shared hospital level results and impact studies.
are currently under review. In FY20, having completed the
Currently, it is expected that the DRGs will have a neutral
Mediclinic Parkview Hospital project, Mediclinic Middle East
impact on the division’s inpatient revenue, as prescribed by
expects expansion capex to be materially lower at around
the Dubai Health Authority. Additional qualified medical
AED250m, with maintenance capex at around AED66m.
practitioners have been appointed as case managers to
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 73
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION DIVISIONAL REVIEW
UNITED ARAB EMIRATES (CONTINUED)
ensure an effective change-over. Training is being carried
out in the division’s Abu Dhabi facilities where DRGs have
been in operation since 2011.
The Abu Dhabi Department of Health, through industry
engagement, has recently introduced the concept of
Centres of Excellence to improve the quality of care in the
Emirate. Mediclinic Middle East was able to demonstrate its
readiness for the initiative through its successful
programmes already established in Dubai
which include the Comprehensive Cancer Centre and
Comprehensive Stroke and Neuroscience Centre at
Mediclinic City Hospital. Two key areas of focus for
Mediclinic Middle East in the Abu Dubai Emirate will be the
establishment of a Comprehensive Cancer Centre and
paediatric Centre of Excellence at Mediclinic Airport Road
Hospital. The Abu Dhabi Department of Health is also
preparing for the implementation of the next phase of the
Jawda initiative, being the introduction of a hospital
star-rating system based on an extensive list of quality and
experience measures with the first reports anticipated to
be published in the second half of the 2019 calendar year.
MARKET OVERVIEW
The Middle East remains a long-term growth market for the
provision of high-quality private healthcare services, driven
by the expatriate market and ageing local population
facing an increased incidence of lifestyle-related medical
conditions. The regulatory environment is maturing with an
increasing focus on quality and clinical outcome measures.
Mediclinic has confidence in its Middle East growth
strategy which includes the opening of new hospitals,
integrating new investments and expansion and upgrades
to existing facilities.
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 and utilisation, which are still prevalent in
some areas of the market and to focus on quality
performance and outcome measures. The senior
management of Mediclinic Middle East continues to forge
ever deeper relationships with the authorities to ensure
Mediclinic remains an integral part of the healthcare
delivery system in the region.
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
ENEC
Mediclinic Ghayathi
ADU DHABI
AL AIN
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
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
74 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OUTLOOK
In 2018, the UAE witnessed sluggish growth with gross
domestic product increasing by 1.7% with a marginal
improvement expected in 2019 and 2020. This is premised
of tariff increases in 2018 and 2019, reflecting the current
macro environment, Mediclinic will, through its annual
negotiations, seek to justify inflation-related increases
in 2020.
on a stable oil price, increased government expenditure
With the operational integration following the Al Noor
likely as Expo 2020 draws closer, non-oil revenue
combination now complete, the focus is on supporting
increasing from new forms of direct and indirect taxation
medical practitioners to grow their patient volumes, bring
and a predicted rise in foreign trade. Economically, there is
newly opened facilities up to capacity, ensuring timely
still opportunity for greater diversification away from
delivery of projects under construction and effectively
hydrocarbons in Abu Dhabi than in Dubai, which in turn
integrate new investments into the division. Mediclinic
can create new opportunities for the private healthcare
Middle East is well positioned, financially and operationally,
industry. Mediclinic’s strategy to reduce reliance on the
to consider further investment opportunities across the
low-tariff insurance sector in Abu Dhabi has proved
continuum of care.
successful and will continue to be rolled out. Despite a lack
I
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MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 75
SUSTAINABLE
DEVELOPMENT OVERVIEW
“SEIZING OPPORTUNITIES
SHOULD BE DONE IN A SUSTAINABLE
AND RESPONSIBLE MANNER TO
ENSURE THAT COMPANIES, AS GOOD
CORPORATE CITIZENS, ARE IN THE
LONG TERM ABLE TO MAINTAIN A
POSITIVE IMPACT NOT ONLY ON
THEIR CLIENTS, BUT ALSO ON THE
INDUSTRY, ON THE PLANET, AND ON
THEIR EMPLOYEES, PARTNERS AND
SURROUNDING COMMUNITIES.”
Dr Ronnie van der Merwe
Chief Executive Officer
INTRODUCTION
The rapidly changing healthcare environment offers an
abundance of opportunities for companies that are poised
and ready to adapt to evolving regulatory requirements
and unique client needs. Seizing such opportunities should,
however, be done in a sustainable and responsible manner
to ensure that companies, as a good corporate citizens, are
in the long term able to maintain a positive impact not only
on their clients, but also on the industry, on the planet, and
on their employees, partners and surrounding communities.
patients, medical practitioners, 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 2019 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 page 114.
Guided by its purpose of enhancing the quality of life,
Mediclinic is refining its strategic goals to address current
industry challenges and ensure sustainability through best
use of its exceptional knowledge base and world-class
infrastructure. During the year, the Group remained
committed to creating value for all stakeholders by
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
following a holistic approach that, in the context of our
sustainable way, and to respond to stakeholder needs, is
purpose, balances financial returns with our ethical
entrenched in the Group’s values and supported by the
responsibility toward its clients, its employees and
Group’s Ethics Code. A wide variety of communication
the planet.
STAKEHOLDER ENGAGEMENT
Mediclinic recognises its accountability to its stakeholders
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
and is committed to effective and regular engagement
Group’s key sustainability priorities, as reported on in the
with them, and to publicly report on its sustainability
performance. Mediclinic’s key stakeholders are those
2019 Sustainable Development Report. The Group
continually looks for ways to improve its use of online
groups who have a material impact on, or are materially
channels to communicate with its stakeholders through the
impacted by, Mediclinic and its operations, including:
corporate website and webcasting.
76 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 2019 Sustainable Development Report
and the GRI Standards Disclosure Index, available on the Company’s website at www.mediclinic.com.
AWARDS AND ACCOLADES SUMMARY FOR THE REPORTING PERIOD
Group
A constituent of FTSE4Good*,
an index that recognises the performance of companies
demonstrating strong environmental,
social and governance (“ESG”) practices.
A constituent of FTSE/JSE
Responsible Investment Index,
an index that recognises such companies listed
on the JSE Ltd that meet the required FTSE Russell ESG
rating.
* FTSE Russell (the trading name of FTSE International Ltd 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
ESG practices. The FTSE4Good indices are used by a wide variety
of market participants to create and assess responsible
investment funds and other products.
Achieved Global B List status
from the Climate Disclosure
Project (“CDP”) for water conservation
and climate change actions.
Hirslanden
Ranked second in the
healthcare sector among
more than 500 enterprises in
Switzerland and Liechtenstein by
Best Recruiters, an independent
recruitment study.
17 out of its 18 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, and were
awarded with CO2 & kWh-reduced
certificates.
Hirslanden Klinik Stephanshorn
certified by the Network of
Corporate Health Management
with the quality label
“Friendly Work Space”,
based on the recommendations of
Health Promotion
Switzerland.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 77
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
AWARDS AND ACCOLADES SUMMARY FOR THE REPORTING PERIOD
(CONTINUED)
Mediclinic Southern Africa
Mediclinic Southern Africa brand ranked 14th in
the Top 20 Brand South Africa
rankings for 2018, being the top South African
healthcare provider for five years in succession according
to Brand Finance and Brand Africa.
Mediclinic Midstream received the Khanyisa
Service Excellence Award in the
category: Private Acute Care
Hospitals from the Gauteng Department of Health.
Aliné Hall (Clinical Quality Specialist:
Mother and Child) was recognised
by The Forum for Professional
Nurse Leaders
in the category of individuals who have excelled in
Dr Melanie Stander (Emergency
Medicine Manager) received the
Dr Cristina Costin International
Emergency Medicine Award
by the American Academy of Emergency Medicine,
their individual endeavours and contributed to
an award which honours a female emergency physician
nursing leadership.
who has made a significant and sustained impact on the
development of emergency medicine in her country.
Three hospitals included in Discovery Health’s Top 20 Private Hospitals in
South Africa 2018, based on the results of patient surveys.
Mediclinic Middle East
Mediclinic City Hospital was named the winner of
the Healthcare Innovation Award by
Dubai Healthcare City Authority,
acknowledging the hospitals work in Robotic Knee Surgery
which saw two patients undergo partial and total knee
replacements using a robotic system for the first time in
the Middle East.
Mediclinic Middle East was awarded Superbrand
status by the UAE Superbrands
Council for 2019, in addition to awards
received in 2015, 2016 and 2018.
78 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
MATERIALITY ASSESSMENT
Mediclinic has various economic, social and environmental responsibilities, including creating employment opportunities;
training and developing employees; using of natural resources responsibly; investing in local communities; and promoting
black economic empowerment in South Africa.
In terms of the Group Sustainable Development Policy, the Clinical Performance and Sustainability Committee annually
reviews the Group’s material sustainability issues. This is done to ensure that management initiatives are directed at those
sustainable development issues that are most significant to the business, and which directly affect the Group’s ability to
create value for its key stakeholders.
The Clinical Performance and Sustainability Committee’s assessment identified the following three material issues,
as illustrated in Figure 1, which constitute the focus of this report:
• developing an engaged and productive workforce;
• minimising environmental impact; and
• being an ethical and responsible corporate citizen.
FIGURE 1: MATERIALITY ASSESSMENT MATRIX
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L ISSUE 1: DEVELOPING AN ENGAGED A N D P R O D U C T I V E W O R
n
t
Mediclinic’s shareholders, patients and employees are key to its sustainability. Relationships with these stakeholders inform
how the Group manages strategy, performance and risks. The link between the Group’s three material sustainability issues
and the Group’s strategy is indicated in this report. The Group’s strategic priorities in the year under review, which are
further detailed in the Our strategy, goals and progress section on page 18, are:
• putting Patients First;
• improving Group and operational efficiencies;
• pursuing attractive growth opportunities; and
• leveraging the Group’s international scale; while
• continuing to invest in employees, information and communications technology and analytics.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 79
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
MATERIAL ISSUE 1: DEVELOPING AN ENGAGED AND PRODUCTIVE
WORKFORCE
HIGHLIGHTS
• Embedding of world-class workforce optimisation initiatives and the integration of these principles in the relevant
business processes in accordance with the agreed workforce plan
• 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
Employee engagement is a vital aspect that is essential to
Workforce optimisation has been a key focus for the year,
the overall success of the business. It is also fundamental to
employee retention and for creating a dynamic working
especially in the clinical environment. Continued focus on
workforce planning and forecasting will ensure that the
environment. The attraction of suitably qualified healthcare
goal of operational efficiency is achieved as required in
professionals is essential in delivering the Group’s Patients
order to deliver on the Patients First strategy.
First strategy. The Group aims to provide a working
environment with a supporting culture where employees
can thrive and be emotionally committed to Mediclinic’s
goals. These initiatives include engagement, corporate
health and wellness, continuous development, mentoring
and coaching. It requires a long-term focus and genuine
transformation of practices to be successful. These
initiatives will be continued and expanded to create a
diverse and inclusive environment that enables the optimal
performance of employees.
LINK TO STRATEGY
• Invest in employees
• Improve safe, quality clinical care
• Improve patient experience
• Improve efficiency
KEY STAKEHOLDERS
• Employees and trade unions
• Medical practitioners
• Patients
KEY PERFORMANCE INDICATORS
CONTROLLABLE EMPLOYEE
TURNOVER RATE*
EMPLOYEE ENGAGEMENT
(GRAND MEAN SCORE – MAXIMUM
SCORE OF 5)
TRAINING SPEND AS APPROXIMATE
PERCENTAGE OF PAYROLL
Switzerland
6.9%
(2018: 8.7%)
Group
3.98
(2018: 3.88)
Switzerland
4.6%
(2018: 4.6%)
Southern
Africa
7.6%
(2018: 7.2%)
Switzerland
4.01
(2018: 3.93)
Southern
Africa
3.7%
(2018: 3.2%)
UAE
6.7%
(2018: 10.3%)
Southern
Africa
3.94
(2018: 3.85)
UAE
0.1%
(2018: 0.2%)
* Refer to page 84 for more information on
UAE
the increase in the turnover rate.
4.02
(2018: 3.86)
80 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
RISKS TO THE BUSINESS
• Inability to recruit healthcare practitioners to meet
business demand
• Poor clinical outcomes and services
• Medical malpractice liability
• Reputational damage
• Delayed new nursing qualifications framework, causing a
• Targeted sourcing and recruitment initiatives, with a
strong focus on agile sourcing techniques to ensure that
the best fit candidate talent is channelled to appropriate
vacancies, supported by a seamless hiring process
• A proactive international recruitment programme
supplementing anticipated medium-term skills gaps
• Tailored retention strategies, supporting the retention of
priority audiences within each business unit
gap in the education pipeline in Southern Africa
• Succession planning and/or career management
• Ageing nursing workforce with decreasing entrants
to profession
• Employee engagement and wellness
• Fraud and ethics failures
MITIGATION OF RISKS
• Extensive training and skills development programmes
• Governance of suitable selection processes with a focus
initiatives within scarce skills disciplines, to ensure
the proactive development of high-performing
employees with the potential to fulfil supervisory and
leadership roles
• Monitoring of medical practitioner satisfaction through
continuous dialogue
• Deployment of integrated talent strategies in support of
core business areas
• Monitoring of employee engagement and satisfaction
on skills assessments, employment references and
through a standardised process and structured,
verification of credentials
systematic action planning
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 81
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR PEOPLE –
MEDICLINIC MIDDLE EAST
The Mediclinic Middle East Employee Wellness
Programme offers comprehensive health and wellness
services tailored to individual and organisational needs,
taking into account the specific challenges in the current
economic and social environment.
The programme, which was launched in January 2018, is
aimed at encouraging a culture of physical, mental,
social and financial wellness, the benefits of which will
also ultimately filter through to the quality of service
provided to patients and their families. A comprehensive
wellness strategy will improve credibility as a leading
healthcare organisation when dealing with regulators
and insurers and simultaneously set an example for
the industry, which is currently nascent in terms of
corporate wellness.
In June 2017, an initial workgroup consisting of
representatives across various functions and business
units was tasked with investigating and recommending a
wellness solution for employees based on the vision of
senior leadership.
One of the wellness education sessions featured
a healthy cooking demonstration.
OFFERING EMPLOYEES ACCESS TO COMPREHENSIVE EMPLOYEE
WELLNESS SERVICES IS A NATURAL PROGRESSION OF
EMPLOYMENT BENEFITS, ESPECIALLY GIVEN THE LEADING
ROLE MEDICLINIC PLAYS IN INTERNATIONAL HEALTHCARE. THE
BENEFITS OF SUCH A PROGRAMME IS SURE TO ULTIMATELY
FILTER THROUGH TO THE QUALITY OF SERVICE OFFERED TO
PATIENTS AND THEIR FAMILIES.
The workgroup evolved into a Wellness Committee which
Participation
considered design principles relevant to the region, as well
as international best practice, such as:
Sustainability
Wellness is not an isolated state, but rather the result of a
Great care must be taken to ensure that employees do not
feel forced to participate. Mandatory programmes may
increase the stress levels of employees, which will be
contrary to the intended objective.
habit of healthy living. Programmes should be aimed at
Leadership commitment and support
continuous reinforcement to ensure sustainable change in
behaviour for the long term.
Individuality
Wellness initiatives should be tailored to the needs of
employees. As such, the employees own the initiatives and
The senior leadership should clearly communicate their
vision and strategy for the promotion of health; they
should actively support the initiatives and continuously
support and, where possible, participate in health
education.
clearly understand the benefits; they are also given the
A health culture
opportunity to provide input.
Business decisions that affect everyday activities should
be made in alignment with wellness goals to reinforce
the division’s commitment to creating a health-
conscious culture.
82 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OWNING WELLNESS
With research in hand, the Wellness Committee proposed a tailored wellness programme for Mediclinic Middle East
employees. The following benefits are offered under the programme:
• discounted health packages for all employees;
• special offers, including fitness and leisure packages;
• a dedicated wellness room at the corporate office equipped with games, wellness equipment and
relaxation areas;
• monthly wellness education sessions covering topics such as managing stress, mindfulness, healthy food
preparation, yoga and financial management;
• employee sporting events, such as soccer, cricket, volleyball and basketball;
• corporate funding sponsorships for individuals or teams participating in an external, accredited sporting event
if certain criteria are met; and
• participation in fitness and health challenges.
Wellness surveys will be conducted annually. The feedback will be used to improve benefits and to ensure that
activities align with the programme’s vision of offering employee-friendly benefits that can be adopted and owned
by the workforce.
SUSTAINABLE DEVELOPMENT OVERVIEW
(CONTINUED)
POLICY, APPROACH AND
PERFORMANCE
Mediclinic’s human capital is strongly supported by policies
and best practice guidelines and is governed to ensure
compliance to achieve global best practice and to minimise
possible risks as mentioned above.
The human resources strategy focuses on harmonising and
embedding enhanced human resources processes and
practices throughout the Group. This is achieved by
standardising processes where possible, sharing best
practice and integrating systems. In this way, the human
resources functions is positioned as an enabling partner
that can deliver visible, credible and value-adding services
to the business.
Employee recruitment and retention
All divisions are experiencing challenges regarding the
global shortage of healthcare professionals specifically to
specialist nurses and clinicians. Proactive strategies and
action plans are continuously deployed to address the
shortages within each of the divisions to ensure a
branding to position each division as the preferred
employer in the relevant geographies where the Group
operates. The Group constantly and actively monitors
industry and external talent pool trends. This allows it to
proactively amend its strategy to mitigate the risks in the
competitive healthcare labour market.
To address the challenges of attracting and retaining
scarce skills, specific strategies are formulated to support
the needs of the areas that are under pressure due to a
limited talent supply in their local market. These strategies
will be entrenched and further refined to align to the
current priorities emerging from the existing workforce
plan. This includes a continued focus on the training of
healthcare professionals in relevant divisions, revised
on-boarding programmes as well as pro-active talent pool
management. Special emphasis is also placed on building
sustainable and positive relationships with the candidates
with critical talent. Other additional initiatives include
continuous targeted internships, on the job training,
student placements, career planning and development.
The alignment of recruitment and selection processes
consistent supply of applicants to fill critical vacancies.
across divisions remains a key focus. This includes
These strategies are regularly reviewed to ensure alignment
exploring the benefits of standardisation of generic
with organisational requirements and industry challenges.
elements and the sharing of best practices. Planning also
This is supported by a highly tailored focus on employer
commenced for the implementation of an international
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 83
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SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
enterprise resource planning (“ERP”) system, supporting
the recruitment and employer branding process during the
course of 2019 and 2020. This supports the move to an
integrated and digitalised human resources landscape, with
an emphasis on data analytics to inform key human capital
decisions. This will provide the Group with tools to identify
of international and local trends and mitigate potential risks
proactively. The Your Voice employee engagement survey
results are scrutinised for generic themes and used to
Training and skills development
The Group continues to invest considerably in training and
skills development to maintain employee engagement and
improve the quality of service delivery. The Group’s
commitment to providing quality care for its patients can
only be ensured if its employees have suitable, evolving
skillset. This is achieved through many learning initiatives
provided by the Group each year.
address themes that affect the retention of the workforce.
Performance management
The Group’s workforce composition is provided in
Figure 2. Controllable Employee Turnover rate is provided
on page 80, indicating a decrease in Switzerland and
Mediclinic Middle East, but a slight increase in Mediclinic
Southern Africa. 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
skilled employees, we are experiencing increased
competition in the market place. As a result, emphasis is
placed on retention and effective utilisation of available
skills. The Group has various measures in place with the
aim to be regarded as an employer of choice: regular
engagement; offering attractive working conditions (e.g.
flexible employment contracts for part-time employees in
Switzerland); career development; a consistent
performance management system; and fair remuneration
practices. Information on the divisions’ turnover rate by age
group and gender; new appointments versus employment
terminations; and return to work after maternity leave are
provided in the Sustainable Development Report,
available on the Company’s website.
A consistent performance management system is applied
throughout the Group, which enables it 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. The Group is committed to optimising the
quality of these discussions where expectations regarding
performance and development are shared and personal
development plans are compiled accordingly. These
discussions also provide the opportunity to translate the
organisational strategic goals into individual employee
objectives, activities and deliverables.
Succession planning, career management,
diversity and inclusion
Succession planning and related leadership development
remains vital to the organisation. The talent pipeline to
Group and divisional key positions is reviewed on an annual
basis and strengthened through a well-structured process
under the guidance of the Nomination Committee and
divisional Talent Review Committees. Successors are
supported with tailored development plans and progress is
monitored to ensure the readiness of the pipeline through
FIGURE 2: WORKFORCE COMPOSITION
proactive development.
2017
(Total: 32 625)
2018
(Total: 31 504)
2019
(Total: 32 398)
9 402
16 848
4.78
4.77
9 635
2.36
16 068
10 442
15 804
6 375
5 801
6 152
Switzerland Southern Africa UAE
Notes
1
Mediclinic International plc has one employee based in the United
Kingdom.
2 The increase in Hirslanden employees from 2018 to 2019 was
influenced by the acquisition of Clinique des Grangettes, effective
October 2018.
3 The increase in Mediclinic Middle East employees from 2018 to
An internationally standardised process is followed with
local adaptation to support divisional challenges. There is a
continued focus on the sharing of best practices to the
benefit of all divisions. This process will be enabled during
2019 and 2020 when an international talent management
system is implemented as part of the deployment of the
international human resources ERP. This will equip the
relevant committees and line managers with better tools to
identify and develop talent toward key roles. The additional
functionality will also give employees greater access to
career opportunities and enable them to indicate their
aspiration to these.
The diversity of the workforce and related internal talent
pools remains a key consideration. A diversity and inclusion
strategy was agreed upon that are currently being
deployed to guide the Group toward the achievement of
the stipulated goals. This includes testing the workforce
perceptions and exploring these through various initiatives
2019 was largely attributable to overall business growth.
that can be considered to ensure a sustainable and optimal
84 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
workforce reaping the benefits from a truly diverse and
and safety of the Group’s employees are critical and
inclusive organisation. Progress in this regard is actively
contribute to the sustainability of quality care to patients.
monitored on a regular basis by the Group and divisional
The programmes and procedures differ within the various
executive teams and reported annually to the Nomination
business units to mitigate health and safety risks.
Committee, which monitors progress holistically.
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 interests. To encourage a
performance-driven organisation, the Group rewards
employees for achieving strategic objectives as well as
performance targets. Benefits to employees may include
participation in a retirement fund and a medical aid
scheme. The Group further covers the liability insurance for
medical employee 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 as well as a
variable component.
Employee benefits and the value they add to the overall
employment proposition are key factors in attracting and
retaining proficient employees. Details of benefits offered
to permanent employees per division are included in the
2019 Sustainable Development Report.
Employee health and safety
The Group recognises the role it has to play toward
employee wellness. It 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 and building a more caring culture for its
employees by applying sound wellness practices.
Health and safety policies and procedures are in place
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
of the Group’s employment conditions.
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
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. These policies are also
available to all employees to ensure that they 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 2019 Sustainable Development Report.
Employee engagement
Since 2015, Mediclinic, in partnership with Gallup®, have
annually administered the Your Voice employee
engagement survey across all divisions to measure the
levels of employee engagement, identify gaps at a
departmental level and support line managers in
developing action plans to address engagement concerns.
In the last survey, the Group achieved an 82% (2017: 77%)
participation rate and 45% (2017: 40%) of employees
showed high levels of engagement, as illustrated on
page 80. The 2019 Your Voice survey identified principal
strengths and opportunities in terms of the employee
engagement levels of Mediclinic. Mediclinic Southern Africa
performs well on the basic engagement needs of
employees while Hirslanden and Mediclinic Middle East
across the Group to ensure a safe working environment for
perform well on the Management Support and Teamwork
the Group’s employees, patients and visitors. The health
levels of the Gallup® engagement hierarchy respectively.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 85
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
MATERIAL ISSUE 2: MINIMISING ENVIRONMENTAL IMPACT*
* This section does not include data pertaining to Clinique des Grangettes in Hirslanden.
HIGHLIGHTS
• Geothermal probes more than 250m below ground produce cooling and heat energy via heat pumps at
Hirslanden. As a result, Hirslanden Klinik Belair and Hirslanden AndreasKlinik facilities used up to 90% less gas than
the previous year and thus emitted considerably less carbon dioxide.
• Total consumption and intensity per bed day sold for energy decreased at Hirslanden.
• Total consumption and intensity per bed day sold for energy and water decreased in Mediclinic Southern Africa,
with Mediclinic Middle East consumption remaining stable.
• Waste diverted from landfill increased by 23% because of uncontaminated food waste being recovered as a
nutrient or for composting by some Mediclinic Southern Africa hospitals.
KEY PERFORMANCE INDICATORS
Unless indicated to the contrary, all environmental data reported is per calendar year. This is to ensure the accuracy of the
data reported and to align the reporting to the annual submission of reports to the CDP.
TOTAL CO2 EMISSIONS
(KG/BED DAY)
ENERGY CONSUMPTION (GJ/BED
DAY) (PER CALENDAR YEAR)
WATER USAGE (kℓ/BED DAY)
(PER CALENDAR YEAR)
Switzerland
11.7kg
(CDP 2018: 12kg)
Switzerland 0.450GJ
Switzerland 0.680kℓ
(2017: 0.458GJ/bed
day)
0.325GJ
(2017: 0.327GJ/bed
day)
1.278GJ
(2017: 1.202GJ/bed
day)
(2017: 0.649kℓ)
Southern
Africa
0.555kℓ
(2017: 0.594kℓ)
UAE**
1.640kℓ
(2017: 1.523kℓ)
Southern
Africa
106kg
(CDP 2017: 112kg)
Southern
Africa
UAE**
376kg
(CDP 2018: 220kg)
UAE**
WASTE RECYCLED (PER
CALENDAR YEAR)
Switzerland
284 tonnes
(2017: 586 tonnes)
Southern
Africa
1 229 tonnes
(2017: 1 202 tonnes)
UAE**
208 tonnes
(2017: 194 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 seven
hospitals, two day case clinics and 18 outpatient The extreme weather conditions in the UAE also negatively affects its energy and water
consumption, which is being managed through various initiatives. Mediclinic Middle East has begun working toward a comprehensive
energy and water use reduction plan for the year ahead to decrease overall consumption.
86 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
WHY THIS IS IMPORTANT TO THE
BUSINESS
Without natural resources, Mediclinic would not be able to
provide a service to its patients. The Group remains
RISKS TO THE BUSINESS
• Business interruptions due to water shortages
• Business interruption due to electricity supply
• Increased operational costs due to cost of electricity,
committed to reducing its impact on the environment and
water and healthcare risk waste
is constantly investigating opportunities to this end. Using
resources responsibly can also be a source of strategic
advantage for the Group, allowing it to manage and
contain its operating costs and ensure ongoing access to
water and energy supplies.
• Reputational damage
• Impact of Carbon Tax and Climate Change legislation
RISK MITIGATION
At Group level, the Board mandated both the Audit and
The Group’s main environmental impacts are the utilisation
Risk Committee and the Clinical Performance and
of resources, predominantly water and energy, electricity
Sustainability Committee to monitor the risk management
consumption, and the disposal of healthcare risk waste and
process and systems of internal control of the Group, and
healthcare general waste. During the year, water
to identify any opportunities for minimising environmental
conservation and waste disposal were top priorities as per
impact that may occur due to climate change. The
revised GRI Standards.
Regulatory changes, environmental constraints and climate
change, including rising costs; reduced access to facilities;
interruptions in service; and incidents of extreme weather
events due to climate change, could greatly affect
operations. Additionally, climate change can lead to water
shortages (especially in Southern Africa and the UAE) and
weather-induced pandemics and disease outbreaks which
could cause high mortality rates.
objective of Group risk management is to establish an
integrated and effective risk management framework
within which important risks are identified, quantified,
prioritised and managed to achieve an optimal risk/reward
profile. The ERM Policy defines the risk management
objectives, risk appetite and tolerance, methodology,
process and responsibilities of the various risk
management role players in the Group and is subject to
annual review. The Clinical Performance and Sustainability
Committee has the role of evaluating whether any risks or
During the period under review, there were no incidents of
climate-related difficulties provide opportunities for
material non-compliance with any environmental
minimising environmental impact within the Group. At
legislation, regulations, accepted standards or codes
asset or operational level, the Group has an Environmental
applicable to the Group, with no significant fines imposed.
Policy to identify aspects of business that could have a
LINK TO STRATEGY
• Improve efficiencies
KEY STAKEHOLDERS
• Patients
• Employees and medical practitioners
• Suppliers
• Governments and authorities
• Community
significant impact on the environment. All business
divisions within the Group are required to implement
environmental management systems such as the ISO 14001
standard and have it certified by an internationally
recognised body.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 87
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION OUR PLANET –
HIRSLANDEN
AT THE HIRSLANDEN ANDREASKLINIK, A GEOTHERMAL HEAT
PUMP CONTRIBUTES TO TEMPERATURE CONTROL BY PRODUCING
HEAT AND COLD IN AN ENERGY-EFFICIENT, SUSTAINABLE AND
ECONOMICAL MANNER. THE HEAT PUMP HAS BEEN SUPPLYING
CO2-FREE ENERGY FOR MORE THAN A YEAR.
SUSTAINABLE GROUND WORK
FINDINGS AFTER ONE YEAR
• 90% less natural gas burned in 2018, compared to 2017
• Heating costs for natural gas decreased by
CHF80 000 in 2018, compared to 2017
• 141mWh energy consumed in natural gas in 2018,
compared to 1 098mWh in 2017
• Consumption of fossil energy for heating per full-time
employee decreased to 675kWh/FTE (full-time
equivalent) at Hirslanden AndreasKlinik, compared to
the Hirslanden general average of 4 300kWh/FTE
The new heat pump is delivered via crane in April 2017.
Within the peaceful surroundings of Cham, the
How does a heat pump work?
unmistakable architecture of AndreasKlinik is easy
to locate. The hospital is well known for its obstetrics
and gynaecology expertise. But it is below this modern
facility that its latest accomplishment provides an
unseen but significant contribution to daily operations.
In principle, a heat pump works in the same way as a
refrigerator, but inversely. While a refrigerator extracts heat
from its interior and emits it to the outside, a heat pump
extracts heat from the outside and emits it to the facility as
heating energy.
The installation of a heat pump at AndreasKlinik in
July 2017 has resulted in significantly reduced costs
and energy consumption within only a year, with
further room for optimisation. As part of the
installation, 16 geothermal probes (also known as
borehole heat exchangers) were installed at a depth
of 250m, using approximately 17km of pipeline.
The heat pump has both hot and cold functionality, to a
large extent replacing the existing gas heating and
ensuring significantly lower CO2 emissions. The saving in
natural gas consumption is due to the fact that the heat
pump is able to single-handedly meet the bulk of the
energy requirements; cooling energy is simultaneously
generated and used to cool the MRI machines, even
in winter.
The new system replaced an existing chiller from 1995 and
a corresponding re-cooler located on the roof. A gas
heating system is still available to supplement the heat
pump at peak times.
In the case of Hirslanden AndreasKlinik, soil is used as an
environmental heat source. Heat from the geothermal probes
feed an evaporator and is then transferred to the heat pump.
As the refrigerant in the heat pump has a low boiling point,
the soil temperature is sufficient to quickly cause it to reach a
vaporous state. In the compressor, the steam is compressed
and thus heated. In the condenser, the hot steam finally
transfers its heat to the water circuit of the heating system.
The installed system offers both heating and cooling
functionality. When cold is produced, heat is generated and
vice versa.
In the cooling operation, the waste heat is transferred to the
heating system whenever possible. In heat pump operation,
the heat source from the geothermal probes is used. If no
heat is required in cooling operation, the waste heat can be
returned to the soil. This allows the geothermal probe field to
regenerate or heat up again and ensures that the soil does
not cool down completely and can be used sustainably to
generate heat when needed.
88 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
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 its processes and services.
Mediclinic Middle East is acutely aware of its commitment
to environmental sustainability and responsibilities. It
undertakes significant efforts to minimise the effects of its
operations on the environment and new projects have been
designed to incorporate the latest environmental
technology. Mediclinic Middle East is committed to
complying with UAE legislation and regulations concerning
the environment and issues related to climate change. It
promotes employee awareness on environmental
sustainability, waste reduction and energy saving.
Furthermore, the division has formulated key performance
indicators (“KPIs”) for environmental sustainability and has
included the development of environmental initiatives as
part of its strategic objectives.
Reduction of carbon emissions
The CDP is a global initiative measuring companies around
the world, their reporting on greenhouse gas emissions and
Hirslanden has committed itself to comply with the Swiss
climate change strategies. It is regarded as a global leader
legalisation concerning the environment, defines
in capturing and analysing data that record the business
programmes to continuously improve environmental
response to climate change, including management of risks
management and actively promotes its employees’
environmental awareness. Furthermore, Hirslanden
and opportunities, absolute emissions levels, performance
over time and governance. Participation and disclosure of
formulates targets to prevent environmental pollution and
the results are voluntary. The project was launched in
minimise the company’s effect on the environment.
South Africa in 2007 in partnership with the National
Suppliers and service providers are encouraged to
Business Initiative, in which JSE-listed companies are
implement environmental programmes to further restrict
measured. Mediclinic has participated in the project since
negative impact on the environment.
2008, initially only in respect of Mediclinic Southern Africa.
Mediclinic Southern Africa is committed to ensuring that its
environmental management systems and practices are
aligned with international best practices to safeguard its
reputation and provide assurance about the environmental
quality, safety and reliability of Mediclinic’s processes and
services. The ISO 14001:2015 Environmental Management
System encourages good management practices that limit
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.
the impact of industry on the environment and ensure legal
Financial optimisation calculations are implemented: Rising
compliance. The purpose of the system is to conserve
electricity costs have been an incentive to reduce
resources, use them effectively and minimise waste.
electricity consumption and resultant carbon emissions
Categories managed in the environmental aspect register
through investments in energy efficient equipment and
are the utilisation of resources and waste management,
alternative renewable energy sources.
which include electricity, water, gases, paper, healthcare
risk waste, hazardous waste and normal waste. Currently,
44 of Mediclinic’s 52 hospitals are ISO 14001 certified by an
external assurance provider (British Standards Institute), as
accredited by the UK Accreditation Services. All the
Group’s hospitals are ISO 14001 trained, follow the same
environmental management practices and are subject to
annual internal audits. Adhering to the system procedures
and processes is expected to reduce the likelihood and
With the assistance of external consultants, the divisions
measure their carbon footprint using the Greenhouse Gas
Protocol. These measures include in varying degrees:
• Direct emissions (scope 1 emissions), Mediclinic
Southern Africa-owned or -controlled equipment
(stationary fuels); air-conditioning, refrigeration gas
refills; anaesthetic and other gas consumption; ER24
emergency response vehicles; and fleet and pool
magnitude of the risk. Mediclinic Southern Africa has
vehicles (mobile fuels).
transitioned from ISO 14001:2004 to the 2015 revision of
• Indirect emissions from the consumption of purchased
the standard.
electricity (scope 2 emissions).
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 89
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
• Indirect emissions in the supply chain
The Group’s main environmental impacts are the utilisation
(scope 3 emissions), Mediclinic’s business travel
activities, its employee commuting, upstream and
downstream third-party distribution, the consumption
of office paper, electricity transmission and distribution
losses and waste are also included; 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.
of resources and waste which have a direct effect on
carbon emissions. Items listed in the aspect register
relating to regulatory compliance, water, electricity,
healthcare risk waste, hazardous waste, organic food
waste, waste to landfill paper usage, and gases not only
could have a significant impact on the environment, but
also informs strategy on climate change related risks and
opportunities.
The carbon emissions per division, reported per calendar
year, are reported in the Sustainable Development Report
as summarised in Figures 3–5.
FIGURE 3: TOTAL CARBON EMISSIONS (HIRSLANDEN) (PER CALENDAR YEAR)
Scope 1: Direct emissions (tonnes)
Scope 2: Indirect emissions from purchased
electricity (tonnes)
Scope 3: Indirect emissions from supply chain, business
travel and waste removal (tonnes)
TOTAL CO2e (tonnes)
CO2e/bed day (kg)
Intensity
2014
7 163
419
102
7 684
14
2015
6 743
2016
7 349
2017
6 317
389
389
837
102
7 234
13
84
7 822
13
n/a*
7 154
12
2018
6 376
415
n/a*
6 791
11.7
FIGURE 4: TOTAL CARBON EMISSIONS (MEDICLINIC SOUTHERN AFRICA)
ACTIVITY
Scope 1: Direct emissions
(tonnes)
Scope 2: Indirect emissions from
purchased electricity (tonnes)
Scope 3: Indirect emissions from
supply chain, business travel and
waste removal (tonnes)
Non-Kyoto Protocol emissions
(tonnes)
TOTAL CO2e (tonnes)
CO2e/full-time employee
CO2e/square meterage
CO2e/bed day (kg)
2013/14
FINANCIAL
YEAR
(CDP 2014)
2014/15
FINANCIAL
YEAR
(CDP 2015)
2015/16
FINANCIAL
YEAR
(CDP 2016)
2016
CALENDAR
YEAR
(CDP 2017)
2017
CALENDAR
YEAR
2018
CALENDAR
YEAR
21 869
22 999
23 841
24 687
24 193
22 422
151 156
154 035
159 571
156 781
149 109
143 338
35 062
33 382
36 037
49 488
47 270
43 063
6 952
6 419
3 966
5 236
2 841
5 236
215 039
216 834
223 415
236 192
223 413
214 059
13.567
13.326
0.335
0.320
13.273
0.313
14.026
0.299
115
111
111
–
117
13.680
0.274
112
13.279
0.254
106
90 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
FIGURE 5: TOTAL CARBON EMISSIONS (MEDICLINIC MIDDLE EAST)
Scope 1: Direct emissions (tonnes)
Scope 2: Indirect emissions from purchased electricity (tonnes)
Scope 3: Indirect emissions from supply chain, business travel and
waste removal (tonnes)
Non-Kyoto Protocol emissions (tonnes)
TOTAL CO2e (tonnes)
CO2e/bed day (kg)*
Intensity
2015/2016
FINANCIAL
YEAR
CDP 2016
2016/2017
FINANCIAL
YEAR
CDP 2017*
2018
CALENDAR
YEAR
CDP 2018**
1 731
12 148
3 464
621
17 964
226
–
5 594
19 892
4 722
3 476
33 684
220
4 191
38 371
7 656
3 561
53 779
376
* Since CDP 2017, the Mediclinic Middle East figures include the Al Noor business, whereas in previous years it only included the Dubai
business. These figures are therefore not directly comparable with those of previous years.
** Mediclinic Middle East figures are now based on calendar year 2018 rather than financial year. Data for 2018 includes acquisitions and the
new Mediclinic Parkview Hospital, as well as additional data which was previously not collected such as air conditioning, additional
business travel and third party vehicle consumption. The figures are therefore not directly comparable with those of previous years.
Energy efficiency
Electricity is the main contributor to the Group’s carbon
footprint. All of its divisions are taking steps to reduce their
electricity consumption intensity through the adoption of
ISO 14001:2015 environmental management standards. This
will lead to improved operational efficiency of technical
installations, the introduction of various new energy-
efficient and renewable technologies and changes in
employee behaviour regarding energy use.
The direct and indirect energy consumption per division,
for the periods as specified therein, is reported in the
2019 Sustainable Development Report.
Responsible water use
Access to fresh water is essential for all life on earth and a
human right recognised by the United Nations, yet this
precious resource is increasingly under pressure. The total
volume of water withdrawn from water utilities throughout
the Group, for the periods as specified therein, is reported
in the 2019 Sustainable Development Report.
During the reporting period, the Western Cape region had
its worst drought on recorded history. This resulted in
increased levels of water restrictions, water tariffs and the
threat of severe disruptions to water supply that
culminated in the proposition of “Day Zero”, when
municipal water supplies would be cut off and a quota
system implemented with reference to strategic businesses
and residences. This constitutes a substantive impact due
to the financial cost to mitigate against the risk. The
primary response was to establish a Water Resilience
Committee to govern the water usage affairs of the
11 hospitals located in the Western Cape region. Through
this committee, Mediclinic engaged with policy makers
and initiated various water augmentation initiatives and
strategies at the hospitals, as elucidated on below.
The division’s hospitals have installed dedicated water
meters with pulse monitoring capabilities, which meters are
linked to the SCADA monitoring systems. These systems
allow for the continuous monitoring of the water
consumption of the hospitals.
In Switzerland, there are no significant water shortages.
The three verification methods implemented to ensure the
Hirslanden’s water usage is supplied by the public water
accuracy and reliability of the electricity consumption,
utilities and all waste water is treated directly by the local
equally apply to water data.
municipalities and monitored locally by the group’s
hospitals. Various measures are in place to monitor and
reduce water consumption throughout the division, such as
the installation of water-flow limiters at water taps, the
replacement of kitchen dishwashers and the insertion of
water-saving valves in the toilets.
Through the ISO 14001:2015 Environmental Management
System, water consumption of the hospitals is measured
and verified. The total water consumption decreased by
77 355kℓ from 1 185 271kℓ in 2017 to 1 107 916kℓ in 2018
(6.53%). The drive in changing human behaviour via the
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 91
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
ISO 14001:2015 Environmental Management System and
Mediclinic Middle East utilises various measures to minimise
the recent drought in the Western Cape was the biggest
water consumption, such as reclaiming water from steam
contributor to the reduction in water consumption.
sterilisers and all air-handling units for redistribution to
The water consumption intensity is calculated in litres per
bed day sold. The water consumption intensity decreased
from 0.594kℓ/per bed day sold in 2017 to 0.555kℓ/per bed
day sold in 2018; this is a reduction of 0.039kℓ/per bed day
sold (6.57%).
Bulk water storage facilities have been installed at hospitals
and boreholes were sunk for strategic sustainability.
Planned maintenance procedures have been implemented
for the measurement and control of water quality. We have
instituted initiatives to reduce water consumption, which
gardens and other non-clinical areas; monitoring of hot
water consumption to reduce energy on hot water tanks,
installing of control sensors on taps in hospital wards and
reducing the pressure of water points. Water consumption is
monitored at each unit and action taken to further reduce
consumption where required. Total water consumption per
bed day has increased by 7.68% in the past year.
Safe waste and hazardous waste
management
Stringent protocols are followed to ensure that refuse
include employee awareness training and monitoring of
removal within the Group complies with all legislation,
uncontrolled leakages. Furthermore, we have installed
regulations and by-legislation. The Group regards the
efficient technologies such as water-saving instrument
handling of waste in an environmentally sound, legal and
washers, water-saving washing machines for laundry, and
safe manner as its ethical, moral and professional duty.
water-saving autoclaves. Certain hospitals also facilitate
During the reporting period, there were no incidents at the
the recycling of autoclave water.
Group’s facilities or offices leading to significant spills.
92 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
MATERIAL ISSUE 3: BEING AN ETHICAL AND RESPONSIBLE CORPORATE
CITIZEN
HIGHLIGHTS
• Anonymous independent ethics lines at all 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
• Mediclinic Southern Africa performed over 120 pro bono procedures on public patients as part of the second year
of collaboration with provincial health structures
KEY PERFORMANCE INDICATORS
CALLS TO ETHICS LINES*
INVESTMENT IN CAPITAL PROJECTS
AND NEW EQUIPMENT (DIVISIONS)
INVESTMENT IN REPLACEMENT OF
EQUIPMENT AND PROPERTY
UPGRADES (DIVISIONS)
Switzerland
25**
(2018: 21)
Southern
Africa
110
(2018: 97)
UAE
19
(2018: 10)
Switzerland CHF55m
Switzerland CHF40m
(2018: CHF47m)
(2018: CHF82m)
Southern
Africa
R506m
(2018: R423m)
Southern
Africa
R672m
(2018: R634m)
UAE
AED376m
(2018: AED358m)
UAE
AED76m
(2018: AED31m)
* Fifteen high-priority cases were reported to the Group’s ethics lines during the year, five have been investigated and closed, while 10 are
still under investigation.
** This figure does not include reference to Clinique des Grangettes.
EXPENDITURE ON REPAIRS AND
MAINTENANCE (DIVISIONS)
CONTRIBUTION TO CSI
TRANSFORMATION
(SOUTH AFRICA)
Switzerland CHF41m
Switzerland CHF2.1m
(2018: CHF40m)
(2018: CHF2.3m)
Southern
Africa
R262m
(2018: R219m)
Southern
Africa
R27.7m
(2018: R29.3m)
Percentage
black
employees
72.8%
(2018: 72.1%)
29.0%
(2018: 29.4%)
Percentage
black
management
employees
UAE
AED33m
(2018: AED42m)
UAE
AED1.4m
(2018: AED1.0m)
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 93
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
WHY THIS IS IMPORTANT TO
THE BUSINESS
Governance and corporate social responsibility (“CSR”) 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:
• enforces good corporate governance standards
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 divisions, Directors and
employees within the Group. These include the Ethics
Code, the ERM Policy, the Fraud Risk Management Policy,
the 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.
These policies are intended to create a culture within the
Group where ethical values are displayed on a day-to-day
basis. It encourages employees to act transparently and be
vigilant for any suspicious or unethical behaviour. These
policies provide clear guidelines and frameworks to assist
in achieving set objectives, for example, compliance with
applicable legislation and regulations. The policies are
LINK TO STRATEGY
Although not directly linked to any particular Group
strategic priority, governance and CSR 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 the regulatory
environment
• Financial and reputational damage caused by poor
governance, unethical practices and inadequate risk
management
• Reputational damage at local community level due to
inadequate community involvement
MITIGATION OF RISKS
• 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 various company
secretarial and legal departments within the Group
communicated to all relevant employees and where
• Group Compliance and Data Protection Manager
necessary training is provided. The enhanced training
appointed to implement compliance framework and
and awareness of Group policies are planned for the
monitor compliance maturity
year ahead.
• Monitoring of CSI initiatives by senior management,
with feedback to the Clinical Performance and
Sustainability Committee
94 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OUR PURPOSE –
MEDICLINIC
SOUTHERN
AFRICA
THROUGH A NUMBER OF
PLANNED COLLABORATIONS
BETWEEN MEDICLINIC SOUTHERN
AFRICA AND PROVINCIAL
HEALTH STRUCTURES, THE
DIVISION HAS BEEN ABLE TO
PLAY AN IMPORTANT ROLE
IN DEVELOPING WORKABLE
SOLUTIONS TO SOME OF THE
CHALLENGES FACING THE SOUTH
AFRICAN HEALTHCARE SECTOR.
COLLABORATING TO
MAKE A DIFFERENCE
In 2018, surgeries offered as part of Public
Private Initiatives have expanded to include knee
surgery for athletes at Mediclinic Milnerton.
To ensure a viable future for healthcare in South Africa, it is
surgeries: “With an increasing acute load due to trauma,
imperative for all healthcare players to engage with one
providing elective surgeries has in recent years become
another – private and public alike. Through its involvement in
increasingly sought after. Trauma cases demand
public private initiatives, Mediclinic Southern Africa now has
prioritisation, thus pushing back elective surgery. Also within
the opportunity to add value beyond its traditional patient
the context of diminishing resources, this is a welcome
base and values the opportunity to draw alongside
chance to catch up some of the elective surgeries and
provincial health structures to seek practical means to
improve the quality of life of our patients.”
support and strengthen the work already being done in the
public sector. The aim of these partnerships is to help
broaden access to quality healthcare while alleviating the
heavy burden of long public surgery waiting lists.
To date, Mediclinic has partnered with the provincial health
structures in several provinces, including the Western Cape,
Limpopo, Free State, KwaZulu-Natal and Gauteng. Initially
surgeries included cataracts, ear, nose and throat and
urology procedures, but in the prior year the success of the
association has allowed for expansion to include cleft palate,
knee surgery, as well as unique procedures such as deep
brain stimulation.
Over the past 24 months, Mediclinic has facilitated free
surgical procedures for more than 200 public-sector
patients. The Mediclinic surgical facilities, nursing employees
and expertise from Mediclinic-associated medical
practitioners are provided free of charge in collaboration
with the local public-sector hospitals.
“We’ve been trying to get help for eight years. Medical aids
did not want to help us because they said the surgery is
cosmetic. For my daughter the cleft palate surgery is
life-changing. It’s not cosmetic for us,” said her father. “The
pro bono surgeries we are performing are about more than
just repairing external features – they are about changing
lives,” says Dr Sharan Naidoo, a maxillofacial and oral
surgeon at the same hospital. “I am passionate about giving
opportunities to these families where they have had to wait
for surgery for their children. There is huge pressure on state
facilities and our partnership will allow a measure of relief for
their waiting lists.”
“In Limpopo province we find it difficult to attract specialist
doctors,” says Dr Ntodeni Ndwamato, acting Deputy
Director-General for Tertiary Health Services and Academic
Development at the Limpopo Department of Health. “This
means patients can wait years to receive treatment. We
appreciate the effort Mediclinic has made to reach out into
the community. They supply the expertise and consumable
Dr Nomafrench Mbombo, Head: Department of Health
materials required to really give these patients a better
Western Cape, explains the importance of these types of
quality of life.”
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 95
SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
POLICY, APPROACH AND
PERFORMANCE
Ethics, anti-bribery and
anti-corruption
The Group’s commitment to ethical standards is set out in
the Group’s values, and is supported by the Group’s Ethics
Code as well as its Anti-bribery Policy, available on the
Company’s website at www.mediclinic.com. The Ethics
Code provides a framework for the standards of business
conduct and ethics that are required of all business
divisions, Directors and employees. The Ethics Code
A summary of the Group’s approach to clinical ethical
issues, are set out in the Clinical services overview on
page 41.
During the period under review, there were no incidents of
material non-compliance with the Ethics Code, Anti-bribery
Policy or any legislation, regulations, accepted standards or
codes applicable to the Group concerning antitrust matters
or matters relating to corruption and bribery, with no
significant fines being paid in this regard.
Cost of healthcare
The Group contributes in various ways to a sustainable
is available to all employee and is included in new
healthcare system by, inter alia, focusing on efficiency and
employee inductions.
The Group adopts zero-tolerance to unethical business
conduct, including bribery, fraud and corruption.
Any employee or external stakeholder is able to report any
wrongdoing throughout the Group in confidence to the
ethics lines. All reports are dealt with in a non-discriminatory
manner and any person making use of the independent
ethics lines has the option to remain anonymous. No form
of retaliation against an employee or other person making
a report in good faith shall not be tolerated. A dedicated
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:
• refining the classification and matching of products
used across all its divisions to compare prices and drive
ethics contact person per division is available to deal with
procurement strategies;
matters pertaining to the Ethics Code. The number of calls
• procurement spend management and development of
received through the Group’s ethics lines is indicated on
KPIs to measure procurement value;
page 93. All complaints are investigated in accordance with
the Ethics Code. Over the years, the majority of calls were
• concluding global contracts with key multi-national
suppliers to reduce prices and efficiencies related to
of a grievance nature. Only in exceptional cases has
surgical products and implants;
information been received that has led to the discovery of
• Hirslanden entering into a collaboration agreement with
unethical, corrupt or fraudulent behaviour.
Sana Kliniken AG to increase buying power;
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. This policy
prohibits the direct sponsorship of supplier and/or third
party events, ensuring that all such sponsorships are
administered and overseen by the relevant division.
The Group’s Fraud Risk Management Policy facilitates the
development of controls for the prevention of fraud and
corruption. Feedback on ethics and fraud is provided to
the Audit and Risk Committee at every meeting, with
regular feedback to the Clinical Performance and
Sustainability Committee.
Further details regarding the Group’s management of
these matters are included in the report on Risk
management, principal risks and uncertainties on
page 55 and the Audit and Risk Committee Report
on page 136.
• better prices through pooling of capital equipment
purchases across the three divisions;
• direct importing and distribution of more cost-effective
surgical and consumable products; and
• adopting a total cost of ownership approach when
concluding transactions to include operational costs.
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
criteria play an important role in selecting suppliers, such
as: compliance with applicable international and local
quality standards, price, compliance with appropriate
96 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
specifications suited to the Group’s markets, stability
of the organisation and the relevant equipment brand,
vast landscape of data protection legislation and
regulations, creates a dynamic and complex environment.
good-quality and cost-effective solutions, support network,
technical advice and training philosophy.
The availability of products and services is imperative to
enable the Group to deliver quality care to its patients, and
therefore an important criterion in its supplier selection
process although not always the case, this often leads to
local suppliers being preferred, which adds to better
and faster service delivery and knowledge of local
legislation and regulations, particularly with regard to
pharmaceutical products.
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 well as on the repair and maintenance of
existing property and equipment. Refer to the key
performance indicators on page 93 and to the
Chief Executive Officer’s Review, the Divisional Reviews
and Our strategy, goals and progress included in the
remainder of the 2019 Annual Report.
Hospitals are high-risk environments in which complex
treatment processes are executed using sophisticated
equipment and techniques. The process of external
accreditation ensures that international standards are
adhered to in all aspects of hospital operations. For more
details on accreditation, please refer to the 2019 Clinical
Services Report, available on the Company’s website at
www.mediclinic.com.
Information and cybersecurity
Information and cybersecurity are paramount in enabling
Mediclinic to conduct its business in a safe and secure
manner. The need is even greater because Mediclinic is in
the healthcare industry, where ensuring data privacy is an
imperative.
To this end, the Group has established an information
security and cybersecurity programme. Some of the key
objectives of the programme are:
• to implement effective measures and controls;
• increase end-user education and threat awareness
levels; and
• provide ongoing assurance toward reduced risk levels
and increased compliance.
The programme is executed at a divisional level. Each
division has well-established ICT structures and is governed
from a central point through the Group Information
Security Committee, represented by dedicated divisional
Information Security Officers. This Group Information
Security Committee annually reviews the
security programme to stay vigilant against cyber attacks
thereby reducing the inherent risks associated with
information security and cybersecurity.
Several international standards are subscribed to in
order to shape, maintain and continuously enhance the
Group’s security programme, including those contained in
Control Objectives for Information Technology (“CoBIT”),
ISO27001/27002/27799 security standards, Centre for
Internet Security and National Institute of Standards and
Technology control frameworks. Information security and
cybersecurity policies are reviewed annually to ensure
alignment with legislative requirements in the different
jurisdictions where the Company operates. In addition,
various mechanisms are used to ensure that information
security and cybersecurity remains relevant, such as
management self-assessments, independent security
reviews, internal and external audits and management
oversight processes.
Overall ICT risk profiles, reviews, outcomes, actions and
remediation plans are maintained and tracked through a
central risk management system. Risk management of ICT
and information security forms part of the Group’s ERM
process and regular assessments ensure that risks
associated with information security and cybersecurity are
appropriately highlighted, positioned and prioritised within
the Group.
Mediclinic and its divisions operate by way of an inter-
connected international network, with localised data
networks in each of the jurisdictions. The extensive ICT
landscape and associated information assets, the
The Group’s information and cybersecurity programme is
supported by both the Board and the Group Executive
Committee and is overseen by the Group’s ICT
Management Committee, which comprises the Group CIO
continuously increasing threat to data security, and the
and divisional CIOs.
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STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SUSTAINABLE DEVELOPMENT
OVERVIEW (CONTINUED)
Privacy and Data Protection
Mediclinic is committed to conducting its business in
accordance with all applicable data protection legislation
as may apply from time to time in the various divisions as
well as other jurisdictions that apply to Group
companies. Maintaining and respecting the privacy of
employees, Directors, patients, affiliated medical
practitioners, suppliers and stakeholders remains priorities.
Mediclinic has reaffirmed its commitment to protecting the
personal data of its stakeholders by embarking on a
group-wide data privacy project to align and ensure
compliance with relevant data protection legislation, as
may be applicable in the various countries of operation,
including the EU’s GDPR. The Group Privacy and Data
Protection Policy has been aligned to the GDPR standards
and various initiatives have commenced to ensure that core
components maintain their compliance status as it was
at 25 May 2018, which is the date the GDPR came into
Respecting human rights
The Group is committed to conducting its business in a
manner that respects and promotes the human rights and
dignity of people and avoids involvement in human rights
abuses throughout its operations and relationships. This
commitment is entrenched in the Group’s Ethics Code,
which is further supported by the Group’s commitment to:
• 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;
effect. During the project rollout to the rest of the Group,
• value diversity and equal opportunities for all in the
compliance to applicable data protection legislation is
workplace; and
ensured through customisation of the standardised
• not tolerate any form of unfair discrimination, such as
project plan.
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. Personal data flow across country borders are
relating to access to employment, career development,
training or working conditions, based on gender, age,
religion, nationality, race/ethnic origin, language,
HIV/Aids status, family status, disability, sexual
orientation or other form of differentiation.
dealt with through formal arrangements in line with
Modern slavery and human trafficking
country-specific legislation. There were no material data
breaches reported during the year under review.
The Group has appointed Data Protection Managers in
each of its divisions as well as at its Corporate Office to
ensure compliance to the Group Privacy and Data
Protection Policy and successful integration of data privacy
into all its operations.
Support of external training
institutions
The Group is committed to educational development in all
The Mediclinic Modern Slavery and Human Trafficking
Statement, which is available on the Company’s website at
www.mediclinic.com, sets out the steps Mediclinic has
taken to prevent any form of modern slavery and human
trafficking, which includes any direct form of forced labour
or child labour in its business, or indirectly through its
supply chain. During the year, Mediclinic has developed
additional steps to strengthen its position in monitoring
slavery and human trafficking activities, to ensure that
these practices are not taking place in its supply chains.
Diversity
three divisions and provides financial and other necessary
The Group values diversity and provides equal
support toward advancing healthcare education.
opportunities in the workplace, a matter which has
received significant 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 reports to members of those
governing bodies, are provided in the Corporate
Governance Statement on page 114 and the Nomination
Committee Report on page 154. Please also refer to the
2019 Sustainable Development Report for more
information.
98 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Broad-based black economic empowerment
(South Africa)
Mediclinic Southern Africa’s commitment to transformation
within the South African context has culminated in a
comprehensive review of its transformation strategy.
Mediclinic has embarked on a transformation journey which
is to embed a transformation strategy encompassing
diversity and inclusivity to meet business imperatives while
ensuring that legislative compliance is maintained.
Mediclinic Southern Africa believes that Broad-Based Black
Emiratisation (UAE)
Due to the expatriate nature of the population in the UAE
the workforce of Mediclinic Middle East includes staff from
multiple nationalities and cultures and therefore the current
focus is more on gender diversity, especially at managerial
level. The UAE Government is driving a program called
Emiratisation to promote the employment of UAE nationals
in the private sector. Mediclinic Middle East has specific
Emiratisation strategies aimed at the employment of UAE
nationals with specific targets set for business units at
Economic Empowerment is not simply aimed at redressing
division level.
the wrongs of the past, but a pragmatic growth strategy
that aims to realise the country’s full economic potential.
Mediclinic Southern Africa’s five-year (2018–2022)
employment equity plan was approved by the Department
of Labour in November 2018. The summarised employment
equity report is included in the 2019 Sustainable
Development Report.
The number of black employees increased year-on-year
from 72.1%to 72.8% of total employees; and black
management representation increased from 11.0% in 2006
to 29.0% in 2019, with a slight decrease between 2018 and
2019 (2018: 29.4%), based on Mediclinic Southern Africa’s
financial reporting period although the decrease in
percentage does not imply a decrease in heads as far as
black managers are concerned.
Corporate social investment
The Group contributes to the well-being of the communities
within which it operates by investing in continuing initiatives
that address socio-economic problems or risks. It has
established itself as an integral member of these
communities, enriching the lives of many communities
throughout Switzerland, Southern Africa and the UAE.
The Group’s CSI activities are structured around the
improvement of healthcare through training and education,
sponsorships, donations, employee volunteerism, public
private initiatives and joint ventures. Many of the Group’s
initiatives relate to providing training and to the financial
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.
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MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 99
NON-FINANCIAL
INFORMATION
STATEMENT
The table below sets out where stakeholders can find information in the Strategic Report that relates to non-financial
matters detailed under Section 414CB of the UK Companies Act 2006 (the “Act”). Further details on all these matters can
be found in the 2019 Sustainable Development Report, as well as policy documents, available on the Company’s website
at www.mediclinic.com.
NON-FINANCIAL MATTER
THE RELEVANT POLICIES
Business model
n/a
Principal risks
ERM Policy
WHERE TO READ MORE
IN THIS REPORT ABOUT
OUR IMPACT
• Business model
• Our strategy, goals and
progress
Risk management, principal
risks and uncertainties
Environmental matters
• Group Sustainable
Development Policy
• Our strategy, goals and
progress
• Group Environmental Policy
• Sustainable development
Employees
• Ethics Code
• Health and safety policies
and procedures
• Employee relations policies
• Board Diversity Policy
• Diversity and Inclusion
Framework
Social matters
Purpose
overview - Material issue 2:
Minimising environmental
impact
• Chairman’s Statement
• Business model
• Our strategy, goals and
progress
• Sustainable development
overview - Material issue 1:
Developing an engaged and
productive workforce
• Corporate Governance
Statement – employees
• Corporate Governance
Statement – slavery and
human trafficking
• Business model
• Our strategy, goals and
progress
PAGE
REFERENCE
16
18
55
18
86
12
16
18
80
131
128
16
18
Respect for human rights
• Modern Slavery and Human
• Sustainable development
76
Trafficking Statement
• Diversity and Inclusion
Framework
overview
• Throughout the Sustainable
From 76
development overview
100 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
NON-FINANCIAL MATTER
THE RELEVANT POLICIES
WHERE TO READ MORE
IN THIS REPORT ABOUT
OUR IMPACT
PAGE
REFERENCE
Anti-corruption and anti-bribery
matters
• Code of Ethics
• ERM Policy
• Fraud Risk Management
Policy*
• Regulatory Compliance
Policy
• Anti-bribery Policy*
• Group Privacy and Data
Protection Policy
* This policy includes anti-
corruption matters.
Non-financial KPIs
n/a
• Our strategy, goals and
progress
• Sustainable development
overview – Material issue 3:
Being an ethical and
responsible citizen
• Company culture
• Clinical services overview
• Sustainable development
overview
18
93
7
41
76
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 101
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 102 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
GOVERNANCE AND
REMUNERATION
CHAIRMAN’S INTRODUCTION
The Board and management team of Mediclinic are
committed to maintaining strict principles of corporate
his successor in both roles from this date. Succession will
continue to be a key priority for the Nomination Committee
and for the Board, including non-executive Directors.
governance and the highest standards of integrity and
The key elements of the Company’s governance structures
ethics which are embedded in the Company’s corporate
culture and values. Mediclinic’s corporate governance
structures support effective strategy delivery and are
focused on building and maintaining a sustainable
business. It also supports the Company’s commitment to
responsible corporate citizenship in every country and
community in which it operates.
In the Corporate Governance Statement that follows,
feedback is given on the governance framework, as well as
on meetings, principal activities, composition and diversity
of the Board and on measures taken to ensure the Board’s
accountability to wider stakeholders. Every Director
demonstrated commitment to Mediclinic throughout the
year through their meeting attendance and the high quality
of their contributions at those meetings. The Nomination
Committee and the Board continued to demonstrate their
commitment to succession planning during the year and
targeted diverse pools of talent from which to recruit the
right individuals. This was demonstrated with the
appointment of Dr Ronnie van der Merwe as CEO
successor to Mr Danie Meintjes from 1 June 2018 and the
appointment of Dr Anja Oswald as an independent
non-executive Director in July 2018. Further, the continued
involvement of Mr Meintjes as a non-executive Director
from 1 August 2018 has reinforced the Board’s view that his
move from executive to non-executive Director continues
to be in the best interests of the Group, its shareholders
include:
• managing the business in a sustainable manner;
• ensuring good clinical outcomes and quality healthcare;
• upholding strict principles of corporate governance,
integrity and ethics;
• maintaining effective risk management and internal
controls;
• engaging with stakeholders; and
• offering employees competitive remuneration packages
based on the principles of fairness and affordability.
Further details are included in this Annual Report, as well
as in the Clinical Services Report and the Sustainable
Development Report available on the Company’s website
at https://investor.mediclinic.com/results-centre/
results-and-reports.
I remain confident that the Board, supported by an
effective management team and governance structure, is
well placed to continue to drive long-term value for
stakeholders and maintain Mediclinic’s leading position in
the international healthcare market.
As mentioned in the report that follows, the Financial
Reporting Council (“FRC”) published the 2018 UK
Corporate Governance Code (“2018 Corporate
Governance Code”) in July 2018 which will apply to
Mediclinic in respect of the 2019/2020 financial year. The
and other stakeholders in view of the wealth of knowledge
Board has reviewed the new requirements and welcomes
and experience he has gained over his 30 years at
its focus on the themes of corporate and Board culture,
Mediclinic.
stakeholder engagement and sustainability.
The above changes represent key steps in a phased
succession plan, further demonstrated by the planned
retirement of Mr Desmond Smith as Senior Independent
Director (“SID”) and Chairperson of the Audit and Risk
Committee at the conclusion of the Company’s AGM
on 24 July 2019 and the nomination of Mr Alan Grieve as
Dr Edwin Hertzog
Non-executive Chairman
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 103
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BOARD OF
DIRECTORS
The committee memberships of the Directors provided herein are as at Wednesday, 22 May 2019
(the “Last Practicable Date”).
1
3
DR RONNIE VAN DER MERWE
Chief Executive Officer
Nationality: South African
DR EDWIN HERTZOG
Non-executive Chairman
Nationality: South African
2
MR JURGENS MYBURGH
Chief Financial Officer
Nationality: South African
4
MR DESMOND SMITH
Senior Independent Director
Nationality: South African
104 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
1
DR EDWIN HERTZOG
Committee memberships: Clinical Performance and Sustainability Committee, Investment Committee (Chairperson),
Nomination Committee (Chairperson)
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 Ltd in 2016, he
served as a Director of Mediclinic International Ltd 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. Three years later, in 1986, Mediclinic International Ltd (then Medi-Clinic Corporation Ltd) was listed
on the JSE Ltd (then Johannesburg Stock Exchange). He was appointed as the first Managing Director of Mediclinic
International Ltd 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 Stellenbosch University.
Qualifications: Dr Hertzog holds an MBChB (Stellenbosch University); the FCA (SA) (Fellowship of the College of
Anaesthetists of South Africa); and a PhD in Philosophy honoris causa (Stellenbosch University).
* Dr Hertzog’s non-executive directorship of Remgro, as reported above, constitutes his other significant commitments for
the purposes of Provision B.3.1 of the Corporate Governance Code.
2
DR RONNIE VAN DER MERWE
Committee memberships: Clinical Performance and Sustainability Committee, Investment Committee
Dr Ronnie van der Merwe is a specialist anaesthetist who worked in the medical insurance industry before joining the
Company in 1999 as Clinical Manager. He established the Advanced Analytics, Clinical Information, Clinical Services and
Health Information Management functions at Mediclinic, and subsequently served as the Group’s Chief Clinical Officer.
He was appointed as an executive Director of Mediclinic International Ltd in 2010 up to the acquisition of Al Noor Hospitals
Group plc. He was appointed as an executive Director and CEO of Mediclinic, with effect from 1 June 2018 and has also
served on Spire’s Board of Directors as a non-executive Director from 24 May 2018.
Qualifications: Dr Van der Merwe holds an MBChB (Stellenbosch University); a DA (SA) (College of Anaesthetists of
South Africa); the FCA (SA) (Fellowship of the College of Anaesthetists of South Africa); and completed the AMP
(Harvard Business School).
3
MR JURGENS MYBURGH
Committee membership: Investment Committee
Mr Jurgens Myburgh was appointed as an executive Director and Chief Financial Officer (“CFO”) of the Company on
1 August 2016. Prior to joining Mediclinic, he served as CFO at Datatec Ltd, an international ICT group, and before that, as
Executive Vice President of Investment Banking at The Standard Bank of South Africa Ltd.
Qualifications: Mr Myburgh holds a BComm Hons in Accounting (University of Johannesburg) and is a qualified
Chartered Accountant registered with the South African Institute of Chartered Accountants.
4
MR DESMOND SMITH
Committee memberships: Audit and Risk Committee (Chairperson), Nomination Committee
Mr Desmond Smith was appointed as an independent non-executive Director of the Company on 15 February 2016 upon the
successful combination of the businesses of the Company (then Al Noor Hospitals Group plc) and Mediclinic International Ltd. Prior
to the combination, he served as an independent non-executive Director of Mediclinic International Ltd from 2008 and as the lead
independent director from 2010. He currently holds the position of Chairman at the Reinsurance Group of America (South Africa)
(“RGA”). He was the CEO of the Sanlam Group (“Sanlam”) from 1993–1997 and of RGA from 1999–2005. He was also Chairman of
Sanlam from 2009–2017. 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).
Qualifications: Mr Smith holds a BSc (Stellenbosch University); has completed the International Senior Management
Programme (Harvard Business School); and is a fellow of the Actuarial Society of South Africa.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 105
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION BOARD OF DIRECTORS (CONTINUED)
5
7
DR MUHADDITHA AL HASHIMI
Independent Non-executive Director
Nationality: Emirati
6
MR JANNIE DURAND
Non-executive Director
Nationality: South African
MR ALAN GRIEVE
Independent Non-executive Director
Nationality: British and Swiss
8
DR FELICITY HARVEY CBE
Independent Non-executive Director
Nationality: British
106 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
5
DR MUHADDITHA AL HASHIMI
Committee membership: Clinical Performance and Sustainability Committee
Dr Muhadditha 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, a member of
the Board of Trustees of the UAE Nursing and Midwifery Council and the UAE Genetics Diseases Association. She is currently
the Chairperson of Sharjah Private Education Authority, UAE. Prior to her current position, Dr Al Hashimi was the Campus
Director of Higher Colleges of Technology Sharjah Women’s and Men’s Colleges in the UAE. In addition, 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 Affairs at the Higher Colleges of Technology; CEO of the Mohammed Bin Rashid Al Maktoum Academic Medical
Centre in Dubai; CEO of Dubai Healthcare City; and the Director of Education of the Harvard Medical School Dubai Centre.
Qualifications: Dr Al Hashimi holds a BS in Medical Technology (University of Minnesota); an MSc in Clinical Laboratory
Services (University of Minnesota); and a DrPH in Public Health (University of Texas).
6
MR JANNIE DURAND
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 Ltd in 2016, he served as a
non-executive Director of Mediclinic International Ltd from 2012. He joined the Rembrandt group in 1996 and in 2012 was
appointed as the CEO of Remgro Ltd, 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 Ltd, RCL Foods Ltd and RMI Holdings Ltd.
Qualifications: Mr Durand holds an BAcc Hons in Accountancy (Stellenbosch University); an MPhil in Management Studies
(Oxford University); and is a qualified Chartered Accountant registered with the South African Institute of Chartered
Accountants.
* Mr Pieter Uys, the Head of Strategic Investment at Remgro Ltd, is appointed as the alternate to Mr Durand,
effective 7 April 2016. Prior to joining Remgro Ltd, Mr Uys was a founding member and ultimately became the
CEO of the Vodacom Group.
Qualifications: Mr Uys holds an MEng in Electronic Engineering (Stellenbosch University) and an executive MBA
(Stellenbosch University).
7
MR ALAN GRIEVE
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 and will succeed
Mr Desmond Smith as Senior Independent Director at the end of the AGM on 24 July 2019. Prior to the combination of the
businesses of the Company (then Al Noor Hospitals Group plc) and Mediclinic International Ltd in 2016, he served as an
independent non-executive Director of Mediclinic International Ltd from 2012 and as a Director of Mediclinic Switzerland AG
(now Hirslanden AG) from 2008–2012. He served as CFO of Reinet Investments Manager S.A. and Reinet Fund Manager S.A.
from 2008–2011 and CEO from 2012 until he retired in 2014. He remains on the boards of both companies as a non-executive
Director. He served as Company Secretary of Richemont, the Swiss luxury goods group, from 1998–2004 and as Director of
Corporate Affairs from 2004–2014. Prior to joining Richemont’s predecessor companies in 1986, he worked with the
international auditing firms now known as PricewaterhouseCoopers and EY.
Qualifications: Mr Grieve holds a BA Hons Business Administration (Heriot-Watt University) and is a member of the
Institute of Chartered Accountants of Scotland.
DR FELICITY HARVEY CBE
8
Committee memberships: Clinical Performance and Sustainability Committee (Chairperson), Nomination Committee
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 Chair of the World Health
Organization 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
Officer of the Department of Health for England. Dr Harvey was appointed CBE in 2008.
Qualifications: Dr Harvey holds an MB BS (St. Bartholomew’s Medical College, University of London); a PgDip in
Clinical Microbiology (The Royal London Hospital College, University of London); an MBA (Henley Management College);
and is an honorary fellow of the Royal College of Physicians and a fellow of the Faculty of Public Health.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 107
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
BOARD OF DIRECTORS (CONTINUED)
9
11
MR SEAMUS KEATING
Independent Non-executive Director
Nationality: Irish
10
MR DANIE MEINTJES
Non-executive Director
Nationality: South African
DR ANJA OSWALD
Independent Non-executive Director
Nationality: Swiss
12
MR TREVOR PETERSEN
Independent Non-executive Director
Nationality: South African
108 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
9
MR SEAMUS KEATING
Committee memberships: Audit and Risk Committee, Clinical Performance and Sustainability 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 Ltd in 2016. He has over 20 years’ experience in the
global technology sector in finance and operational roles, and was a main board Director of Logica plc from 2002–2012. He was
CFO of Logica plc from 2002–2010 when he became CEO and head of its Benelux operations. Prior to his role at Logica plc,
he worked for the Olivetti Group in senior finance roles in the UK and Italy. He served as non-executive Director and Chairman
of the audit committee of Mouchel plc from November 2010–2012. He is currently Chairman of First Derivatives plc,
a non-executive Director of BGL Group Ltd and a non-executive Director of Mi-pay Group plc.
Qualifications: Mr Keating is a fellow of the UK Chartered Institute of Management Accountants.
10
MR DANIE MEINTJES
Committee membership: Investment Committee
Mr Danie Meintjes served as the CEO of Mediclinic from 2010 up to his retirement on 1 June 2018, remaining on the Board as
an executive Director until 31 July 2018. He currently serves as a non-executive Director, effective 1 August 2018, and as the
designated non-executive Director for workforce engagement, effective 1 April 2019. He was appointed as an executive
Director and CEO 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 Ltd in 2016, he served as the CEO of Mediclinic International Ltd
from 2010. He has served in various management positions in the Remgro group before joining Mediclinic 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 CEO of Mediclinic Middle East in 2007. Mr Meintjes serves as a non-executive Director of Capitec Bank
Holdings Limited and Capitec Bank Limited. He served as a non-executive Director of Spire Healthcare Group plc from 2015,
a position from which he retired on 24 May 2018.
Qualifications: Mr Meintjes holds a BPL Hons in Industrial Psychology (University of the Free State) and completed the
AMP (Harvard Business School).
11
DR ANJA OSWALD
Committee memberships: Nomination Committee, Remuneration Committee
Dr Anja Oswald was appointed as an independent non-executive Director of the Company on 25 July 2018. She is the CEO of
the Klinik Sonnenhalde, a well-established private clinic for psychiatry and psychotherapy with inpatients, day-care clinics and
outpatients in Riehen, Switzerland, and is President of the Association of Private Hospitals in Basel. She is also a board member
of Integrierte Psychiatrie Winterthur in Canton Zürich and of the Alliance for a Free Health Care System in Switzerland. Prior to
this, she was Head of Medical and Pharmaceutical Services and Deputy Medical Officer in the Department of Health of the
Cantonal Government in Basel and a member of various cantonal, regional and national committees. Dr Oswald was also
CEO of a start-up company in the healthcare sector and worked several years as a Medical Doctor in different hospitals.
Qualifications: Dr Oswald holds an MD PhD specialising in Orthopaedic Surgery and Traumatology, as well as in Sports
Medicine (University of Basel) and an executive MBA (University of Rochester-Berne). She passed the Board School at the
International Centre of Corporate Governance of the University of St. Gallen.
12
MR TREVOR PETERSEN
Committee memberships: Audit and Risk Committee, Remuneration Committee (Chairperson)
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 Ltd in 2016, he served
as an independent non-executive Director of Mediclinic International Ltd from 2012. In 1996, he resigned as a Lecturer from the
University of Cape Town to take up a partnership in the merged firm of PricewaterhouseCoopers Inc. He served as a partner of the
national firm from 1997–2009 and 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 Ltd) 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 2006–2007.
Qualifications: Mr Petersen holds a BComm Hons in Accountancy (University of Cape Town) and is a qualified Chartered
Accountant registered with the South African Institute of Chartered Accountants.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 109
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION GROUP EXECUTIVE
COMMITTEE
The CEO, Dr Ronnie van der Merwe, 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.
The biographies of Dr Van der Merwe (CEO) and Mr Myburgh (CFO) are provided on page 105 of this Annual Report.
1
3
MR GERT HATTINGH
Chief Corporate Services Officer
Nationality: South African
2
DR DIRK LE ROUX
Chief Information Officer
Nationality: South African
MR MAGNUS OETIKER
Chief Human Resources and Corporate
Development Officer
Nationality: Swiss
4
DR RENÉ TOUA
Chief Clinical Officer
Nationality: South African
110 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
1
MR GERT HATTINGH
Mr Gert Hattingh joined Mediclinic in 1991 as Group Accountant. He served in various management positions across the
Group and was appointed as Company Secretary in 2000 and Group Services Executive in 2011. Subsequent to the acquisition
of Al Noor Hospitals Group plc in February 2016, he holds the position of Chief Corporate Services Officer.
Qualifications: Mr Hattingh holds BAcc Hons (Stellenbosch University); completed the AMP (Harvard Business School);
and is a qualified Chartered Accountant registered with the South African Institute of Chartered Accountants.
2
DR DIRK LE ROUX
Dr Dirk Le Roux joined Mediclinic in August 2014 as the Group ICT Executive. Prior to joining Mediclinic, he served in various
managerial roles, including as Managing Director of ThinkWorx Consulting, CIO at Media24, General Manager of IT Strategy
and Risk at Absa Bank Ltd, as well as the Head of IT at the Development Bank of Southern Africa.
Qualifications: Dr Le Roux holds a DComm in Informatics (University of Pretoria); an MBA cum laude
(Potchefstroom University for Christian Higher Education); a PgDip in Data Metrics (University of South Africa);
and BEng in Civil Engineering (University of Pretoria).
3
MR MAGNUS OETIKER
Mr Magnus Oetiker worked for Hirslanden in various management positions from 2000–2016. He served on this division’s
executive committee from 2008 in various roles, while also taking responsibility for human resource management. During his
last two years at Hirslanden, he acted as Chief Strategy Officer. In 2016, he joined a family-owned company in Switzerland with
interests in healthcare and catering as CEO. In February 2018, he was appointed Chief Human Resources Officer of Mediclinic.
Qualifications: Mr Oetiker holds a BSc in Business Administration (Zürich University of Applied Sciences) and
an Executive MBA (University of Zürich).
4
DR RENÉ TOUA
Dr René Toua is a medical practitioner with extensive experience in private and public healthcare. She started her career in
primary healthcare, established a geriatric private primary care practice and working in emergency medicine, including at an
academic trauma unit, for several years. She joined Mediclinic in 2006 and held the positions of Regional Clinical Manager, and
Clinical Data and Information Manager for Mediclinic Southern Africa. Subsequently, she served as the Group General Manager:
Clinical Performance. She sits on the executive committee and board of trustees for Remedi, the in-house medical aid scheme,
and is the chairperson of the Medical Advisory Committee. She was appointed Chief Clinical Officer with effect from 1 July 2018.
Qualifications: Dr Toua holds an MBChB (Stellenbosch University); an MPhil in Emergency Medicine (Patient Safety and
Clinical Decision Making) (University of Cape Town); and a PgDip in Project Management (Stellenbosch University
Business School).
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5
7
MR DANIEL LIEDTKE
Chief Executive Officer: Hirslanden
Nationality: Swiss
6
MR KOERT PRETORIUS
Chief Executive Officer:
Mediclinic Southern Africa
Nationality: South African
MR DAVID HADLEY
Chief Executive Officer: Mediclinic Middle East
Nationality: British
112 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
5
MR DANIEL LIEDTKE
Mr Daniel Liedtke joined the Hirslanden Klinik St. Anna in Lucerne in 2001. He held various clinical and managerial
positions at Hirslanden prior to his appointments as Hospital Manager of Klinik Hirslanden in 2008 and as
Chief Operating Officer of the Hirslanden Group in 2015. In 2019 he was appointed as Chief Executive Officer of
Hirslanden the Hirslanden Private Hospital Group.
Qualifications: Mr Liedtke holds a Doctor of Business Administration (Charles Sturt University); a Master of Health
Administration (FHS St. Gallen); a D.O. in Osteopathic Medicine (GDK); a BSc in Physiotherapy (Swiss Confederation);
and a Certificate in Car Electronics (Federal certificate).
6
MR KOERT PRETORIUS
Mr Koert Pretorius joined Mediclinic in 1998 as the Regional Manager of the central region of Mediclinic’s operations in Southern
Africa and in 2003 took on the role of Chief Operating Officer of the Mediclinic Group. He was appointed CEO of Mediclinic
Southern Africa in 2008 and served as an Executive Director of Mediclinic International Ltd from 2006 up to acquisition of
Al Noor Hospitals Group plc.
Qualifications: Mr Pretorius holds a BCompt in Accounting Science (University of the Free State) and an MBL
(University of South Africa).
7
MR DAVID HADLEY
Mr David Hadley joined Mediclinic in 1993 and filled various administrative roles in human resources, finance, operations and
hospital management before being seconded to Dubai in 2007 to oversee the opening of Mediclinic City Hospital. He was
appointed as Chief Executive Officer: Mediclinic Middle East in 2009 and has served on the Group Executive Committee
since 2011.
Qualifications: Mr Hadley holds a BComm (University of South Africa) and an MBA with distinction
(University of Liverpool).
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 113
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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.
To ensure consistency in adherence to corporate
governance practices, 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 divisions.
COMPLIANCE WITH UK CORPORATE
GOVERNANCE CODE AND LISTINGS
RULES
The current UK Corporate Governance Code (“2016
Corporate Governance Code”) was published by the
FRC in April 2016 and is available on its website at
www.frc.org.uk. The 2016 Corporate Governance Code
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 the
Board’s application of and compliance with the
2016 Corporate Governance Code.
During the year under review and up to the date of this
report, the Company complied with all the provisions of the
2016 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)
The Nomination Committee recommends appointments
to the Board and further details of the committee and
the appointment process can be found on page 154. In
accordance with the Company’s relationship agreement
with its principal shareholder, Remgro Ltd (“Remgro”),
further details of which are provided on page 131
(the “Relationship Agreement”), Remgro is entitled to
appoint up to a maximum of three Directors to the
Board. 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
Relationship Agreement, the Nomination Committee
leads the process for Board appointments and makes
recommendations to the Board. 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 were used in the appointment of
Dr Anja Oswald in July 2018. She was selected as
the preferred candidate for the role of independent
non-executive Director of the Company from a
number of candidates identified based on a
search-and-interview process through the Company’s
extensive network in Switzerland. Dr Oswald, with her
expertise in the Swiss healthcare system, political
landscape and regulatory environment, in addition
to her experience in surgical medicine, general
management and the development of business
strategies, is proving to be a valuable addition to the
Board. Through a structured and balanced process,
Dr Oswald’s proposed appointment was considered
by the Nomination Committee and recommended
to the Board.
• Provision E.1.1 (regarding the attendance by the 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 supports
the main principle requiring dialogue with shareholders
based on a mutual understanding of objectives and that
the chairman should ensure that all Directors are made
aware of 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. During
the year, the Chairman met with two of Mediclinic’s top
shareholders (excluding Remgro) and the SID attended
one of these meetings in London. Although the SID and
the non-executive Directors have the opportunity to
attend results presentations and other events hosted by
the Company, the principal engagement with the capital
114 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
markets lies mainly with the 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 through the
extensive global investor relations programme
scheduled during the year. In April 2018, the Group
conducted a detailed perception study with
88 participants using QuantiFire, a third-party
independent service provider. The results were shared
with the Board and a summary of the details have been
set out on page 126, along with more information on the
Company’s shareholder engagement.
During the year, the Board and its committees considered
the FRC’s consultation on proposed revisions to the
UK Corporate Governance Code and the subsequent
publication of the 2018 Corporate Governance Code. The
amended Code applies to the Company from 1 April 2019
and as at the date of this report, the Board has reviewed
the 2018 Corporate Governance Code and its implications,
and initiated activities to ensure compliance. The Board
will continue the implementation thereof during the
coming year, with a view to taking the steps required to
ensure that the Company’s corporate governance
framework remains robust and effective, and reflects
good governance practice.
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 the relevant requirements of the
JSE Listings Requirements and the NSX Listings
Requirements arising from its secondary listings on
the JSE in South Africa and the NSX securities exchange
in Namibia.
BOARD STRUCTURE AND ROLES
The Board has full and effective control of the Company
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, and outlines the roles of the various
Board committees.
Board committees
In order to operate efficiently and provide the appropriate
level of attention and consideration to relevant matters, the
Board has delegated authority to five committees to carry
out certain tasks on its behalf, while reserving the authority
to approve certain key matters, as documented in the
Group’s authority levels and reserved matters. The latter is
reviewed annually by the Board. The key responsibilities of
the Board committees, namely the Audit and Risk
Committee, Clinical Performance and Sustainability
Committee, Investment Committee, Nomination Committee
and Remuneration 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 these committees are included in this
Annual Report.
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
and all material resolutions are approved by the Board.
ensures that no one individual on the Board has unfettered
The Board has adopted a robust corporate governance
powers or authority.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 115
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
FIGURE 1: CORPORATE GOVERNANCE FRAMEWORK
NON-EXECUTIVE
CHAIRMAN
Dr Edwin Hertzog
SENIOR INDEPENDENT
DIRECTOR2, 3
Mr Desmond Smith
Key responsibilities
• Leads the Board
• Ensures the effective performance of the Board
• 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 104.
Key responsibilities
• A sounding board for the Chairman
• 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
the independence of non-executive Directors
BOARD1, 2, 3
Membership
One non-executive Chairman, two additional non-executive Directors, seven 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 Group’s governance structure, corporate reporting, risk management and internal control
• Sets appropriate corporate culture and ensures it is embedded across 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 page 104.
EXECUTIVE DIRECTORS
CHIEF FINANCIAL
OFFICER
Mr Jurgens Myburgh
CHIEF EXECUTIVE
OFFICER
Dr Ronnie van der Merwe1
Key responsibilities – CEO & CFO
• Contribute detailed insight into 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 across the Group
116 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
NON-EXECUTIVE DIRECTORS
AUDIT AND RISK COMMITTEE2, 3
Dr Muhadditha Al Hashimi, Mr Jannie Durand,
Mr Alan Grieve,2 Dr Felicity Harvey,
Mr Seamus Keating, Mr Danie Meintjes,1
Dr Anja Oswald, Mr Trevor Petersen,
Mr Desmond Smith3
Key responsibilities
• Support the development of the Group’s
strategy
• Scrutinise management’s performance
• Provide constructive challenge, drawing
on their skills, experience and judgment
• 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 function
• Reviews and monitors the effectiveness
of the Group’s internal control systems
and risk management processes
CLINICAL PERFORMANCE AND
SUSTAINABILITY COMMITTEE
Membership
Three 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
Link Company Matters Ltd
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
GROUP EXECUTIVE COMMITTEE
Membership
CEO, CFO, Chief Corporate Services Officer,
Chief Clinical Officer, CIO, 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
makes recommendations to the Board
• Performs any other functions delegated
to management by the Board
INVESTMENT COMMITTEE
Membership
One independent non-executive Director,
three 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
NOMINATION COMMITTEE
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
Group Executive Committee and their direct reports
REMUNERATION COMMITTEE
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
• Provides guidance on general remuneration policies across
the Group
Notes
1
Dr Van der Merwe succeeded Mr Meintjes as CEO with effect from 1 June 2018. Mr Meintjes continued to serve as an executive Director
until 31 July 2018 and as a non-executive Director with effect from 1 August 2018.
2 Mr Alan Grieve will succeed Mr Desmond Smith as SID and Chairperson of the Audit and Risk Committee with effect from the conclusion
of the AGM on 24 July 2019.
3 Mr Smith will retire from the Board and the Board committees upon the conclusion of the AGM on 24 July 2019.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 117
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
BOARD MEETINGS
Meeting attendance
The names of all the Directors who served during the reporting period are set out in Table 1 below, together with their
attendance of Board meetings held during the period under review. Their biographies are provided on page 104.
Attendance of Investment Committee meetings held during the year under review is set out in Table 2. Attendance of
other committee meetings is set out in the respective committee reports. Each Director’s attendance of 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 Board 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’s Chairperson for raising, as
appropriate, during the meeting.
TABLE 1: BOARD MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
Directors as at 31 March 2019
Dr Edwin Hertzog3
Dr Ronnie van der Merwe4
Mr Jurgens Myburgh
Mr Desmond Smith
Non-executive Chairman
Chief Executive Officer
Chief Financial Officer
Senior Independent Director
15/02/2016
01/06/2018
01/08/2016
15/02/2016
Dr Muhadditha Al Hashimi
Independent Non-executive Director
01/11/2017
Mr Jannie Durand
Mr Alan Grieve5
Dr Felicity Harvey
Mr Danie Meintjes
Mr Seamus Keating
Dr Anja Oswald6
Mr Trevor Petersen
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
Non-executive Director
15/02/2016
15/02/2016
03/10/2017
15/02/2016
Independent Non-executive Director
05/06/2013
Independent Non-executive Director
Independent Non-executive Director
25/07/2018
15/02/2016
Directors who served on the Board until 25 July 2018
Prof Dr Robert Leu
Ms Nandi Mandela
Independent Non-executive Director
Independent Non-executive Director
15/02/2016
15/02/2016
6/7
6/6
7/7
7/7
7/7
7/7
6/7
7/7
7/7
7/7
5/5
7/7
2/2
2/2
118 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 2: INVESTMENT COMMITTEE MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT
(as committee
member)
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED7
Dr Edwin Hertzog3 (Committee
Chairperson)
Dr Ronnie van der Merwe
Mr Jurgens Myburgh
Mr Jannie Durand
Mr Alan Grieve
Mr Danie Meintjes
Non-executive Chairman
19/02/2016
Chief Executive Officer
Chief Financial Officer
Non-executive Director
Independent Non-executive Director
Non-executive Director
25/07/2018
01/08/2016
19/02/2016
19/02/2016
19/02/2016
1/2
1/1
2/2
2/2
2/2
2/2
Notes
1
The composition of the Board and its committees is shown as at 31 March 2019.
2 The attendance reflects the number of scheduled Board meetings held during the financial year. Between the Company’s financial
year-end and the Last Practicable Date, the Board held one scheduled meeting and all members who were eligible to attend did so.
3 Dr Hertzog was unable to attend one scheduled Board meeting and one scheduled Investment Committee meeting for unexpected
personal reasons.
4 Dr Van der Merwe was appointed as CEO of the Company on 1 June 2018 and attended all subsequent scheduled Board meetings.
5 Mr Grieve was unable to attend one scheduled Board meeting owing to a prior commitment which could not be changed.
6 Dr Oswald was appointed as independent non-executive Director of the Company on 25 July 2018 and attended all subsequent scheduled
Board meetings.
7 The attendance reflects the number of scheduled meetings of the Investment Committee held during the financial year. The Investment
Committee held three additional ad hoc meetings during the financial year to deal with urgent matters, which were attended by all or a
majority of members. Between the Company’s financial year-end and the Last Practicable Date, the Investment Committee met once and
all members were present.
PRINCIPAL BOARD ACTIVITIES
Table 3 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 address all necessary matters. 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 concerns arising.
TABLE 3: 2018 BOARD FOCUS AREAS
STRATEGIC GOALS
PRINCIPAL RISKS AND UNCERTAINTIES CATEGORIES
As described in Our strategy, goals and progress on
page 18.
As described in Risk management, principal risks and
uncertainties on page 55,
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
5 Compliance
6 Clinical
7 People
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 119
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
TABLE 4: PRINCIPAL BOARD ACTIVITIES
STRATEGY AND BUSINESS PLANS
• Monitored progress against the Group’s overall strategic objectives and
goals, including the long-term business plan and annual budget for each
division and the Group as a whole
• Oversaw and approved the development of a refocused corporate strategy
for the financial year commencing in April 2019, including the purpose of
the Group, strategic goals and enablers to allow the Group to deliver on its
purpose, vision and mission
Refer to Our strategy, goals and progress on page 18.
• Considered requests for approval of investments and business development
transactions of a size that require Board approval, such as the combination
of Hirslanden Clinique la Colline and Clinique des Grangettes (Switzerland)
Refer to the Divisional Reviews from page 62.
OPERATIONAL PERFORMANCE
• Discussed regular reports from the CEO on the operating performance of
the Group’s divisions and central functions
• 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 on page 24 and the Divisional
Reviews from page 62.
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 medical practitioners and facilities,
implementation of clinical information systems and clinical governance
matters across the Group
Refer to the Clinical services overview on page 41.
STRATEGIC
GOALS
PRINCIPAL
RISKS
1 2 3 4
1 2
1 2 3 4
1 2 3 4 5 6 7
2 3
1 2 3 6 7
1 2 3 4
2 3 4 5 6 7
1 2 4
5 6 7
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 via a
mandated sub-committee, the interim financial report, the annual report
and the corresponding results announcement and investor presentations,
with support from the Management Disclosure Committee, as appropriate
• Reviewed and adopted an updated Group tax strategy
• Considered and approved decisions regarding the interim and final
dividends paid and proposed in FY19, taking account of the Company’s
Dividend Policy and previous dividends paid
Refer to the Financial Review on page 29.
2 3
1 2
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 of the Group
2 3
1 2 3 4 5 6 7
120 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
RISK MANAGEMENT AND INTERNAL CONTROLS (continued)
STRATEGIC
GOALS
PRINCIPAL
RISKS
• 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
• Oversaw the successful establishment of an in-house Internal Audit
function
Refer to the report on Risk management, principal risks and uncertainties on
page 55 and the Audit and Risk Committee Report on page 136.
2 3
1 2 3 4 5 6 7
INFORMATION AND COMMUNICATIONS TECHNOLOGY
• Considered regular reports from the CIO
• Received updates on the Group’s ICT infrastructure, strategy, risks, potential
impact, existing controls and mitigants, and proposed enhancements
• Closely monitored progress on the implementation of IT projects and the
adoption of new technology across the Group’s divisions aimed at adapting
the Group to the evolving global healthcare environment
CORPORATE GOVERNANCE
• Considered the implications of the 2018 UK Corporate Governance Code
and the Companies (Miscellaneous Reporting) Regulations 2018 on the
Company’s corporate governance framework
• Agreed the Company’s approach to workforce and stakeholder
engagement and approved the appointment of Mr Meintjes as designated
non-executive Director for workforce engagement
• Considered the feedback from the Hampton-Alexander Report and
enhanced existing policies and succession planning arrangements to
improve the diversity of the Board, the Group Executive Committee and
their direct reports
• Reviewed and approved the Company’s updated Modern Slavery and
Human Trafficking Statement
• Considered feedback from: (a) the Audit and Risk Committee in respect of
non-audit services disclosures; (b) the Nomination Committee in relation to
diversity, succession planning and the appointment of new non-executive
Directors; and (c) the Remuneration Committee in relation to executive
remuneration
• Reviewed and approved all Group policies and procedures, including those
in relation to:
– the 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
– treasury strategy
– tax strategy
SUSTAINABILITY
• Considered the feedback from the Clinical Performance and Sustainability
Committee on sustainability matters
• Monitored the broad-based black economic empowerment initiatives
undertaken by the Group in South Africa
Refer to the Clinical Performance and Sustainability Committee Report
on page 150.
2 3
3 4
1 2 3
1 3 5
2 3 4
1 2 3 6 7
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 121
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
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 a third
female independent non-executive Director to broaden the diversity and
refresh the Board’s composition
• Reviewed the outcomes and agreed actions after the internally facilitated
evaluation of the composition, structure and functioning of the Board and
its committees
Refer to the Nomination Committee Report on page 154 and the section
regarding the Board evaluation on page 155.
STAKEHOLDER ENGAGEMENT
• Took an active interest in how the Company engaged with its key
stakeholders who are vital to building a successful and sustainable business
Refer to the Stakeholder interest and board engagement section further
below.
STRATEGIC
GOALS
PRINCIPAL
RISKS
1 2 3 4
1 2 3 4 5 6 7
BOARD COMPOSITION AND
DIVERSITY
The delivery of the Company’s long-term strategy depends
on attracting and retaining the right skills across the Group,
starting with the Board, as well as the executive
management team, and their direct reports. Biographies of
the Company’s current Directors who were in office during
the year and up to the date of signing the financial
statements, can be found on page 104.
As at 31 March 2019 and as at the date of this Annual
Report, the Board comprised the non-executive Chairman,
two non-executive Directors, seven independent non-
executive Directors, and two executive Directors from
wide-ranging backgrounds and with varying industry and
professional experience. The Company complies with the
2016 Corporate Governance Code recommendation that at
least half the Board should be independent.
When determining whether a non-executive Director is
independent, the Board considers each individual against
continue to provide challenge within Board meetings and to
drive productive discussions.
The Company’s Chairman, Dr Hertzog, is not considered
to be an independent Director given his involvement as
Chief Executive of Mediclinic International Ltd until his
appointment as Chairman in 1992 and his position as
non-executive Deputy Chairman of Remgro Ltd, the
principal 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.
Mr Meintjes does 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 gained over 30 years in different
capacities across the business, and the overall composition
the 2016 Corporate Governance Code and also considers
of the Board.
how they conduct themselves in Board meetings, including
how they exercise judgement and independent thinking.
Taking those factors into account, the Board believes that
the Directors who are classified as independent non-
executive Directors continue to demonstrate their
independence as set out in the Assessment of
independence of non-executive Directors on page 157.
Appointments to the Board are recommended and led by
the Nomination Committee and further details of the
committee and the appointment process can be found on
page 155. In accordance with the Company’s Relationship
Agreement with its principal shareholder, Remgro (further
details of which are provided on page 131), Remgro is
entitled to appoint up to a maximum of three Directors to
Mr Alan Grieve will succeed Mr Desmond Smith as both as
the Board. Mr Durand was appointed to the Board in
SID and Chairperson of the Audit and Risk Committee with
accordance with the terms of the Relationship Agreement
effect from the conclusion of the AGM on 24 July 2019.
on 15 February 2016 and represents Remgro on the Board of
The Board believes that Messrs Smith and Grieve are
Directors. No new Board appointments were made in terms
independent in character, skill and judgement and that both
of the Relationship Agreement during the year under review.
122 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 also include and
make good use of differences in the skills, geographic and
industry experience, background, race, social background,
cognitive and personal strengths and other characteristics
of Directors.
The Board seeks to construct an effective, robust, well-
balanced and complementary Board, the capability of
which is appropriate to the nature, complexity and
strategic demands of the business. 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, as described on page 155 of the
Nomination Committee Report. A range of diversity factors
are taken into account in determining the optimal
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 Dr Oswald during the year. The Nomination
Committee continues to consider and develop succession
plans for the Board and its committees. Accordingly, when
considering Board appointments and internal promotions
at senior level, the Company will continue to take account
of relevant voluntary guidelines in fulfilling their role
regarding diversity, while seeking to ensure that each post
is offered strictly on merit to the best available candidate.
The Board’s Diversity Policy statement is set out on
page 156. For details of the diversity of the Board, the
Group Executive Committee and the executive committees
of each division (including a breakdown of race for
Southern Africa, in line with local requirements), see the
section on Employees on page 131. Figure 2 provides an
overview of the Board’s composition and diversity in terms
of gender and experience.
FIGURE 2: BOARD COMPOSITION AND DIVERSITY
Number of Directors
UK corporate
governance/listed
company
Corporate memory
Healthcare sector
Medical/clinical/
operational
Sustainability
3
Marketing and
customer focus
Financial and
accounting
Risk
management
Information technology
and cyber security
Strategy/capital markets/
investor relations
Other stakeholder
management
HR/talent management/
culture management
Executive remuneration
3
E
C
N
E
I
R
E
P
X
E
D
N
A
S
L
L
I
K
S
’
S
R
O
T
C
E
R
D
I
4
6
7
5
5
9
9
9
9
12
12
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 123
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
FIGURE 2: BOARD COMPOSITION AND
DIVERSITY (CONTINUED)
COMPOSITION
58%
17%
25%
GENDER
75%
Independent
non-executive
Directors
Non-executive
Directors
Executive
Directors
25%
Male
Female
EVALUATION OF THE BOARD,
COMMITTEES AND CHAIRMAN
During the year under review, the Board conducted an
internally facilitated 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 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 2019.
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 a frank exchange of views.
The conclusions of this year’s evaluation were discussed at
the Board meeting held in March 2019 and the actions
agreed upon for 2019 have been summarised below:
• To review the introduction of return on invested capital
(“ROIC”) as a performance measure for forthcoming
long-term incentives.
• To improve the implementation of technology and
associated change management across the divisions
continuously.
• To implement and oversee the Company’s corporate
strategy.
• To oversee succession planning within all divisions
continuously.
• To establish a meaningful and practical structure for
updating the Board on issues concerning the workforce
and wider stakeholders.
The non-executive Directors, led by the SID, discussed the
performance evaluation of the Chairman, having obtained
the views of the executive Directors. The results were
discussed privately between the Chairman and the SID
after the March 2019 meeting.
The Company will conduct an externally facilitated
performance evaluation every three years and internal
self-evaluations in the intervening years. The Board
conducted an externally facilitated evaluation in the 2018
financial year and therefore does not anticipate doing so
again until 2021, but is committed to ensuring that the
internally facilitated review in 2020 will highlight progress
against the above actions, as well as identify further areas
for improvement.
The Board is satisfied with the progress made in respect of
the key priorities identified by the externally facilitated
evaluation conducted in 2018.
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 and/or concerns raised
are outlined further in the Sustainable Development
Report, available on the Company’s website at https://
investor.mediclinic.com/results-centre/results-and-
reports. The Board is reviewing existing engagement
mechanisms to ensure they are effective.
124 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 5: BOARD ENGAGEMENT
STAKEHOLDERS
IMPORTANCE
BOARD ENGAGEMENT
Patients
Patients are 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.
• Regularly reviews clinical performance
indicators and their evolution over time
• Reviews patient experience index and
implementation of resulting action plans
Shareholders
Shareholder support and engagement are
critical to the delivery of the long-term strategy
and to the sustainability of the business.
• Considers investors’ views and feedback,
including detailed feedback obtained
through an investor perception study
People
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.
Regulators
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.
• Seeks to increase the amount and quality of
engagement with shareholders through the
executive Directors to develop the Board’s
understanding of investors’ views
• Consults regarding key developments
• Reviews annual employee engagement
surveys and implementation of resulting
action plans
• Monitors remuneration arrangements across
the Group
• Regular communications through
management briefings and internal
announcements
• Encourages a constructive dialogue with the
Group’s regulators
• Monitors clinical, regulatory and legal
compliance through regular management
reports
Healthcare funders
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.
• Regularly reviews the clinical performance
indicators across the Group
• Encourages the development and
publication of clinical performance
information
• Encourages a constructive dialogue with the
Group’s healthcare funders
Suppliers
To deliver its services, Mediclinic depends on a
large and diverse range of suppliers.
• Reviews and approves the Company’s
arrangements regarding modern slavery
• Reviews and approves payment practices
and performance reporting in the UK
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 125
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
SHAREHOLDER ENGAGEMENT
Responsibility for shareholder relations rests with the
Chairman, CEO, CFO, SID and Head of Investor Relations.
Collectively – but mainly through the CEO, CFO and Head
of Investor Relations (as referred to on page 114) – they
ensure that there is effective, regular and transparent
communication with shareholders on matters such as
operational and financial performance, regulatory changes,
In June 2018, the Group hosted a Capital Markets Day and
site visit for investors and analysts in Switzerland. Several
Group Executive Committee members presented at the
event, including the CEO and CFO, and all presentations
were available to view on the investor relations section of
Mediclinic’s website via a live webcast. Additionally, the
Group hosted an investor and analyst site visit to Mediclinic
Middle East in December 2018.
governance and strategy. In addition, they are responsible
The Group receives regular feedback from investors
for ensuring that the Board understands the views of
through QuantiFire, a third-party service provider that
shareholders on matters such as governance and strategy.
collects feedback and confidence measures from investors
The Board is supported by the Company’s corporate
on behalf of the Board and presents these results on a
brokers with whom it is in constant dialogue. The
quarterly basis. In addition, the Group conducted a detailed
Management Disclosure Committee assists the Board to
perception study in April 2018, the results of which were
ensure the timely and accurate disclosure of all information
shared with the Board. The perception study gathered
that is required to be disclosed to meet the legal and
regulatory obligations, as well as the requirements arising
feedback from 75 institutions and included 11 of Mediclinic’s
top 15 active shareholders representing 61% of the shares in
from its listing on the LSE.
During the year, the investor relations programme included
regular communication with the capital markets including
investor meetings, attendance at investor conferences,
roadshows, presentations, site visits and ad hoc events with
investors, sell-side analysts and sales teams. Members of
the Board and Group Executive Committee met with more
than 150 institutions and participated in some
20 roadshows, investor conferences and ad hoc capital
market events across the UK, South Africa and North
issue at that time, excluding Remgro. The results revealed
some concern from investors about regulation and margin
pressures in Switzerland and a growing optimism in growth
opportunities in the Middle East, along with confidence
levels in the Company’s 3–5 year outlook. Successful
execution in the Middle East and maintaining margins in
Switzerland were identified by investors as the main
priorities for the Company, as well as disciplined capital
allocation, the need to set and meet guidance, and to
generate returns on invested capital.
America. A breakdown of the fund manager style and
Shareholders can access details of the Group’s results and
geographic holdings as at year-end are provided in
Figure 3 and 4 respectively.
other news releases through the LSE’s Regulatory News
Service and the JSE Stock Exchange News Service. In
FIGURE 3: STYLE OF FUND MANAGER
BREAKDOWN
FIGURE 4: GEOGRAPHIC HOLDINGS
4%
3%
45%
6%
5%
9%
Corporate
GARP
Growth
Retail
Index
18%
2%
2%
5%
45%
Remgro (Africa)
Rest of Africa
UK
North America
Nordics and Asia
Value and growth
28%
Other
28%
Western Europe
126 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
addition, the Group publishes the announcements on the
investor relations section of its website at https://investor.
mediclinic.com/. Shareholders and other interested parties
can subscribe to email news updates by registering via the
website.
The Group continuously investigates ways to improve its
use of online channels to communicate with stakeholders
through the Group website and webcasting. During the
year, the Group launched a new corporate website that
ensures information is easier to access and offers an
enhanced user experience.
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’s
financial, operational and strategic objectives.
The Group’s governance structure for risk management is
illustrated in Figure 5 below.
FIGURE 5: RISK MANAGEMENT
GOVERNANCE STRUCTURE
r
o
f
y
t
i
l
i
b
a
t
n
u
o
c
c
A
r
o
f
y
t
i
l
i
b
i
s
n
o
p
s
e
R
Board of
Directors
Responsible for corporate
governance, strategy, risk
management and
financial performance
Audit and
Risk
Committee
Responsible for review
and approval of the
adequacy and
effectiveness of risk
management and internal
controls
Group
Executive
Committee
Supports the CEO in
management
of business activities
Divisions
Responsible for the
identification, assessment,
implementation and
management of divisional
risks
The Board is responsible for reviewing and confirming the
A review of the Group’s risk management approach and
effectiveness of the Group’s risk management and internal
controls, including material controls (i.e. financial,
operational and compliance controls). Although the
responsibility of evaluating the Group’s risk management
procedures, assessing the effectiveness of internal controls
internal control systems is further discussed in the
Strategic Report on page 9. For detail on the management
and mitigation of each principal risk, see page 56. The
Group’s Viability statement can be found on page 60.
Please refer to page 136 for more information on the role
and monitoring reporting integrity has been delegated to
of the Audit and Risk Committee.
the Audit and Risk Committee, the Board, maintains a
strong and regular oversight of the outcome of the Audit
and Risk Committee’s work.
Key features of the Group’s internal control
systems include:
• clearly defined delegations of authority and lines
of accountability;
• policies and procedures governing financial resource
management, financial reporting, key projects and
ICT security;
• periodic checks conducted by the Internal
Audit function;
Ethics and compliance
Conducting business in an honest, fair and legal manner is
one of Mediclinic’s fundamental guiding principles and is
actively endorsed by the Board and management, ensuring
that the highest ethical standards are maintained in all
dealings with stakeholders. The Group’s commitment to
ethical standards is set out in the Group’s values and is
supported by the Company’s Ethics Code which is available
on the website at https://www.mediclinic.com/en/
governance/business-conduct-ethics.html. The Ethics
Code provides a framework of the standards of business
conduct and ethics that are required of all divisions,
• annual representation letters from the divisional CEOs
regarding key risks and associated mitigating actions
Directors and employees in order to promote and enforce
ethical business practices and standards across the Group.
per division; and
• review of the disclosures by the Group, the Board and
the Audit and Risk Committee within the annual, interim
and other price-sensitive reports, as relevant, to ensure
compliance.
The Ethics Code is available to all employees and
communicated to new employees as part of the
on-boarding process.
Compliance with relevant legislation, regulations and
accepted standards/codes is integral to the Group’s
risk management process and is monitored in accordance
with the Group’s Regulatory Compliance Policy.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 127
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
Slavery and human trafficking
The Board has considered and approved the Company’s
updated Modern Slavery and Human Trafficking
Statement for the year under review, as required in terms
of the Modern Slavery Act 2015. The updated statement
international network enables data flows, inter-operability
and communication across the entire Group. Major planned
ICT-related projects include various SAP projects, an EHR
system and a further phase of the international human
resources management system.
reflects the steps taken by the Group to enhance its
ICT governance is done in the context of the Group’s
internal processes and due diligence of suppliers to prevent
overall enterprise governance, in general, and in the context
slavery and human trafficking and demonstrate its
of the Group’s risk management structures and processes,
commitment to this objective. The statement is available on
the Company’s website at https://www.mediclinic.com/
en/modern-slavery-statement.html.
Fraud and corruption
The Group adopts zero-tolerance to unethical business
conduct, in particular fraud and corruption, which is
addressed in the Ethics Code and the Group’s Anti-bribery
Policy. Refer to the Audit and Risk Committee Report on
page 136 for more information.
specifically. Central to ICT governance is the Group’s ICT
Steering Committee and various ICT architecture sub-
committees across the divisions. The Group ICT Committee
is a sub-committee of the Group Executive Committee, and
membership consists of the Group CIO, divisional CIOs,
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 by way of:
Competition legislation
The Group supports and adheres to the relevant
competition and anti-trust legislation applicable in the
various countries in which it operates. The legislation is
complex and the Group has issued guidelines, which are
reviewed and updated at least annually, to its employees
on compliance with competition legislation within their
relevant jurisdiction.
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 competition legislation experts and legal
advisors who support Mediclinic through the process, as
referred to in the Divisional Review of Mediclinic Southern
Africa on page 67.
No legal action for anti-competitive, anti-trust or similar
conduct was instituted against the Group during the year
under review.
ICT governance
Mediclinic has an extensive ICT environment that acts as an
enabler of business strategies and operations. The core
business information systems cover clinical processes,
revenue cycle management and patient administration. The
SAP enterprise resource planning back-office systems
support, inter alia, the Finance, Accounting, Human
• digitalisation of Mediclinic’s business model and
services;
• performance and cost of ICT departments across the
divisions;
• establishing ICT reference architectures and standards;
• setting information security-related policies and
standards;
• 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 Group ICT Committee is supported by the Group’s
Information Security Architecture Committee, consisting of
the Group’s Information Security Officers. 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.
The Group’s risk management system is used to capture
and track all ICT risks, audit findings, actions and
responsibilities.
To ensure business continuity, Mediclinic employs a wide
range of technology capabilities to safeguard its ICT
installation, users and connections to other external ICT
systems.
Resources Management and Procurement functions. An
enterprise data warehouse enables advanced analytics and
Information security and data protection policies and
controls are in place throughout the Group regulating, inter
supports decision-making by providing sourcing and
alia, the processing, use and protection of own, personal
enriching the required data sets. An extensive office
and third-party information. This is further entrenched
automation environment exists which enables both
through continuing user training, security awareness
on-premise and remote working, as well as collaboration
programmes and certification courses in information
and communication within and across divisions, while an
security. The flow of personal data across country borders
128 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
is managed in accordance with country-specific legislation.
There were no material information security or data privacy
incidents during the year under review.
DIRECTORS
Appointment, removal and tenure
The rules relating to the appointment and removal of
Directors are set out in the Company’s Articles of
Association, as adopted on 20 July 2016 (“Articles”).
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 serve on the basis of letters of
appointment, which are available for inspection at
the Company’s registered office and at the AGM. The
letters of appointment set out the time commitment
Independent professional advice
All Directors may seek independent professional advice in
connection with their roles as Directors. All Directors have
access to the advice and services of the Company
Secretary at the expense of the Company.
Election/re-election
In accordance with the Company’s Articles, 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 2016 Corporate Governance Code requires
that all Directors of FTSE 350 companies should stand for
re-election annually. Accordingly, Dr Oswald (appointed on
25 July 2018) will stand for election at the AGM and all
other Directors will stand for re-election.
expected of non-executive Directors who, on
Taking into account the result of the Board evaluation
appointment, undertake that they will have sufficient
carried out during the year and following recommendations
time to meet their responsibilities.
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
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
the re-election of all Directors (other than Mr Smith) and
the election of Dr Oswald. Biographies of the Directors can
be found on page 104.
in respect of their legal, regulatory and governance
Remgro, through wholly owned subsidiaries, holds 44.56%
responsibilities and obligations in accordance with the UK
of the issued ordinary shares of the Company and is
regulatory regime. The induction includes face-to-face
therefore regarded as a controlling shareholder of the
meetings with the Group Executive Committee and
operational site visits to orientate and familiarise the new
Directors with the healthcare industry as well as
Company for the purposes of the listings rules issued by
the Financial Conduct Authority (“Listings Rules”). The
Listings Rules require that independent non-executive
Mediclinic’s business, strategy and commercial objectives
Directors of a company with a controlling shareholder must
and key risks.
Dr Oswald was appointed during the year under review
and is undertaking a comprehensive Board induction
programme tailored to her individual requirements.
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
The training needs of the Directors are periodically
poll and the votes cast by independent shareholders and
discussed at Board meetings and briefings are arranged on
all shareholders will be calculated separately. Such
issues relating to corporate governance and other areas of
resolutions will be passed only if a majority of votes cast
importance.
The Board is kept informed of legal, regulatory and
governance matters. Additional training 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 conflicts of
interest and training on the new corporate governance
requirements introduced by the 2018 Corporate
Governance Code and the Companies (Miscellaneous
Reporting) Regulations 2018.
by independent shareholders are in favour thereof, in
addition to a majority of votes cast by all shareholders are
in favour thereof.
Powers of Directors
The general powers of the Directors are contained within
relevant UK legislation and the Company’s Articles. The
Directors are entitled to exercise all powers of the
Company, subject to any limitations imposed by the
Articles or applicable legislation.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 129
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
Indemnification of Directors
The Company has entered into a deed of indemnity with
each Director who served during the year under identical
terms. The deeds indemnify the Directors in accordance
with the applicable laws of England against liability
incurred as a Director or employee of the Group. In
addition, the Company has provided Directors and officers
with indemnity insurance and insurance in connection with
their duties and responsibilities.
Directors’ conflicts of interest
In accordance with the Act and the Company’s Articles,
the Board may authorise any matter that otherwise may
involve any Director breaching his/her duty to avoid
conflicts of interest. The Board has adopted a procedure to
address this requirement, which includes the Directors
completing detailed conflicts of interest questionnaires
upon appointment and annual confirmation of these
detailed declarations. 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
Act and the Articles. Directors are also required to disclose
any new conflicts of interest and additional external
appointments as soon as they arise, for prior approval by
the Board.
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 agreements and
their notice periods can be found in the
Directors’ Remuneration Report on page 159.
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, is included on page 122.
Directors’ interests
The Directors’ shareholding and share interests in the
issued shares of the Company are provided in the
Directors’ Remuneration Report on page 159.
OTHER DISCLOSURES
Articles of Association
The Company’s Articles may be amended by way of a
special resolution of the shareholders.
The Articles are available in the governance section of the
Company’s website at https://www.mediclinic.com/en/
governance/corporate-governance.html.
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 Relationship Agreement with Remgro was entered
into on 14 October 2015 with an effective date of
15 February 2016. This agreement does not include a
change of control provision but does terminate if:
(i)
the Company’s ordinary shares cease to be listed
and admitted to trading on the LSE’s main market
for listed securities; or
(ii) Remgro, taken together, ceases to hold the
minimum interest of 10% in the Company.
• The following facilities and finance agreements are
regarded as significant and contain change of control
provisions:
– Swiss senior secured borrowings expiring in
September 2024 with three uncommitted extension
options and bearing interest at Swiss franc London
Interbank Offered Rate (“LIBOR”) plus a margin of
1.25% up to a maximum of Swiss franc LIBOR plus a
margin of 1.65% depending on the loan-to-value:
n
n
n
CHF1.5bn amortising senior secured term
loan facility;
CHF0.254bn senior secured capex facility; and
CHF0.1bn senior secured revolving facility.
– South African senior secured borrowings totalling
R6.2bn, bearing interest at Johannesburg Interbank
Average Rate (“JIBAR”) plus a margin of 1.48% to
1.59%, expiring in September 2022 with uncommitted
extension options.
– South African unsecured preference share funding
totalling R1.8bn, bearing interest at 72% of JIBAR plus
a margin of 1.65%, expiring in September 2022 with
uncommitted extension options.
– UAE amortising senior secured borrowings of
US$250m bearing interest at USD LIBOR plus a
margin of 1.85%, expiring in August 2023.
130 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Principal shareholder and relationship
agreement
In accordance with Listings Rule 9.8.4(14), the Company
has set out below a statement describing the Relationship
Agreement. Remgro held 44.56% of the issued ordinary
share capital of the Company, as at 22 May 2019.
Under the Relationship Agreement, Remgro undertakes to
comply with the following independence provisions, as
required under the Listings Rules:
• Transactions and arrangements between the Company
and Remgro (and/or its associates) are, and will be, at
arm’s length and on normal commercial terms.
• 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
Listings Rules.
• 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 Listings Rules.
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 is subject to the requirement that
the Board will, following such appointment, comprise a
majority of independent non-executive Directors.
If Remgro’s shareholding reduces to below 10% of the
Company’s share capital (or 10% of the aggregate voting
rights in the Company), the rights and obligations of
Remgro in terms of the Relationship Agreement shall
terminate. The ordinary shares owned by Remgro rank
pari passu with the other ordinary shares in all respects.
Related-party transactions
Details of all related-party transactions are contained in
note 35 of the consolidated financial statements on page 269.
Political donations
Political donations are generally prohibited in terms of the
Company’s Ethics Code and Anti-bribery Policy, unless
pre-approved by the executive committee of the division
and reported to the Group Executive Committee. It is not
the policy of the Company to make political donations as
contemplated in the Act and during the year, the Group,
made no such payments. However, as a result of broad
definitions used in the Act, normal business activities of the
Company, which might not be considered political
donations or expenditure in the usual 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. This could include 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. The Board has therefore resolved to propose a
resolution for shareholder consideration at the AGM, as in
previous years and in line with best practice, to authorise
the Company to make political payments up to an
aggregate amount of £100 000.
As is customary in Switzerland, Hirslanden maintains a
proper and constructive dialogue with political decision-
makers and stakeholders, to represent the division’s
perspective and support informed decision-making that
contributes to improving patient outcomes and the
long-term sustainability of the business. Under the Swiss
political system, citizens are active in political bodies at
federal, cantonal and municipal levels in addition to their
regular occupations. Parliamentarians are not professional
politicians in this system and the parties do not receive
state support. Therefore, in line with common and official
practice in Switzerland, Hirslanden assists in supporting the
country’s political system by making third-party
contributions to a number of political parties, institutions
and associations involved in campaigns which are of
interest to the business. Payments of this kind made by
Hirslanden in the 2019 financial year totalled CHF4 500
(2018: CHF30 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.
Employees
The employees’ trust and respect are vital to Mediclinic’s
success. Listening and responding to employee needs
through effective communication and sound relations are
important components in being regarded as an employer
of choice among existing and prospective employees, and
vital to maintaining an engaged and loyal workforce.
Employee engagement is conducted through various
methods, including leadership video conferences, periodic
employee surveys, performance reviews, employee
magazines and employee wellness and recognition
programmes. Further details of the Group’s employee
engagement are included in the Sustainable Development
Report, available on the Company’s website at https://
investor.mediclinic.com/results-centre/results-
and-reports.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 131
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
At the end of March 2019, the Company announced the
appointment of Mr Meintjes as designated
non-executive Director for engagement with the Group’s
workforce with effect from 1 April 2019. As the former CEO
and with his prior experience as Divisional HR Executive,
Mr Meintjes was closely involved with the Company's
approach to engaging with, investing in and rewarding the
Group’s employees. With his wealth of knowledge and
experience gained in different capacities over 30 years at
Mediclinic, the Board considers him to be extremely well
positioned to engage effectively with employees.
Details of how the Group engaged with key stakeholders,
including employees, can be found on page 124.
Continuous training and development of the Group’s
employees ensure employee retention, particularly of
scarce skills which are most critical, and proper succession
planning. Further details of the Group’s training initiatives
can be found in the Sustainable development overview on
page 76 and the Sustainable Development Report,
available on the Company’s website at https://investor.
mediclinic.com/results-centre/results-and-reports.
The distribution of the Group’s employees per division is
included on page 6, 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 Table 6.
The Group values diversity and provides equal
opportunities in 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 for
applicants with disabilities to receive training to perform
safely and effectively; there are also 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.
TABLE 6: RACE, GENDER AND AGE REPRESENTATION ON GOVERNANCE BODIES1
RACE
(only in respect of
Southern Africa)
GENDER
AGE (YEARS)
AS AT 31/03/2019
Black
White
Male
Female
30–50
> 50
TOTAL
MEMBERS2
Number
%
Number
%
Number
%
Number
%
Number
%
Number
%
Mediclinic
Board
Group
Executive
Committee1
Hirslanden
Executive
Committee1
Mediclinic
Southern
Africa
Executive
Committee1
Mediclinic
Middle East
Executive
Committee1
12
2 Board members of colour (17%)3
9
4
9
9
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
8
4
8
7
75%
89%
100%
89%
78%
3
1
–
1
2
25%
11%
–
11%
22%
2
2
2
3
5
17%
10
83%
22%
50%
33%
56%
7
2
6
4
78%
50%
67%
44%
Notes
1
The race, gender and age distribution of the direct reports to the executive committees of the Company and the divisions are included
in the Sustainable Development Report available on the Company’s website at https://investor.mediclinic.com/results-centre/
results-and-reports.
2 Total membership is shown as at the Last Practicable Date.
3 Consistent with the Parker Report, the term “persons of colour” is used to identify individuals with evident heritage from African, Asian,
Middle Eastern and South American regions.
132 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 7: GENDER REPRESENTATION –
GROUP EMPLOYEES AND SENIOR
MANAGERS1
77%
0.23
74.5%
25.5%
Senior
managers
23%
Group
employees
Female
Male
Note
1
Senior managers are employees who have responsibility for
planning, directing or controlling the activities of the Group or a
strategically significant part of the Group and directors of
undertakings included in the Group consolidation (excluding the
executive Directors of the Company).
Going concern status
The Group’s consolidated financial statements, as set
out on pages 182 – 278 and approved by the Board on
22 May 2019, were prepared on a going concern basis. The
Directors considered the Company’s financial position,
availability of funding, 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 136 and the Viability
statement on page 60.
Events after the reporting period
No events which may have a material effect on the Group
occurred between the financial year-end and Last
Practicable Date.
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 Listings Rules
Information required to be disclosed in terms of Listings
Rule 9.8.4R, as applicable, is referenced below:
DETAIL
LOCATION IN ANNUAL REPORT
Long-term incentive schemes
Page 170
Confirmations regarding entering into a relationship agreement with a
controlling shareholder and compliance with independence provisions
Refer to Principal shareholder and
relationship agreement on page 131
None other than the relationship agreement
referred to on page 131
None other than the services provided by
Remgro described in note 35 of the
consolidated financial statements on
page 269
See notes 2.16 and 25 to the consolidated
financial statements on pages 205 and
page 250 respectively
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
Non-pre-emptive issues of equity for cash by any unlisted
major subsidiary
Parent company participation in a placing by a listed subsidiary
Shareholder waiver of dividends
Shareholder waiver of future dividends
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 133
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CORPORATE GOVERNANCE
STATEMENT (CONTINUED)
DIRECTORS’ REPORT
The information set out in this Corporate Governance
Statement, together with the following disclosures included
in this Annual Report and incorporated by reference,
constitute the Directors’ Report of the Company for the
year ended 31 March 2019, as contemplated in the Act, and
was duly approved by the Board on 22 May 2019:
• Strategic Report – refer to page 9
• Statement of Directors’ Responsibilities – refer to
page 179
• Shareholder information – refer to page 296
The Strategic Report sets out those matters required to be
disclosed in the Directors’ Report which are considered to
on page 54, with further details available in the
Clinical Services Report available on the Company’s
website at https://investor.mediclinic.com/results-
centre/results-and-reports
• Greenhouse gas emissions – refer to page 86, with
further details available in the Sustainable Development
Report, available on the Company’s website at
https://investor.mediclinic.com/results-centre/
results-and-reports
• Corporate social responsibility and corporate social
investment – refer to page 93, with further details
available in the Sustainable Development Report
available on the Company’s website at https://investor.
mediclinic.com/results-centre/results-and-reports
be of strategic importance:
For and on behalf of the Board.
• Strategy and future developments – refer to page 20
• Financial risk management objectives and policies –
refer to page 211
• Research and development activities – refer to various
activities discussed in the Strategic Report on page 9;
the standardised employee engagement initiatives on
page 85; and clinical research activities referred to
Dr Edwin Hertzog
Non-executive Chairman
22 May 2019
134 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 135
AUDIT AND RISK
COMMITTEE REPORT
Mr Desmond Smith
Chairperson of the Audit and Risk Committee
As Chairperson of the Audit and Risk Committee, I am
pleased to present this report for the financial year ended
31 March 2019 which provides insight into how the Audit
and Risk Committee discharged its responsibilities during
the reporting period and the significant matters it
considered in doing so, together with the priorities
anticipated for the next financial year.
COMMITTEE COMPOSITION AND
MEETINGS
The Audit and Risk Committee is comprised solely of
attendance records are set out in Table 1 below. Detailed
information on each member’s experience, skills and
qualifications can be found on page 104. The Board regards
each member as possessing recent and relevant financial
experience and the appropriate level of independence,
enabling them to provide oversight and challenge, and
obtain a full explanation from management, the Internal
Audit function or the external auditor on any matter
considered necessary. The Board is also satisfied that the
Audit and Risk Committee as a whole has the required
sector-specific competence, knowledge and experience
to exercise its duties in an effective, informed and
independent non-executive Directors, whose names and
responsible manner.
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
QUALIFICATIONS
APPOINTMENT DATE
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Mr Desmond Smith
(Committee Chairperson)
Mr Alan Grieve3
BSc, FASSA
BA Hons, CA
Mr Seamus Keating
FCMA
Mr Trevor Petersen
BComm Hons, CA(SA)
15/02/2016
15/02/2016
05/06/2013
15/02/2016
4/4
3/4
4/4
4/4
The composition is shown as at 31 March 2019. There were no changes to the composition during the year.
Notes
1
2 The attendance reflects the number of scheduled meetings held during the financial year. One additional ad hoc meeting was held during
the financial year and one meeting has been scheduled between the Company’s financial year-end and the Last Practicable Date; both
these meetings were attended by all members.
3 Mr Grieve was unable to attend one scheduled meeting owing to a prior commitment which could not be changed.
136 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
As announced on 15 November 2018, Mr Desmond Smith
will retire as a Director of the Company at the conclusion
of the Company’s AGM scheduled for 24 July 2019 and will
not seek re-election. Mr Smith will also step down from all
Board committees at that time. Mr Alan Grieve, who has
been a member of the Audit and Risk Committee since
February 2016, will succeed Mr Smith as Chairperson of the
Audit and Risk Committee (and as SID), effective from the
date of Mr Smith’s resignation.
The Audit and Risk Committee normally holds
four meetings during the financial year, with one
of these meetings being dedicated primarily to an
extensive review of risk-related matters.
• Internal audit
• External audit
• Ethical conduct, governance and compliance
The following sections of this report explain the work that
it has undertaken under each of those headings and the
resultant outcomes. The Audit and Risk 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 117 of the Corporate Governance
Statement.
Financial reporting
The Audit and Risk Committee’s principal responsibility in
Dr Ronnie van der Merwe (CEO), Mr Jurgens Myburgh
this area is to review and challenge management’s
(CFO) and Mr Gert Hattingh (Chief Corporate Services
approach to significant judgments and ensure the integrity
Officer) attend all meetings. Other attendees differ from
time to time and may include Dr Edwin Hertzog (Board
of the Group’s financial reporting, including annual and
interim reports and financial statements and
Chairman), Mr Pieter Uys (alternate to Mr Jannie Durand),
announcements regarding the Company’s financial
Dr Dirk Le Roux (Chief Information Officer), Mr Glenn Ho
performance. The key financial reporting activities
(Group General Manager: Internal Audit), Mr Martin Rossouw
undertaken are set out below.
(Group General Manager: Risk Services) and other relevant
management members, as and when their specialist
April 2018
knowledge is required. Representatives from the external
auditor are invited to attend all meetings.
From 1 January 2018 to 30 May 2018, as part of the
handover arrangements for Dr Van der Merwe
succeeding Mr Danie Meintjes as CEO, both Mr Meintjes
and Dr Van der Merwe were invited to attend meetings as
CEO and CEO Designate respectively. In addition, following
Mr Ho’s appointment as Group General Manager: Internal
Audit on 1 July 2018, as part of the transition arrangements,
the Company’s former internal auditor (Remgro Internal
Audit) continued to attend meetings as necessary for the
remainder of the 2019 financial year.
Each scheduled meeting takes place prior to a Board
meeting, at which the Chairperson of the Audit and Risk
Committee provides a report of the Audit and Risk
Committee’s activities. The Audit and Risk Committee met
privately without management present after each
scheduled meeting. In addition, it meets separately with
the external auditor, the Internal Audit function and senior
management to allow any issues of concern to be raised
by, or with, each party.
KEY AREAS OF ACTIVITY
During the financial year under review and between the
financial year-end and the Last Practicable Date, the
Committee continued to provide oversight and challenge in
relation to the following matters within the Group:
• Financial reporting
• Internal control systems, risk management processes
and related assurance activities
• Considered the impairment assessment at Hirslanden
May 2018
• Considered the external auditor’s 2018 year-end
audit report and opinion
• Considered the financial performance of the Group
and each division, including debt covenants
• Considered and satisfied itself with the approach
adopted for significant accounting policies, key
accounting items, areas of significant judgments, and
material assumptions and 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
• Considered the final dividend proposal and
recommended it to the Board for approval by the
shareholders
• Reviewed the key tax considerations across the
Group, together with the disclosures made in the
2018 Annual Report
• Considered 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)
• Considered and approved the Audit and Risk
Committee Report for inclusion in the 2018 Annual
Report
• Considered the 2018 Annual Report and financial
statements, including the confirmation of fair,
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 137
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION AUDIT AND RISK COMMITTEE
REPORT (CONTINUED)
balanced and understandable reporting and
May 2019
recommended these for approval by the Board
• Considered the preliminary results announcement
and recommended these for approval by the Board
• Considered the 2018 notice of annual general
meeting and recommended it for approval by
the Board
• Considered the external auditor’s 2019 year-end
audit report and opinion
• Considered the financial performance of the Group
and each division, including debt covenants
• Reviewed the key tax considerations across the
Group, together with the disclosures made in the
• Reviewed the key tax considerations across the
2019 Annual Report
Group
November 2018
• Considered the external auditor’s interim
review findings
• Considered the financial performance of the Group
and each division, including debt covenants
• Considered and satisfied itself with the approach
adopted for significant accounting policies, key
accounting items, areas of significant judgment and
any material assumptions or estimates
• Reviewed and confirmed the going concern status
and recommended its adoption for approval by
the Board
• Considered the interim dividend and recommended
it for approval by the Board
• Considered 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)
• Considered the interim financial statements and
results announcement, including the confirmation of
fair and balanced reporting
• Reviewed the key tax considerations across the
Group and the Group tax strategy, and
recommended the latter for approval by the Board
March 2019
• Considered the external auditor’s pre-year-end
report on accounting, auditing and control matters
• Considered the significant accounting policies,
including the implementation of IFRS 9 and IFRS 15
• Considered and satisfied itself with the approach
adopted for significant accounting policies, key
accounting items, areas of significant judgments
(including impairment assessments), 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
• Considered the final dividend proposal and
recommended it to the Board for approval by the
shareholders
• Considered 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)
• Considered and approved the Audit and
Risk Committee Report for inclusion in the
2019 Annual Report
• Considered the 2019 Annual Report and financial
statements, including the confirmation of fair,
balanced and understandable reporting, and
recommended these for approval by the Board
• Considered the preliminary results announcement
and recommended these for approval by the Board
• Considered the notice of AGM and recommended it
for approval by the Board
The Audit and Risk Committee, together with management
and the external auditor, paid particular attention to the
and the corresponding transition disclosures and the
following matters:
impact assessment of IFRS 16
• Considered the preliminary going concern and
long-term viability assessment, together with the
supporting stress testing analysis
• The financial performance of the Group’s divisions and
the Group as a whole, in the context of the agreed
budget for the year and guidance provided to investors,
together with the key drivers of the Group’s
• Reviewed the key tax considerations across
performance.
the Group
• Conducted an annual review of the Finance function
• Considered the actions taken by management in
• The significant accounting policies and practices
adopted by the Group, including the new accounting
and reporting requirements introduced by IFRS 9
response to governance and reporting good practice
Financial Instruments, IFRS 15 Revenue from Contracts
with Customers and IFRS 16 Leases, and their impact on
138 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
the Group’s financial statements for the financial year
ended 31 March 2019.
• Key accounting items and areas of significant judgment,
together with any material assumptions and estimates
adopted by management.
• Areas of discussion where there was discussion with the
external auditor and the existence of any errors,
adjusted or unadjusted, resulting from the audit.
• The clarity of disclosures and compliance with relevant
accounting standards and financial and governance
reporting requirements, including the reporting
recommendations published by the FRC during the
financial year.
• Outstanding tax matters, any tax risks and the
assurances received from the Company’s tax advisors as
part of the year-end audit, together with progress on
country-by-country tax reporting and transfer pricing
documentation. The Audit and Risk Committee also
reviewed and recommended the Group tax strategy to
the Board for approval. The strategy is published on
Mediclinic’s website at https://www.mediclinic.com/en/
governance/risk-management.html and a summary is
available on page 38 of this Annual Report.
• The processes followed to ensure the integrity of the
information provided in the annual and interim reports
and assurance that the 2019 Annual Report presents a
fair, balanced and understandable assessment of the
Group’s position and prospects.
Significant financial reporting matters
Table 2 below sets out the principal areas of judgment in
relation to the 2019 interim and annual financial statements,
which the Audit and Risk Committee discussed with
management and the external auditor.
TABLE 2: SIGNIFICANT ISSUES CONSIDERED AND STEPS TAKEN
SIGNIFICANT
ISSUES CONSIDERED
Goodwill and non-financial
assets (CGU level)
impairment reviews
(see notes 6 and 7 to the
consolidated financial
statements)
STEPS TAKEN BY THE AUDIT AND RISK COMMITTEE
The Audit and Risk Committee reviewed:
• the impairment assessment of the carrying amount of the Middle East goodwill;
• the impairment assessment of the carrying amount of Hirslanden’s brand names; and
• the assessment as to whether an indication existed that non-financial assets at an
individual CGU level might be impaired, and the subsequent impairment test of the
Swiss CGUs including property valuations and the goodwill arising from the acquisition
of Clinique des Grangettes.
It reviewed the key assumptions to the impairment review performed, which included the
cash flows derived from the annual financial planning process, long-term growth rates and
the discount rates. Long-term growth rates for periods not covered by the forecast
periods were challenged to ensure they were appropriate in the countries relevant to
the divisions.
Based on its challenge of the key assumptions and associated sensitivities, the Audit and
Risk Committee concluded that the carrying value of the Middle East goodwill was
appropriately supported by the recoverable amount calculated.
It concurred with the impairment charges that arose in the Swiss division because of the
disappointing performance and changes in the market and regulatory environment that
affected key inputs to the calculation of the recoverable amount.
It considered the sensitivities to changes in assumptions and the related disclosures
required by IAS 36 Impairment of Assets.
The Audit and Risk Committee discussed the external auditor’s feedback and considered
its conclusion regarding the impairment charge recorded.
Considering all of the above, management responses and the external auditor’s
views, the Audit and Risk Committee was satisfied that the assumptions used were
reasonable and that the impairment charges, together with related disclosures, were
appropriately presented.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 139
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION AUDIT AND RISK COMMITTEE
REPORT (CONTINUED)
SIGNIFICANT
ISSUES CONSIDERED
STEPS TAKEN BY THE AUDIT AND RISK COMMITTEE
Impairment review of
equity investment in Spire
The Audit and Risk Committee reviewed the impairment tests of the equity investment in
Spire.
(see note 8 to the
consolidated financial
statements)
It reviewed the key assumptions, which included the forecast cash flows, long-term
growth rates and the discount rate. These were based on valuation work by two global
investment banks.
It noted that a significant impairment had arisen at 30 September 2018 because of revised
guidance issued by Spire.
The Audit and Risk Committee further considered the updated full-year financial results,
further announcements and guidance issued by Spire and Mediclinic’s independent view
about Spire’s future trading prospects, as well as 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 Audit
and Risk Committee concurred with the impairment charge taken at 30 September 2018
and that no further impairment charge or reversal of impairment charge was required at
31 March 2019.
Purchase price allocation
of the Clinique des
Grangettes acquisition and
related put option liability
The Audit and Risk Committee reviewed and was satisfied with the purchase price
allocation performed in respect of the Clinique des Grangettes acquisition including the
recognition of a put option liability. It noted that EY had performed an independent
valuation of the intangible assets and the Committee was satisfied that a rigorous process
was followed.
The Audit and Risk Committee was presented with management’s considerations and
feedback from the external auditor on procedures performed.
It was satisfied that a rigorous process was followed in identifying and considering the
alternative intangible asset categories and that the significant intangible asset was
reasonably valued, applying appropriate judgment.
Adoption of IFRS 9
Financial Instruments and
IFRS 15 Revenue from
Contracts with Customers
The Audit and Risk Committee reviewed the first-time adoption of IFRS 9 and IFRS 15 and
the related disclosures in the Group’s annual financial statements.
It considered the appropriateness and disclosure of the classification and measurement of
financial instruments and the quantification of the impairment provision of trade
receivables under the expected loss model as required by IFRS 9.
It also considered the disclosure of revenue including an assessment of the agent versus
principal criteria in relation to medical practitioners.
Swiss pension fund
liabilities
(see note 18 to the
consolidated financial
statements)
The Audit and Risk Committee reviewed the main valuation assumptions such as discount
rates, mortality and inflation rate applied in the valuation of the pension fund plan assets
and obligations.
The principal valuation assumptions prepared by external actuaries and adopted by
management were considered in the light of prevailing economic indicators.
140 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
SIGNIFICANT
ISSUES CONSIDERED
Classification and
presentation of
exceptional items
Impact assessment of
IFRS 16 Leases
(see note 2.26 to the
consolidated financial
statements)
Going concern and
viability statement
(see pages 60–61 in this
Annual Report)
STEPS TAKEN BY THE AUDIT AND RISK COMMITTEE
The Group uses non-IFRS measures in evaluating performance and as a method to provide
clear and consistent reporting. Judgment is required in determining whether an item is
exceptional. For the financial year ended 31 March 2019, the exceptional items (after taking
related tax and deferred tax into account) amounted to £349m (£413m before tax) of
which £194m (£241m before tax) related to impairment charges.
Refer to the Financial Review on page 32 for details of the exceptional items. Exceptional
items were evaluated based on their nature to assess whether their classification and
presentation was in line with the Group’s policy and guidance from the FRC.
The Audit and Risk Committee reviewed management’s application of the policy for
consistency with previous accounting periods. It also assessed whether the disclosures
within the Financial Review and the interim and preliminary results announcements
provided sufficient detail to understand the nature of these items.
It was satisfied that the amounts classified as exceptional items were reasonable in all
material respects and the related disclosure of these items in the Financial Review and
results announcements was appropriate.
The Audit and Risk Committee was satisfied that all adjusted measures were appropriately
labelled and reconciled to the equivalent statutory measures and it found the related
disclosures to be clear and transparent.
Key matters reviewed by the Audit and Risk Committee included the detailed impact
assessment of IFRS 16, such as the quantification of lease liabilities, right-of-use assets and
the impact on the Group’s 2020 income statement.
The quantification and consideration of the impact on the Group’s financial statements for
the 2020 financial year, together with the associated disclosures and the approach taken
in the IFRS 16 transition project, were considered and accepted as appropriate.
The Audit and Risk Committee monitors the Group’s robust risk management process and
system of internal control via a mandate from the Board (see page 117). The principal risks
as detailed on pages 56 – 59 were identified by these systems and, for the purposes of the
viability assessment, severe but plausible scenarios reflecting the risks that could impair
the viability of the Group were identified for each of the divisions to form the basis for
stress testing.
This analysis showed that the business, in its geographically diverse portfolio, would be
able to withstand any individual and certain combinations of the severe but plausible
scenarios by taking management action, ceteris paribus, with the key mitigating steps
being a reduction in discretionary investment, cost management initiatives, drawdown of
overdraft facilities and improvement in net working capital days. The Audit and Risk
Committee therefore has a reasonable expectation that the Group will be able to continue
in operation and meet its liabilities as they fall due over the five-year period of their
detailed assessment, ending in 31 March 2024.
Having considered the principal risks and the viability assessment, the Audit and Risk
Committee also considered it appropriate to adopt the going concern basis of accounting
in preparing the financial statements.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 141
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION AUDIT AND RISK COMMITTEE
REPORT (CONTINUED)
FAIR, BALANCED AND
UNDERSTANDABLE REPORTING
Throughout the year, the Audit and Risk Committee (and in
certain instances, the Board) reviewed the Group’s external
financial reports and other announcements relating to its
financial performance to ensure that these presented a fair,
balanced and understandable assessment of the
Company’s position and prospects. The Audit and Risk
Committee also reviewed the use of adjusted measures by
the Group and ensured that these were appropriate for
aiding users of the Group’s financial statements to better
understand its performance year on year (including items
included or excluded from calculation).
At the request of the Board, the Audit and Risk Committee
reviewed a full draft of this Annual Report, together with a
summary of management’s approach to the preparation of
the narrative sections and the annual financial statements.
It considered whether there was consistency between the
key messages in this Annual Report and the Group’s
position, performance and strategy, and between the
narrative sections and the annual financial statements. The
Audit and Risk Committee also considered whether all key
events reported to the Board and its committees during
the year, both good and bad, were adequately reflected.
Feedback from the Audit and Risk Committee on areas
that would benefit from further clarity was incorporated
into this Annual Report ahead of final approval.
Following its review, the Audit and Risk Committee advised
the Board that, in its opinion, this Annual Report, taken as
a whole, was fair, balanced and understandable and
representative of the financial year under review, and that it
provided the information necessary for stakeholders to
assess the Group’s position, performance, business model
and strategy.
INTERNAL CONTROL SYSTEMS AND
RISK MANAGEMENT PROCESSES
The Group upholds an effective control environment,
including a comprehensive system of internal controls
which is designed to ensure the accuracy and reliability of
the Group’s financial reporting, that risks are mitigated and
that the Group’s objectives are attained. The key features
of the system include appropriate and well-defined
delegations of authority, clear lines of accountability,
policies and procedures covering financial planning and
reporting, and monitoring mechanisms. Management is
responsible for establishing and maintaining adequate
internal controls, while the Board, via the Audit and Risk
Committee, is responsible for ensuring the efficacy of these
During the year, the internal control environment was
enhanced by establishing an in-house Internal Audit
function, which works closely with the Group Risk
Management function (refer to section below on Internal
Audit). The Group’s compliance process forms an integral
component of the Group’s risk management and internal
controls programme. The Compliance Officer is supported
by company secretaries at Group and divisional levels, as
well as by internal legal advisors who are responsible for
providing guidance in respect of compliance with
applicable legislation and regulations.
Effectiveness of risk management
process and system of internal control
The Board retains overall responsibility for determining the
risk appetite of the Group, overseeing the risk management
processes and internal controls implemented throughout
the Group, reviewing their effectiveness and reporting
on the outcome of their review in the annual report.
Details of the Group’s principal risks and uncertainties
and risk management processes and of the key features of
the Group’s internal control systems are set out on pages
56 – 59 and page 127 respectively of this Annual Report.
The Board has delegated responsibility for monitoring and
reviewing the effectiveness of the Group’s risk
management processes and internal controls to the Audit
and Risk Committee. This covers all material controls
including financial, operational and compliance controls
and risk management systems. In discharging the
responsibilities delegated by the Board, the Audit and Risk
Committee is supported by the internal audit and
management reports.
Internal assurance is provided through self-assessments,
supported by various peer reviews and self-assessment
control processes. Further assurance is provided through
the delivery of the internal audit plan, which is developed
by the Internal Audit function with input from
management. Recommendations arising from internal
audits are communicated to the relevant business areas
and their implementation is tracked by the function. The
Audit and Risk Committee receives regular reports on
progress against the internal audit plan and corrective
actions taken by management in response to internal audit
findings. In addition, where appropriate, the Group seeks
external assurance from independent external experts. The
internal control environment is also evaluated during the
annual external audit. The results of all these assurance
processes are monitored by the Group’s Risk Management
function and reported to the management team of each
division and the Group.
controls and that appropriate actions are taken to correct
The Audit and Risk Committee also receives reports from
deficiencies when they are identified.
management on a range of issues focused primarily on the
142 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
key risks identified in the ERM dashboard, as well as fraud
and ethics matters (including any instances of
whistleblowing). It also receives reports and considers the
activities of the internal and external auditors. The Audit
and Risk Committee provides regular updates to the Board
on these matters.
The Audit and Risk Committee conducted a robust review
of the principal risks and uncertainties faced by the Group
and of the efficacy of the risk management processes and
system of internal controls in place within the Group for the
year under review and up to the Last Practicable Date, in
project (including GDPR); and clinical risk
management processes
• Considered management’s reports on the status of
regulatory compliance across the Group; and fraud
and ethics matters (including any instances of
whistleblowing)
November 2018
• Considered the principal risks and uncertainties and
recommended these for approval by the Board
• Considered the combined assurance processes
accordance with the requirements of the Guidance on Risk
established for IT projects aimed at adapting the
Management, Internal Control and Related Financial and
Business Reporting published by the FRC. The key
Group to the evolving global healthcare environment
• Considered the outcome of the Group’s 2018 cyber
activities undertaken by the Audit and Risk Committee in
governance health check; the cyber incident
respect of its work in this area are set out below.
April 2018
• Considered progress on implementation of data
privacy project (including GDPR)
May 2018
• Considered the report on internal control systems
and risk management processes included in the 2018
Annual Report and recommended it for approval by
the Board
• Considered and approved the amended ERM Policy
• Considered and confirmed that there were no
material changes to the principal risks and
uncertainties identified at the March 2018 meeting
and recommended these for approval by the Board
• Considered management’s reports on: progress
regarding the implementation of the Group-wide
data privacy project (including GDPR); key IT
projects; and fraud and ethics matters (including any
instances of whistleblowing)
September 2018
• Considered management’s reports on the ERM
dashboard and status report, including changes to
key risks across the Group, risk ratings and progress
against risk management plans
• Considered and approved the Group Information
Security Management Policy and conducted an
in-depth review of IT-related risks, including the
governance and status of key IT projects
• Conducted other in-depth reviews covering:
corporate and tax structures across the Group;
the Group-wide data privacy protection
response plan and steps being taken to enhance the
Group’s cyber protection arrangements. The
Committee recommended the cyber incident
response plan to the Board for approval
• Considered and noted the Group Tax Policy compiled
by management
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
March 2019
• Conducted a robust assessment of the Group’s risk
management processes and internal control systems,
principal risks and uncertainties and mitigating
actions, including: the ERM framework, ERM Policy
and risk appetite statement; top risks; other topical
risk areas; and the ERM plan for the 2020 financial
year. The Committee took into consideration the
control matters reported in the in auditors pre-year-
end report
• Considered the preliminary going concern and
long-term viability assessment, together with the
supporting stress testing analysis
• Considered the Fraud Risk Management Policy and
management’s report on fraud and ethics matters
(including any instances of whistleblowing)
• Considered the Treasury Policy and procedures
• Group Information Security Management Policy
• Cyber incident response plan
• Data Privacy and Data Protection Policy
• Considered the Group’s key insurance policies
• Considered the Group Regulatory Compliance Policy
and management’s report on assurances obtained in
respect of compliance matters and the programme
for the 2020 financial year
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REPORT (CONTINUED)
May 2019
• Considered the report on internal control systems
and risk management processes included in this
Annual Report, taking into account the control
matters notes in the external auditor’s report and
recommended it for approval by the Board
• Considered the report on principal risks and
uncertainties and mitigating actions included in this
Annual Report and recommended these for approval
by the Board
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
• Considered management’s report on cybersecurity
risks and monitoring
INTERNAL AUDIT
As stated in the 2018 Annual Report, the Audit and Risk
Committee approved the appointment of a Group General
Manager: Internal Audit with effect from 1 July 2018 in
order to establish an in-house Internal Audit function. As
part of the arrangements designed to ensure a gradual and
smooth transition of responsibilities from Remgro Internal
Audit to the new in-house function, Remgro Internal Audit
continued to provide internal audit services to the Group
until May 2019.
The key topics relating to internal audit considered by
the Audit and Risk Committee during the year are set
out below.
May 2018
The key areas examined by the Audit and Risk Committee
during the year included:
• Considered the internal audit report for the 2018
financial year, including annual review of the
effectiveness of the Group’s internal controls and risk
• the ERM Policy, framework and processes, including the
management processes
Group’s risk appetite and action plans designed to
• Considered the updated internal audit plan for the
mitigate risks in line with the Group’s risk appetite
2019 financial year
statement;
• Privately consulted with the internal auditor, without
• further strengthening of the combined assurance model
management
by integrating the reports received on financial,
operational, clinical and compliance internal control
systems and risk management processes, together with
the corresponding key performance indicators and
sources of internal and external assurances;
• the governance arrangements and progress on
implementation of IT projects aimed at adapting the
Group to the evolving global healthcare environment,
such as HIT2020 in Hirslanden and the Intersystems
EHR in Mediclinic Middle East;
• progress on the implementation of a comprehensive
data privacy project across the Group (including GDPR);
• key ICT risks including cybersecurity, project delivery,
information protection, architecture and quality
• Privately consulted with management, without the
internal auditor
September 2018
• Considered an update on internal audit
• Discussed employment and resourcing arrangements
November 2018
• Considered the internal audit report and findings,
including progress on the internal audit plan for the
2019 financial year
• Considered plans to increase internal staffing
March 2019
• Reviewed the internal audit report, internal audit
of IT systems, and application control and change
mandate and Internal Audit function
risks and steps taken by management to mitigate
• Privately consulted with the internal auditor, without
these risks; and
management
• the control findings raised by the external auditor.
• Privately consulted with management, without the
The review confirmed that there were no significant failings
internal auditor
or weaknesses and that processes were in place to ensure
May 2019
that the necessary actions were taken, where areas for
improvement were identified, and that these outcomes
were monitored. The Board, via the Audit and Risk
Committee is therefore satisfied that the Group has an
internal control and risk management environment that is
effective in ensuring the consistent achievement of key
control objectives and appropriately mitigating the
significant risks faced by the Group.
• Considered the internal audit report, including the
annual review of the effectiveness of the Group’s
internal controls and risk management processes
• Privately consulted with the internal auditor, without
management
• Privately consulted with management, without the
internal auditor
144 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
The Internal Audit function, which reports functionally to
cyber and security risks, medical technology risks, clinical
the Audit and Risk Committee and administratively to the
audits, data privacy audits and procurement audits, as well
Chief Corporate Services Officer, is responsible for
as a range of financial controls.
undertaking risk-based reviews across the Group,
examining the internal controls and management of risks
relating to the financial, operational and clinical
performance, IT and compliance activities of the Group. Its
responsibilities also include conducting an annual
documented review of the effectiveness for the Board of
the system of internal controls and risk management. The
Audit and Risk Committee receives regular reports on the
activities and key findings of the function and the status of
management’s implementation of recommendations.
A key aspect of the Audit and Risk Committee’s work
during the year was to ensure the adequate staffing and
resourcing of the in-house Internal Audit function to allow
for a smooth transition away from Remgro Internal Audit.
A high-level assessment of the function conducted in
March 2019 recognised that it had been in operation for
less than nine months, with most of the internal audit
employees joining Mediclinic during February 2019. The
Audit and Risk Committee was satisfied with the
effectiveness, independence, resourcing and standing of
During the year, the Internal Audit function completed and
the Internal Audit function within the Group and the
reported to the Audit and Risk Committee on audits and
progress made in establishing the function.
reviews across the Group, which focused particularly on
the human resources and payroll cycle. A cycle of clinical
audits was also implemented to provide assurance on
agreed clinical risk areas. In addition, internal audits were
performed at a high-level on certain business projects
aimed at adapting the Group to the evolving global
healthcare environment. The Audit and Risk Committee
provided feedback on the findings and recommendations
made and also considered the Internal Audit function’s
annual written assessment of the effectiveness of the
Group’s internal controls and risk management processes.
Following discussion with the function and management,
the Audit and Risk Committee confirmed to the Board that
it is satisfied with the effectiveness and efficiency of the
function, reliability of financial reporting and compliance
with applicable legislation and regulations.
One of the principal duties of the Audit and Risk
Committee is to review and approve the internal audit plan.
The plan is set on a three-year rolling basis and the focus
areas are determined and updated in line with:
• the internal audit mandate;
• the Group’s ERM dashboard;
• 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 Audit and Risk
Committee;
• new developments in organisational governance; and
• emerging risks and trends.
EXTERNAL AUDIT
The Audit and Risk Committee, on behalf of the Board, is
responsible for the relationship with the external auditor.
PricewaterhouseCoopers LLP was appointed as the
Company’s external auditor in February 2016, as approved
by the Company’s shareholders in December 2015. The lead
audit engagement partner is Mr Giles Hannam who was
appointed in February 2016. The external auditor is invited
to all Audit and Risk Committee meetings and receives
copies of all relevant papers and meeting minutes.
The key topics considered by the Audit and Risk
Committee during the year in relation to the external audit
are set out below.
May 2018
• Considered the external auditor’s year-end audit
report and opinion
• Evaluated the external auditor’s performance,
focusing on its independence and the objectivity and
effectiveness of the external audit process
• Considered and recommended the external auditor’s
re-appointment
• Considered the non-audit services expenditure for
the 2018 financial year
• Considered and approved the non-audit services
thresholds for the 2019 financial year
• Privately consulted with the external auditor, without
management
• Privately consulted with management, without the
external auditor
September 2018
• Considered relevant statutory, regulatory and good
The internal audit plan approved by the Audit and Risk
practice developments
Committee for the 2020 financial year will focus on risks
linked to business and IT projects aimed at adapting the
Group to the evolving global healthcare environment,
• Privately consulted with only the Audit and Risk
Committee members present
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REPORT (CONTINUED)
November 2018
• Considered the external auditor’s interim
review report
• Considered and approved the external audit plan for
the 2019 financial year, including the proposed
materiality threshold, the scope of the audit, the
Effectiveness and independence
An important element of the Audit and Risk Committee’s
role is to examine the effectiveness of the audit process
and monitor the independence of the external auditor. It is
committed to ensuring that the Group receives a high-
quality and effective statutory audit.
significant audit risks and fees and the corresponding
Prior to the start of the statutory audit work in respect of
engagement letter
the current reporting period, the Audit and Risk Committee
• Considered the non-audit services expenditure for
discussed the strategy and scope of the audit with
the 2019 financial year to date
• Considered and approved the revised non-audit
services thresholds for the 2019 financial year
• Privately consulted with the external auditor, without
management
• Privately consulted with management, without the
external auditor
March 2019
PricewaterhouseCoopers LLP and management. At the
March 2019 meeting, PricewaterhouseCoopers LLP
presented the Audit and Risk Committee with a pre-year-
end report on accounting, auditing and control matters,
allowing it to monitor and discuss progress against the
external audit plan. Private meetings held after Audit and
Risk Committee meetings with the external auditor without
management present, and with management without the
external auditor present, encouraged open and transparent
• Considered the external auditor’s pre-year-end
feedback from both parties.
report on accounting, auditing and control matters
• Considered and approved the 2019 financial year
audit fees
• Considered and approved the policy on the external
auditor’s independence and non-audit services
• Considered the non-audit services expenditure for
the 2019 financial year to date
As the 2019 financial year external audit neared finalisation,
all members of the Audit and Risk Committee,
management and those who regularly provide input or
have regular contact with the external auditor were asked
to evaluate its performance, with a strong focus on its
independence and objectivity. The evaluation was
performed by way of a questionnaire, which focused on
• Considered and approved the non-audit services
four key performance areas: (1) the robustness of the audit
thresholds for the 2020 financial year
• Privately consulted with the external auditor, without
management
• Privately consulted with management, without the
external auditor
May 2019
process; (2) the quality of delivery; (3) the quality of
reporting; and (4) quality of people and service. The
feedback from the questionnaire and the meetings with
the external auditor and management held during the
year was considered and discussed by the Audit and Risk
Committee at the meeting held in May 2019 and any
opportunities for improvement were brought to the
• Considered the external auditor’s year-end audit
attention of the external auditor. The Audit and Risk
report and opinion
Committee was satisfied with the overall feedback
• Evaluated the external auditor’s performance,
on PricewaterhouseCoopers LLP and concluded
focusing on its independence and the objectivity and
that the external audit process was effective and that
effectiveness of the external audit process
expectations set when awarding the external audit to
• Considered and recommended the external auditor’s
PricewaterhouseCoopers LLP in 2018 had largely been met.
re-appointment
• Reviewed the non-audit services expenditure for the
2019 financial year
In assessing the independence of the external auditor, the
Audit and Risk Committee adopts a two-fold approach.
Firstly, it considers the information and assurances
• Privately consulted with the external auditor, without
provided by the external auditor under the FRC’s Revised
management
Ethical Standard for Auditors. PricewaterhouseCoopers
• Privately consulted with management, without the
LLP confirmed that there were no significant facts and
external auditor
matters that may reasonably be thought to bear on its
independence or on the objectivity of the lead partner and
146 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
the audit team. The quality review partner, who reviews the
audit fee are taken into account in determining these
judgments of the audit team, rotates every seven years and
thresholds. Any individual assignment with a fee exceeding
the lead partner and key audit partners at each division
£50 000 requires the Audit and Risk Committee’s prior
rotate every five years. The lead partner and quality review
approval.
partner were appointed in February 2016 and are therefore
not due for rotation until after 2020 and 2022 respectively.
The key audit partners for Switzerland, Southern Africa and
the Middle East were appointed in 2018, 2017 and 2019
respectively, with rotation due after 2023, 2022 and 2024.
Secondly, the Audit and Risk Committee developed and
monitors the Non-audit Services Policy and associated
fees discussed below, which are designed to safeguard
the independence of the external auditor. Based on this
The fees paid to PricewaterhouseCoopers LLP in respect of
non-audit services amounted to approximately £550 000
or 23% of the statutory audit fees. Approximately £248 000
of the non-audit services fees were in respect of reviews
conducted in relation to the financial statements for the
six months ended 30 September 2018. Therefore, excluding
the interim reviews, non-audit service fees as a percentage
of statutory audit fees amounted to 13%.
approach and the Audit and Risk Committee’s findings, it
was satisfied that PricewaterhouseCoopers LLP continues
Refer to note 23 to the consolidated financial statements
on page 253 for more information for the fees paid audit
to be independent and free from any conflicting interest
and non-audit services during the year.
with the Group.
Non-audit services and fees
The Audit and Risk Committee believes that it may be
Re-appointment
The Audit and Risk Committee concluded that the services
provided by the external auditor were of a high quality;
appropriate in certain circumstances for the Company to
that the external audit process in respect of the 2019
engage its external auditor to provide non-audit services.
financial statements was effective; and that the auditor
A policy governing the provision of such services is in place
remains objective and independent. Accordingly, the Audit
to ensure non-audit services provided by the external
and Risk Committee recommended to the Board that the
auditor do not impair, and are not perceived to impair,
re-appointment of PricewaterhouseCoopers LLP as the
its independence or objectivity. The policy was last
Company’s external auditor be proposed to shareholders at
reviewed and approved by the Audit and Risk Committee
the Company’s AGM on 24 July 2019.
in March 2019.
As a result of the UK’s implementation of the European
The policy makes it clear that only certain types of services
Union’s mandatory audit firm rotation requirements, and in
are permitted to be carried out by the external auditor.
accordance with the Audit and Risk Committee’s terms of
Since 1 April 2017, the policy has excluded the provision of
tax services by the external auditor (previously provided by
PricewaterhouseCoopers LLP). Deloitte LLP was appointed
to provide tax advice to the Company and Mediclinic
Southern Africa and KPMG was appointed to provide tax
advice to Hirslanden and Mediclinic Middle East. In order to
help maintain the independence and objectivity of the
external auditor, the policy further requires that a different
partner be appointed to lead any non-audit services.
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. PricewaterhouseCoopers LLP was first
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
At the beginning of each financial year, the Audit and Risk
financial year commencing 1 April 2023, which is 10 years
Committee determines the pre-approved monetary
after the Company’s initial listing. The Audit and Risk
thresholds for each category of non-audit services that
Committee complied with the provisions of The Statutory
may be provided by the external auditor. The nature of the
Audit Services for Large Companies Market Investigation
non-audit services, the individual fee levels for each
(Mandatory Use of Competitive Tender Processes and
category and the aggregate fee relative to the external
Audit Committee Responsibilities) Order 2014.
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REPORT (CONTINUED)
ETHICAL CONDUCT, GOVERNANCE
AND COMPLIANCE
The Group is focused on conducting its business in an
• Considered management’s report on assurances
obtained in respect of compliance matters
• Considered the non-audit services expenditure for
honest, fair and ethical manner – a principle endorsed by
the 2019 financial year to date
the Board and management. The Audit and Risk
• Considered and approved the non-audit services
Committee oversees the Group’s processes for handling
thresholds for the 2020 financial year
breaches of the Group’s Ethics Code and Anti-bribery
• Reviewed the key tax considerations across
Policy. The key topics considered by the Audit and Risk
the Group
Committee during the year in relation to ethical conduct,
governance and compliance are set out below.
May 2018
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
• Considered the Regulatory Compliance Policy
• Considered the non-audit services expenditure for
the 2018 financial year
• Considered and approved the non-audit services
thresholds for the 2019 financial year
• Reviewed the key tax considerations across the
Group
• Considered relevant statutory, regulatory and good
practice developments
September 2018
• Considered management’s reports on the status of
regulatory compliance across the Group and fraud
and ethics matters (including any instances of
whistleblowing)
• Considered relevant statutory, regulatory and good
practice developments
May 2019
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
• Reviewed the key tax considerations across the
Group
• Considered relevant statutory, regulatory and good
practice developments
During the year, the Audit and Risk Committee received
regular feedback from the Group General Manager: Risk
Management on all material cases and incidents reported
on the ethics lines, on how these were managed and their
overall effectiveness. Further details on the ethics lines are
provided on page 93 of the Sustainable development
overview. The Fraud Risk Management Policy adopted in
the 2018 financial year has facilitated the development of
further controls for the prevention of fraud and corruption.
• Considered relevant statutory, regulatory and good
The Audit and Risk Committee is responsible for ensuring
practice developments
November 2018
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
Group-wide compliance with relevant legislation and
regulations. During 2018, Mr Dirk Lubbe was appointed
Group General Manager: Compliance and Data Protection
to maintain the standardised risk-based compliance
monitoring programme, which was strengthened in the
• Considered the key tax considerations across the
2018 financial year under the guidance of an external
Group and the Group tax strategy and recommended
compliance consultant. The programme tracks the Group’s
the Group tax strategy for approval by the Board
compliance with key legislation across all the jurisdictions
• Considered and noted the Group Tax Policy
established by management
• Considered and approved the revised non-audit
services thresholds for the 2019 financial year
March 2019
• Considered management’s report on fraud and ethics
matters (including any instances of whistleblowing)
• Conducted an annual review of: the Audit and Risk
Committee’s Terms of Reference; the Internal Audit
Mandate; policy in respect of the independence and
the provision of non-audit services by the external
auditor; ERM Policy; Fraud Risk Management Policy;
Treasury Policy and procedures; and Group
Regulatory Compliance Policy
in which it operates. The Audit and Risk Committee
received regular updates on progress regarding the
development of the compliance programme; examined the
implications of forthcoming legislation and management’s
plans to address the new requirements; and monitored
progress on their implementation, particularly in relation to
the EU’s GDPR, new data protection legislation in
Switzerland and South Africa, and new value-added tax
legislation in the UAE.
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 96 of the
Sustainable development overview. Details of the Clinical
148 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Performance and Sustainability Committee are provided on
page 117 of the Corporate Governance Statement.
during the financial year and any priorities for improving its
performance in the coming year. It reviewed and discussed
COMMITTEE EVALUATION
The Audit and Risk Committee’s performance was
reviewed within the framework of the annual internal Board
evaluation, which is discussed on page 124 of the
Corporate Governance Statement. The evaluation focused
on the Audit and Risk Committee’s composition and time
management, processes and support, the work undertaken
the outcomes of the evaluation and certain actions were
agreed for implementation, designed to further develop or
mature some of the Group’s risk management and
reporting. The results were reported to the Board at the
March 2019 meeting. The Audit and Risk Committee will
monitor progress on the agreed actions and resultant
outcomes, and these will be incorporated into the following
year’s performance evaluation.
PROGRESS ON KEY PRIORITIES FOR THE COMMITTEE FOR THE 2019
FINANCIAL YEAR
PRIORITIES
STATUS
• Monitor establishment of in-house Internal Audit function
• Monitor progress against the internal audit plan for the 2019
financial year
Refer to the internal audit section on
page 144 of this Audit and Risk
Committee Report
• Monitor progress against the overall ERM plan for the 2019 financial year
• Mature the integration of reporting to the Audit and Risk Committee on
financial, operational and compliance internal controls and risk
management systems
Refer to the internal control systems and
risk management processes section on
page 142 of this Audit and Risk
Committee Report
• Monitor the performance of recently implemented IT projects aimed at
adapting the Group to the evolving global healthcare environment
• Monitor the implementation of new IFRS standards
• Appoint a permanent compliance officer and monitor the entrenchment
of compliance management
Refer to the financial reporting section
on page 137 of this Audit and Risk
Committee Report
Refer to the ethical conduct, governance
and compliance section on page 148
of this Audit and Risk Committee Report
KEY PRIORITIES FOR THE COMMITTEE IN THE 2020 FINANCIAL YEAR
For the coming financial year, the Audit and Risk Committee will, among other matters, focus on:
• further developing the Group’s clinical risk management and reporting processes;
• continuous monitoring of the development of the in-house Internal Audit function and progress against the internal audit
plan for the 2020 financial year;
• monitoring progress against the ERM plan for the 2020 financial year;
• maturing the integration of reporting to the Audit and Risk Committee on financial, operational and compliance internal
controls and risk management systems;
• maturing the monitoring and reporting of projects aimed at adapting the Group to the evolving global healthcare
environment and cybersecurity risks;
• monitoring the implementation of new IFRS standards;
• overseeing the selection and transition of the new lead external audit partner who will lead the audit from the 2021
financial year;
• further enhancing the Group’s monitoring of potential, long-term regulatory developments; and
• monitoring progress against the regulatory compliance plan for the 2020 financial year.
Approved and signed on behalf of the Audit and Risk Committee.
Mr Desmond Smith
Chairperson of the Audit and Risk Committee
22 May 2019
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STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CLINICAL PERFORMANCE
AND SUSTAINABILITY
COMMITTEE REPORT
Dr Felicity Harvey
Chairperson of the Clinical Performance
and Sustainability Committee
As Chairperson of the Clinical Performance and
Changes to the composition during the year are
Sustainability Committee, it is my pleasure to report on its
listed below:
activities for the financial year ended 31 March 2019.
This report provides an overview of the key focus areas
• Dr Ronnie van der Merwe succeeded Mr Danie Meintjes
as the CEO on 1 June 2018 and as a member of the
considered during the year together with the priorities for
Clinical Performance and Sustainability Committee on
next financial year. The responsibilities and functions of the
25 July 2018.
Clinical Performance and Sustainability Committee are
governed by formal terms of reference available in the
governance section of the Company’s website at
www.mediclinic.com and summarised on page 117
of the Corporate Governance Statement. These are
approved by the Board and subject to regular review,
at least annually.
COMMITTEE COMPOSITION AND
MEETING ATTENDANCE
The composition of the Clinical Performance and
Sustainability Committee and meeting attendance
during the period under review are set out in Table 1.
• Mr Seamus Keating was appointed as a member of the
Clinical Performance and Sustainability Committee with
effect from 25 July 2018.
The Chief Clinical Officer, Chief Corporate Services Officer
(who is responsible for the Group’s sustainable
development management) and General Manager for
Clinical Performance are invited on a permanent basis to
attend and speak at all meetings. As part of the Ward-to-
Board accountability framework detailed below, each of
the divisional Chief Clinical Officers are invited to all
meetings, as well as the divisional CEOs (as required).
Other relevant members of management are invited to
attend meetings, as required.
150 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
DESIGNATION
APPOINTMENT
DATE
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
Dr Felicity Harvey3
(Committee Chairperson)
Independent Non-executive Director
03/10/2017
Dr Muhadditha Al Hashimi3
Independent Non-executive Director
01/04/2018
Dr Edwin Hertzog4
Mr Seamus Keating5
Dr Ronnie van der Merwe6
Non-executive Director
Independent Non-executive Director
Chief Executive Officer
15/02/2016
25/07/2018
25/07/2018
4/4
3/4
3/4
3/3
3/3
Notes
1
2 The attendance reflects the number of scheduled meetings held during the financial year. One meeting was held between the Company’s
The composition of the Clinical Performance and Sustainability Committee is shown as at 31 March 2019.
financial year-end and the Last Practicable Date, which was attended by all members.
3 Dr Hertzog stood down as Chairperson of the Clinical Performance and Sustainability Committee on 1 April 2018 and was succeeded by
Dr Harvey. Dr Hertzog was unable to attend one scheduled Committee meeting for unexpected personal reasons.
4 Dr Al Hashimi was unable to attend the first meeting following her appointment to the Committee due to a previous commitment which
could not be changed.
5 Mr Keating was appointed as a member with effect from 25 July 2018.
6 Dr Van der Merwe was appointed as CEO of the Company on 1 June 2018 and a member of the Clinical Performance and Sustainability
Committee with effect from 25 July 2018.
FIGURE 1: COMMITTEE MEMBERS’ SKILLS
AND EXPERIENCE
Number of committee members
Healthcare
Medical/
clinical/
operational
Sustainability
Other
stakeholder
management
HR, talent
and culture
management
2
2
KEY AREAS OF ACTIVITY
The Clinical Performance and Sustainability Committee has
increased the frequency of its meetings from 4–5 meetings
annually for the financial year commencing 1 April 2019, to
facilitate discussions on the 3–5 year clinical strategy of the
Group. In the year under review, the Clinical Performance
and Sustainability Committee met four times and the main
focus areas are set out below.
5
4.77
5
5
Clinical performance
In relation to clinical performance functions, the Clinical
1.53
Performance and Sustainability Committee is responsible
for promoting a culture of excellence in patient safety,
quality of care and patient experience. During the year, it
COMMITTEE COMPOSITION
FIGURE 2: COMMITTEE COMPOSITION
focused, inter alia, on:
Governance
60%
Independent
non-executive Directors
Non-executive Directors
Executive Directors
20%
20%
The implementation of the Ward-to-Board accountability
framework is designed to support and enhance the
Patients First strategic objective by aligning the interests of
patients and care providers and by building a culture of
performance reporting and accountability. This approach
also ensures that the information flows up and down the
organisation more effectively and facilitates Group-wide
alignment and collaboration. The framework has been
successfully implemented in Mediclinic Southern Africa and
Mediclinic Middle East and is in the process of being rolled
out in Hirslanden. This includes establishing a Clinical
Performance Committee for each division and replicating
this appropriately at hospital level. The divisional
committees will also include local independent clinical
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COMMITTEE REPORT (CONTINUED)
expert members to provide a different perspective and
• monitoring the sustainable development performance of
avoid ‘group think’. The Ward-to-Board accountability
the Group with specific regard to stakeholder
framework will drive improved quality and more effective
engagement (which includes the outcomes from the
outcomes for patients, thereby creating satisfaction and
patient experience index and employee engagement
value for the Company and its stakeholders.
index), health and public safety, broad-based black
Clinical performance management system
Another important area of focus has been the Group’s
clinical management model, which is based on a clinical
performance framework 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 divisions, including their individual
hospitals against internal and external benchmarks. This
will enable the management team and the Clinical
Performance and Sustainability Committee to analyse
trends and prioritise the corresponding clinical
performance improvements.
economic empowerment in Southern Africa, labour
relations and working conditions, the Company’s
Modern Slavery and Human Trafficking Statement as
required in terms of the Modern Slavery Act 2015
(available on the Company’s website at https://www.
mediclinic.com/en/modern-slavery-statement.html),
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 legislation) and corporate social
investment;
• considering and noting the paper by the Business and
Human Rights Resource Centre in respect of Modern
The Clinical Performance and Sustainability Committee
Slavery Act statements published by the FTSE 100, and
new initiatives being implemented to strengthen the
Group’s procurement practices and risk management;
• 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
recognises companies with strong environmental, social
and governance practices;
• confirming the key sustainability priorities, as
recommended by management and reported on
page 79 and in the Sustainable Development Report
available on the Company’s website at https://investor.
mediclinic.com/results-centre/results-and-reports; and
• reviewing and approving the annual Sustainable
development overview included in the Annual Report
and the Sustainable Development Report published on
the Company’s website at https://investor.mediclinic.
com/results-centre/results-and-reports.
As referred to on page 153, certain South African
subsidiaries of the Company are required to appoint
a Social and Ethics Committee in terms of the
South African Companies Act, No. 71 of 2008, as
amended (“SA Companies Act”), unless such companies
are subsidiaries of another company that has a Social and
Ethics Committee, which performs the functions required
by this regulation on its behalf. The Clinical Performance
and Sustainability Committee therefore performs the
statutory functions required of a social and ethics
committee in terms of the SA Companies Act.
continued its focus on:
• monitoring the clinical performance of the Group;
• evaluating patient safety, IPC 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 divisional level;
• 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 https://
investor.mediclinic.com/results-centre/results-
and-reports.
Sustainable development
In relation to its sustainability functions, the Clinical
Performance and Sustainability Committee is responsible
for ensuring that the Group remains a good and
responsible corporate citizen. During the year, it focused,
inter alia, on:
• reviewing and further aligning the Group’s policies to
the Group’s commitment to governance and reporting
of its sustainable development performance, including
the Group Sustainable Development Policy, the Group
Environmental Policy and its Ethics Code, thereby
strengthening the Group’s position on non-
discrimination, and respect for patient rights and human
rights. These are available on the Company’s website at
https://www.mediclinic.com/en/governance/
sustainable_development.html;
152 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
COMPLIANCE
The Clinical Performance and Sustainability Committee
considered the compliance universe and the risk and
control self-assessment process for the Group, as well as
new legislation and regulations.
ASSURANCE
The Clinical Performance and Sustainability Committee
considered the need for external assurance of the
Company’s non-financial reporting, particularly in relation
to the Company’s sustainable development performance. It
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 sustainable
development. The Clinical Performance and Sustainability
Committee will continue to monitor whether additional
shareholders at the company’s annual general meeting on
the matters within its mandate. As the Clinical Performance
and Sustainability Committee is performing the role and
function of a Social and Ethics Committee in terms of the
SA Companies Act, it will fulfil this function by referring
shareholders at the Company’s AGM on 24 July 2019, to
this report, which should be read in conjunction with the
Sustainable Development Report available on the
Company’s website at https://investor.mediclinic.com/
results-centre/results-and-reports. Any specific questions
for the Clinical Performance and Sustainability Committee
may be sent to the Company Secretary prior to the AGM.
PRIORITIES FOR THE COMMITTEE
FOR THE 2020 FINANCIAL YEAR
For the coming financial year, the Clinical Performance
and Sustainability Committee will, among other matters,
forms of assurance are required in future.
focus on:
COMMITTEE EVALUATION
The Clinical Performance and Sustainability Committee’s
performance was internally evaluated by its members by
way of a self-evaluation questionnaire, the results of which
were considered by both the Clinical Performance and
Sustainability Committee and the Board. Following
feedback received from the self-evaluation, the Clinical
Performance and Sustainability Committee agreed that
meetings regarding substantial matters would be held
in person, wherever possible. No other significant issues
that required improvement were identified. The Clinical
Performance and Sustainability Committee and the
Board concluded that the committee operated effectively
during the year and that its members are suitably skilled
and experienced.
• the continued implementation of the Ward-to-Board
accountability framework across the divisions;
• reviewing the clinical performance indicators and
identifying trends;
• the implementation of advanced technology for
improved clinical information and performance; and
• continued monitoring of the Company’s sustainable
development.
Signed on behalf of the Clinical Performance and
Sustainability Committee.
ANNUAL GENERAL MEETING
In terms of the SA Companies Act, a social and ethics
committee must, through one of its members, report to the
Dr Felicity Harvey
Chairperson of the Clinical Performance and
Sustainability Committee
22 May 2019
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COMMITTEE REPORT
As Chairperson of the Nomination Committee, it is my
pleasure to report on the Nomination Committee’s
activities for the financial year ended 31 March 2019.
The report provides an overview of the key focus areas
considered during the year, together with the priorities for
the 2020 financial year. The Nomination Committee is
governed by formal terms of reference, which it reviews
annually. The terms of reference are available in the
governance section of the Company’s website at https://
www.mediclinic.com/en/governance/corporate-
governance/board-committees.html and summarised on
page 117 of the Corporate Governance Statement.
Dr Edwin Hertzog
Chairperson of the Nomination Committee
COMMITTEE COMPOSITION AND
MEETING ATTENDANCE
The current composition of the Nomination Committee
meets the requirements of the 2016 UK Corporate
Governance Code, with the majority of members being
independent non-executive Directors. The Chairman of the
Board is the Chairperson of the Nomination Committee,
but does not chair the meeting when it is dealing with the
matter of succession to the chairmanship. Biographies of
members are included on page 104. Composition and
meeting attendance during the period under review are set
out in Table 1 alongside.
Attendees of the Nomination Committee meetings may,
from time to time and upon invitation, include the CEO, the
Group Chief Human Resources Officer and the Group
General Manager: Talent Management.
154 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
DESIGNATION
APPOINTMENT
DATE
NUMBER OF
SCHEDULED
MEETINGS
ATTENDED2
Dr Edwin Hertzog
(Committee Chairperson)
Mr Desmond Smith
Mr Jannie Durand
Dr Felicity Harvey³
Dr Anja Oswald³
Non-executive Director
Senior Independent Director
Non-executive Director
Independent Non-executive Director
Independent Non-executive Director
15/02/2016
15/02/2016
15/02/2016
25/07/2018
25/07/2018
2/2
2/2
2/2
2/2
2/2
Notes
1
The composition of the Nomination Committee is shown as at 31 March 2019. The Committee Chairperson, Dr Hertzog, is the Chairman of
the Board.
2 The attendance reflects the number of scheduled meetings held during the financial year. One additional ad hoc meeting was held during
the financial year to deal with urgent matters and was attended by all members. One ad hoc meeting was held between the Company’s
financial year-end and the Last Practicable Date and was attended by all members.
3 Drs Harvey and Oswald were appointed to the Nomination Committee with effect from 25 July 2018.
KEY AREAS OF ACTIVITY
Succession planning
The Nomination Committee conducted a detailed review of
the succession plans for the Board, the Group Executive
Committee and members of the divisional executive
committees, taking into account the Board Diversity Policy
mentioned below, the outcome of the annual Board
evaluation and a detailed skills matrix.
Board and committee composition
Following the announcement made by the Company on
20 February 2018 regarding Prof Robert Leu’s planned
retirement, the Nomination Committee identified potential
candidates through a rigorous selection process against
an agreed set of criteria. During the financial year, the
Board approved the Nomination Committee’s
recommendations and appointed Dr Oswald as an
independent non-executive Director.
The Board also approved the Nomination Committee’s
recommendation to appoint Mr Danie Meintjes as a
non-executive Director following his retirement as an
executive Director of the Company. The Nomination
Committee considered that Mr Meintjes’ continued
involvement in the Group was in the best interests of the
Company, its shareholders and other stakeholders in view
of the wealth of knowledge and experience he has gained
during his tenure of more than 30 years at Mediclinic.
As announced on 15 November 2018, Mr Desmond Smith
will retire as a Director of the Company at the conclusion
of the Company’s AGM scheduled for 24 July 2019 and will
not seek re-election. Mr Smith will also step down from all
Board committees at that time. Mr Alan Grieve, who has
been a member of the Audit and Risk Committee since
February 2016, will succeed Mr Smith both as SID and
Chairperson of the Audit and Risk Committee, effective
from the date of Mr Smith’s resignation. A search has also
commenced for an independent non-executive Director
with a strong financial background and recent and relevant
financial experience to be appointed to the Board.
MWM Consulting has been appointed to commence
with an extensive selection process to shortlist suitably
qualified candidates.
During the reporting period, the Nomination Committee
conducted its annual review of the structure, size, diversity
and composition of the Board and its committees. As part
of this process, it considered a detailed skills matrix for the
Board and the outcome of the Board evaluation. The areas
reviewed included the Board members’ experience,
independence, tenure, geographical knowledge, and
knowledge of the Company as whole.
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Diversity
During the year, the Nomination Committee reviewed the
Board Diversity Policy, which applies to the Board and the
Group Executive Committee (the direct reports to the
executive Directors). It also received feedback from the
divisions regarding progress against their diversity and
inclusion goals and plans for continued improvement
during the 2020 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 different skills; geographical, educational and
professional backgrounds; industry experience; age; race;
gender; social and ethnic backgrounds; cognitive and
appropriately. When recruiting new Directors, 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. In fulfilling its role in terms of
diversity, the Nomination Committee will continue to
consider relevant prescribed guidelines and the
performance of peer companies.
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.
personal strengths; and other characteristics. These
The Board Diversity Policy has four objectives to support
factors will be considered in determining the optimum
composition of the Board and, when possible, be balanced
the Board’s commitment to diversity. These objectives and
progress against these are set out below in Table 2.
TABLE 2: PROGRESS AGAINST OBJECTIVES
OBJECTIVE
PROGRESS
The Board will not impose quotas
regarding diversity, although it will
remain committed to achieving a
diverse Board and executive
management including aspects
such as age, gender, education
and professional background.
During the year, the Board appointed one female independent non-executive
Director, Dr Oswald. The new Director offers a diverse background and experience
of the Swiss healthcare industry and political landscape.
The Board is also pleased to report on the appointment of Dr René Toua as
Chief Clinical Officer from 1 July 2018, as the first female member of the Group
Executive Committee.
The CEO and divisional CEOs annually share their diversity goals and report on
progress to the Nomination Committee. The divisions have been focused on
increasing diversity below Board level by encouraging and strengthening the talent
pipeline within the divisions through short- and long-term succession planning.
Where the Company has been unable to promote within, it has identified the
desired criteria for external candidates. Both of these activities have been
embedded 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 the executive management remain 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 Nomination Committee will
annually consider and make
recommendations, if applicable,
to the Board on its diversity
objectives.
The Nomination Committee reviewed the Board Diversity Policy and was satisfied
that the objectives remained relevant. The Nomination Committee remains
committed to progressing the objectives for the 2020 financial year. A Group
diversity and inclusion strategy framework was approved during 2019 to help
develop a diverse pipeline of talent to executive management positions. Progress
against these objectives will be reviewed at least annually.
156 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OBJECTIVE
PROGRESS
In reviewing the composition of
the Board and executive
management, the Nomination
Committee will also consider
diversity, in addition to
considering the balance of
skills, experience, independence
and knowledge.
The Nomination Committee reviewed the composition of the Board and its
committees, specifically the balance of skills, experience, independence, knowledge
and diversity. The Board appointed a new Director with a diverse background and
experience as detailed above. The Nomination Committee reviewed the progress
made in each division and reported it to the Board. Each division’s talent pipeline
strategy was reviewed in detail, including their diversity focus, progress made in
that regard during the year, and plans for continued improvement during the 2020
financial year.
As at the date of this report, the Company complied with the recommendation
included in the Parker Report, namely to have at least one Director of colour by
2021. Good progress has been made in increasing female representation on the
Board, 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 Board had two Directors of colour (as defined in the Parker Report) and
25% female representation.
The Group’s workforce has in excess of 73.6% female representation overall. The
Board and executive management remain committed to creating a diverse and
inclusive workplace.
In identifying suitable candidates
for appointment to the Board, the
Nomination Committee will assess
candidates on merit against
objective criteria and with
due regard to the benefits of a
diverse Board.
The new non-executive Director was identified from a diverse list of candidates and
was 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 Nomination Committee
considered each of the candidates’ significant commitments, other directorships,
skills, experience, knowledge, gender, race, geographical location, and other
diversity considerations.
Assessment of independence of
non-executive directors
The Board annually reviews any potential conflicts of
CORPORATE GOVERNANCE CODE
DEVELOPMENTS
The Nomination Committee reviewed and considered the
interest and identified conflicts are, if appropriate,
amendments contained in the 2018 Corporate Governance
authorised. The Nomination Committee and the Board are
Code in preparation for its implementation in the 2020
satisfied that the commitments of the Chairman and other
financial year, insofar as these related to:
non-executive Directors, as shown in their biographies on
page 104, do not conflict with their duties and
commitments as Directors of the Company. As noted
earlier, the Nomination Committee reviewed the
composition of the Board and its committees, including
specifically the independence of the non-executive
directors. While the Chairman, Mr Durand and Mr Meintjes
are considered to be non-independent, the Board is
satisfied that the seven independent non-executive
Directors are free from any relationship that could affect
their judgment and continue to demonstrate their
independence by how they conduct themselves in Board
meetings, including how they exercise judgment and
independent thinking.
• establishing the preferred method for gathering the
views of the workforce;
• considering length of service of Directors when
reviewing the composition of the Board;
• accompanying papers to the resolutions to elect or
re-elect each Director at the annual general meeting,
outlining specific reasons why their contribution is
and continues to be important for the Company’s
long-term success;
• reporting on how the Company has engaged with its
workforce, suppliers and other stakeholders and how
the interests of stakeholders have influenced the Board’s
decision-making pursuant to Section 172 of the UK
Companies Act 2006;
• the proposed changes to the independence criteria
and tenure for Directors and for the Chairman of
the Company;
• using merit and objective criteria when considering
appointments and succession plans;
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• the recommendation for the Chairman not to remain in
the post beyond nine years from the date of the first
appointment to the Board;
• the continued emphasis on the promotion of diversity
expanding beyond gender to include social and ethnic
When considering the election or re-election of Directors,
the Nomination Committee considers the outcome of the
Board evaluation process, as well as other factors such as
the individual Director’s knowledge, skills and experience;
the independent judgment they add to Board deliberations;
backgrounds and cognitive and personal strengths,
and other commitments. In view of Mr Desmond Smith’s
through the design of appointment and succession
intention to retire after the AGM, the Nomination
planning practices; and
• the expansion of the Nomination Committee’s remit to
include the oversight of development of a diverse
pipeline for succession planning for the Board and
executive management and the resultant reporting
obligations for the Nomination Committee.
Committee launched a search for an independent non-
executive director with a strong financial background and
recent and relevant financial experience, to ensure the
Board’s current level of expertise in that area is maintained.
In accordance with the 2016 Corporate Governance Code,
all Directors of FTSE 350 companies should stand for
In line with the provisions of the 2018 Corporate
re-election annually. Accordingly, Dr Oswald (who was
Governance Code, the Company has appointed
appointed on 25 July 2018) will stand for election at the
Mr Meintjes, with effect from 1 April 2019, as the designated
non-executive Director responsible for engaging with the
AGM and all other Directors (other than Mr Smith) will
stand for re-election. Biographies of the Directors can be
Company’s workforce. The Board believes that Mr Meintjes
found on page 104.
is suitable for the role due to the wealth of knowledge and
experience he has gained during his tenure of more than
30 years at Mediclinic.
COMMITTEE EVALUATION
The performance of the Nomination Committee was
internally evaluated by its members by way of a self-
evaluation questionnaire, the results of which were
considered by the Nomination Committee and the Board.
No significant issues requiring improvement were identified
and the Nomination Committee and the Board concluded
that it operated effectively during the year.
EVALUATION OF THE COMPOSITION,
STRUCTURE AND FUNCTIONING OF
THE BOARD
The composition, structure and functioning of the Board
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 and at the AGM.
PRIORITIES FOR THE COMMITTEE
FOR THE 2020 FINANCIAL YEAR
For the coming financial year, the Nomination Committee
will, among other matters, focus on:
• 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
was evaluated internally during the year by way of a
• monitoring and implementing, where appropriate, the
self-evaluation questionnaire. The questionnaire focused on
2018 Corporate Governance Code requirements.
Board composition and expertise; the Board’s role in
setting strategy; its understanding of risks facing the
Group; succession planning; and the effectiveness of
Board committees.
The Board regards the evaluation process as an important
Signed on behalf of the Nomination Committee.
way to monitor progress. Further details on the Board
effectiveness evaluation is included in the Corporate
Governance Statement on page 124.
Dr Edwin Hertzog
Chairperson of the Nomination Committee
22 May 2019
158 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
DIRECTORS’
REMUNERATION REPORT
Mr Trevor D Petersen
Chairperson of the Remuneration Committee
LETTER FROM THE CHAIRPERSON
As Chairperson of the Remuneration Committee, it is my
pleasure to present the Directors' Remuneration Report for
the year ended 2019.
The Board believes that maintaining the highest standards
of corporate governance is essential to protecting
shareholder value and central to this is aligning Directors’
remuneration with the strategy of the business. The
Company therefore continues to review its strategy in line
with the evolving healthcare landscape in which it operates
to ensure that the Group’s variable pay schemes remain
linked with its long-term success.
At the annual general meeting on 25 July 2017, the
Directors' Remuneration Policy was put to a binding
shareholder vote and was approved by 95.9% of the votes
cast. The Remuneration Committee intends to commence a
thorough review of this policy in the forthcoming year,
taking into consideration investors’ feedback. A revised
Directors’ Remuneration Policy will be submitted for
shareholder approval at the 2020 annual general meeting.
REPORT STRUCTURE
As there are no proposed changes to the Directors’
included on page 162, which summarises key policy
features together with how it will be implemented in the
2020 financial year, as well as the pay outcomes for the
2019 financial year.
The Annual Remuneration Report on page 166 provides a
detailed explanation of the remuneration paid to Directors
during the 2019 financial year and will be submitted for an
advisory shareholder vote at the 2019 AGM.
CHIEF EXECUTIVE OFFICER
SUCCESSION
As stated in the 2018 Annual Report and financial
statements, Dr Ronnie van der Merwe succeeded
Mr Danie Meintjes as CEO on 1 June 2018. Details of
Dr Van der Merwe’s remuneration are set out within
the Annual Remuneration Report.
Mr Meintjes retired as an executive Director on 31 July 2018
and was appointed as a non-executive Director on
1 August 2018. This appointment is considered to be in
the long-term interest of Mediclinic and its stakeholders
in view of his wealth of knowledge and experience gained
from working for the Group, in different capacities, for over
30 years.
Remuneration Policy this year, the full policy has not been
In determining Mr Meintjes’ remuneration arrangements on
included in this report. However, as part of our
retirement, the Remuneration Committee considered both
commitment to provide clarity on executive Director
remuneration, a Remuneration at a Glance section is
UK investors’ expectations and South African labour
market requirements. In line with Section 430(2B) of the
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REPORT (CONTINUED)
Act, a notice was published on the Company’s website on
Long-term incentive awards granted in 2016, which were
14 August 2018 disclosing the treatment of Mr Meintjes’
based on relative total shareholder return and adjusted EPS
remuneration arrangements, the details of which can be
metrics lapsed based on below threshold performance
found on page 171 of the Annual Remuneration Report.
levels measured over the three-year period ending
PERFORMANCE AND REWARD
As set out earlier in the Annual Report, the Group faced a
challenging market and regulatory environment in all three
of the operating divisions, particularly in Switzerland
through the introduction of TARMED and the outmigration
of certain medical treatments from an inpatient to an
outpatient tariff, which was reflected in the Group’s overall
financial performance. This translated to an increase in
Group revenue of 2% to £2 932m (2018: £2 876m),
and a decrease in adjusted EBITDA of 4% to £493m
(2018: £515m).
From a patient safety and clinical effectiveness
perspective, the Group delivered strong performance with
the majority of indicators showing improvement. Much of
this progress can be attributed to a strong collaborative
effort between the clinical services teams of the respective
divisions and the corporate centre.
The executive Directors’ short-term incentive (“STI”) was
calculated on a Group-achieved EBITDA measure defined
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 specific items subject to approval by the
Remuneration Committee. This is combined with detailed
operating metrics measured at divisional level, which
comprise financial and operational objectives, including
clinical performance measurement. 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, the overall
bonus for executive Directors was 16.5% of maximum
(further details can be found on page 169), which is
reflective of the Company’s stringent approach to target
setting and its commitment to aligning pay with
performance. Following the end of the year, the
Remuneration Committee considered the pay-outs in the
context of the underlying financial performance of the
Group (including the shareholder experience) and
determined that the pay-out levels were appropriate as
they reflected the progress made by the Group in a very
31 March 2019. While this outcome was disappointing, the
Remuneration Committee approved the lapsing of the
awards as it reflected the overall financial performance of
the Group which has been materially impacted by
significant regulatory changes in Switzerland and the
UAE during the three-year period.
PROPOSED IMPLEMENTATION OF
THE DIRECTORS’ REMUNERATION
POLICY IN THE 2020 FINANCIAL
YEAR
Given that the Remuneration Committee intends to
undertake a thorough review of the Directors’
Remuneration Policy over the course of the coming year,
the Remuneration Committee only intends to make minor
changes to the implementation of the Directors’
Remuneration Policy during the 2020 financial year to
ensure it is aligned with the Group’s recent performance
and strategic priorities and reflects feedback received from
shareholders. These changes are set out below.
• Short-term incentive: The 2020 Group STI will continue
to be based on Group-achieved EBITDA performance
and subset performance indicators for the divisions,
which include financial and operational objectives. To
further support the Group’s clinical focus, additional
emphasis has been placed on improving clinical
performance by introducing and/or enhancing non-
financial performance measures, which include clinical
performance, patient experience, employee engagement
and patient safety measures. Incentive opportunities will
remain in line with last year.
• Long-term incentive – performance metrics of total
shareholder return (“TSR”): Given that the Company is
now a constituent of the FTSE 250, the Remuneration
Committee is changing the comparator group against
which TSR will be measured under the long-term
incentive plan (“LTIP”), to a based index comprising
constituents of the FTSE 250 (previously the FTSE 100).
The peer group will exclude financial services and
extraction companies given their exposure to different
market influences. TSR will continue to have a weighting
challenging environment.
of 40% of the overall award.
160 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
• Long-term incentive – performance metrics of
earnings per share: The remainder of the award will
continue to be based on adjusted EPS and accounts for
60% of the overall award. In light of the Group’s internal
business plan over the coming three years and taking
into account the market’s performance expectations,
the Remuneration Committee has set the target range
at 4% p.a. (threshold performance) to 11% p.a. (maximum
performance) growth.
• Long-term incentive – underpin: In light of investor
feedback, the Remuneration Committee has introduced
a discretionary override if a ROIC underpin is not met.
This allows the Remuneration Committee to review the
formulaic level of vesting delivered under the adjusted
EPS and relative TSR performance conditions based on
ROIC performance of the Company over the period.
• Long-term incentive – award levels: The Remuneration
Committee reviewed the long-term incentive award
levels given the decline in the share price in 2018 and in
the context of investor expectations. Given the
increased external focus on the affordability of
healthcare delivery, resulting in changing care delivery
models and greater regulatory intervention, the
Remuneration Committee’s view is that the current
share price is reflective of an industry re-rating. In this
context, the Remuneration Committee felt it appropriate
to maintain the same award levels as for 2019 financial
year which will also serve to further align the interests of
the executive management with those of investors.
Further details on implementation of the Directors’
Remuneration Policy for the 2020 financial year can be
found on page 162–165.
CORPORATE GOVERNANCE
The Remuneration Committee remained informed of the
evolving views of shareholders on pay and, in particular, the
new principles and provisions regarding Directors’
remuneration introduced by the 2018 Corporate
Governance Code. The Remuneration Committee is already
focused on ensuring that its approach to pay is fair and
that pay in the wider workforce is continually considered
and reflected in its deliberations. It is regularly updated on
wider workforce pay and makes its decisions relating to the
remuneration of senior executives and key management
within the context of the reward practices applied across
each of the divisions.
During the 2020 financial year, as part of the review of the
Directors’ Remuneration Policy, the Remuneration
Committee will continue to review Mediclinic’s compliance
with the remuneration aspects of the 2018 Corporate
Governance Code and make amendments where necessary.
We will continue to monitor any further statutory or
corporate governance developments regarding
Directors’ remuneration.
SHAREHOLDER ENGAGEMENT
The Chairman of the Board and executive Directors of the
Company have engaged with shareholders throughout the
period to provide regular updates on the progress and
performance of the Company. In addition, the
Remuneration Committee conducted a separate
consultation with shareholders on the treatment of
Mr Meintjes’ remuneration arrangements, upon his
retirement as CEO.
Base compensation
In line with South African employment practices, the
Remuneration Committee reviewed the base compensation
for the Company’s executive Directors, Dr Van der Merwe
and Mr Jurgens Myburgh, for the coming year and
approved a South African rand salary increase of 5.6% for
the portion paid in South African rand. No changes were
made to the Board fee (which is set in pound sterling) from
I trust the information presented in this report enables
stakeholders to understand how the Directors’
Remuneration Policy has been implemented over the
reporting period, how it will be implemented in the coming
financial year and the rationale behind the Remuneration
Committee’s decision-making. We remain committed to
open and transparent dialogue with investors and welcome
any feedback or comments.
1 April 2019.
Using a constant currency exchange rate of £1: R17.22 to
eliminate the effect of fluctuating exchange rates, the
increases in base compensation for Dr Van der Merwe and
Mr Myburgh equate to 4.9% and 4.7% respectively,
compared to the average increase of 5.0% for all Mediclinic
Southern Africa and Mediclinic Group Services employees.
Mr Trevor D Petersen
Chairperson of the Remuneration Committee
22 May 2019
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 161
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REPORT
ON REMUNERATION
REMUNERATION AT A GLANCE
The following section provides an overview of the Directors’ Remuneration Policy and how it will be implemented in the
2020 financial year, as well as an overview of remuneration outcomes for the current reporting period. A summary of the
Directors’ Remuneration Policy (as approved by shareholders at the 2017 annual general meeting) is available on the
Company’s website at http://annualreport2018.mediclinic.com/governance-and-remuneration/remuneration-report/ or,
alternatively, a summary can be found on pages 136–140 of the 2018 Annual Report and financial statements.
EXECUTIVE DIRECTORS’ REMUNERATION POLICY AND PROPOSED
IMPLEMENTATION IN THE 2020 FINANCIAL YEAR
TABLE 1: OVERVIEW OF EXECUTIVE DIRECTORS’ REMUNERATION POLICY AND
IMPLEMENTATION IN THE 2020 FINANCIAL YEAR
ELEMENT
OF PAY
PURPOSE AND LINK TO
STRATEGY
TERMS
CEO
CFO
Base
compensation
Annual
Short-Term
Incentive
• To attract, retain and
motivate talented
individuals who are
critical to the Group’s
success
• To encourage and
reward delivery of the
Group’s annual financial
and operational
objectives
• To align with
shareholder interest
With effect from
1 April 2019
£562 6951 (see further
details below)
£414 7851 (see further
details below)
Maximum opportunity
(% of base
compensation)
150%
133%
Performance conditions Group achieved EBITDA performance and
other financial and strategic objectives of the
three divisions.
Targets are not published in advance as
they are commercially sensitive, however,
details will be provided at the end of the
financial year.
Deferral portion
50% compulsory deferral for two years
Long-Term
Incentive Plan
Maximum opportunity
(% of base
compensation)
Performance conditions
• 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
200%
150%
MEASURE
WEIGHTING THRESHOLD MAXIMUM
Adjusted
EPS growth
Relative
TSR*
60%
40%
4% p.a.
Median
11%p.a.
Upper
quartile
*
Measured against the FTSE 250, excluding financial services
and extraction companies
Awards are also subject to an underpin3 which
allows the Remuneration Committee to review
the formulaic out-turn in the context of
ROIC performance delivered over the
performance period.
Performance/deferral
period
Performance is measured over three years,
following which awards are subject to a
two-year deferral period.
162 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
ELEMENT
OF PAY
Pension/
retirement
benefits
Benefits
PURPOSE AND LINK TO
STRATEGY
• To help recruit and retain
high-performing
executive Directors
• To provide employees
with long-term savings
via pension provisions
To provide a market-
competitive level of
benefits to ensure executive
Directors’ well-being
TERMS
CEO
CFO
Contribution
(% of salary)
9.0% of salary, in line with the pension
contribution levels provided across Mediclinic
Southern Africa and Mediclinic Group Services.
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
Directors’ interests with
those of shareholders
Requirement as a % of
base compensation
225%
200%
Annualised remuneration payable in South African rand translated into pound sterling at a rate of £1: R18.01 at 31 March 2019.
Notes
1
2 Remuneration payable in South African rand was translated into pound sterling at a rate of £1: R18.01 at 31 March 2019.
3 For LTIP awards to vest, the Remuneration Committee must be satisfied that the Company’s ROIC performance is appropriate. The
Remuneration Committee will consider outcomes where ROIC performance is not considered acceptable.
Base compensation
Base compensation levels were reviewed in accordance
with the Directors’ Remuneration Policy, taking into
account Company and individual performance, wider
workforce comparisons and market benchmarks of South
African pay levels and LSE-listed companies of similar size
and international footprint. The executive Directors’ base
compensation consists of a portion paid in South African
rand and a portion, equal to that of the Board fee, paid in
pound sterling.
The Remuneration Committee noted that, as at the end of
the 2019 financial year, the consumer price index in South
Africa was 4.5%, while average salary increases in South
Africa across industries ranged 5.0–7.0%. In this context,
the Remuneration Committee approved a South African
rand salary increase for Dr Van der Merwe and Mr Myburgh
of 5.6%. No changes were made to the Board fee (which is
set in pound sterling) from 1 April 2019.
Using a constant currency exchange rate of £1: R17.22 to
eliminate the effect of fluctuating exchange rates, the
increases in base compensation for Dr Van der Merwe and
Mr Myburgh equate to 4.9% and 4.7% respectively,
compared to the average increase of 5.0% for all Mediclinic
Southern Africa and Mediclinic Group Services employees.
TABLE 2: EXECUTIVE DIRECTORS’ BASE COMPENSATION LEVELS
SALARY
FROM
1 APRIL 2018
R’000
SALARY
FROM
1 APRIL 2019
R’000
SALARY
FROM
1 APRIL 2019
£’0002
BOARD FEE
FROM 1 APRIL
2019
£’000
BASE
COMPEN-
SATION FROM
1 APRIL 2019
£’0002
8 5261
6 000
9 000
6 336
500
352
63
63
563
415
EXECUTIVE DIRECTOR
Dr Ronnie van der Merwe
Mr Jurgens Myburgh
Notes
1
Dr Van der Merwe was appointed as an executive Director on 1 June 2018, however for comparison his salary from 1 April 2018 has been
annualised.
2 South African rand remuneration was translated into pound sterling at a rate of £1: R18.01 at 31 March 2019 and £1: R17.22 at 31 March 2018.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 163
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
REMUNERATION AT A GLANCE (CONTINUED)
Illustration of executive Directors’ remuneration
outcomes in the 2019 financial year
compensation package, on a case-by-case basis. It may
require notice to be worked or to make payment in lieu of
Figure 1 shows the maximum policy levels of remuneration
and actual remuneration of the executive Directors for the
2019 financial year (based on the executive Directors’
salaries as at 1 April 2018).
FIGURE 1: EXECUTIVE DIRECTORS’
MAXIMUM POLICY LEVELS OF
REMUNERATION AND ACTUAL
REMUNERATION FOR THE
2019 FINANCIAL YEAR (£’000)
notice or to place the Director on garden leave for the
notice period. Such a decision is made to protect the
interests of the Company and its stakeholders. In case of
payment in lieu of notice or garden leave, the salary,
benefits and pension contributions will be paid for the
period of notice served on garden leave or paid in lieu of
notice. If the Remuneration Committee deems 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
Dr Ronnie van der Merwe, Chief Executive Officer
earnings elsewhere.
£600
Actual
82%
18%
£2 054
Maximum
24%
1.41
33%
Mr Jurgens Myburgh, Chief Financial Officer
2017
£527
Actual
83%
17%
£1 576
0.96
Maximum
28%
34%
38%
43%
2.52
2.45
4.78
4.77
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
Fixed Pay
STI
LTIP
of the Remuneration Committee, subject to the
Note
1
Dr Van der Merwe was appointed as an executive Director on
1 June 2018 and his remuneration in Figure 1 covers the period
from appointment date to the end of the reporting period.
Executive Directors’ service
agreements and policy on payment
for loss of office
A summary of the Company’s policy on payments for loss
of office is set out below for shareholders’ reference.
The Remuneration Committee seeks to ensure that
contractual terms of the executive Directors’ service
agreements reflect best practice. It is the Company’s policy
that all executive Directors have rolling contracts that can
be terminated by the employee in line with his service
agreement. Executive Directors’ service agreements are
terminable on six months’ notice. Consistent with the 2016
Corporate Governance Code, all Directors are subject
to re-election by shareholders at each annual general
meeting.
In circumstances of termination on notice, the
Remuneration Committee will determine an equitable
performance conditions attached to the relevant awards.
The awards may be scaled back pro rata for the period of
the vesting period worked by the Director.
In addition to the above payments, the Remuneration
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
Remuneration Committee, reimbursement for legal advice
and provision of outplacement services) as necessary.
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 Remuneration 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,
take on outside appointments, however, all fees will be
retained by the Company.
164 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Directors’ recruitment and promotions
A summary of the Company’s policy on Directors
recruitment and promotions is set out below for
shareholders’ reference.
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
close alignment between the interests of shareholders and
management:
• If a new executive Director is appointed, the
Remuneration 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
Remuneration Policy.
• Depending on the timing of the appointment, the
Remuneration Committee may deem it appropriate to
set different STI performance conditions to that of the
current executive Directors for the first performance
year of appointment.
• An LTIP award can be made following an appointment
(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
awards, the Remuneration Committee will look to
replicate the arrangements being forfeited as closely as
possible and, in doing so, will take account of relevant
factors including: the nature of the deferred
remuneration, performance conditions and the time over
which they would have vested or been paid. The face
and/or expected values of the award(s) offered will
not materially exceed the value ascribed to the
award(s) foregone.
• For an internal appointment, any incentive amount
awarded in respect of a prior role may be allowed to
vest on its original terms or be adjusted as relevant to
take into account the appointment. Any other ongoing
remuneration obligations existing prior to appointment
may continue.
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.
NON-EXECUTIVE DIRECTORS’
REMUNERATION POLICY AND
PROPOSED IMPLEMENTATION IN THE
2020 FINANCIAL YEAR
Following a review of the fee levels within the Company
against the UK market, no changes are proposed for the
2020 financial year.
TABLE 3: NON-EXECUTIVE DIRECTORS’ FEES IN THE 2020 FINANCIAL YEAR
BASE FEES
Chairman
Base Board fee
FEE FROM
1 APRIL 2018
FEE FROM
1 APRIL 2019
%
INCREASE
£280 000
£63 000
£280 000
£63 000
COMMITTEE CHAIRPERSON/SENIOR INDEPENDENT DIRECTOR FEES
Audit and Risk Committee Chairperson
Remuneration Committee Chairperson
Clinical Performance and Sustainability Committee Chairperson
Investment Committee Chairperson
Senior Independent Director
COMMITTEE MEMBER FEES
Audit and Risk Committee
Clinical Performance and Sustainability Committee
Investment Committee
Nomination Committee
Remuneration Committee
£16 000
£16 000
£10 000
£10 000
£25 000
£10 000
£7 000
£7 000
£7 000
£10 000
£16 000
£16 000
£10 000
£10 000
£25 000
£10 000
£7 000
£7 000
£7 000
£10 000
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
0%
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 165
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT
DIRECTORS’ REMUNERATION
This section sets out the single figure tables showing the remuneration for the executive and non-executive Directors for
the 2019 financial year. Further information on these figures is set out in the subsequent sections.
TABLE 4: SINGLE TOTAL FIGURES OF DIRECTORS’ REMUNERATION (AUDITED)
SALARY
AND
FEES
£’000
BENEFITS
£’000
ANNUAL
BONUS/
STI
£’000
LTIP
£’000
PENSION
£’000
EXECUTIVE DIRECTORS1
Dr Ronnie van der Merwe2
2018/2019
Mr Danie Meintjes3
Mr Jurgens Myburgh
2018/2019
2017/2018
2018/2019
2017/2018
447
212
560
396
373
7
3
10
14
10
110
46
511
87
304
0
0
0
0
0
36
15
45
30
28
TOTAL
REMUNE-
RATION
£’000
600
276
1 126
527
715
FEES
£’000
BENEFITS
£’000
TOTAL
REMUNERATION
£’000
NON-EXECUTIVE CHAIRMAN
Dr Edwin Hertzog
NON-EXECUTIVE DIRECTORS
Mr Desmond Smith
2018/2019
2017/2018
2018/2019
2017/2018
Dr Muhadditha Al Hashimi5
2018/2019
Mr Jannie Durand4
Mr Alan Grieve
Dr Felicity Harvey5
Mr Seamus Keating
Prof Dr Robert Leu6
Ms Nandi Mandela6
Mr Danie Meintjes3
Dr Anja Oswald7
Mr Trevor Petersen
Total
Total
2017/2018
2018/2019
2017/2018
2018/2019
2017/2018
2018/2019
2017/2018
2018/2019
2017/2018
2018/2019
2017/2018
2018/2019
2017/2018
2018/2019
2018/2019
2018/2019
2017/2018
2018/2019
2017/2018
280
250
111
100
70
25
78
66
80
77
78
33
90
87
28
77
22
66
47
55
91
85
1 030
866
8
8
6
6
3
1
4
2
1
1
0
0
0
0
3
4
5
7
1
1
7
6
40
35
288
258
117
106
73
26
81
68
81
78
78
33
90
87
31
81
27
73
48
56
98
91
1 068
901
Notes
1
2 Dr Van der Merwe was appointed as an executive Director on 1 June 2018 and his remuneration for 2018/2019 covers the period from
South African rand remuneration was translated into pound sterling at a rate of £1: R18.01 at 31 March 2019 and £1: R17.221 at 31 March 2018.
appointment date to the end of the reporting period.
3 Mr Meintjes retired as an executive Director of the Company on 31 July 2018, therefore his remuneration for 2018/2019 in the executive
Director section of the table covers the period from the start of the reporting period to his date of retirement. Subsequently, Mr Meintjes was
appointed as a non-executive Director on 1 August 2019, therefore his remuneration for 2018/2019 in the non-executive Director section of
the table covers the period from 1 August 2018 to the end of the reporting period.
4 Mr Durand’s fees are paid to Remgro and include services rendered by Mr Durand or his alternate, Mr Pieter Uys.
5 Dr Harvey joined the Board on 3 October 2017 and Dr Al Hashimi joined the Board on 1 November 2017. Their remuneration for 2017/2018
covers the period from appointment date to the end of the reporting period.
6 Prof Dr Leu and Ms Mandela retired from the Board on 25 July 2018 and their remuneration for 2018/2019 covers the period from the start of
the reporting period to the date of their retirement.
7 Dr Oswald joined the Board on 25 July 2018 and her remuneration for 2018/2019 covers the period from appointment date to the end of the
reporting period.
166 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
BASE COMPENSATION (AUDITED)
Base salaries and Board fees are reviewed annually in March, with any changes effective in April.
The executive Directors’ base compensation consists of a portion paid in South African rand and a portion, equal to that of
the Board fee, paid in pounds sterling. The following base compensation was paid during the reporting period:
TABLE 5: BASE COMPENSATION FOR THE 2019 FINANCIAL YEAR
EXECUTIVE DIRECTOR
Dr Ronnie van der Merwe2
Mr Danie Meintjes3
Mr Jurgens Myburgh
BOARD FEE
(£)
52 500
27 322
63 000
BASE
SALARY
(R)
7 105 000
3 319 105
6 000 000
TOTAL BASE
COMPEN-
SATION
(£)1
446 981
211 604
396 130
Figures converted to pound sterling at a rate of £1: R18.01 at 31 March 2019.
Notes
1
2 Dr Van der Merwe’s remuneration covers the period from appointment date, 1 June 2019, to the end of the reporting period.
3 Mr Meintjes’ remuneration covers the period from the start of the reporting period to 31 July 2018, when he retired as an executive
Director of the Company.
BENEFITS AND PENSION (AUDITED)
The benefits of Dr Van der Merwe, Mr Meintjes and
Mr Myburgh include private medical insurance, life
insurance and reimbursements for reasonable business-
None of the executive Directors have rights to a defined
benefit pension. Details of executive Directors’ pension-
related entitlements in the event of loss of office are set
out on page 164.
related expenses (e.g. travel, accommodation and
Non-executive Directors were reimbursed for reasonable
subsistence). In some instances, the associated tax was
business-related expenses (e.g. travel, accommodation and
borne by the Company.
subsistence) and, in some instances, the associated tax was
The executive Directors participated in the Mediclinic
Southern Africa-defined contribution fund and received a
company pension contribution equal to 9.0% of their salary
in line with the Directors’ Remuneration Policy and the rate
allocated to all Mediclinic Southern Africa and Mediclinic
Group Services employees. No element of any executive
Director’s remuneration other than base salary is
pensionable.
borne by the Company. They receive no pension
contribution or other benefits and do not participate in
short-term or long-term1 reward schemes.
1
LTIP awards granted to Mr Meintjes relate to the period served as
an executive Director. Outstanding LTIP awards, in accordance
with the plan rules and South African employment practices, will
continue on the same terms, reflecting Mr Meintjes’ continued
service to the Company. Mr Meintjes will not receive further
awards in his role as non-executive Director (detail set out on
page 171).
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 167
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
SHORT-TERM INCENTIVE (AUDITED)
Achieved bonuses were determined based on the Group achieved EBITDA performance and subset performance
indicators for each of the three divisions, which comprise financial and operational objectives, including measures of
clinical performance.
Group achieved EBITDA for the purposes of the executive Directors’ STI comprises Group-adjusted EBITDA calculated
based on budgeted foreign exchange rates (£5.1m) excluding the impact of STI bonus accruals for the Group’s key
management and employees (£6.8m) and subject to further amendment by approval of the Remuneration Committee
(-£8.4m). In 2019, these further amendments included adjustments for factors not incorporated into the budget at the
start of the year, including the acquisition of Clinique des Grangettes in Hirslanden.
The Group EBITDA target is based on the sum of Corporate and each division’s approved budgeted adjusted EBITDA. The
Group’s actual adjusted EBITDA performance sets the initial bonus outcome percentage. The non-achievement of subset
performance indicators then gives rise to a reduction in the initial bonus outcome percentage. The subset performance
indicators are weighted relative to each division’s respective contribution to the Group’s adjusted EBITDA.
The performance indicators, targets and performance against the targets are set out in Figure 2 below.
FIGURE 2: SUMMARY OF THE PERFORMANCE CONDITIONS AND ACHIEVEMENT
AGAINST TARGETS
MAIN PERFORMANCE INDICATOR
GROUP ACHIEVED EBITDA
Group
Achieved
EBITDA
Maximum
496 678
553 574
Threshold
484 247
17.9% of a maximum EBITDA bonus achieved
SUBSET PERFORMANCE INDICATORS
HIRSLANDEN
MEDICLINIC
SOUTHERN AFRICA
MEDICLINIC
MIDDLE EAST
Debtors’ days
N/A
N/A
FINANCIAL PERFORMANCE INDICATORS
Threshold: 105 days
Maximum: 95 days
Achievement: 99 days
(Penalty 2%)
168 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
OPERATIONAL, CLINICAL AND PATIENT QUALITY PERFORMANCE INDICATORS
Clinical care quality
indicator
Achievement: Partial
achievement against clinical
safe surgery, national
society for quality assurance
readmission index and
quality initiative benchmark
indicators
(Penalty 5%)
Achievement: Partial
achievement against never
events, hand hygiene
compliance and aggregated
antimicrobial index value
indicators
(10% Penalty)
Achievement: Partial
achievement against never
events, surgical site
infections, injectable
administration error and
patient identification error
indicators
(3% Penalty)
Employee engagement
N/A
Personal performance
Personal objective
scoreboard indicators
Patient satisfaction
N/A
Employment equity
N/A
Achievement: Full
achievement based on
employee responses to
“My team has effectively
followed through on actions
we agreed on during our
action planning session”
Achievement: Null
achievement based on
employee engagement
response
(Penalty 5%)
Achievement: Full
achievement based on
overall mean Patient
Experience Indicator score
Achievement: Partial
achievement based on
overall mean Patient
Experience Indicator score
(Penalty 3%)
Achievement: Full
achievement based on
appointment to open
positions.
N/A
Penalty
Weighting of Division
Weighted Penalty
Total Subset Penalty
5.0%
45.3%
(2.3%)
10.0%
37.7%
(3.8%)
13.0%
17.0%
(2.2%)
(8.3%) of a 17.9% achieved EBITDA Bonus equates to a (1.5%) total bonus deduction
GROUP ACHIEVEMENT (ACHIEVED EBITDA BONUS LESS SUBSET OUTCOME): 16.5%
Note
The foreign exchange rate used for budget purposes was £1: R17.25; £1: CHF1.30 and £1: AED5.10.
The STI achieved was 16.5% of the maximum bonus. The amounts awarded to the executive Directors are set out below:
TABLE 6: STI AWARDS FOR THE 2019 FINANCIAL YEAR
EXECUTIVE DIRECTOR
Mr Danie Meintjes
Dr Ronnie van der Merwe
Mr Jurgens Myburgh
ACTUAL
BONUS AS
A % OF
MAXIMUM
BONUS
OPPORTUNITY
AS A % OF
ACTUAL
BONUS
(£)1
ANNUAL BASE
ANNUAL BASE
COMPEN-
SATION
COMPEN-
SATION
46 2882
110 3082
86 896
24.7%
24.7%
21.9%
150%
150%
133%
Note
1
2 Dr Van der Merwe’s actual bonus from appointment date 1 June 2019 to the end of the reporting period.
Figures converted to pound sterling at a rate of £1: R18.01 at 31 March 2019.
The STI bonus payable for the 2019 financial year 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 INTERNATIONAL PLC | 2019 ANNUAL REPORT 169
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
LTIP AWARDS VESTED TO EXECUTIVE DIRECTORS (AUDITED)
In August 2016, an LTIP award equal to 150% of base compensation was granted to Mr Myburgh, based on adjusted EPS
growth and relative TSR performance versus the FTSE 100 over the three financial years to 31 March 2019. In view of the
actual performance compared to the threshold targets, set out in Table 7 below, no LTIP awards vested to Mr Myburgh
during the 2019 financial period.
TABLE 7: LTIP PERFORMANCE TARGETS AND ACTUAL PERFORMANCE
PERFORMANCE
CONDITION
WEIGHTING
Adjusted EPS growth
60%
THRESHOLD
TARGET
(25% VESTING)
MAXIMUM
TARGET
(100%
VESTING)
ACTUAL
PERFORMANCE
VESTING
(% OF
MAXIMUM)
5% per annum
compounded
12% per annum
compounded
(10.3%) per
annum
0%
TSR ranked relative to
constituents of the
FTSE 100 Index
40%
Median of peers
(50th
percentile)
Upper quartile
of peers
(75th percentile)
Below median
0%
No awards were due to vest to Dr Van der Merwe during the 2019 financial period.
LTIP AWARDS GRANTED TO EXECUTIVE DIRECTORS (AUDITED)
2018 LTIP
Tables 8 and 9 below set out the LTIP awards granted to the executive Directors in June 2018, together the corresponding
performance conditions.
TABLE 8: 2018 LTIP AWARDS GRANTED TO EXECUTIVE DIRECTORS
EXECUTIVE
DIRECTOR
DATE OF
GRANT
NATURE OF
AWARD
NUMBER OF
SHARES1
FACE
VALUE
£’000
FACE VALUE AS
A % OF
ANNUAL BASE
COMPEN-
SATION
END OF
PERFOR-
MANCE PERIOD
PERFOR-
MANCE
CONDITIONS
Mr Danie
Meintjes
Dr Ronnie van
der Merwe
Mr Jurgens
Myburgh
15 June 2018
15 June 2018
15 June 2018
Conditional
Share Awards
Conditional
Share Awards
Conditional
Share Awards
209 998
£1 171 453
200%
31 March 2021
200 128
£1 116 394
200%
31 March 2021
110 646
£617 228
150%
31 March 2021
See Table 9
below
See Table 9
below
See Table 9
below
Note
1 Number of shares granted based on the five-day average middle market quotation prior to grant of an LSE share (£5.58).
TABLE 9: 2018 LTIP PERFORMANCE CONDITIONS
PERFORMANCE CONDITION
WEIGHTING
Adjusted EPS growth
TSR ranked relative to constituents of the FTSE 100 Index
60%
40%
THRESHOLD
TARGET
(25% VESTING)
MAXIMUM
TARGET
(100%
VESTING)
5% per annum
compounded
12% per annum
compounded
Median of peers
(50th
percentile)
Upper quartile
of peers
(75th percentile)
The awards are subject to clawback and malus provisions.
170 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Awards are denominated in shares with vesting dependent
• was granted an LTIP award in June 2018, in line with the
on the achievement of performance conditions over a
normal grant cycle. The award was structured as a
three-year period. Awards are subject to a two-year
conditional award over 209 998 ordinary shares in the
deferral period after vesting, meaning they are settled only
Company and will be subject to performance, vesting
at the end of a five-year period from the date of grant.
and deferral conditions in line with other participants
After this time, the value of the awards will be calculated
(as set out on page 170).
by alignment to share price movement but settled in cash
given the difficulty in settling awards in shares for
executive Directors who are South African residents.
Where a Director has not yet met the share ownership
guidelines, these funds must be used to purchase shares
in the Company.
TREATMENT OF REMUNERATION
ARRANGEMENTS FOR
MR MEINTJES UPON RETIREMENT
Mr Meintjes retired as an executive Director on 31 July 2018
and became a non-executive Director with effect from
Treatment of incentive awards
outstanding on retirement
• With respect to outstanding deferred STI awards, these
will continue to vest on the normal vesting date, subject
to the normal deferral period of two years:
– 2017 award: 27 187 ordinary shares due to vest on
1 June 2019.
– 2018 award: 45 811 ordinary shares due to vest on
15 June 2020.
• With respect to outstanding LTIP awards, in accordance
with the plan rules, awards will continue on the same
1 August 2018. In determining Mr Meintjes’ remuneration
terms, reflecting Mr Meintjes’ continued services to the
arrangements upon retirement, the Remuneration
Company. Awards will therefore continue and vest,
Committee considered both UK investors’ expectations
subject to performance achieved over the original
and South African labour market requirements, given
performance period, at the normal time. Awards
that South Africa was Mr Meintjes’ country of residence
remain subject to a service condition and may therefore
and employment.
be pro-rated if Mr Meintjes were to step down from the
In accordance with his Service Agreement and the
shareholder-approved Directors’ Remuneration Policy, with
respect to his remuneration arrangements up to and after
retirement, Mr Meintjes:
• received his normal base compensation, pension and
benefits up to 31 July 2018;
• received a payment in respect of accrued, but not taken,
leave of R319 105;
• remained eligible to receive a STI award in June 2019
in respect of the period of the 2019 financial year when
he served as an executive Director, to be pro-rated
accordingly (details of payments under the STI
in respect of 2019 financial year can be found
on page 169); and
Board.
– 2016 award: As set out above, the 2016 LTIP
performance targets were not met, therefore the
2016 LTIP lapsed in full.
– 2017 award: 129 626 ordinary shares due to
vest on 1 June 2020, subject to performance to
31 March 2020. Awards are subject to a further
two-year deferral period and therefore will not be
released until 1 June 2022.
– 2018 award: 209 998 ordinary shares due to vest on
15 June 2021, subject to performance to 31 March
2020. Awards are subject to a further two-year
deferral period and therefore will not be released
until 15 June 2023.
The Remuneration Committee has not exercised any
discretion in allowing Mr Meintjes’ outstanding deferred STI
and LTIP share awards to continue on the same terms.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 171
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED)
Table 10 sets out the Directors’ shareholdings, including shareholdings by persons connected to them, and share interests.
There were no changes in the Directors’ shareholdings between the financial year end and the Last Practicable Date. Full
details of the Directors’ shareholdings and share allocations are given in the Company’s Register of Directors’ Interests,
which is open for inspection at the Company’s registered office during business hours.
The executive Directors are required to build and maintain a minimum shareholding in Mediclinic, linked to their base
compensation. Shares are valued for these purposes at the year-end price, which was £3.05 per share as at 31 March 2019.
TABLE 10: DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS
SHARE-
HOLDING
GUIDELINES
AS A % OF
ANNUAL
BASE
COMPEN-
SATION
225%
200%
225%
EXECUTIVE
DIRECTOR
Dr Ronnie van
der Merwe
Mr Jurgens
Myburgh
Mr Danie
Meintjes
SHARES
HELD
AS AT
31 MARCH
2018
SHARES
HELD
AS AT
31 MARCH
2019
% OF
ANNUAL
BASE
COMPEN-
SATION
OUT-
STANDING
UNVESTED
LTIP AWARDS
WITH
PERFOR-
MANCE
CONDI-
TIONS1
DEFERRED
STI SHARES1
SHARE-
HOLDING
REQUIRE-
MENT MET
40 630
40 630
23%2
227 026
0
60 000
80 000
61%
175 909
38 051
173 323
142 0633
205%
339 624
72 998
No
No
No
Notes
1
Awards will be settled in cash and therefore are not taken into consideration as part of determining whether shareholding requirements
have been met.
2 Percentage of annualised base compensation.
3 Shareholdings as at date of retirement on 31 July 2018.
Dr Van der Merwe and Mr Myburgh will use any cash-settled awards paid to them under the LTIP to purchase shares in the
Company until they meet their shareholding guideline.
The shareholding in Mediclinic by non-executive Directors, including shareholdings by persons connected to them, is
shown below. 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.
TABLE 11: NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS
NON-EXECUTIVE DIRECTOR
AS AT 31 MARCH 2018
AS AT 31 MARCH 2019
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 Leu2
Ms Nandi Mandela2
Mr D Meintjes
Dr Anja Oswald
Mr Trevor Petersen
Mr Pieter Uys1
394 276
–
–
–
7 500
–
–
–
–
173 323
–
–
417
394 276
–
–
–
7 500
–
–
–
–
142 063
–
–
417
Notes
1 Mr Uys is the alternate to Mr Durand.
2 Prof Dr Leu and Ms Mandela served as non-executive Directors of the Company until 25 July 2018.
172 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
SHARE DILUTION LIMITS
The Company remains committed to protecting 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 and equity-based
awards under executive share plans to 5% of issued share capital over the same period.
SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT
The commencement dates of the executive Directors’ service agreements are:
TABLE 12: EXECUTIVE DIRECTORS SERVICE CONTRACT COMMENCEMENT DATES
EXECUTIVE DIRECTOR
Mr Jurgens Myburgh
Dr Ronnie van der Merwe
COMMENCEMENT DATE OF SERVICE AGREEMENT
1 August 2016
1 June 2018 (joined Mediclinic on 1 July 1999)
Further details of the executive Directors’ service agreements are provided on page 164.
Non-executive Directors do not have service agreements 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 Table 13.
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. Non-executive Directors’ appointments are terminable by three months’
notice on either side. In accordance with the 2016 Corporate Governance Code, all Directors are subject to annual election
or re-election by shareholders at the Company’s annual general meeting.
TABLE 13: NON-EXECUTIVE DIRECTORS’ APPOINTMENT DATE AND EXPIRY OF
CURRENT TERM
NON-EXECUTIVE DIRECTOR
DATE OF APPOINTMENT
EXPIRY OF CURRENT TERM
Dr Edwin Hertzog
Mr Desmond Smith
Dr Muhadditha Al Hashimi
Mr Jannie Durand
Mr Alan Grieve
Dr Felicity Harvey
Mr Seamus Keating
Mr Danie Meintjes
Dr Anja Oswald
Mr Trevor Petersen
15 February 2016
15 February 2016
1 November 2017
15 February 2016
15 February 2016
3 October 2017
5 June 2013
1 August 2018
25 July 2018
15 February 2016
14 February 2022
24 July 2019
30 October 2020
14 February 2022
14 February 2022
2 October 2020
4 June 2022
31 July 2021
24 July 2021
14 February 2022
The service agreements and letters of appointment are available for inspection during normal business hours at the
Company’s registered office and at the upcoming AGM.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 173
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
CHANGE IN REMUNERATION LEVELS
Table 14 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 Mediclinic Southern Africa in local currency.
The Remuneration Committee selected employees in South Africa as the most appropriate comparator since they are
subject to the same inflationary conditions.
TABLE 14: COMPARATIVE PERCENTAGE CHANGE IN REMUNERATION CEO AND EMPLOYEES
% CHANGE IN CEO SALARY, BENEFITS AND BONUS
% CHANGE
CEO1
Base compensation
Benefits
Bonus2
All employees
Salary
Benefits
Bonus
5.6
10.2
(73.2)
5.0
10.0
(27.5)
Note
1
Table 14 shows the percentage change between the CEO’s annualised local salary for the 2018 financial year, paid in South African rand
and his local salary, benefits and bonus for the 2019 financial year, paid in South African rand.
2 Percentage change of actual bonus as a percentage of annualised base compensation for Mr Meintjes over this tenure as CEO.
PERFORMANCE AND PAY PERFORMANCE
Figure 3 shows the value at 31 March 2019 of £100 invested in the Company upon inception on 21 June 2013, compared
with the value of £100 invested in the FTSE 100 Index and FTSE 250 Index on the same date. The intervening points are
the financial year-ends prior to the date of the combination with Al Noor Hospitals Group plc on 15 February 2016 and the
financial year-ends since.
The FTSE 100 and FTSE 250 were used as comparators as the Company has been a member of each of these indices.
FIGURE 3: MEDICLINIC TOTAL SHAREHOLDER RETURN COMPARED TO FTSE250
Mediclinic TSR vs FTSE 100 and FTSE 250 – Value of £100 invested on 21 June 2013 (£)
250
200
150
100
50
0
6/1/2 013
12/1/2 013
6/1/2 014
12/1/2 014
6/1/2 015
12/1/2 015
6/1/2 016
12/1/2 016
6/1/2 017
12/1/2 017
6/1/2 018
12/1/2 018
Mediclinic
FTSE 100
FTSE 250
174 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Table 15 shows the total CEO remuneration 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.
TABLE 15: TOTAL CEO REMUNERATION
TOTAL CEO REMUNERATION
YEAR ENDED 31 DECEMBER
YEAR ENDED 31 MARCH
2012
2013
2014
2014
2015
1 Jan–
15 Feb
2016
15 Feb –
31 March
2016
2017
2018
1 Apr–
31 May
20181
Dr Kassem Alom
Mr Ronald Lavater
Mr Danie Meintjes
1 Jun
2018–
31 March
20192
Dr
Ronnie
van der
Merwe
326
361
290
170
702
2 165
79
1 029
1 126
138
600
n/a
n/a
n/a
n/a
n/a
n/a
n/a
11.8%
20.0%
n/a
79.7%
55.9%
61.4%
16.5%
16.5%
n/a
100.0%
n/a
n/a
n/a
50.0%
50.0%
n/a
n/a
n/a
65.4%
69.9%
n/a
0.0%
0.0%
0.0%
0.0%
0.0%
Chief Executive
Officer
Total
remuneration
£’000
STI out-turn
(% of maximum)
Deferred STI
portion
LTIP vesting
(% of maximum)
Notes
1
Mr Meintjes retired as CEO on 31 May 2018, therefore his remuneration for 2018/2019 covers the period from the start of the reporting
period to his date of retirement as CEO. Subsequently, Mr Meintjes was appointed as an executive Director on 1 June 2019.
2 Dr Van der Merwe was appointed as a Director on 1 June 2018 and his remuneration for 2018/2019 covers the period from appointment
date to the end of the reporting period.
RELATIVE IMPORTANCE OF SPEND ON PAY
Table 16 compares the spend on employee costs for the reporting period to the spend in the previous reporting period, as
disclosed in last year’s Directors’ Remuneration Report on page 154 of the 2018 annual report, and returns to shareholders
over the same period:
TABLE 16: COMPARISONS SPEND ON EMPLOYEE COSTS
Employee costs1
Dividends paid
2018/2019
£’000
1 233 000
59 000
2017/2018
£’000
1 293 000
58 000
CHANGE
%
(4.6%)
1.7%
Note
1
Figures converted to pound sterling at a rate of £1: R18.01, £1: AED4.82 and £1: CHF1.30 at 31 March 2019.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 175
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
SHAREHOLDER VOTING ON REMUNERATION MATTERS
The Directors' Remuneration Report for the 2018 financial year was approved by shareholders at the Company’s 2018
annual general meeting with 93.5% of votes cast in its favour. The current Directors’ Remuneration Policy was approved at
the Company’s 2017 annual general meeting with 95.9% votes cast in its favour.
TABLE 17: SHAREHOLDER VOTING ON REMUNERATION MATTERS
FOR
%
AGAINST
%
WITHHELD
TOTAL
SHARES
VOTED
% OF
ISSUED
SHARES
VOTED
Directors’ Remuneration
Report (2017/2018)
Remuneration Policy
(2016/2017)
584 591 036
93.5%
40 339 642
6.5%
909 418
624 930 678
84.8%
614 711 926
95.9%
25 915 697
4.1%
2 718 474
643 346 097
87.3%
REMUNERATION COMMITTEE COMPOSITION AND MEETINGS
The Remuneration 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 117 of the Corporate Governance Statement.
The current composition of the Remuneration Committee meets the requirements of the 2016 Corporate Governance
Code, with at least three members being independent non-executive Directors. Biographies of members are included on
page 104. The Remuneration Committee composition and meeting attendance during the period under review are set out
in Table 18 alongside.
Mr Petersen (Remuneration Committee Chairperson), Mr Keating, Prof Dr Leu and Dr Oswald held office during the year.
Following Prof Dr Leu’s retirement from the Board and the Remuneration Committee, Dr Oswald was appointed to the
Board and replaced Prof Dr Leu as a member of the Remuneration Committee on 25 July 2018.
Mr Meintjes, Mr Durand and/or his alternate Mr Uys attend meetings by invitation but are not voting members. Other
attendees, by invitation only, include the CEO, the Chief Human Resources Officer, the Group Executive: Reward and
representatives from Deloitte LLP, all of whom provide material assistance to the Remuneration Committee. None of the
aforementioned attend as a right, nor do they attend when their own remuneration is being discussed.
None of the Remuneration Committee members are involved with the Company at an operational level, nor do they have
any personal financial interest in the matters considered at meetings. The Remuneration Committee recommends the
compensation of the Chairman of the Board, but the Chairman of the Board, in consultation with the executive Directors,
determines non-executive Director fees.
176 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TABLE 18: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
COMMITTEE
MEMBER1
DESIGNATION
APPOINTMENT
DATE
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Mr Trevor Petersen
(Committee Chairperson)
Mr Seamus Keating3
Dr Anja Oswald4
Independent non-executive Director
15/02/2016
Independent non-executive Director
17/03/2017
Independent non-executive Director
25/07/2018
4/4
3/4
3/3
Notes
1
2 The attendance reflects the number of scheduled meetings held during the financial year. Two additional ad hoc meetings were held
The composition of the Remuneration Committee is shown as at 31 March 2019.
during the financial year to deal with urgent matters and all of the members made themselves available at short notice for these meetings.
One Remuneration Committee meeting was held between the Company’s financial year-end and the Last Practicable Date, which was
attended by all Remuneration Committee members.
3 Mr Keating was unable to attend one Remuneration Committee meeting due to another commitment which could not be changed.
Mr Keating provided comments on the items being discussed to the Remuneration Committee Chairperson ahead of this meeting.
4 Prof Dr Robert Leu retired as a non-executive Director of the Company and the Remuneration Committee on 25 July 2018. Upon his
retirement, Dr Oswald was appointed as a member and attended all subsequent meetings.
Including routine monitoring and approval activities, the material issues discussed by the Remuneration Committee during
the financial year under review and between the financial year-end and the Last Practicable Date are summarised below:
TABLE 19: MATERIAL ISSUES DISCUSSED BY THE REMUNERATION COMMITTEE
AREA
Awards
DISCUSSIONS
• Reviewed and approved the STI targets and subset performance indicators for the 2020
financial year
• Reviewed and approved the final STI payment for the 2019 financial year
• Reviewed and approved new allocations and performance criteria for the LTIP
• Reviewed and approved division-specific junior management bonus scheme payments
Remuneration of the
outgoing CEO
• Reviewed and approved remuneration arrangements for Mr Meintjes’ outstanding share-
based awards
Remuneration levels
• Reviewed and approved salary increases for executive Directors and the Group Executive
Committee
• Reviewed and approved overall salary increases of all employee groups of each division
• Reviewed and approved the fee of the Chairman of the Board
• Reviewed and approved the remuneration methodology for the appointment of expatriate
Executive Committee members
Regulatory and
governance review
• Reviewed regulatory and corporate governance developments and reviewed and
recommended to the Board for approval the ensuing changes to its terms of reference
• Reviewed and confirmed the independence and objectivity of its remuneration consultant,
Deloitte LLP
The Remuneration Committee Chairperson presents a summary of material matters to the Board and meeting minutes are
circulated to all Directors. The Remuneration Committee reports to shareholders annually in this report and the
Chairperson attends the annual general meeting to address any questions that arise.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 177
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNUAL REMUNERATION REPORT (CONTINUED)
ADVISOR TO THE COMMITTEE
During the year, the Remuneration Committee and the Company retained an independent external advisor to assist with
various aspects of the Company’s remuneration as set out in Table 20 below.
TABLE 20: ADVISORS TO THE REMUNERATION COMMITTEE
FEES PAID BY THE
COMPANY FOR
THESE SERVICES
PROVIDED IN THE
REPORTING
PERIOD
OTHER SERVICES
PROVIDED TO
THE COMPANY IN
THE REPORTING
PERIOD
£99 000 based on
time charges for work
completed
Personal tax advice
for non-UK resident
Directors
APPOINTED/
SELECTED BY
SERVICES
PROVIDED
Appointed by the
Remuneration
Committee following
a robust selection
process and reviewed
annually by the
Remuneration
Committee
General advice on
remuneration matters
Advice on UK market
practice and UK
shareholder
perspectives
ADVISOR
Deloitte LLP
Founding member of
the Remuneration
Consultants Group
and adheres to the
Voluntary Code of
Conduct in relation to
executive
remuneration
consulting in the UK
The Remuneration Committee reviewed the independence and objectivity of Deloitte LLP, taking into consideration its
experience and management’s feedback, together with the assurances provided by Deloitte LLP that it has effective
internal processes to ensure it is able to provide remuneration consultancy services that meet these two critical
requirements. Following this review, the Remuneration Committee is satisfied that Deloitte LLP has maintained
independence and objectivity and has no conflicts of interest with the Company that may impact on such.
This Directors’ Remuneration Report has been prepared on behalf of the Board by the Remuneration Committee, in
accordance with the 2016 Corporate Governance Code, the Listings Rules, the Act and the Large- and Medium-sized
Companies and Groups (Accounts and Reports) (Amendments) Regulations 2013.
Signed on behalf of the Remuneration Committee.
Mr Trevor D Petersen
Chairperson of the Remuneration Committee
22 May 2019
178 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
The Directors are responsible for preparing the annual
report, including the financial statements, in accordance
with applicable legislation and regulation.
DIRECTORS’ CONFIRMATIONS
The Directors consider that this Annual Report, which
contains the annual financial statements, taken as a whole,
The Act requires the Directors to prepare financial
is fair, balanced and understandable and provides the
statements for each financial year. The Directors prepared
information necessary for shareholders to assess the
the Group and Company financial statements in accordance
position, performance, business model and strategy of the
with IFRS, as adopted by the EU. The Directors should only
Group and Company.
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 these
consistently;
• state whether applicable IFRS, as adopted by the EU,
have been followed for the Group and Company
financial statements respectively, subject to any material
departures disclosed and explained in the financial
statements;
Each of the Directors, whose names and functions are
listed on page 104 of this 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 EU, give a true and fair view of the assets, liabilities,
financial position, cash flows and results of the Group
and the Company; and
• the Directors’ Report on page 130 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
• make judgments and accounting estimates that are
uncertainties that they face.
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.
DISCLOSURE OF INFORMATION TO
EXTERNAL AUDITOR
In the case of each Director in office on the approval date
The Directors are responsible for safeguarding the assets
of the Directors’ Report, they confirm that:
of the Group and Company and hence for taking
reasonable steps to prevent and detect fraud and other
irregularities.
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
the Group and Company and enable them to ensure that
the financial statements and the Directors’ Remuneration
Report comply with the Act and, in respect of the Group’s
consolidated financial statements, Article 4 of the
International Accounting Standards Regulation.
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 UK governing the
preparation and dissemination of financial statements may
differ from legislation in other jurisdictions.
• in so far as the Directors are aware, there is no relevant
audit information of which the Group and Company
auditor is unaware; and
• they have taken all reasonable steps as a Director to
ascertain any relevant audit information and to establish
that the Group and Company’s auditor is aware of that
information.
For and on behalf of the Board.
Dr Ronnie van der Merwe Mr Jurgens Myburgh
Chief Executive Officer
22 May 2019
Chief Financial Officer
22 May 2019
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 179
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
180 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
FINANCIAL
STATEMENTS
CONTENTS
GROUP FINANCIAL STATEMENTS
182 Independent auditors’ report
191 Consolidated statement of financial position
192 Consolidated income statement
193 Consolidated statement of other comprehensive
income
194 Consolidated statement of changes in equity
196 Consolidated statement of cash flows
197 Notes to the consolidated financial statements
271 Annexure – Investments in subsidiaries, associates
and joint ventures
COMPANY FINANCIAL STATEMENTS
280 Independent auditors’ report
287 Company statement of financial position
288 Company statement of changes in equity
289 Company statement of cash flows
290 Notes to the Company financial statements
GENERAL INFORMATION
These financial statements are consolidated financial
statements for Mediclinic 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 271–278.
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 JSE Ltd 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.
The financial statements were authorised for issue by
the Directors on 22 May 2019. No authority was given to
anyone to amend the financial statements after the date
of issue.
All press releases, financial reports and other information
are available on our website: www.mediclinic.com.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 181
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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 2019 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 2019; the consolidated income statement, the consolidated statement of comprehensive
income, the consolidated statement of cash flows and the consolidated 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 Group in accordance with the ethical requirements that are relevant to our audit of the
financial statements in the UK, which include 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 23 to the consolidated financial statements, we have provided no non-audit services to
the Group in the period from 1 April 2018 to 31 March 2019.
Our audit approach
Overview
Materiality
Audit scope
Key audit
matters
• Overall Group materiality: £14 million (2018: £15 million) based on approximately 5% of
adjusted profit before tax.
• Our Group audit included full scope audits at three reporting units. We performed
centralised procedures on the equity accounted results of Spire Healthcare Group plc
(“Spire”) based on its audited financial statements at 31 December 2018. We have also
audited selected financial statement line items of the parent company to support the
Group audit.
• Taken together, the reporting units where we conducted audit procedures, together with
work performed at the Group level, accounted for 93% of consolidated revenue, 84% of
consolidated loss before tax and 83% of consolidated adjusted profit before tax.
• 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 Grangettes Healthcare SA (“Les Grangettes”)
• Finance transformation
182 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Group and industry, we identified that the principal risks of non-compliance with laws
and regulations related to healthcare reforms and introduction of new regulations in the Group’s markets (see page 55
of the Annual Report) and we considered the extent to which non-compliance might have a material effect on the financial
statements. We also considered those laws and regulations that have a direct impact on the preparation of the financial
statements such as the Companies Act 2006, the UK Listing Rules, the Johannesburg Stock Exchange Limited Listings
Requirements and applicable anti-bribery legislation in each of the Group’s markets. We evaluated management’s
incentives and opportunities for fraudulent manipulation of the financial statements (including the risk of override of
controls) and we determined that the principal risks were related to posting inappropriate journal entries to increase
revenue or reduce expenditure, accounting for large or unusual transactions outside the normal course of business and
management bias in key accounting estimates. The Group audit team shared this risk assessment with the component
auditors in the Group audit instructions so that they could include appropriate audit procedures in response to such risks
in their work. Audit procedures performed by the Group audit team included:
• Discussions with management, Internal Audit and the Audit and Risk Committee including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
• Review of Internal Audit reports;
• Evaluation of management’s controls designed to prevent and detect irregularities;
• Assessment of whistleblower claims including matters reported on the Group’s whistleblowing helpline and the results
of management’s investigation of such matters;
• Challenging assumptions and judgements made by management in relation to the Group’s accounting estimates;
• Identifying and testing journal entries based on our risk assessment; and
• Review of related work performed by component auditors, including the risk related to management override of
controls, the risk of fraud in revenue recognition and the risk associated with finance transformation.
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. In addition, 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.
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 audit 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
consolidated 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 183
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT
AUDITORS’ REPORT (CONTINUED)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS
1. IMPAIRMENT OF INTANGIBLE ASSETS,
GOODWILL AND NON-FINANCIAL ASSETS
(refer to Audit and Risk Committee Report on page 136
and notes 6 and 7 in the Group financial statements)
The Group has £1 587 million (2018: £1 406 million)
of intangible assets. This balance consists mainly
of goodwill relating to the Mediclinic Middle East
operations of £1 340 million (2018: £1 245 million)
and goodwill relating to the recently acquired
Les Grangettes of £99 million.
The Group is required to perform annual impairment
tests on goodwill. These impairment tests are generally
undertaken at the operating division level being the
level at which management monitors goodwill for
impairment. The Group also performed impairment
assessments of individual CGUs which form part of
these operating divisions. Particular focus was directed
at the Swiss and Middle East operating divisions.
Goodwill is generally assessed for impairment at the
operating division level on the basis that the rationale
for the transactions giving rise to goodwill is to realise
synergies across the entire operating division and not
just within the acquired business. The one exception is
the current year acquisition of Les Grangettes whose
goodwill is assessed for impairment at the CGU level
given the existence of a significant non-controlling
interest. Other assets subject to impairment assessment
at the CGU level primarily comprise land and buildings.
In the current year, an impairment loss of £55 million
was recorded to impair the remaining carrying value of
the Hirslanden and Linde brand names and £186 million
was recorded to partially impair property and equipment
within five Swiss CGUs.
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 judgements related to discount rates or
growth rates change, that further impairment losses will
be required.
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 we corroborated certain information with third party
sources. We challenged management on its use of a seven
year period for the short-term cash flow projections at
the Middle East operations by assessing management’s
rationale related to the development phase of new hospital
and expansion projects by reference to supporting evidence
and historical experience.
We agreed the underlying cash flows to approved budgets
and we 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 performed independent 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. In particular, we evaluated management’s
judgement regarding the determination of the respective
CGUs in the Swiss operating division, 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 assumptions as part of assessing the
reasonableness of the approach and outputs determined
by management.
184 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS
1. IMPAIRMENT OF INTANGIBLE ASSETS,
GOODWILL AND NON-FINANCIAL ASSETS
(continued)
We focused on the impairment assessments of goodwill,
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.
2. IMPAIRMENT OF THE GROUP’S ASSOCIATE
INVESTMENT IN SPIRE
(refer to Audit and Risk Committee Report on page 136
and note 8 in the Group financial statements)
At 31 March 2019, 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 £164 million was required.
We focused on this area because of the significance of
the impairment loss recorded in the current year and the
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.
Based on our work performed, we concurred with
management that impairment charges are required in the
current year for the Swiss operations and that no impairment
losses were required for the goodwill related to the Middle
East operations at 31 March 2019. 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. Given that there is reduced headroom for
the Middle East based on management’s assessment, we
believe that the disclosure of specific risk disclosures to
highlight the sensitivity of the Middle East impairment
judgement to reasonably possible changes to the
assumptions to be appropriate.
We reviewed the share price performance of Spire over the
period 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 and 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 performed independent 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 185
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
INDEPENDENT
AUDITORS’ REPORT (CONTINUED)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS
3. PURCHASE PRICE ALLOCATION FOR THE
ACQUISITION OF LES GRANGETTES
(refer to Audit and Risk Committee Report on page 136
and note 30 in the Group financial statements)
The Group acquired 60% of Les Grangettes for a total
consideration of £118 million. The acquisition resulted in
the recognition at fair value of total net assets
amounting to £32 million and goodwill of £99 million.
Net assets assumed at fair value consisted mainly of
property, equipment and vehicles (£10 million) and a
brand name (£25 million) identified as part of the
purchase price allocation. Management performed the
purchase price allocation with the assistance of an
external expert.
The Group entered into a put and call agreement to
acquire the remaining 40% stake in Les Grangettes after
four years. A derivative liability of £86 million for the full
redemption amount has been recognised with a related
charge directly in equity.
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 the
intangible assets requires specialist skills and knowledge.
In addition, the redemption liability for the put option is
based on estimates of future business performance,
which are inherently judgemental.
We obtained the purchase price allocation prepared by
management. Based on discussions with management,
reading the purchase agreements and applying our
understanding of the business and industry, we critically
assessed the process followed for the identification of the
assets and liabilities acquired, including assessment of the
completeness thereof.
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 rates used in management’s model to
value the brand were tested for reasonableness by
benchmarking the assumptions to industry average rates
and by recalculating the discount rate. We evaluated the
commercial rationale for the residual goodwill valuation.
We performed specific procedures on the opening balance
sheet of Les Grangettes prepared at 1 October 2018
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 comparative accounting
policies and practices of the Group and Les Grangettes
prepared by management to ensure that the Group’s
accounting policies have been appropriately applied.
We obtained the valuation of the derivative liability
prepared by management. We critically assessed the
process for calculating the value of the liability by
recalculating the expected redemption amount with
reference to the contract terms, approved forecast and
discount rate. We assessed the reasonableness of the future
forecast by reference to current trading and by performing
sensitivities on key assumptions.
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.
186 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS
4. FINANCE TRANSFORMATION
(refer to Audit and Risk Committee Report on page 136)
The Group has commenced a finance transformation
programme to simplify, standardise and automate its
finance processes. In 2019, the finance transformation
included the start of a multi-year roll-out of a new
enterprise-wide resource planning (ERP) at Hirslanden,
the commencement of a multi-year roll-out of a
new clinical and revenue system at Mediclinic Middle
East (“MCME”) and the migration of the Group’s
consolidation onto a new technology platform alongside
the implementation of new software tools to manage
the Group’s IT user access rights and IT change
management.
These changes represent a financial reporting risk while
migrations are happening as controls and processes that
have been established and embedded over a number of
years are updated and migrated into a new environment.
There is an increased risk of breakdown in internal
financial controls during the transition and an increased
risk of inaccurate or incomplete migration of financial
data, which would in turn increase the risk of material
misstatements to the Group financial statements.
We centrally directed the work performed by component
teams at Hirslanden and MCME, with Group site visits to
both locations to review the execution and findings of our
component teams.
At Hirslanden, the testing included evaluation of control
design, testing of selected IT related controls and
substantive testing. The focus of testing was related to the
accuracy and completeness of data migration to the new
ERP system together with testing of access controls. At
MCME, given the limited extent of roll-out of new systems
completed in the financial year, our testing focused on the
review of control design.
In relation to the Group’s consolidation, we evaluated the
design and tested the operating effectiveness of key
automated and manual controls after the migration to the
centralised consolidation environment, including IT general
controls and controls in respect of data interfacing. We also
substantively tested the accuracy and completeness of data
processed into the new system along with the controls over
this process.
Based on our work performed, we did not identify
any significant exceptions as a result of the impact of
financial transformation.
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
consolidated 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 consolidated financial statements are a consolidation of thirteen reporting units which comprise 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.
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 audit 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 consolidated 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, selected financial statement line items reported by the
Mediclinic International plc parent company and over the Group’s associate interest in Spire (and review procedures over
the Annual Report and audit of the financial statement disclosures) were directly led by the Group audit team.
Taken together, the reporting units where we conducted our audit work, together with work performed at the Group level,
accounted for 93% of consolidated revenue, 84% of consolidated loss before tax and 83% of consolidated adjusted profit
before tax calculated on an absolute basis. Our audit covered all reporting units that individually contributed more than
2% to consolidated revenue and more than 2% to consolidated loss before tax and to consolidated adjusted profit before
tax calculated on an absolute basis.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 187
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 consolidated financial statements as a whole.
Based on our professional judgement, we determined materiality for the consolidated financial statements as a whole
as follows:
Overall Group
audit materiality
How we
determined it
Rationale for
benchmark applied
£14 million (2018: £15 million)
Based on approximately 5% of adjusted profit before tax, calculated as consolidated statutory
loss before tax adjusted for impairment losses, accelerated depreciation, fair value
adjustments on derivative contracts and loss on disposal 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 materiality. The
range of materiality allocated across components was between £6 million and £12.6 million. 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 £0.7 million (2018: £0.75 million) 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 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 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 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. For example, the terms on which
the United Kingdom may withdraw from the
European Union are not clear and it is difficult
to evaluate all of the potential implications on
the Group’s trade, customers, suppliers and the
wider economy.
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.
188 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 2019 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)
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 179 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 60 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 179, 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 136 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 189
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 179, 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.
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 four years, covering the years ended 31 March 2016 to 31 March 2019.
OTHER MATTER
We have reported separately on the Company financial statements of Mediclinic International plc for the year ended
31 March 2019 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
22 May 2019
190 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF FINANCIAL POSITION
AS AT 31 MARCH 2019
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
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
29.8
32
13
13
13
14
16
17
10
18
19
20
21
17
19
18
32
2019
£’m
5 337
3 524
1 587
193
10
23
1 091
88
732
1
1
265
4
6 428
74
690
–
4 769
(2 382)
3 151
115
3 266
2 576
1 895
423
138
29
91
–
586
464
87
15
11
8
1
3 162
6 428
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
These financial statements and the accompanying notes were approved for issue by the Board of Directors on
22 May 2019 and were signed on its behalf by:
CA van der Merwe
Chief Executive Officer
PJ Myburgh
Chief Financial Officer
Mediclinic International plc (Company no 08338604)
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 191
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CONSOLIDATED
INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2019
Revenue
Cost of sales
Administration and other operating expenses
Impairment of property, equipment and vehicles
Impairment of intangible assets
Other administration and operating expenses
Other gains and losses
Operating profit/(loss)
Finance income
Finance cost
Share of net profit of equity accounted investments
Impairment of equity accounted investment
Loss before tax
Income tax credit
Loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Loss per ordinary share attributable to the equity holders
of the Company – pence
Basic
Diluted
* Refer to note 2.1
Notes
22
23
23
6 & 23
7 & 23
23
24
25
8
8
26
16
27
27
2019
£’m
2 932
(1 827)
(1 021)
(186)
(55)
(780)
(3)
81
9
(66)
3
(164)
(137)
7
(130)
(151)
21
(130)
(20.5)
(20.5)
(Re-presented)*
2018
£’m
2 876
(1 779)
(1 387)
(84)
(560)
(743)
2
(288)
9
(94)
3
(109)
(479)
5
(474)
(492)
18
(474)
(66.7)
(66.7)
192 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
CONSOLIDATED STATEMENT
OF OTHER COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2019
Loss for the year
Other comprehensive income/(loss)
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 income/(loss), net of tax
Total comprehensive loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Notes
28
28
28
28
2019
£’m
(130)
142
142
–
(34)
(34)
108
(22)
(29)
7
(22)
2018
£’m
(474)
(309)
(310)
1
60
60
(249)
(723)
(742)
19
(723)
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 193
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CONSOLIDATED STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2019
Balance at 1 April 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
Balance at 31 March 2018
IFRS 9 transition adjustment
Restated as at 1 April 2018
(Loss)/profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Transfer to other reserves
Business combinations
Derivative entered into as part of business
combinations
Settlement of Forfeitable Share Plan
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2019
Share
capital
(note 13)
£’m
Capital
redemption
reserve
(note 14)
£’m
Share
premium
reserve
(note 13)
£’m
Reverse
acquisition
reserve
(note 14)
£’m
Treasury
shares
(note 13)
£’m
74
6
690
(3 014)
(2)
–
–
–
–
–
–
–
–
–
74
–
74
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
690
–
690
(3 014)
–
(3 014)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
74
6
690
(3 014)
–
–
–
–
–
–
1
–
–
(1)
–
(1)
–
–
–
–
–
–
1
–
–
–
Share-based
payment
reserve
(note 14)
Foreign
currency
translation
reserve
(note 14)
Attributable
to equity
holders
controlling
Non-
interests
(note 16)
£’m
Retained
earnings
£’m
of the
Company
£’m
Hedging
reserve
(note 14)
£’m
£’m
24
(23)
(1)
–
–
–
–
1
–
–
1
–
1
–
–
–
–
–
–
–
–
–
(1)
£’m
779
–
(311)
(311)
468
468
153
153
–
–
–
–
–
–
–
–
7
–
–
–
–
–
4
–
1
1
5
–
5
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(7)
5 525
(492)
60
(432)
23
–
–
–
(1)
(58)
5 057
(2)
5 055
(151)
(31)
(182)
–
–
–
41
(59)
4 086
(492)
(250)
(742)
(1)
(58)
3 286
(2)
3 284
(151)
122
(29)
–
–
1
–
–
–
–
41
(59)
3 151
(86)
(86)
628
(2)
4 769
Total
equity
£’m
4 164
(474)
(249)
(723)
(1)
–
1
–
–
(68)
3 373
(2)
3 371
(130)
108
(22)
–
12
(86)
–
58
(67)
3 266
78
18
1
19
(1)
–
–
–
1
(10)
(14)
87
–
87
21
7
–
12
–
–
17
(8)
115
194 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Balance at 1 April 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
Balance at 31 March 2018
IFRS 9 transition adjustment
Restated as at 1 April 2018
(Loss)/profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Transfer to other reserves
Business combinations
Derivative entered into as part of business
combinations
Settlement of Forfeitable Share Plan
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2019
Capital
Share
Reverse
Share
redemption
premium
acquisition
capital
(note 13)
reserve
(note 14)
reserve
(note 13)
£’m
74
£’m
6
£’m
690
reserve
(note 14)
£’m
(3 014)
Treasury
shares
(note 13)
£’m
(2)
74
74
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
6
–
6
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
690
(3 014)
690
(3 014)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
(1)
(1)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
1
–
–
–
74
6
690
(3 014)
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
–
–
–
(23)
–
1
(1)
–
–
1
–
1
–
–
–
–
–
–
(1)
–
–
–
779
–
(311)
(311)
–
–
–
–
–
–
468
–
468
–
153
153
7
–
–
–
–
–
4
–
1
1
–
–
–
–
–
–
5
–
5
–
–
–
(7)
–
–
–
–
–
628
(2)
5 525
(492)
60
(432)
23
–
–
–
(1)
(58)
5 057
(2)
5 055
(151)
(31)
(182)
–
–
(86)
–
41
(59)
4 769
4 086
(492)
(250)
(742)
–
–
1
–
(1)
(58)
3 286
(2)
3 284
(151)
122
(29)
–
–
(86)
–
41
(59)
3 151
78
18
1
19
–
(1)
–
–
1
(10)
87
–
87
21
(14)
7
–
12
–
–
17
(8)
115
Total
equity
£’m
4 164
(474)
(249)
(723)
–
(1)
1
–
–
(68)
3 373
(2)
3 371
(130)
108
(22)
–
12
(86)
–
58
(67)
3 266
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 195
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION CONSOLIDATED STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2019
2019
£’m
Inflow/
(outflow)
2018
£’m
Inflow/
(outflow)
Notes
CASH FLOW FROM OPERATING ACTIVITIES
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 money market funds
Proceeds from other investments and loans
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
29.1
29.2
29.3
29.4
29.5
30
31
8
16
29.6
29.7
29.7
Net increase/(decrease) 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
29.8
451
9
(61)
(55)
344
(298)
(86)
(154)
(63)
–
(4)
4
–
5
46
(34)
(8)
(59)
385
(347)
(5)
–
12
261
(8)
265
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
196 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
1.
DESCRIPTION OF BUSINESS
Mediclinic International plc is an international healthcare services group with current divisions, in 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.
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. The
Group has applied IFRS 9 and IFRS 15 for the first time in the 2019 financial year and comparative information has
not been restated. Refer to note 33 for descriptions on the changes in accounting policies.
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”) guidance and with the Companies Act 2006 applicable to companies reporting under IFRS. There are
no differences for the Group in applying IFRS as issued by the IASB and IFRS as adopted by the European Union.
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, equity instruments measured at FVPL and equity instruments measured
at FVOCI (2018: available-for-sale financial assets) are measured at fair value;
• Retirement benefit obligations calculated in terms of the projected unit credit method and corresponding plan
assets are measured at fair value; 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 pound 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 pound 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
2019
2018
1.30
18.01
4.82
1.30
18.90
4.79
1.29
17.22
4.87
1.34
16.57
5.15
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 197
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
2.
2.1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Basis of preparation (continued)
Going concern
Having assessed the principal risks and other matters considered in the viability statement, the directors
considered it appropriate to adopt the going concern basis of accounting in preparing the financial statements.
Income statement reclassification
The income statement for the year ended 31 March 2018 has been re-presented to reclassify certain costs of the
Southern African segment that were previously shown as a reduction of revenue. The impact of the reclassification
was an increase in revenue and cost of sales of £6m. The reclassification had no impact on reported cash, profits or
net assets.
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 relinquished.
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 obtained and, liabilities incurred or
assumed. Costs directly attributable to the business combination are expensed as incurred, except the costs to
issue debt or incur borrowings 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 companies) 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.
198 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.2 Consolidation and equity accounting (continued)
b)
Business combinations (continued)
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.
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.
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FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 Group Executive Committee comprises the executive directors and senior management as
disclosed in the Annual Report on pages 110 and 113.
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 to enhance an
asset 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.
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. Impairments 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, except for Les Grangettes.
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 are capitalised at the cost to the Group and amortised on a
straight-line basis over their estimated useful lives of 2 to 25 years. Trade names are carried at cost less
accumulated amortisation and accumulated impairment. Expenditure to maintain trade names is accounted for
against income as incurred.
200 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
2.5
c)
Intangible assets (continued)
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 (2 to 10 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, is recognised as an
intangible asset. 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 for
non-financial assets other than goodwill, 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 (accounting policies applied from 1 April 2018)
From 1 April 2018, the Group classifies its financial assets in the following measurement categories:
• Financial assets measured subsequently at fair value (either through other comprehensive income (FVOCI), or
through profit or loss (FVPL)); and
• Financial assets measured at amortised cost.
The classification depends on the business model for managing the financial assets and the contractual term of the
cash flows. Management determines the classification of its investment at initial recognition.
For assets measured at fair value, gains and losses will either be recorded in profit or loss or other comprehensive
income. For investments in debt instruments, this will depend on the business model in which the investment is
held. For investments in equity instruments, this will depend on whether the company has made an irrevocable
election at the time of initial recognition to account for the equity investment at fair value through other
comprehensive income (FVOCI).
At initial recognition, the Group measures a financial asset at its fair value plus, in the case of a financial asset not at
fair value through profit or loss, transaction costs that are directly attributable to the acquisition of the financial
asset. Transaction costs of financial assets carried at fair value through profit or loss are expensed in profit or loss.
Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or
have been transferred and the Group has transferred substantially all risks and rewards of ownership.
Equity instruments
The Group subsequently measures all equity investments at fair value. Changes in the fair value of financial assets
at fair value through profit or loss (FVPL) are recognised in other gains and losses in the income statement.
Where management has elected to present fair value gains and losses on equity investments in other
comprehensive income, there is no subsequent reclassification of fair value gains and losses to profit and loss.
Upon derecognition of these equity investments, any balance within the FVOCI reserve is reclassified to retained
earnings. Dividends from such investments are recognised in profit or loss as other gains and losses when the
Group’s right to receive payments is established. Currently the Group has not elected to designate any equity
instruments at FVOCI.
Impairment losses on equity investments measured at FVOCI or FVPL are not reported separately from other
changes in fair value.
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FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.7
Financial assets (accounting policies applied from 1 April 2018) (continued)
Debt instruments
Subsequent measurement of debt instruments depends on the Company’s business model for managing the asset
and the cash flow characteristics of the asset.
There are two measurement categories into which the company classifies its debt instruments:
• Amortised cost: Assets that are held for collection of contractual cash flows representing solely payments of
principal and interest are measured at amortised cost. Interest income from these financial assets is included in
finance income using the effective interest rate method. Trade receivables are classified as debt instruments
measured at amortised cost.
• Fair value through profit or loss (FVPL): Assets that do not meet the criteria for amortised cost or FVOCI are
measured at FVPL. A gain or loss is recognised in profit or loss and presented in the income statement as part
of other gains and losses in the period in which it arises. Interest income from these financial assets is included
in finance income.
Debt instruments are included in current assets, except for maturities greater than 12 months after the reporting
date, which are classified as non-current assets.
Impairment
The Group recognises an allowance for expected credit losses for all debt instruments not held at FVPL. Expected
credit losses are based on the difference between the contractual cash flows due in accordance with the contract
and all the cash flows that the Group expects to receive, discounted at an approximation of the original effective
interest rate.
Expected credit losses are recognised in two stages. For credit exposures for which there has not been a
significant increase in credit risk since initial recognition, expected credit losses are provided for credit losses that
result from default events that are possible within the next 12 months. For those credit exposures for which there
has been a significant increase in credit risk since initial recognition, a loss allowance is required for credit losses
expected over the remaining life of the exposure, irrespective of the timing of the default.
For trade receivables only, the Group applies the simplified approach permitted by IFRS 9, which requires lifetime
expected credit losses to be recognised from initial recognition of the receivables. The Group has established a
provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors specific
to the debtors and the economic environment. Trade receivables have been grouped based on shared credit risk
characteristics, such as the counterparty (insurer or individual etc) or geographical region, and the days past
due. The expected loss rates are based on the payment profiles of debtors over a period of 24 months before
31 March 2018 and the corresponding historical credit losses experienced within this period. The historical loss rates
are adjusted to reflect current and forward-looking information on macroeconomic factors affecting the ability of
the customers to settle the receivables.
For debt instruments at FVOCI and debt instruments at amortised cost, the Group applies the low credit risk
simplification. At every reporting date, the Group evaluates whether the debt instrument is considered to have low
credit risk using all reasonable and supportable information that is available without undue cost or effort. In
addition, the Group considers that there has been a significant increase in credit risk when contractual payments
are more than 30 days past due.
The Group considers a financial asset in default when contractual payments are 90 days past due. However, in
certain cases, the Group may also consider a financial asset to be in default when internal or external information
indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into
account any credit enhancements held by the Group. A financial asset is written off when there is no reasonable
expectation of recovering the contractual cash flows.
202 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.8 Financial assets (accounting policies applied until 31 March 2018)
The Group classifies its financial assets in the following categories: loans and receivables and available for sale
financial assets. The classification depends on the purpose for which the asset was acquired. Management
determines the classification of its investments at initial recognition.
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. Trade receivables
are classified as loans and receivables.
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.
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. 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.
2.9 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.
2.10
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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FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11 Cash and cash equivalents
Cash and cash equivalents consist of balances with banks and cash on hand and are classified as debt instruments
measured at amortised cost under IFRS 9 (2018: loans and receivables under IAS 39). 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.
At inception of a hedge relationship, the Group formally designates and documents the hedge relationship to
which it applies hedge accounting and the risk management objective and strategy for undertaking the hedge.
Before 1 April 2018, the Group documented 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 documentation also included the identification of the hedging instrument, the hedged item or
transaction, the nature of the risk being hedged and how the Group assessed the effectiveness of changes in the
hedging instrument’s fair value in offsetting the exposure to changes in the hedged item’s fair value or cash flows
attributable to the hedged risk.
Beginning 1 April 2018, the documentation includes the identification of the hedging instrument, the hedged item,
the nature of the risk being hedged and how the Group will assess whether the hedging relationship meets the
hedge effectiveness requirements. A hedging relationship qualifies for hedge accounting if it meets all of the
following effectiveness requirements:
• There is an economic relationship between the hedged item and the hedging instrument.
• The effect of credit risk does not dominate the value changes that result from that economic relationship.
• The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item
that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to
hedge that quantity of hedged item.
Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below under
“Cash flow hedges”.
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 reclassified 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.
204 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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.
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. 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.
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FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.18 Current and deferred income tax (continued)
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.
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.
206 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.19 Employee benefits (continued)
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.
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 (accounting policies applied from 1 April 2018)
Revenues are measured at the transaction price which is the amount of consideration that the Group expects to be
entitled to in exchange for the services provided.
A performance obligation is a promise to transfer a distinct good or service to a customer. Hospital services
provided to patients are regarded as a bundle of services which comprise accommodation, meals, theatre time, use
of equipment, pharmacy stock and nursing services. This is considered to be a single performance obligation as the
medical procedures cannot be performed without one of the above elements.
Revenue is recorded during the period in which the hospital service is provided and is based on the amounts due
from patients and/or medical funding entities. Fees are calculated and billed based on various tariff agreements
with funders.
Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain levels of
patient visits and constitutes variable consideration under IFRS 15. 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. Refer to note 22 for the accounting policies regarding these discounts
specifically for Mediclinic Southern Africa and Mediclinic Middle East.
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. Disallowance write-offs on rejected claims is a general practice by the insurers
in the Middle East. Accordingly, Mediclinic Middle East expects an amount of consideration that is less than what
was originally invoiced. 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. In prior
periods, revenue was recognised based on the contract with the insurers and a provision for bad debt was
recognised for the rejections based on historical trends.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 207
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.20 Revenue recognition (accounting policies applied from 1 April 2018) (continued)
The Group does not expect to have any contracts where the period between the transfer of the promised service
to the patient and the payment by the patient exceeds one year. As a consequence, the Group does not adjust any
of the transaction prices for time value of money.
Refer to note 22 for specific revenue recognition accounting policies relating to different geographical locations.
Other income
Other income is recognised on the following bases:
• Interest income for credit-impaired financial assets is measured by applying the effective interest rate method to
amortised cost. For all other financial assets, the interest income is measured by applying the effective interest
rate method to the gross carrying amount.
• 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 Revenue recognition (accounting policies applied until 31 March 2018)
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.
Other income
Other income is 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.
2.22 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.
2.23 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.
208 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.24 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.
2.25 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”.
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.
2.26 Standards, interpretations and amendments
Published standards, amendments and interpretations effective for the 31 March 2019 financial period:
The following published standards, amendments and interpretations are mandatory for the accounting period
beginning on or after 1 April 2018 and have been adopted (refer to the changes in accounting policy note (note 33)
for a description of the impact of the implementation of these standards):
• IFRS 9 – Financial Instruments (1 January 2018)
• IFRS 15 – Revenue from Contracts with Customers (1 January 2018)
Other standards adopted
The following new accounting standards, interpretations and amendments, adopted on 1 April 2018:
• 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)
The implementation of these standards and amendments had no material financial impact on the reported results
or financial position of the Group.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 209
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.26 Standards, interpretations and amendments (continued)
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 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 (recognition of a right-of-use asset to use the leased item and a financial liability to pay
the rentals). The standard replaces IAS 17 Leases and related interpretations. The consolidated income statement
will also be affected because the total expense is generally higher in the earlier years of a lease and lower in later
years. Additionally, the operating lease expense will be replaced with interest and depreciation, resulting in an
expected change in EBITDA and the EBITDA margin. The Group plans to adopt the new standard on 1 April 2019
using the simplified transition approach and will not restate comparative information.
During the 2019 financial year, the Group performed a detailed impact assessment of the implementation of
IFRS 16. The Group expects to recognise right-of-use assets of approximately £610m and lease liabilities of
approximately £662m. The deferred tax impact and impairment assessment relating to the initial recognition of
the right-of-use assets on adoption of IFRS 16 are still being considered and will be concluded ahead of the
announcement of the Group’s half year results at 30 September 2019. On application of IFRS 16 to the 2020
financial year income statement, indicatively, profit before tax would be lower by approximately £4m excluding
the Group’s equity accounted share of the impact at Spire. EBITDA would be higher by approximately £61m due
to the fact that the operating lease expense recognised under IAS 17 is replaced with interest and depreciation
under IFRS 16 (which are excluded from EBITDA). Spire has disclosed the estimated impact of IFRS 16 in its
Annual Report at 31 December 2018, which estimated the Group’s equity share of profit before tax would be
lower by approximately £4m based on the results for the year ended 31 December 2018.
Other standards
The following new accounting standards, interpretations and amendments will have no material impact on the
financial statements:
• IAS 19 – Plan amendment, curtailment or settlement (1 January 2019)
• IAS 28 – Long term interests in associates and joint ventures amendments (1 January 2019)
• IFRS 9 – Prepayment features with negative compensation amendments (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 2022)
210 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 pound sterling/Swiss franc, pound sterling/South African rand and pound 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 divisions predominantly operate 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 minimise foreign currency risk.
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 £8m (2018: increase/decrease by £12m) due to exposure to the
sterling/Swiss franc exchange rate;
• profit for the period would increase/decrease by £7m (2018: increase/decrease by £9m) due to exposure to the
sterling/South African Rand exchange rate;
• profit for the period would increase/decrease by £5m (2018: increase/decrease by £4m) due to exposure to the
sterling/UAE dirham exchange rate;
• foreign currency translation reserve would increase/decrease by £132m (2018: increase/decrease by £152m) due
to exposure to the sterling/Swiss franc exchange rate;
• foreign currency translation reserve would increase/decrease by £12m (2018: increase/decrease by £7m) due to
exposure to the sterling/South African rand exchange rate; and
• foreign currency translation reserve would increase/decrease by £157m (2018: increase/decrease by £153m) 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. The interest rate hedges entered into match key
contractual terms of the borrowings to enable an economic relationship between hedged item and hedging
instrument. At year end a portion of the South African borrowings and Middle East borrowings were hedged and
the Swiss borrowings was unhedged (refer to note 17). 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 211
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
3.
3.1
a)
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
Market risk (continued)
ii) Interest rate risk (continued)
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 2019, the 3M Swiss LIBOR was -0.71% (2018: -0.74%). Interest rates would have to
increase by 71 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 (2018: no impact).
• Southern Africa - profit for the period would increase/decrease by £0.6m (2018: increase/decrease by £1m) 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 (2018: 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 expected credit losses. Credit risk with respect to trade receivables is limited
due to the large number of customers comprising the Group’s customer base, which consists mainly of medical
schemes and insurance companies. The financial condition of these clients in relation to their credit standing is
evaluated on an ongoing basis. Medical schemes and insurance companies are forced to maintain minimum reserve
levels. The policy for patients that do not have a medical scheme or an insurance company paying for the Group’s
service is to require a preliminary payment instead. The Group does not have any significant exposure to any
individual customer or counterparty.
The Group is exposed to credit-related losses in the event of non-performance by counterparties to hedging
instruments. The counterparties to these contracts are major financial institutions. The Group monitors its positions
and limits the extent to which it enters into contracts with any one party.
The gross carrying amounts of financial assets (before credit loss allowances) included in the statement of financial
position represent the Group’s maximum exposure to credit risk in relation to these assets. At 31 March 2018 and
31 March 2019, 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 banking facilities and overdraft facilities are:
2019
£’m
295
2018
£’m
467
212 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
3.
3.1
c)
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
Liquidity risk (continued)
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 2019
Borrowings
Derivative financial instruments
Trade payables
Other payables and accrued expenses
31 March 2018
Borrowings
Derivative financial instruments
Trade payables
Other payables and accrued expenses
3.2 Capital management
Carrying
value
Contractual
cash flows
1 – 12
months
1 – 5
years
Beyond
5 years
1 982
91
230
181
1 937
2
210
144
2 869
94
230
181
2 766
2
210
144
160
–
230
181
146
1
210
144
2 635
94
–
–
73
–
–
–
990
1 630
1
–
–
–
–
–
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 and new share issues, 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-capital ratios at
31 March 2019 and 31 March 2018 were as follows:
Borrowings
Less: cash and cash equivalents
Net debt
Total equity
Debt-to-equity capital ratio
2019
£’m
1 982
(265)
1 717
3 266
53.1%
2018
£’m
1 937
(261)
1 676
3 373
49.7%
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 213
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
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)
• 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 (refer to note 7)
• Impairment of equity-accounted investments (refer to note 8)
• Retirement benefits (refer to note 18)
214 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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.
Reportable operating segments
Other
Year ended 31 March 2019
Revenue
EBITDA
EBITDA before
management fee
Management fees included
in EBITDA
Other gains and losses
Depreciation and
amortisation
Impairment of property,
equipment and vehicles
Impairment of intangible
assets
Operating profit/(loss)
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 2019
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
Southern
Africa
£’m
Middle East
£’m
United
Kingdom
£’m
Corporate
£’m
Total
£’m
Switzerland
£’m
2 932
1 368
493
493
–
(3)
219
224
(5)
–
886
187
192
(5)
1
677
88
91
(3)
(3)
(168)
(101)
(31)
(36)
–
–
–
–
–
–
–
–
–
3
(164)
–
–
–
–
–
(161)
180
–
–
–
–
49
–
–
1
(7)
(7)
–
–
43
4
–
94
1 965
182
385
385
–
–
–
–
1
(1)
(14)
13
(1)
–
–
–
(2)
–
–
–
–
16
(16)
(1)
(3)
–
–
1
40
2
2
–
(186)
(186)
(55)
81
3
(164)
9
(66)
(66)
–
7
(130)
189
4
232
6 428
(55)
(123)
–
–
–
(23)
(39)
16
47
(99)
2
–
72
3 532
3 162
2 182
4 060
3 080
(898)
(898)
–
–
157
–
–
8
(36)
(36)
–
(39)
90
3
4
65
709
593
593
–
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 215
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
5.
SEGMENTAL REPORT (continued)
Reportable operating segments
Other
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
* Refer to note 2.1
Total
£’m
Switzerland
£’m
2 876
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
2 972
1 986
3 829
2 843
(857)
(857)
Southern
Africa*
£’m
Middle East
£’m
United
Kingdom
£’m
Corporate
£’m
883
189
194
(5)
–
(29)
–
160
–
–
7
–
(38)
(38)
(40)
–
89
2
5
62
747
673
673
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
–
216 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
5.
SEGMENTAL REPORT (continued)
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
2019
£’m
2 909
482
1 733
180
–
2 932
2018
£’m
2 958
498
1 549
348
–
2 876
180
5 124
348
5 005
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 217
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 and impairment
2019
£’m
889
2 200
2 763
(563)
3 089
81
311
904
(593)
43
208
(165)
3 524
Net book value at 1 April 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
Additions
Depreciation
Business combinations
Transfer between asset classes
Prior year capital expenditure completed
Impairment
Transfer to assets held for sale
Exchange differences
Net book value at 31 March 2019
Land and
buildings
£’m
3 205
39
(39)
103
28
(84)
–
(204)
3 048
17
(50)
8
–
192
(181)
–
55
3 089
Capital
expenditure
in progress
£’m
Equipment
£’m
Furniture
and vehicles
£’m
113
107
–
–
(32)
–
–
(7)
181
123
–
–
1
(221)
–
–
(3)
81
328
55
(70)
7
3
–
(1)
(16)
306
49
(78)
7
8
26
–
(1)
(6)
311
57
22
(23)
–
1
–
–
(2)
55
15
(20)
5
(9)
3
(5)
–
(1)
43
2018
£’m
864
2 184
2 509
(325)
3 048
181
306
810
(504)
55
224
(169)
3 590
Total
£’m
3 703
223
(132)
110
–
(84)
(1)
(229)
3 590
204
(148)
20
–
–
(186)
(1)
45
3 524
218 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
6.
PROPERTY, EQUIPMENT AND VEHICLES (continued)
Total additions
To maintain operations
To expand operations
2019
£’m
204
82
122
2018
£’m
223
98
125
Property, equipment and vehicles with a book value of £2 678m (2018: £2 594m) are encumbered as security for
borrowings (see note 17).
Included in equipment is capitalised finance lease equipment with a book value of £1m (2018: £2m).
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 CGUs
Following the impact of regulatory changes on Hirslanden, the Swiss CGUs were assessed for impairment at
30 September 2018 and 31 March 2019. The recoverable amounts of the CGUs tested for impairment were based
on fair value less cost to sell calculations, which is regarded as the more appropriate reflection of the value of the
business. In prior years, the recoverable amount was based on value in use calculations. The determination of fair
value less cost to sell calculations uses level 3 valuation techniques. In determining the fair value less cost to sell
for the CGUs, the cash flows were discounted at rates between 4.9% and 5.1%. Beyond five years a growth rate of
1.6% (2018: 1.6%) was used. The carrying values of five CGUs were determined to be higher than their recoverable
amount and as a result an impairment charge of £186m was recognised in the income statement relating to
property, equipment and vehicles.
After accounting for impairments in the current year, some CGUs within Hirslanden have limited headroom ranging
from £nil to £45m and remain sensitive to reasonably possible changes in key assumptions in the fair value less
cost to sell calculations. As a result, any increase in the discount rate or decreases in the short term cash flow
projections or long term growth rates could give rise to further material impairment charges in future periods.
Any impairment determined at a CGU level under IAS 36 will include an assessment of the recoverable amount of
Hirslanden’s owned properties, which are subject to a third party valuation at least annually. This valuation applies a
consistent methodology across key assumptions to determine the rental charges based on appropriate and
market-related metrics, which is discounted using a market-related discount rate to determine the value of the
properties. Therefore, there is a risk that the third party valuation could materially change in future periods.
The level of sensitivity of each individual Swiss CGU to reasonably possible changes in key assumptions in the fair
value less cost to sell calculations will vary as the impairment assessment is also dependent on any changes in the
third party valuation of Hirslanden’s owned property portfolio.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 219
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
7.
INTANGIBLE ASSETS
Goodwill
Cost
Accumulated impairment
Trade names
Cost
Accumulated amortisation and impairment
Computer software
Cost
Accumulated amortisation
Leases
Cost
Accumulated amortisation
2019
£’m
1 451
1 759
(308)
53
425
(372)
60
119
(59)
23
26
(3)
1 587
Net book value at 1 April 2017
Additions
Amortisation
Business combinations
Disposal of subsidiaries
Impairment
Exchange differences
Net book value at 31 March 2018
Additions
Amortisation
Business combinations
Impairment
Exchange differences
Net book value at 31 March 2019
Goodwill
£’m
Trade
names
£’m
Computer
software
£’m
Leases*
£’m
1 715
377
–
13
–
(3)
(300)
(172)
1 253
–
–
107
–
91
1 451
(24)
–
17
(260)
–
(27)
83
–
(4)
25
(55)
4
53
38
22
(11)
–
–
(1)
–
48
28
(15)
–
–
(1)
60
26
(1)
–
–
–
(3)
–
22
–
(1)
–
–
2
23
2018
£’m
1 253
1 553
(300)
83
386
(303)
48
91
(43)
22
24
(2)
1 406
Total
£’m
2 156
22
(36)
30
(3)
(560)
(203)
1 406
28
(20)
132
(55)
96
1 587
* 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.
220 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
7.
INTANGIBLE ASSETS (continued)
Critical accounting estimates and judgements
The Group tests annually whether goodwill, resulting from acquisitions, has suffered any impairment. The
recoverable amounts of CGUs have been determined based on fair value less cost to sell calculations. These
calculations require the use of estimates in respect of cash flow projections and long-term 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 an operating division level or segmental level except for Grangettes, which was
assessed at a CGU level given the significant non-controlling interest and aligned to the location in which synergies
are expected to arise. 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 could not be allocated on a reasonable and consistent basis to the CGUs that consists
of individual hospitals (refer to note 6). As a result, it was viewed as a corporate asset and the carrying amount of
the net assets of the group of CGUs (including the allocation of trade name) was tested for impairment at a Swiss
operating division level in prior years and at 30 September 2018. The Hirslanden brand was fully impaired after the
impairment test was performed at 30 September 2018.
Impairment testing of significant goodwill balances
The Group tests goodwill 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 annual financial
planning 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 except for goodwill arising from the current year
acquisition of Les Grangettes which was assessed at a CGU level given the significant non-controlling interest and
aligned to the location in which synergies are expected to arise.
The recoverable amount of a group of CGUs is determined by its fair value less cost to sell, regarded as the more
appropriate reflection of the value of the business, which is derived from discounted cash flow calculations. The key
inputs to its calculations are described below.
Forecasts
As part of the annual financial planning process, the Group’s operating divisions are required to submit budgets for
the next financial year and forecasts for the following four years (except for Mediclinic Middle East which prepared
a seven year forecast), which are approved by the Board. Future earnings in the fair value less cost to sell
calculation are based on these budgets and forecasts that are 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. The regulatory
environment and impact on tariffs are considered. Growth rates have been benchmarked against external data for
the relevant markets.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 221
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
7.
INTANGIBLE ASSETS (continued)
Impairment testing of significant goodwill balances (continued)
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.
Impairment testing of Hirslanden goodwill and trade names
Following the impact of regulatory changes on Hirslanden, the recoverable amount of certain Swiss CGUs and the
Hirslanden trade name were tested for impairment during the year. The recoverable amounts have been
determined based on fair value less costs to sell discounted cash flow calculations.
Discount rates – The discount rate applied to cash flow projections is 5.0% (2018: 5.0%).
Growth rates – The terminal growth rate beyond five years is 1.6% (2018: 1.6%).
Forecasts – As a result of the continued impact of changes in the regulatory and market environment (including
TARMED tariffs and regulations that require enhanced outmigration of medical treatments) and to reflect actions
taken by management to adapt to the new operating environment, the forecasted cash flows have been adjusted.
The carrying amount of the Hirslanden trade name and Linde trade name were fully impaired during the year. The
impairment charge recognised in the income statement consisted of £39m for the impairment of the Hirslanden
trade name and £16m for the Linde trade name (2018: £300m for the impairment of goodwill and £260m for the
impairment of the Hirslanden trade name). The only remaining goodwill and trade names relate to the current year
acquisition of Les Grangettes. A decline in terminal growth rate to 0.3% or an increase in the discount rate to 5.3%
would reduce the headroom to nil in the CGU to which Grangettes has been allocated.
Impairment testing of Mediclinic Middle East goodwill
The Mediclinic Middle East goodwill with a carrying amount of £1 340m (2018: £1 245m) 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 fair value less cost to sell calculations for the annual impairment
testing were as follows:
Discount rates – The discount rate applied to cash flow projections is 9.0% (2018: 8.7%).
Growth rates – The terminal growth rate beyond seven years is 3.0% (2018: 3.0%).
Forecasts – As a result of the changes in the market environment, mainly due to outlook of tariffs, the forecasted
cash flows have been adjusted. The discrete period used for the fair value less cost to sell calculation is 7 years
given the expansion and growth anticipated in the medium term from existing expansion projects.
Sensitivity analysis – Any increase in the discount rate or decreases in the short-term cash flow projections or
long-term growth rate could give rise to material impairment charges in future periods due to the reduced
headroom to the current carrying value.
222 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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
IFRS 9 transition adjustment
Additional investment in unlisted associate
Share of net profit of associated companies
Impairment of listed associate
Dividends received from associated companies
Set out below are details of the associate which is material to the Group:
2019
£’m
189
4
193
180
9
189
352
(2)
4
3
(164)
(4)
189
2018
£’m
352
5
357
348
4
352
461
2
–
3
(109)
(5)
352
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
at a detailed level and has a December year-end. The investment in associate was equity accounted for the
12 months to 31 December 2018 (2018: 31 December 2017). No significant events occurred since 1 January 2019 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 NCRC recognised to £nil (2018: £28m). The amortisation charge for the current period is £1m
(2018: £2m).
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 223
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
8.
8.1
EQUITY ACCOUNTED INVESTMENTS (continued)
Investment in associates (continued)
Summarised financial information in respect of the Group’s material associate is set out below:
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 after impairments
Transaction costs capitalised
NCRC
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
2018
£’m
As at
31 Dec
2017
£’m
1 537
175
1 712
(563)
(122)
1 027
29.9%
180
–
–
180
155
931
11
–
11
1 555
179
1 734
(571)
(125)
1 038
29.9%
310
10
28
348
251
932
17
–
17
Refer to the Annexure on page 278 for further details of investments in associates.
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 market value of the investment
below its carrying value. The value in use calculation 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 2018, the market value of the investment in Spire was £169m, 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 2018. The impairment test was prepared based on the Group’s updated expectations of
Spire’s future trading performance and considered external sources of information, including investor analyst
valuations and target prices published. Key assumptions related to cash flow growth rates in the short- and
medium-term were adjusted in the value in use calculation. As a result, an impairment loss of £164m was recorded
against the carrying value.
At year end, another impairment test, updated for latest guidance announced by Spire in March 2019, was
performed and indicated no further impairment losses. The following key assumptions were used in the calculation:
Discount rates – discount rates ranging between 5.3% and 6.8% was applied to the discrete period cash flow
projections for the five years and a discount rate of 7.2% was applied to the terminal year.
Growth rates – a terminal growth rate of 2.0% was applied in the calculation.
Forecasts – The five year forecast reflects the Group’s best view of future earnings.
Sensitivity analysis – any increase in the discount rate or decreases in the short-term cash flow projections or
long-term growth rate could give rise to further material impairment charges in future periods as there is little
headroom to the current carrying value. At 31 March 2019, the market price was £155m.
224 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
8.
EQUITY ACCOUNTED INVESTMENTS (continued)
8.2
Investment in joint venture
Reconciliation of carrying value at the beginning and end of the period
Opening balance
Exchange differences
2019
£’m
5
(1)
4
2018
£’m
4
1
5
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 2018
(2018: 31 December 2017) since it has a different year-end.
Details of the joint venture appear in the Annexure on page 278.
9.
OTHER INVESTMENTS AND LOANS
IFRS 9 financial instruments
Debt instruments at amortised cost
Equity instruments as FVPL (unlisted shares)
IAS 39 financial instruments
Loans and receivables
Available-for-sale: Unlisted shares
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
Refer to note 33 for explanations regarding the changes in accounting policies.
2019
£’m
2018
£’m
8
3
–
–
11
10
1
11
3
6
2
11
–
–
7
1
8
7
1
8
1
7
–
8
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 225
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
10.
DEFERRED TAX
The movement on the deferred tax account is as follows:
Opening balance
Income statement credit for the year
Exchange differences
Business combinations
(Credited)/charged to other comprehensive income
Balance at the end of the year
Deferred income tax assets
Deferred income tax liabilities
2019
£’m
445
(60)
17
6
(8)
400
(23)
423
400
2018
£’m
506
(59)
(38)
20
16
445
(22)
467
445
The deferred tax relating to current assets and current liabilities contains temporary differences that are 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 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
455
(10)
17
(30)
432
80
(55)
5
(7)
23
At 1 April 2018
432
23
(Credited)/charged to the income
statement
Business combinations
Exchange differences
At 31 March 2019
Set-off of deferred tax liabilities pursuant
to set-off provisions
Net deferred tax liabilities at the end
of the year
(47)
2
10
397
(12)
6
–
17
7
–
–
–
7
7
(2)
–
–
5
16
(1)
–
(1)
14
14
5
1
1
21
558
(66)
22
(38)
476
(9)
467
476
(56)
9
11
440
(17)
423
226 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
10.
DEFERRED TAX (continued)
The impairment of the trade names (£55m) and the impairment of the properties (£186m) led to the release of
deferred tax liabilities in the “Intangible assets” and “Tangible assets” categories of £12m and £35m respectively.
Refer to notes 6 and 7 regarding the impairment charge recognised. A prior year adjustment relating to a change in
the basis of estimating deferred tax on the Swiss properties led to the recognition of a tax credit of £17m.
Current
liabilities
£’m
Provisions
and others
£’m
Long term
liabilities
£’m
Derivatives
£’m
Tax losses
carried
forward
£’m
Total
£’m
Deferred tax assets
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
(2)
–
–
–
(2)
(7)
(2)
–
–
(9)
(25)
–
15
(2)
(12)
At 1 April 2018
(2)
(9)
(12)
Charged/(credited) to the
income statement
Credited to other
comprehensive income
Business combinations
Exchange differences
At 31 March 2019
Set-off of deferred tax
assets pursuant to set-off
provisions
Net deferred tax assets at
the end of the year
–
–
–
–
1
–
–
1
(2)
(8)
(3)
3
(2)
(7)
(22)
(2)
(16)
1
1
–
–
–
(1)
–
–
1
–
8
–
–
(8)
(8)
(2)
–
–
1
(9)
(52)
7
16
(2)
(31)
9
(22)
(31)
(4)
(8)
(3)
6
(40)
17
(23)
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 227
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
10.
DEFERRED TAX (continued)
At 31 March 2019, the Group had unutilised tax losses of approximately £113m (2018: £96m) potentially available for
offset against future profits. A deferred tax asset of £9m (2018: £8m) 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:
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
2019
£’m
2018
£’m
19
1
9
47
76
–
18
5
40
63
Deferred tax on unremitted earnings
The Group recognised a deferred tax liability of £1m (2018: £1m) 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 270m (2018: £1 616m). 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.
228 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
11.
INVENTORIES
Inventories consist of:
Pharmaceutical products
Consumables
2019
£’m
78
10
88
2018
£’m
80
10
90
The cost of inventories recognised as an expense and included in cost of sales amounted to £656m (2018: £671m).
12.
TRADE AND OTHER RECEIVABLES
The accounting policies were changed to comply with IFRS 9 which replaces the provisions of IAS 39. The 2019
figures are presented on an IFRS 9 basis and the 2018 figures are presented on an IAS 39 basis.
Trade receivables
Loss allowance (2018: IAS 39 provision for impairment)
Other receivables*
2019
£’m
534
(18)
516
216
732
2018
£’m
485
(45)
440
167
607
* Included in other receivables are Swiss unbilled services of £119m (2018: £79m). More than 92% will be recovered from 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 debt instruments at amortised cost (2018: loans and receivables
under IAS 39). The carrying amounts of the Group’s trade and other receivables are denominated in the following
currencies:
Swiss franc
South African rand
UAE dirham
2019
£’m
458
87
187
732
2018
£’m
380
90
137
607
Trade receivables to the value of £59m (2018: £61m) have been ceded as security for banking facilities.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 229
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
12.
TRADE AND OTHER RECEIVABLES (continued)
The Group applies the simplified approach for providing for expected credit losses prescribed by IFRS 9, which
permits the use of lifetime expected loss provision for all trade receivables. The loss allowance as at March 2019 is
determined as follows:
1 – 30
days past
due*
£’m
31 – 60
days past
due*
£’m
61 – 90
days past
due
£’m
More than
90 days
past due
£’m
Current
£’m
2019
Gross carrying amount
Loss allowance
Net carrying amount
280
(2)
278
74
-
74
45
-
45
33
(1)
32
102
(15)
87
Expected loss rate
0.45%
0.65%
0.93%
2.93%
14.17%
Total
£’m
534
(18)
516
* Impact is less than £0.5m.
The loss allowance for credit-impaired trade receivables as at 31 March 2019 reconciles to the opening balance for
provision for impairment of receivables calculated in terms of IAS 39 as follows:
Movement in the loss allowance (2018: IAS 39 provision for impairment)
Opening balance (calculated under IAS 39)
Restatement on adoption of IFRS 9*
Loss allowance (2018: IAS 39 provision for impairment)
Disallowances recognised as bad debt reclassified to gross debtors
(IFRS 15 adjustment)
Exchange differences
Amounts written off as uncollectable
Balance at the end of the year calculated under IFRS 9 (2018: IAS 39)
* Impact is less than £0.5m.
2019
£’m
45
–
11
(32)
1
(7)
18
2018
£’m
41
–
23
–
(10)
(9)
45
A loss allowance is recognised for all receivables, in accordance with IFRS 9 Financial Instruments, and is monitored
at the end of each reporting period. In addition to the loss allowance, receivables are written off when there is no
reasonable expectation of recovery, for example, when a debtor has been placed under liquidation. Receivables
which have been written off are not subject to enforcement activities.
The other receivables which include the Swiss unbilled services have been assessed for impairment and no
impairment has been identified.
The expected credit losses for non credit-impaired receivables is not material.
Refer to note 33 for and explanation on the impact of the implementation of the new accounting policies.
230 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
12.
TRADE AND OTHER RECEIVABLES (continued)
Management considers the credit quality of the trade receivables, that have not been credit impaired, to be high in
light of the nature of these trade receivables as described in note 3.1(b).
Disclosures for comparatives under IAS 39:
Included in the Group’s trade receivables balance for 2018 are trade receivables with a carrying value of £167m
that were past due at 31 March 2018, but which the Group had not impaired as there was not a significant change
in credit quality and the amounts were still considered to be recoverable. The ageing of these receivables was
as follows:
Up to 3 months
Between 3 and 6 months
Over 6 months
13.
SHARE CAPITAL
Issued share capital
Share capital
Share premium
Treasury shares
Ordinary Shares
Number of shares in issue
Nominal value
2018
£’m
90
41
36
167
2018
£’m
74
690
(1)
763
2019
£’m
74
690
–
764
2019
2018
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.
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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 231
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
13.
SHARE CAPITAL (continued)
Treasury Shares
At 1 April 2017
Vesting of Forfeitable Share Plan
At 31 March 2018
Vesting of Forfeitable Share Plan
At 31 March 2019
The balance of the treasury shares comprise:
Forfeitable Share Plan
Mpilo Trusts
Total
£’m
(2)
1
(1)
1
–
Number
of shares
271 620
(137 948)
133 672
(101 342)
32 330
–
32 330
32 330
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.
232 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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
Transfer from other reserves
Hedging reserve
Opening balance
Fair value adjustments of cash flow hedges, net of tax
Transfer to other reserves
2019
£’m
–
628
(2)
(3 014)
6
(2 382)
–
1
–
(1)
–
628
468
153
7
(2)
5
–
(7)
2018
£’m
1
468
5
(3 014)
6
(2 534)
1
24
1
(1)
(23)
468
779
(311)
–
5
4
1
–
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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 233
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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:
Forfeitable Share Plan
Expenses arising from equity-settled share-based payment transactions
Forfeitable Share Plan
2019
£’m
2018
£’m
–
–
–
–
–
–
–
1
1
2
1
1
1
1
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 vested in June 2018.
Opening balance
Vested
Closing balance
Weighted average
fair value at grant
date offer price
2019
Number of
shares
R87.41
101 342
(101 342)
–
2018
Number of
shares
239 290
(137 948)
101 342
A valuation has been determined and an expense recognised over a three-year period. The fair value of the TSR
performance condition was determined by using the Monte Carlo simulation model and for the headline earnings
per share performance condition, consensus forecasts were 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.
234 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
15.
SHARE-BASED PAYMENTS (continued)
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
A reconciliation of the movement in the LTIP award units is detailed below:
Opening balance
Granted
Vested
Lapsed
Closing balance
Valuation assumptions relating to the outstanding units:
Average price
(pence)
547
564
2019
£’m
1
(1)
–
–
2019
Number
of units
875 846
1 216 177
(2 516)
(41 774)
2 047 733
2018
£’m
1
–
–
1
2018
Number
of units
284 011
593 492
(1 657)
–
875 846
Grant date
Vesting date
Outstanding units
Closing share price
Risk-free interest rate
Expected dividend yield
Volatility
2018 LTIP
allocation
2017 LTIP
allocation
2016 LTIP
allocation
15 June 2018
1 June 2017
14 June 2016
15 June 2021/2023
1 June 2020/2022 14 June 2019/2021
1 183 768
584 127
271 579
305
0.68%
0.0%
38.2%
305
0.67%
0.0%
41.3%
305
0.67%
0.0%
41.3%
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, 2 516 vested in 2019 and 5 340 units of these awards
vested in 2018 and 2017.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 235
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
16.
NON-CONTROLLING INTEREST
Opening balance
Transactions with non-controlling shareholders
Dividends to non-controlling shareholders
Business combinations
Non-controlling shareholders derecognised on disposal of subsidiaries
Share of total comprehensive income
Share of profit
Currency translation differences
Non-controlling interest
Details of non-wholly-owned subsidiaries that have material non-controlling
interests (“NCI”):
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
Grangettes 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
** Place of business: Switzerland
2019
£’m
87
17
(8)
12
–
7
21
(14)
115
3.3%
7
2
30.4%
21
4
40.0%
29
3
2018
£’m
78
1
(10)
–
(1)
19
18
1
87
3.6%
7
2
30.4%
22
4
0%
–
–
236 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
16.
NON-CONTROLLING INTEREST (continued)
Summarised financial information in respect of the Group’s subsidiaries that have 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
Grangettes 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 inflow from investing activities
Net cash outflow from financing activities
Net cash inflow
2019
£’m
137
148
(33)
(133)
384
38
2
40
44
(10)
(34)
–
48
36
(3)
(13)
68
13
–
13
15
(7)
(8)
–
163
73
33
31
74
8
(7)
1
23
4
(9)
18
2018
£’m
168
158
(36)
(161)
391
39
–
39
62
(15)
(45)
1
50
38
(3)
(12)
66
13
–
13
15
(14)
(8)
(7)
–
–
–
–
–
–
–
–
–
–
–
–
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 237
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
2019
£’m
1 703
96
181
2
1 982
1 895
87
1 982
2018
£’m
1 559
200
176
2
1 937
1 866
71
1 937
2019
£’m
Non-
current
2019
£’m
Current
2018
£’m
Non-
current
2018
£’m
Current
1 066
77
1 085
26
14
1
13
8
12
181
–
–
–
7
–
176
–
–
–
–
1
1 282
1
79
1
1 282
1
27
17.
BORROWINGS
Bank loans
Preference shares
Listed bonds
Other liabilities
Non-current borrowings
Current borrowings
Total borrowings
Secured bank
loan one1
Secured bank
loan two1
Swiss operations
(denominated in Swiss franc)
These loans bear interest at variable rates linked
to the 3M LIBOR plus 1.25%. CHF50m must
be redeemed on 21 June 2019 and on
30 September 2019 respectively. The remaining
balances are repayable by 30 September 2024.
The non-current portion includes capitalised
financing costs of £13m (2018: £11m).
These loans were acquired as part of the Linde
acquisition and bear interest at a fixed rate
of 1.12%. CHF0.5m is repayable on 30 June and
31 December every year. The remaining balances
are repayable during May 2023.
Secured bank
loan three2
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.
Secured bank
loan four2
These loans were acquired as part of the
Grangettes acquisition and bear interest linked
to the 3M LIBOR plus 1.4%.
Listed bonds The listed bonds consist of CHF145m 1.625%
Secured long
term finance3
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% and are repayable
in equal monthly payments in periods ranging
from one to seven years.
Balance carried forward
238 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
17.
BORROWINGS (continued)
Balance carried forward
1 282
79
1 282
27
2019
£’m
Non-
current
2019
£’m
Current
2018
£’m
Non-
current
2018
£’m
Current
Secured bank
loan one4
Secured bank
loan two4
Secured bank
loan three4
Secured bank
loan four4
Secured bank
loan five5
Preference
shares4
Preference
shares
Southern African operations
(denominated in South African rand)
The loan bears interest at the 3M JIBAR variable
rate plus a margin of 1.49% compounded quarterly
and is repayable on 26 September 2022.
The loan bears interest at the 3M JIBAR variable
rate plus a margin of 1.59% compounded quarterly
and is repayable on 26 September 2023.
The loan bears interest at the 3M JIBAR variable
rate plus a margin of 1.51% compounded
quarterly. This liability was extinguished during
September 2018 as part of the refinancing.
The loan bears interest at the 3M JIBAR variable
rate plus a margin of 1.69% compounded
quarterly. This liability was extinguished during
September 2018 as part of the refinancing.
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 72% of
3M JIBAR plus a margin of 1.65%. The outstanding
balance will be redeemed on 26 September 2022.
Dividends are payable semi-annually at a rate of
73% of the prime interest rate (10.25%).
The amount was repaid on 26 September 2018
as part of the refinancing.
Secured bank
loan one6
Secured bank
loan two6
Middle East operations
(denominated in UAE dirham)
The loan bears interest at variable rates linked to
the 3M LIBOR and a margin of 1.85% with 5-year
amortising terms, expiring in August 2023.
The loan bears interest at variable rates linked to
the 3M LIBOR and a margin of 2.50%. The liability
was extinguished during August 2018 as part
of the refinancing.
136
189
–
–
6
95
–
1
1
–
–
1
1
–
–
–
208
73
6
108
91
187
4
–
–
–
2
–
2
1
–
–
–
1 895
–
87
98
1 866
39
71
1 The loan is secured by mortgage notes on Swiss properties and buildings to the value of £2 395m (2018: £2 326m) and
Swiss bank accounts with a book value of £112m (2018: £64m).
2 These loans are secured by mortgage notes on the properties and buildings of the Linde Group.
3 Equipment with a book value of £1m (2018: £2m) is encumbered as security for these loans.
4 Property and equipment with a book value of £262m (2018: £251m) are encumbered as security for these loans. Cash and
cash equivalents of £12m (2018: £34m) and trade receivables of £58m (2018: £60m) have also been ceded as security for
these borrowings.
5 Property, equipment and vehicles with a book value of £20m (2018: £15m) are encumbered as security for these loans. Net trade
receivables of £1m (2018: £1m) have also been ceded as security for these loans.
6 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.
The borrowing facilities in Mediclinic Southern Africa and Mediclinic Middle East were refinanced during the year. In
both instances, the terms of the loans were extended with favourable pricing. The effective date for the funding
and the closing was 26 September 2018 and 29 August 2018 respectively.
The refinancing agreements in both Mediclinic Southern Africa and Mediclinic Middle East have been treated as
extinguishments of the original financial liabilities due to the substantial modifications of the terms (including the
terms of the financing and the margins). As a result, the original liabilities were derecognised and new financial
liabilities were recognised. The unamortised portion of the capitalised finance cost of the original agreements of
£2m in Mediclinic Middle East was derecognised as a result of the extinguishment of the liabilities.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 239
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
18.
RETIREMENT BENEFIT OBLIGATIONS
Statement of financial position obligations for:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end-of-service benefit obligation
Total retirement benefit obligations
Short-term portion of retirement benefit obligations
Non-current retirement benefit obligations
Total amount charged to the income statement:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end-of-service benefit obligation
Total amount charged/(credited) to the other comprehensive income:
Swiss pension benefit obligation
South African post-retirement medical benefit obligation
UAE end of service benefit obligation
2019
£’m
52
37
60
149
149
(11)
138
36
6
9
51
44
(3)
1
42
2018
£’m
4
40
52
96
96
(10)
86
34
6
9
49
(74)
–
(2)
(76)
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.
240 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
18.
(a)
RETIREMENT BENEFIT OBLIGATIONS (continued)
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 (cash balance plan)
• Hirslanden Clinique La Colline SA (cash balance plan)
• Privatklinik Linde AG (cash balance plan)
• Clinique des Grangettes SA (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 loss/(gain)
Exchange differences
2019
£’m
2018
£’m
1 216
(1 164)
52
1 045
(1 041)
4
1 045
1 086
35
8
–
35
(32)
49
45
31
37
6
(4)
34
(35)
39
(45)
(73)
Balance at the end of the year
1 216
1 045
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
1 041
1 013
38
35
(32)
42
8
1
(1)
32
1 164
38
34
(35)
28
6
29
(1)
(71)
1 041
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 241
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
18.
a)
RETIREMENT BENEFIT OBLIGATIONS (continued)
Swiss pension benefit obligation (continued)
Statement of financial position
Net pension liability reconciliation
Opening net liability
Expenses recognised in the income statement
Contributions paid by employer
Business combinations
Exchange differences
Actuarial gain/(loss)
Closing net liability
Statement of other comprehensive income
Amounts recognised in other comprehensive income are as follows:
Actuarial loss – experience
Actuarial (gain)/loss 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
2019
£’m
2018
£’m
4
36
(38)
7
(1)
44
52
(5)
(40)
1
(44)
35
–
8
(8)
1
36
9
0.45%
1.75%
0.00%
1.25%
9 804
995
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
242 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
18.
a)
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
2019
£’m
367
280
42
147
836
32
12
223
61
328
2019
%
31.5%
24.1%
3.6%
12.6%
71.8%
2.7%
1.0%
19.2%
5.2%
28.2%
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%
1 164
100.0%
1 041
100.0%
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
Discount rate
Salary growth rate
Pension growth rate
0.45%
1.75%
0.00%
0.25%
0.50%
0.25%
(2.7%)
0.8%
2.4%
2.9%
(0.8%)
0.0%
Change in
assumption
Increase by
1 year in
assumption
Decrease by
1 year in
assumption
Life expectancy (mortality)
1 year in expected life time of plan
participants
2.2%
(2.2%)
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.
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 INTERNATIONAL PLC | 2019 ANNUAL REPORT 243
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
18.
a)
RETIREMENT BENEFIT OBLIGATIONS (continued)
Swiss pension benefit obligation (continued)
Expected employer contributions to be paid to the pension plans for the year ended 31 March 2020 are £34m 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 13.9 years (2018: 12.9 years). The maturity profile
of the defined benefit obligation is as follows:
31 March 2019
Defined benefit obligation
31 March 2018
Defined benefit obligation
<= 1 year
£’m
1 – 5 years
£’m
> 5 years
£’m
Total
£’m
80
73
242
219
980
1 302
877
1 169
Additional information on Swiss defined benefit pension plans
Additional information is 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.
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.
244 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
18.
a)
RETIREMENT BENEFIT OBLIGATIONS (continued)
Swiss pension benefit obligation (continued)
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 into 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 INTERNATIONAL PLC | 2019 ANNUAL REPORT 245
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 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 2019, a 9.30% (2018: 8.10%) medical inflation rate and a 10.50% (2018: 9.10%)
discount rate were assumed. The average retirement age was set at 63 years (2018: 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
Actuarial gain recognised in other comprehensive income
Present value of unfunded obligations
Assumptions and sensitivity analysis
2019
£’m
2018
£’m
40
6
2
4
(1)
(5)
(3)
37
35
6
2
4
(1)
–
–
40
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
Discount rate
Medical inflation rate
10.50%
9.30%
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.
246 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
18.
(c)
RETIREMENT BENEFIT OBLIGATIONS (continued)
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
Classified as held for sale
Exchange differences
Actuarial loss/(gain) recognised in other comprehensive income
Present value of unfunded obligations
Current portion of retirement benefit obligations
Non-current retirement benefit obligations
Assumptions and sensitivity analysis
2019
2018
2.9%
1.9%
60 years
10.0%
2019
£’m
3.4%
2.0%
60 years
10.3%
2018
£’m
52
9
7
2
(6)
(1)
5
1
60
11
49
60
56
9
7
2
(6)
–
(5)
(2)
52
10
42
52
Impact on defined benefit obligation
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
Discount rate
Future salary increases
2.91%
1.90%
1.00%
1.00%
(6.0%)
7.0%
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 and one non-executive director of Mediclinic International plc participate in the
South African post-retirement medical benefit obligation.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 247
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
19.
PROVISIONS
Non-current
Employee benefits
Legal cases and other
Tariff risks
Current
Employee benefits
Legal cases and other
Tariff risks
2019
£’m
2018
£’m
29
16
1
12
15
2
6
7
44
23
14
–
9
15
2
5
8
38
Opening balance at 1 April 2017
Charged to the income statement
Utilised during the year
Unused amounts reversed
Business combinations
Exchange differences
Closing balance at 31 March 2018
Charged to the income statement
Utilised during the year
Unused amounts reversed
Business combinations
Exchange differences
Closing balance at 31 March 2019
Employee
benefits
£’m
Legal cases
and other
£’m
Tariff
risks
£’m
Total
£’m
17
2
(2)
–
–
(1)
16
3
(2)
–
–
1
18
5
2
(2)
(1)
–
1
5
2
(1)
–
1
–
7
23
4
(5)
(5)
2
(2)
17
6
–
(5)
–
1
19
45
8
(9)
(6)
2
(2)
38
11
(3)
(5)
1
2
44
(a)
Employee benefits
This provision is for benefits granted to employees for long service. The provision is calculated based on the
employee’s cost to the company as well as the estimated expected utilisation of the employee benefits.
(b)
Legal cases and other
This provision relates to payments for malpractice claims and other costs for legal claims. The recognised provision
reflects the best estimate of the most likely outcome.
(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. The tariff risk 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. Refer to note 22 for an explanation of the provisional tariffs and the impact on recognition of
the tariff risk provision.
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
248 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2019
£’m
15
22
7
44
2018
£’m
15
16
7
38
20. DERIVATIVE FINANCIAL INSTRUMENTS
Non-current
Interest rate swaps – cash flow hedges
Forward exchange contracts
Written put option (redemption liability)
Current
Interest rate swaps – cash flow hedges*
2019
£’m
2018
£’m
2
1
88
91
–
–
91
2
–
–
2
–
–
2
* Amount is less than £0.5m 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 2019, the Group had 14 effective
interest rate swap contracts (2018: 10) 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:
31 March 2019
1 to 3 years*
31 March 2018
1 to 3 years*
Borrowings
hedged
£’m
Fixed
interest
payable
Interest
receivable
Fair value
gain/(loss)
for the year
£’m
245
6.9 – 7.7%
3 month JIBAR/
69% of prime
interest rate
222
6.9 –7.7%
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 £53m, 2 March 2020 for £26m, 1 June 2020 for £78m, on 1 September 2020 for £38m and on 1 June 2021 for
£51m. There is no ineffective portion recognised in the profit and loss that arises from the cash flow hedges.
In Mediclinic Middle East, an interest rate swap was entered into for a third of the borrowing facility (£64m) to
hedge for rising interest rates. The swap was entered into at a fixed rate of 4.99% (1.85% margin plus 3.1% for the
5 year USD swap curve rate). The fair value movement was immaterial during the current financial year.
Redemption liability (written put option)
Through the acquisition of the Grangettes group, the Group entered into a put/call agreement over the remaining
40% interest in the combined company of Clinique des Grangettes and Clinique La Colline. The options are
exercisable after 4 years and the consideration on exercise will be determined based on the profitability of Clinique
des Grangettes and Clinique La Colline at that time. The exercise price is formula based. Refer to note 30 for the
disclosures of the Grangettes business combination.
The amount that may become payable under the option on exercise is initially recognised at the present value
of the redemption amount with a corresponding charge directly to equity. The charge to equity is recognised
separately as written put options over non-controlling interests.
The liability is subsequently adjusted for changes in the estimated performance and increased through finance
charges up to the redemption amount that is payable at the date at which the option first becomes exercisable. In
the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to
equity. The changes in the fair value of the liability will impact the income statement. A 10% change in the projected
earnings will change the liability and profit before tax by £9m.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 249
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
21.
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accrued expenses
Social insurance and accrued leave pay
Value added tax
2019
£’m
230
181
43
10
464
2018
£’m
210
144
62
8
424
22.
REVENUE
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.
Disaggregation of revenue from contracts with customers
Major service lines
Healthcare services
Rental income
Corporate
Other
Primary geographic markets
Switzerland
Southern Africa
United Arab Emirates
Other
* Refer to note 2.1
(Re-
presented)*
2018
£’m
2019
£’m
2 838
2 780
31
1
62
29
1
66
2 932
2 876
1 368
886
677
1
2 932
1 349
883
643
1
2 876
Switzerland healthcare services revenue
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 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. Tariff provisions are recognised in revenue when
the pricing model for DRGs is based on provisional tariffs. Provisional tariffs are recognised in revenue to the extent
that it is highly probable that it will not be reversed. 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 payments made, the insurer can claim from the healthcare provider if the tariffs are lower than the provisional
tariffs billed. The accounting for the provision results in a reduction of revenue with a corresponding entry to
provisions in the statement of financial position. The tariff adjustment cannot be adjusted against accounts
receivable due to the fact that the original invoices are settled before the finalisation of the tariffs. Tariff
adjustments are therefore classified as provisions and this view is supported by the fact that balances due to
funders are not settled on a net basis. 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.
250 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
22.
REVENUE (continued)
Switzerland healthcare services revenue (continued)
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.
Set out below is a breakdown of the Swiss healthcare services revenue:
Inpatient revenue
Outpatient revenue
2019
£’m
1 029
265
1 294
Southern Africa healthcare services revenue
In Southern Africa, a fee-for-service model is predominantly 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.
For certain procedures, a fixed fee contract model is used. 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 length of stay of the patient. Excess costs or savings are not charged to the funder
and are absorbed by the division.
Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain admission
levels. These volume discounts are negotiated with funders on an annual basis. The retrospective volume discounts
give rise to variable consideration. Variable consideration is recognised as a revenue to the extent that it is highly
probable that it will not reverse. Discounts are accrued over the course of the period based on the estimates of the
level of business expected. This is adjusted at the end of the period to reflect 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).
Set out below is a breakdown of the Southern Africa healthcare services revenue:
Hospital and day clinic patient income
Emergency medical transport
2019
£’m
836
35
871
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 251
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
22.
REVENUE (continued)
Middle East healthcare services revenue
In 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.
For certain procedures in the Middle East (Abu Dhabi), 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 length of stay of the patient.
Excess costs or savings are not charged to the funder and are absorbed by the division.
Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain admission
levels. These volume discounts are negotiated with funders on an annual basis. The retrospective volume discounts
give rise to variable consideration. Variable consideration is recognised as revenue to the extent that it is highly
probable that it will not reverse. Discounts are accrued over the course of the period based on the estimates of the
level of business expected. This is adjusted at the end of the period to reflect 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).
In the Middle East, the normal business process associated with transactions with insurers includes an amount of
claims disallowed which is not paid by the insurer. These rejected claims could be for various technical or medical
reasons. Accordingly, Mediclinic Middle East accepts and expects an amount of consideration that is less than what
was originally invoiced. 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. In prior
periods, revenue was recognised based on the contract with the insurers and a provision for bad debt was
recognised for the rejections based on historical trends. Under IFRS 15, these rejected claims are recognised as part
of revenue (decreasing the revenue recognised). The rejections recognised in the provision for impairment of trade
receivables in the prior period is reclassified to gross debtors on 1 April 2018, refer to note 33.2.
Set out below is a breakdown of the Middle East healthcare services revenue:
Inpatient revenue
Outpatient revenue
2019
£’m
239
434
673
252 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
23.
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
Other assurance services
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 property, equipment and vehicles
Impairment of goodwill
Impairment of trade names
Other expenses
* Refer to note 2.1
2019
£’m
(Re-presented)*
2018
£’m
0.5
1.9
2.4
0.4
0.2
–
3.0
656
148
50
78
20
1 233
1 167
16
51
(1)
11
53
63
60
3
20
241
186
–
55
420
0.4
2.0
2.4
0.4
0.1
0.1
3.0
671
132
39
70
23
1 293
1 228
15
49
1
23
52
57
54
3
36
644
84
300
260
255
2 848
3 166
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 253
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION 2019
£’m
1 827
1 021
2 848
124
44
168
(Re-presented)*
2018
£’m
1 779
1 387
3 166
112
56
168
32 398
31 504
–
(1)
(2)
(3)
55
–
5
2
–
10
(6)
66
9
(7)
–
2
55
6
5
19
(4)
15
(2)
94
NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
23.
EXPENSES BY NATURE (continued)
Classified as:
Cost of sales
Administration and other operating expenses
Depreciation and amortisation is classified as:
Cost of sales
Administration and other operating expenses
Number of employees
* Refer to note 2.1
24. OTHER GAINS AND LOSSES
Release of pre-acquisition Swiss provision
Loss on disposal of subsidiaries
Fair value adjustments on derivative contracts
25.
FINANCE COST
Interest expense
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
* Amount is less than £0.5m
254 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
26
INCOME TAX EXPENSE
Current tax
Current year
Previous year
Deferred tax credit (note 10)
Taxation per income statement
Composition
UK tax
Foreign tax
Reconciliation of rate of taxation:
UK statutory rate of taxation
Adjusted for:
Capital gains taxed at different rates
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
Derecognition of tax losses relating to prior years
Prior year adjustment4
Effective tax rate5
2019
£’m
(Re-presented)
2018
£’m
53
–
(60)
(7)
–
(7)
(7)
56
(2)
(59)
(5)
–
(5)
(5)
2019
%
2018
%
19.0%
19.0%
0.1%
0.4%
0.4%
–
0.1%
0.1%
(26.5%)
(18.0%)
0.7%
1.5%
0.1%
(1.7%)
(0.3%)
11.7%
5.4%
0.2%
0.7%
(0.6%)
(0.5%)
(0.2%)
0.3%
1.1%
1
Impairment of the listed associate of £164m was not deductible for tax purposes. The tax effect amounted to £31m (impact of
22.7% in effective tax rate).
2 Since the tax reconciliation is based on a UK statutory tax rate at 19.0%, a reconciling item result due to profit from South Africa
which is subject to an income tax rate of 28.0% reduced by profit from the Middle East which is not subject to income tax.
3 The impairment of the trade names (£55m) and the impairment of property, equipment and vehicles (£186m) in Switzerland led
to the release of a deferred tax liability of £47m. A reconciling item arises because the tax rate applied in calculating the deferred
tax liabilities was higher than the current statutory rate of taxation.
4 Included in the prior year adjustment is a credit of £17m relating to a change in the basis of estimating deferred tax related to
Swiss properties from providing at a tax rate of 20.1% to tax rate of 19.3%.
5 If the impairment charges (and related deferred tax effect) discussed in point 3 above together with the items listed in
point 1 and 4 were excluded from the effective tax rate calculation, the adjusted effective tax rate would be 20.4% (2018: 20.8%).
The adjusted effective tax rate changes year-on-year reflecting a lower average tax rate in Switzerland.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 255
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
27.
EARNINGS PER ORDINARY SHARE
Loss per ordinary share (pence)
Basic (pence)
Diluted (pence)
Earnings reconciliation
Loss attributable to equity holders of the Company
Adjusted for:
No adjustments
Loss 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
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
Mpilo Trusts
Forfeitable Share Plan
2019
£’m
(20.5)
(20.5)
(151)
–
(151)
2018
£’m
(66.7)
(66.7)
(492)
–
(492)
2019
Number of
shares
2018
Number of
shares
737 243 810
737 243 810
(49 544)
(32 330)
(17 214)
(133 672)
(32 330)
(101 342)
737 194 266
737 110 138
737 194 266
737 110 138
49 544
32 330
17 214
133 672
32 330
101 342
737 243 810
737 243 810
Mpilo Investment Holdings 1 (RF) (Pty) Ltd is a structured entity that is not consolidated due to the Group not
having control. This company is an investment holding company and was incorporated as part of the Mediclinic
BEE transaction. The company holds ordinary shares in Mediclinic International plc on which it receives dividends.
These dividends are used to repay the outstanding debt of the company. The outstanding debt referred to is
provided by third parties with no recourse to the Group.
256 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
27.
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 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)
28. 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
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
Year ended 31 March 2019
Currency translation differences
Remeasurement of retirement benefit
obligations
Other comprehensive income
Year ended 31 March 2018
Currency translation differences
Fair value adjustments – cash flow hedges
Remeasurement of retirement benefit
obligations
Other comprehensive income
153
(39)
114
(311)
1
76
(234)
–
8
8
–
–
(16)
(16)
(11)
(3)
(14)
1
–
–
1
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 257
2019
£’m
2018
£’m
(151)
(492)
164
192
1
5
211
28.6
28.6
2019
£’m
142
–
(34)
108
109
576
7
3
203
27.6
27.6
2018
£’m
(310)
1
60
(249)
Total
£’m
142
(34)
108
(310)
1
60
(249)
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
29.
CASH FLOW INFORMATION
29.1 Reconciliation of profit before taxation to cash generated
from operations
Loss before taxation
Adjustments for:
Finance cost – net
Share of net profit of equity accounted investments
Share-based payments
Depreciation and amortisation
Loss allowance (2018: 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
Fair value adjustments on derivative contracts
Operating income before changes in working capital
Working capital changes
Decrease/(increase) in inventories
Increase in trade and other receivables
Increase/(decrease) in trade and other payables
29.2 Interest paid
Finance cost per income statement
Non-cash items
Amortisation of capitalised financing fees
Derecognition of unamortised financing fees
Fair value gains on ineffective cash flow hedges
29.3 Tax paid
Liability at the beginning of the year
Provision for the year
Business combinations
Liability at the end of the year
29.4 Investment to maintain operations
Property, equipment and vehicles purchased
Intangible assets purchased
Movement in capital expenditure payables
29.5 Investment to expand operations
Property, equipment and vehicles purchased
Intangible assets purchased
Movement in capital expenditure payables
258 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
2019
£’m
2018
£’m
(137)
(479)
57
(3)
(1)
168
11
5
7
241
164
1
–
2
515
(64)
4
(104)
36
451
66
(5)
–
–
61
4
53
5
62
(7)
55
82
1
3
86
122
26
6
154
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
125
12
5
142
29.
CASH FLOW INFORMATION (continued)
29.6 Dividends
Dividends declared
Year ended 31 March 2019
Interim dividend
Final dividend
Year ended 31 March 2018
Interim dividend
Final dividend
Dividends paid
Dividends paid during the period
Date paid/
payable
Dividend per
share (pence)
2019
£’m
2018
£’m
18 December 2018
29 July 2019
18 December 2017
30 July 2018
3.20
4.70
7.90
3.20
4.70
7.90
24
35
59
59
24
35
59
58
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 29 July 2019 from retained earnings has not been recognised as a
liability on 31 March 2019.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 259
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
29.
CASH FLOW INFORMATION (continued)
29.7 Changes in liabilities arising from financing activities
Year ended 31 March 2019
Opening balance
Cash flow movements
Proceeds from borrowings
Repayment of borrowings
Refinancing transaction cost
Non-cash items
Amortisation of capitalised financing fees
Business combinations
Exchange rate differences
Closing balance
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
Net derivative
financial
instruments
held to hedge
borrowings
£’m
Total
borrowings
£’m
1 937
385
(347)
(5)
5
19
(12)
1 982
2 030
6
(30)
–
(12)
5
19
–
25
(106)
1 937
2
–
–
–
–
–
–
2
9
–
–
(4)
–
–
–
(5)
–
2
2
2019
£’m
Total
£’m
1 939
385
(347)
(5)
5
19
(12)
1 984
2 039
6
(30)
(4)
(12)
5
19
(5)
25
(104)
1 939
2018
£’m
29.8 Cash and cash equivalents
For the purposes of the statement of cash flows, cash, cash equivalents
and bank overdrafts include:
Cash and cash equivalents
265
261
Cash, cash equivalents and bank overdrafts are denominated in the following
currencies:
Swiss franc*
South African rand**
UAE dirham***
Pound sterling****
119
97
19
30
265
71
116
46
28
261
*
The facility agreement of the Swiss subsidiary restricts the distribution of cash. The counterparties have a minimum A1 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 £12m (2018: £34m) and Swiss bank
accounts denominated in Swiss franc amounting to £112m (2018: £64m) have been ceded as security for
borrowings (see note 17).
260 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
30.
BUSINESS COMBINATIONS
The following business combinations occurred during the current and prior years:
Cash flow on acquisition:
Clinique des Grangettes
City Centre Clinics Deira and Me’aisem
Welkom Medical Centre
Intercare Hospital Group
Sandton Day Hospital and Sandton sub-acute Hospital
Linde Holding Biel/Bienne AG
Rontgeninstitut Cham AG
2019
£’m
(50)
(7)
(6)
–
–
–
–
(63)
2018
£’m
–
–
–
–
–
(74)
(9)
(83)
Clinique des Grangettes
Effective on 1 October 2018, Hirslanden AG acquired a 60% stake in Grangettes Healthcare SA through a newly
formed structure and obtained control over the company. A new entity, Hirslanden La Colline Grangettes SA,
was formed to effect the business combination. The new entity was established by contribution in kind of the
investment in Grangettes Healthcare SA. As part of the consideration transferred, the investment in Hirslanden
Clinique La Colline SA was transferred to the newly founded entity.
Clinique des Grangettes is a leading private hospital in Geneva offering a wide range of medical services,
specialising in maternity care, paediatrics, cardiology, oncology, radiology and emergency care. The Clinique
des Grangettes has state-of-the-art equipment diagnostic and treatment equipment, which is used by more than
450 affiliated doctors.
The Clinique La Colline is known for its competence centres in orthopaedics, neurosurgery, visceral surgery
and sports medicine. The medical services of the two hospitals thus complement each other perfectly. The
combination of the Clinique des Grangettes and the Hirslanden Clinique La Colline enables operational synergies
and cost savings.
The goodwill of £99m (CHF126m) arising from the acquisition is attributable to the acquired workforce and
economies of scale expected from combining the operations of the Group and Grangettes Group. None of the
goodwill recognised is expected to be deductible for income tax purposes.
The following table summarises the total consideration transferred at the acquisition date for the Grangettes Group
(consisting of Clinique des Grangettes SA, Dianecho SA and Grangettes Healthcare SA).
Consideration at 1 October 2018
Cash
Portion given up of investment in Clinique La Colline
Total consideration transferred
2019
£’m
60
58
118
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 261
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
30.
BUSINESS COMBINATIONS (continued)
Clinique des Grangettes (continued)
The following table summarises the provisional fair value of assets acquired and liabilities assumed at the
acquisition date for the Grangettes Group (consisting of Clinique des Grangettes SA, Dianecho SA and Grangettes
Healthcare SA).
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
Other investments and loans
Total assets
Liabilities
Borrowings
Provisions
Retirement benefit obligations
Deferred tax liabilities
Trade and other payables
Current income tax liabilities
Total liabilities
Total identifiable net assets at fair value
Non-controlling interest at fair value
Goodwill
Consideration transferred for the business
Net cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
2019
£’m
10
25
2
25
10
2
8
82
15
1
7
9
13
5
50
32
(13)
99
118
10
(60)
(50)
The Group elected to recognise the non-controlling interest at its proportionate share of the acquired net
identifiable assets. As part of the consideration transferred, 40% of the previously fully owned Hirslanden Clinique
la Colline SA was transferred to the seller of Grangettes group. This transfer is accounted for as a transaction with
non-controlling interest, as it does not result in a loss of control and amounted to £17m. The difference between fair
value of the consideration transferred and the carrying value of the net assets of Hirslanden Clinique La Colline at
the acquisition date is recorded in equity (£41m). The Group entered into a put/call agreement over the remaining
40% of the interest in the combined company of Clinique des Grangettes and Clinique La Colline. Refer to note 20.
262 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
30.
BUSINESS COMBINATIONS (continued)
The fair value of trade and other receivables is £25m. The best estimate at acquisition date of the contractual cash
flows not expected to be collected are £2m. From the date of acquisition, the Grangettes Healthcare SA has
contributed £44m to revenue and £6m to the net profit before tax of the Group. The Group does not disclose
revenue and profit before tax of Les Grangettes as if the business combination occurred at the beginning of the
reporting period due to not having access to the relevant information before the Group obtained control over
the business.
The fair value of the acquired identifiable assets and liabilities has been provisionally determined for all business
combinations. If new information obtained within one year of the date of acquisition about facts and circumstances
that existed at the date of acquisition identifies adjustments to the above amounts, then the accounting for the
acquisition will be revised. The following smaller business combinations occurred during the current year:
City Centre Clinics Deira and Me’aisem
On 28 June 2018, Mediclinic Middle East acquired 100% of the Dubai based City Centre Clinics Deira and Me’aisem
from Majid Al Futtaim for £7m (AED35m).
City Centre Clinic Deira is a large outpatient facility with one day case surgery theatre and 18 medical disciplines.
City Centre Clinic Me’aisem is a smaller community clinic focusing on six core disciplines. The clinics serve strategic
geographic locations and offer the opportunity to refer higher acuity inpatient cases to existing Mediclinic Middle
East hospitals as well as the new Mediclinic Parkview Hospital.
The goodwill of £2m (AED8m) arising from the acquisition is attributable to the acquired workforce and economies
of scale expected from combining the operations of Mediclinic Middle East and the City Centre Clinics.
Welkom Medical Centre
On 3 September 2018, Mediclinic Southern Africa acquired 100% of the share capital of Welkom Medical Centre for
£6m (ZAR110m).
Welkom Medical Centre consists of a day case clinic with 20 beds, a sub-acute unit of 20 beds and a mental health
unit with a further 20 beds. The goodwill of £3m (ZAR54m) arising from the acquisition is attributable to the
acquired workforce and economies of scale expected from combining the operations of Welkom Medical Centre
and Mediclinic Southern Africa. None of the goodwill recognised is expected to be deductible for income
tax purposes.
Intercare Hospital Group
On 1 November 2018, Mediclinic Southern Africa acquired 50% plus one share of Intercare Hospital Group for £1m
(ZAR32m).
The Intercare Hospital Group consists of 4 day case clinics and 4 sub-acute hospitals and a fertility hospital. The
goodwill of £2m (ZAR37m) arising from the acquisition is attributable to the acquired workforce and economies of
scale expected from combining the operations of the Intercare Hospital Group and Mediclinic Southern Africa.
None of the goodwill recognised is expected to be deductible for income tax purposes.
Sandton Day Hospital and Sandton sub-acute Hospital
On 1 November 2018, Mediclinic Southern Africa acquired 71% of the share capital of Sandton Day Hospital and
Sandton sub-acute Hospital for £0.2m (ZAR2m).
The Sandton Day Hospital and Sandton sub-acute Hospital consist of a day case clinic with 20 beds and sub-acute
units of 30 beds. The goodwill of £1m (ZAR20m) arising from the acquisition is attributable to the acquired
workforce and economies of scale expected from combining the operations of the Sandton Day Hospital and
Sandton sub-acute Hospital and Mediclinic Southern Africa. None of the goodwill recognised is expected to be
deductible for income tax purposes.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 263
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
30.
BUSINESS COMBINATIONS (continued)
The following table summarises the consideration paid for the smaller business combinations and the provisional
fair value of assets and liabilities assumed at the acquisition date:
Recognised amounts of identifiable
assets acquired and liabilities assumed
Assets
Property, equipment and vehicles
Deferred tax assets
Cash and cash equivalents
Total assets
Liabilities
Borrowings
Trade and other payables
Total liabilities
Total identifiable net assets at fair value
Non-controlling interest
Goodwill
Consideration transferred
for the business
Cash flow on acquisition
Cash acquired with subsidiary
Cash paid
Net cash flow on acquisition
Total
£’m
City Centre
Clinics
£’m
Welkom
Medical
Centre
£’m
Intercare
Hospital
Group
£’m
Sandton Day
and sub-
acute
Hospitals
£’m
10
1
1
12
4
3
7
5
1
8
14
5
–
–
5
–
–
–
5
–
2
7
3
–
–
3
–
–
–
3
–
3
6
1
(14)
(13)
–
(7)
(7)
–
(6)
(6)
1
1
1
3
2
3
5
(2)
1
2
1
1
(1)
–
1
–
–
1
2
–
2
(1)
–
1
–
–
–
–
264 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
31.
DISPOSAL OF SUBSIDIARIES
During the current year, the Group disposed of Mediclinic Aspetar LLC and Mediclinic Pharmacy Aspetar LLC that
were part of the Middle East segment as well as Mediclinic Barberton (Pty) Ltd that was part of the Southern
Africa segment. In the prior year, the following companies that were part of the Middle East segment were
disposed of: Lookwow One Day Surgery Company LLC and the following branches of Mediclinic Hospitals LLC:
Mirfa, Ajman, Hamdan Pharmacy, Sanaya and ICAD.
Analysis of assets and liabilities over which control was lost
2019
£’m
2018
£’m
Property, equipment and vehicles
Goodwill
Trade and other payables
Non-controlling interest derecognised
Net assets disposed of
Consideration received
Cash and cash equivalents
Total consideration
Loss on disposal of subsidiary
Consideration received*
Net assets disposed of
Loss on disposal
Net cash inflow
Total cash flow on disposal of subsidiary
Less: cash and cash equivalents disposed of
Net cash inflow on disposal
* Amount is less than £0.5m
32.
DISPOSAL GROUPS HELD FOR SALE
1
–
–
–
1
–
–
–
(1)
(1)
–
–
–
8
3
(1)
(1)
9
2
2
2
(9)
(7)
2
–
2
During the financial year, management decided to sell the following clinics within the Mediclinic Middle East
segment: Mediclinic Hospitals – Al Musafah Speciality Clinics.
Analysis of assets and liabilities held for sale
Assets
Property, equipment and vehicles
Trade and other receivables
Total assets
Liabilities
Retirement benefit obligations
Total liabilities
2019
£’m
2018
£’m
1
3
4
1
1
1
–
1
–
–
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 265
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
33.
CHANGES IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 15 Revenue from Contracts with Customers and
IFRS 9 Financial Instruments on the Group’s financial statements.
33.1
IFRS 15 Revenue from contracts with customers
The Group adopted IFRS 15 from 1 April 2018 which resulted in changes in accounting policies. In accordance with
the transitional provisions in the standard, the Group followed the modified retrospective approach. The
comparative information is presented based on the requirements of IAS 18 Revenue and no adjustment to opening
retained earnings was required.
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. Disallowance write-offs on rejected claims is a general practice by the insurers
in the Middle East. Accordingly, Mediclinic Middle East expects an amount of consideration that is less than what
was originally invoiced. 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. In prior
periods, revenue was recognised based on the contract with the insurers and a provision for bad debt was
recognised for the rejections based on historical trends. Under IFRS 15, these rejected claims are recognised as part
of revenue (decreasing the revenue recognised). The rejections recognised in the provision for impairment of trade
receivables in the prior period is reclassified to gross debtors on 1 April 2018. Refer to note 33.2 below. If IFRS 15
was applied to the prior period results, revenue from the Middle East segment would have been £626m compared
to the £643m recognised under IAS 18 (with a corresponding decrease of £17m in expenses). This change has no
impact on net profit.
The implementation of IFRS 15 did not have a material impact on the Group’s other divisions.
33.2 IFRS 9 Financial Instruments
The accounting policies were changed to comply with IFRS 9 which replaces the provisions of IAS 39 that relate to
the recognition, classification and measurement of financial assets and financial liabilities; derecognition of financial
instruments; impairment of financial assets; and hedge accounting.
The Group has adopted IFRS 9 which resulted in changes in accounting policies and adjustments to the amounts
recognised in the financial statements. In accordance with the transitional provisions in the standard, comparative
figures have not been restated. Differences arising from the adoption of IFRS 9 have been recognised directly in
retained earnings. The adjustments arising from the new impairment rules are therefore not reflected in the
statement of financial position as at 31 March 2018, but are recognised in the opening balance of retained earnings
on 1 April 2018.
The changes due to the implementation of IFRS 9 are described below:
Classification and measurement
Under IFRS 9, debt instruments are subsequently measured at fair value through profit or loss, amortised cost or
fair value through OCI. The classification is based on two criteria: the Group’s business model for managing the
assets; and whether the instruments’ contractual cash flows represent solely payments of principal and interest on
the principal amount outstanding.
The assessment of the Group’s business model was made as of the date of initial application, 1 April 2018. The
assessment of whether contractual cash flows on debt instruments are solely comprised of principal and interest
was made based on the facts and circumstances as at the initial recognition of the assets.
The classification and measurement requirements of IFRS 9 did not have a significant impact to the Group. The
following are the changes in the classification of the Group’s financial assets:
• Trade receivables and other loans and receivables classified as “loans and receivables” at 31 March 2018 are held
to collect contractual cash flows and give rise to cash flows representing solely payments of principal and
interest. These are classified and measured as “debt instruments at amortised cost” beginning 1 April 2018.
• Equity investments in non-listed companies classified as “investments available for sale” at 31 March 2018 are
classified and measured as “financial assets at fair value through profit or loss” beginning 1 April 2018. These
investments do not meet the IFRS 9 criteria for classification at amortised cost, because their cash flows do not
represent solely payments of principal and interest. This reclassification had no impact on equity because the
equity reserve relating to these available for sale investments was nil at 1 April 2018.
266 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
33.
CHANGES IN ACCOUNTING POLICIES (continued)
There are no changes in classification and measurement for the Group’s financial liabilities.
In summary, upon adoption of IFRS 9, the Group had the following required or elected reclassifications as at
1 April 2018:
IAS 39 measurement category
Loans and receivables
Trade and other receivables
Loans and receivables (other investments and loans)
Investments available for sale
Unlisted shares (other investments and loans)
IFRS 9 measurement category
FVPL
£’m
Amortised cost
£’m
–
–
1
1
607
7
–
614
£’m
607
7
1
Impairment of financial assets
The Group was required to revise its impairment methodology under IFRS 9. The Group applied the simplified
approach to measure the expected credit losses as prescribed by IFRS 9 for trade receivables. The simplified
approach requires the use of the lifetime expected loss provision for all trade receivables. Other financial assets
classified as debt instruments at amortised cost are considered to be low risk and therefore the impairment
provision is determined as 12 months of expected credit losses. The impact of the change in the impairment
methodology on the Group’s equity is as follows:
Opening retained earnings – IAS 39
Adjustment to retained earnings on adoption of IFRS 9:
Increase in provision for impairment of trade receivables*
Impact of IFRS 9 on equity accounted investments
Opening retained earnings – IFRS 9
* Impact is less than £0.5m.
1 Apr 2018
£’m
5 057
–
(2)
5 055
The Group was required to revise its impairment methodology under IFRS 9 for trade receivables. The Group
applied the simplified approach to measure the expected credit losses as prescribed by IFRS 9. The simplified
approach requires the use of the lifetime expected loss provision for all trade receivables.
Hedge accounting
At the date of initial application, all of the Group’s existing hedging relationships (10 hedges in the Southern Africa
segment) were eligible to be treated as continuing hedging relationships. The Group’s risk management strategies
and hedge documentation are aligned with the requirements of IFRS 9 and these relationships are therefore
treated as continuing hedges.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 267
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
34.
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
2019
£’m
99
15
69
15
166
16
130
20
265
2018
£’m
138
14
77
47
204
15
142
47
342
In terms of a forward contract in the Middle East, the Group has an obligation to pay £7m on 31 October 2020.
This best estimate of the obligation is determined based on an earnings multiple and is contractually capped to an
amount of £80m.
These commitments will be financed from Group cash flow and borrowed funds.
Operating lease commitments
The Group has entered into various operating lease agreements on premises and equipment. The future non-
cancellable minimum lease rentals are payable during the following financial years:
Within 1 year
1 to 5 years
Beyond 5 years
2019
£’m
63
199
492
754
2018
£’m
47
147
413
607
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 2018 to March 2019
April 2019 to March 2020
April 2020 to March 2021
April 2021 to March 2022
2019
£’m
2018
£’m
–
3
1
1
5
3
1
1
–
5
268 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
34.
COMMITMENTS (continued)
Contingent liabilities
The Group is routinely subject to legal proceedings, claims, complaints and investigations arising out of the
ordinary course of business. The Group cannot always accurately predict the outcome of individual legal actions,
claims, complaints or investigations but a best estimate of the likelihood of such actions and claims crystallising a
financial exposure is made at each period end. Where an exposure is deemed probable and is reliably estimable, a
provision is made. Except for those matters where provisions have been recorded, which are described in note 19,
the Group considers that no material loss to the Group is expected to result from legal proceedings, claims,
complaints and investigations.
35.
RELATED PARTY TRANSACTIONS
Remgro Limited owns, through various subsidiaries (Remgro Healthcare (Pty) Ltd, Remgro Health Ltd and Remgro
Jersey GBP Ltd) 44.56% (2018: 44.56%) of the Company’s issued share capital.
The following transactions were carried out with related parties:
2019
£’m
2018
£’m
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 Zürich
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 £0.1m
0.3
0.2
–
6
–
–
(2)
9
–
2
0.3
0.2
–
6
–
1
(2)
8
–
2
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 269
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS (CONTINUED)
36.
FINANCIAL INSTRUMENTS
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).
Financial instruments carried at fair value in the statement of financial
position
Financial assets
Other investments and loans
Financial liabilities
Derivative financial instruments
2019
£’m
3
(91)
2018
£’m
1
(2)
• Debt instruments at FVPL (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, put/call agreements and forward contracts. These financial
instruments 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 are grouped as level 2. The forward contract and put option (redemption
liability) are grouped as level 3.
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
2019
£’m
8
516
265
2018
£’m
7
440
261
(1 982)
(411)
(1 937)
(354)
• 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.
37.
EVENTS AFTER THE REPORTING DATE
No material events occurred between the reporting date and the date the financial statements were authorised
for issue.
270 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
ANNEXURE – INVESTMENTS IN
SUBSIDIARIES, ASSOCIATES AND
JOINT VENTURES
SUBSIDIARIES
Company
Al Noor Holdings Cayman Limited
(“ANH Cayman”)
ANMC Management Limited
(“ANMC Management”)
Mediclinic CHF Finco Limited
Country of
incorporation
and place of
business
Principal activities
Cayman Islands Dormant company in
process of liquidation
Cayman Islands Dormant company in
process of liquidation
Jersey
Treasury
Mediclinic Holdings Netherlands B.V.
Netherlands
Mediclinic International (RF) (Pty) Ltd
South Africa
Mediclinic Middle East Holdings Limited
Jersey
Group
Indirectly held through Mediclinic CHF Finco Limited
Mediclinic Jersey Limited
Jersey
Indirectly held through Mediclinic International (RF) (Pty) Ltd
South Africa
Mediclinic Investments (Pty) Ltd
Mediclinic Group Services (Pty) Ltd
South Africa
Indirectly held through Mediclinic Investments (Pty) Ltd
Mediclinic Middle East Investment Holdings
(Pty) Ltd
South Africa
Mediclinic Southern Africa (Pty) Ltd
South Africa
Indirectly held through Mediclinic Group Services (Pty) Ltd
Medical Innovations (Pty) Ltd
South Africa
Indirectly held through Mediclinic Southern Africa (Pty) Ltd
Curamed Holdings (Pty) Ltd
South Africa
ER24 Holdings (Pty) Ltd
Howick Private Hospital Holdings (Pty) Ltd*
(50% plus 1 share)
South Africa
South Africa
Medical Human Resources (Pty) Ltd
South Africa
Mediclinic (Pty) Ltd (ordinary shares and
Mediclinic Head Office Hospital shares)
South Africa
Intermediary holding
company
Intermediary holding
company
Intermediary holding
company
Intermediary holding
company
Intermediary holding
company
Provision of group
services within the
Mediclinic Group
Deregistered
Intermediary holding
company
Intermediary holding
company
Intermediary holding
company
Intermediary holding
company
Management of
healthcare staff
Intermediary holding
company and operating
company of Mediclinic
Southern Africa
Mediclinic Brits (Pty) Ltd*
South Africa
Healthcare services
Mediclinic Finance Corporation (Pty) Ltd
South Africa
Treasury
Mediclinic Holdings (Namibia) (Pty) Ltd
Namibia
Intermediary holding
company
Mediclinic Lephalale (Pty) Ltd*
Mediclinic Midstream (Pty) Ltd*
South Africa
Healthcare services
South Africa
Healthcare services
Mediclinic Midstream Properties (Pty) Ltd
South Africa
Deregistered
Mediclinic Paarl (Pty) Ltd*
South Africa
Healthcare services
Interest in capital1
31 March
2019
%
31 March
2018
%
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
–
100.0
100.0
100.0
69.6
69.6
100.0
100.0
50.0
50.0
100.0
100.0
100.0
66.7
100.0
100.0
91.2
79.8
–
75.5
100.0
67.8
100.0
100.0
91.2
81.1
100.0
75.9
Hospital equipment and
procurement
100.0
100.00
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 271
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (CONTINUED)
Company
Mediclinic Properties (Pty) Ltd
Mediclinic Tzaneen (Pty) Ltd*
(50% plus one share)
Country of
incorporation
and place of
business
South Africa
Principal activities
Property ownership and
management
South Africa
Healthcare services
Interest in capital1
31 March
2019
%
31 March
2018
%
100.0
100.0
50.0
72.5
34.0
50.0
50.0
50.0
–
–
–
50.0
100.0
100.0
50.0
50.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
99.0
97.1
100.0
99.0
96.5
98.2
89.9
99.0
75.0
99.4
80.1
99.3
98.5
98.9
90.9
99.0
75.5
99.4
83.0
97.3
98.5
Mediclinic Stellenbosch (Pty) Ltd*
South Africa
Healthcare services
Indirectly held through Mediclinic Southern Africa (Pty) Ltd
Intercare Holdings (Pty) Ltd (Clinics)
South Africa
Healthcare services
Intercare Group Hospital Holdings (Pty) Ltd
(Hospitals) (50% plus one share)
Newcastle Private Hospital (Pty) Ltd*
(50% plus one share, including B class shares)
South Africa
Healthcare services
South Africa
Healthcare services
Practice Relief (Pty) Ltd
South Africa
Provision of debt
collection and related
services
Victoria Hospital (Pty) Ltd* (50% plus
five shares, including B class shares)
South Africa
Healthcare services
Indirectly held through Mediclinic Holdings (Namibia) (Pty) Ltd
Mediclinic Capital (Namibia) (Pty) Ltd
Namibia
Investment holding
company
Mediclinic Otjiwarongo (Pty) Ltd
Namibia
Healthcare services
Mediclinic Properties (Swakopmund) (Pty) Ltd
Namibia
Mediclinic Properties (Windhoek) (Pty) Ltd
Namibia
Property ownership and
management
Property ownership and
management
Mediclinic Swakopmund (Pty) Ltd
Mediclinic Windhoek (Pty) Ltd
Namibia
Namibia
Healthcare services
Healthcare services
Hospital Investment Companies
Mediclinic Bloemfontein Investments (Pty) Ltd
South Africa
Mediclinic Cape Gate Investments (Pty) Ltd
South Africa
Mediclinic Cape Town Investments (Pty) Ltd
South Africa
Mediclinic Constantiaberg Investments (Pty) Ltd South Africa
Mediclinic Durbanville Investments (Pty) Ltd
South Africa
Mediclinic Emfuleni Investments (Pty) Ltd
South Africa
Mediclinic George Investments (Pty) Ltd
South Africa
Mediclinic Highveld Investments (Pty) Ltd
South Africa
Hospital investment
company
Hospital investment
company
Hospital investment
company
Hospital investment
company
Hospital investment
company
Hospital investment
company
Hospital investment
company
Hospital investment
company
272 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Company
Country of
incorporation
and place of
business
Mediclinic Hoogland Investments (Pty) Ltd
South Africa
Principal activities
Hospital investment
company
Mediclinic Kathu Investments (Pty) Ltd
South Africa
Dormant
Mediclinic Klein Karoo Investments (Pty) Ltd
South Africa
Mediclinic Legae Investments (Pty) Ltd
South Africa
Mediclinic Louis Leipoldt Investments (Pty) Ltd
South Africa
Mediclinic Milnerton Investments (Pty) Ltd
South Africa
Mediclinic Morningside Investments (Pty) Ltd
South Africa
Mediclinic Nelspruit Investments (Pty) Ltd
South Africa
Mediclinic Panorama Investments (Pty) Ltd
South Africa
Mediclinic Pietermaritzburg Investments (Pty) Ltd South Africa
Mediclinic Plettenberg Bay Investments (Pty) Ltd South Africa
Mediclinic Sandton Investments (Pty) Ltd
South Africa
Mediclinic Secunda Investments (Pty) Ltd
South Africa
Mediclinic Vereeniging Investments (Pty) Ltd
South Africa
Mediclinic Vergelegen Investments (Pty) Ltd
South Africa
Mediclinic Welkom Investments (Pty) Ltd
South Africa
Mediclinic Worcester Investments (Pty) Ltd
South Africa
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
Indirectly held through Mediclinic (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*
South Africa
Healthcare services
South Africa
Healthcare services
South Africa
Healthcare services
South Africa
Healthcare services
South Africa
Healthcare services
South Africa
Healthcare services
Indirectly held through Howick Private Hospital Holdings (Pty) Ltd
Howick Private Hospital (Pty) Ltd*
South Africa
Healthcare services
Interest in capital1
31 March
2019
%
31 March
2018
%
99.1
100.0
99.1
100.0
100.0
100.0
89.3
99.8
99.4
79.7
98.2
99.2
76.4
93.0
93.8
81.8
98.5
94.4
91.8
99.6
99.4
79.5
98.7
99.2
77.4
93.0
94.0
81.8
98.5
92.9
91.9
91.4
97.3
58.1
53.2
89.5
50.0
85.6
50.0
97.3
52.2
53.2
89.4
50.0
86.1
50.0
100.0
100.0
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 273
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (CONTINUED)
Company
Country of
incorporation
and place of
business
Indirectly held through Mediclinic Limpopo (Pty) Ltd
Mediclinic Limpopo Day Clinic (Pty) Ltd
South Africa
Mediclinic Limpopo Investments (Pty) Ltd
South Africa
Principal activities
Day clinic investment
company
Investment holding
company
Indirectly held through Mediclinic Durbanville Investments (Pty) Ltd
Mediclinic Durbanville Day Clinic (Pty) Ltd
South Africa
Day clinic investment
company
Indirectly held through Mediclinic Welkom Investments (Pty) Ltd
Welkom Medical Centre (Free State) (Pty) Ltd
South Africa
Healthcare services
Indirectly held through Mediclinic Morningside Investments (Pty) Ltd
Sandton Day Hospital (Pty) Ltd
South Africa
Healthcare services
Sandton Sub-Acute Hospital (Pty) Ltd
South Africa
Healthcare services
Interest in capital1
31 March
2019
%
31 March
2018
%
57.9
60.2
100.0
100.0
85.2
78.8
70.0
70.0
89.9
77.3
–
–
Indirectly held through Mediclinic Victoria Hospital (Pty) Ltd
South Africa
Victoria Hospital Investments (Pty) Ltd
Indirectly held through Curamed Holdings (Pty) Ltd
Curamed Hospitals (Pty) Ltd
South Africa
Curamed Properties (Pty) Ltd
South Africa
Indirectly held through Curamed Hospitals (Pty) Ltd
Mediclinic Thabazimbi (Pty) Ltd
South Africa
Indirectly held through ER24 Holdings (Pty) Ltd
ER24 EMS (Pty) Ltd
South Africa
ER24 Trademarks (Pty) Ltd
South Africa
ER24 Zambia Ltd
Zambia
Investment holding
company
100.0
100.0
Healthcare services
100.0
100.0
Property ownership and
management
100.0
100.0
Healthcare services
76.0
76.0
Emergency medical
services
Intellectual property
holding company
Emergency medical
services
100.0
100.0
100.0
100.0
99.0
99.0
Indirectly held through Mediclinic Stellenbosch (Pty) Ltd
Mediclinic Winelands (Pty) Ltd
South Africa
Healthcare services
100.0
100.0
Hedrapix Investments (Pty) Ltd (to be renamed
Stellenbosch Day Clinic (Pty) Ltd)
South Africa
Dormant
100.0
100.0
* Controlled through long-term management agreements.
$ Operating through a trust.
274 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Company
Country of
incorporation
and place of
business
Principal activities
Interest in capital1
31 March
2019
%
31 March
2018
%
Indirectly held through Mediclinic Holdings Netherlands B.V.
Mediclinic Luxembourg S.à.r.l
Luxembourg
Indirectly held through Mediclinic Luxembourg S.à.r.l.
Hirslanden AG
Switzerland
Intermediary holding
company
100.0
100.0
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 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
Hirslanden Klinik Linde AG
Hirslanden La Colline Grangette SA
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
80.0
100.0
99.7
100.0
100.0
100.0
–
100.0
60.0
Indirectly held through Hirslanden Klinik am Rosenberg AG
Switzerland
Klinik am Rosenberg Heiden AG
Healthcare services
99.2
Lindenpark Immobilien AG
Switzerland
Healthcare services
Indirectly held through Hirslanden Bern AG
Herzchirurgie Hirslanden Bern AG
Switzerland
Healthcare services
Indirectly held through Hirslanden La Colline Grangettes SA
Switzerland
Hirslanden Clinique La Colline SA
Healthcare services
Grangettes Healthcare SA
Switzerland
Healthcare services
Indirectly held though Grangettes Healthcare SA
Clinique des Grangettes SA
Dianecho SA
Switzerland
Switzerland
Healthcare services
Healthcare services
Indirectly held through Mediclinic Middle East Holdings Limited
Mediclinic International Co Limited
United Kingdom Dormant
Emirates Healthcare Holdings Limited
British Virgin
Islands
Intermediary holding
company
–
–
60.0
60.0
60.0
43.9
100.0
100.0
100.0
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
–
99.2
99.7
100.0
–
100.0
–
–
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 275
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (CONTINUED)
Company
Country of
incorporation
and place of
business
Indirectly held through Emirates Healthcare Holdings Limited
British Virgin
Welcare World Holdings Limited
Islands
Emirates Healthcare Limited
British Virgin
Islands
Indirectly held through Emirates Healthcare Limited
UAE
Delah Cafe FZ LLC
(incorporated in October 2016)
Principal activities
Healthcare services
Healthcare services
Food and catering
Emirates Healthcare Estates Limited (liquidated) British Virgin
Property management
Mediclinic Al Quasis Clinic LLC2
Mediclinic Beach Road LLC2 (dormant)
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 (dormant)
Welcare Hospitals Limited (BVI)
Welcare World Health Systems Limited
Mediclinic Hospitals LLC4* (Al Noor Hospital)
Pharma Light Medical Store LLC
Islands
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
UAE
British Virgin
Islands
British Virgin
Islands
UAE
UAE
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Procurement
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Healthcare services
Medical store /
procurement
Interest in capital1
31 March
2019
%
31 March
2018
%
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
49.0
49.0
100.0
49.0
49.0
49.0
49.0
49.0
49.0
100.0
100.0
100.0
49.0
49.0
100.0
–
–
Indirectly held through Welcare Hospitals Limited (BVI)
Mediclinic Welcare Hospital LLC2
UAE
Healthcare services
49.0
49.0
Indirectly held through Welcare World Holdings Limited
Mediclinic Corniche Medical Centre LLC2
(dormant)
Mediclinic Pharmacy LLC2 (dormant)
UAE
UAE
Healthcare services
Healthcare services
(pharmacy)
49.0
49.0
49.0
49.0
Indirectly held through Welcare World Health Systems Limited
Mediclinic Middle East Management Services
FZ LLC
UAE
Healthcare management
services
100.0
100.0
Indirectly held through Al Noor Commercial Investment – Sole Proprietorship LLC
Al Noor Hospital Clinics – Al Ain9
UAE
Intermediary holding
company
51.0
–
276 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Company
Country of
incorporation
and place of
business
Indirectly held through Mediclinic Hospitals LLC
Al Madar Medical Center LLC5 (previously
Al Madar Group LLC) (dormant)
Al Madar Medical Center Pharmacy LLC
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
(sold on 5 December 2018)
Mediclinic Pharmacy Aspetar LLC (previously
named Aspetar Al Madar Medical Pharmacy)
(sold on 5 December 2018)
UAE
UAE
UAE
UAE
UAE
UAE
Notes
Principal activities
Healthcare services
Healthcare services
Interest in capital1
31 March
2019
%
31 March
2018
%
73.0
49.0
73.0
49.0
Healthcare services
99.0
100.0
Healthcare services
49.0
49.0
Healthcare services
Healthcare services
–
–
49.0
49.0
1 The actual equity interest in the UAE entities are disclosed herein, with the beneficial interest further explained in the notes.
2 In terms of the constitutional and contractual arrangements, the Group has full management control and an economic interest of 100% in
these UAE entities.
3 Al Nahda International Holding LLC holds 100% share capital of Al Noor Commercial Investments– 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 (Al Noor Hospital) 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 (Al Noor Hospital) and Emirates Healthcare Limited BVI holds the remaining 49%. By virtue
of this shareholder agreement, the parties have agreed that ANCI and Mediclinic Hospitals LLC (Al Noor Hospital) will be managed and
controlled by EHL. Every dividend declared by Mediclinic Hospitals LLC (Al Noor Hospital) 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 Emirates Healthcare Limited BVI holds 49% of the issued share capital of Mediclinic Hospitals LLC, (Al Noor Hospital) with the remaining
51% held by ANCI. ANCI assigned 100% of the voting rights, management control and dividend rights to Emirates Healthcare Limited BVI.
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 (Al Noor Hospital)
5 Mediclinic Hospitals LLC (Al Noor Hospital) 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 (Al Noor Hospital) 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 (Al Noor Hospital) holds 99% and ANCI holds 1% in the issued share capital of Mediclinic Al Mamora LLC,
collectively 100%.
7 Mediclinic Hospitals (Al Noor Hospital) 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 Mediclinic Hospitals LLC (Al Noor Hospital) 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%.
8 Al Noor Commercial Investment _ Sole Proprietorship LLC holds 51% of the issued share capital of Al Noor Hospital Clinics - Al Ain LLC,
with the remaining 49% held by Mediclinic Hospitals LLC. 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%.
9 Mediclinic Hospitals (Al Noor Hospital) holds 49% of the issued share capital of Al Madar Medical Centre Pharmacy 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%.
* Controlled through long-term management agreements.
$ Operating through trusts or partnerships.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 277
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES (CONTINUED)
JOINT VENTURES
Company
Wits University Donald Gordon Medical
Centre (Pty) Ltd
ASSOCIATES
Company
Listed:
Spire Healthcare Group plc (held through
Mediclinic Jersey Limited)
Unlisted:
Intercare Medical Proprietary Limited
Bourn Hall International MENA 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*
GRGB Santé SA, Genève
Country of
incorporation
and place of
business
South Africa
Principal
activities
Healthcare
services
Interest in capital
31 March
2019
%
31 March
2018
%
49.9
49.9
Interest in capital
Book value of investment
31 March
2019
%
31 March
2018
%
31 March
2019
£’m
31 March
2018
£’m
29.9
29.9
180
348
34.0
30.0
49.2
24.0
25.0
20.0
23.0
30.0
30.0
34.0
–
50.0
24.0
25.0
20.0
23.0
30.0
–
3
4
2
–
–
–
–
–
–
2
–
2
–
–
–
–
–
–
189
352
The nature of the activities of the associates is similar to the major activities of the Group.
* Book value is less than £0.5m.
** The Hirslanden group does not control Zentrallabor Zürich as it has no power over the company.
278 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 279
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 2019 and of its 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.
We have audited the financial statements, included within the Annual Report, which comprise: the Company statement of
financial position at 31 March 2019; the Company statement of cash flows and the Company 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 include 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 7 to the financial statements, we have provided no non-audit services to the Company
in the period from 1 April 2018 to 31 March 2019.
Our audit approach
Overview
Materiality
Audit scope
(2018: £13.4 million).
• Overall materiality: £38 million based on approximately 1% of total assets
• Our audit included substantive procedures of all material balances and transactions.
• Impairment assessment of the Company’s investments in subsidiaries.
Key audit
matters
280 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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.
Capability of the audit in detecting irregularities, including fraud
Based on our understanding of the Company and industry, we identified that the principal risks of non-compliance with
laws and regulations related to healthcare reforms and introduction of new regulations in the Group’s markets and
unethical and prohibited business practices (see page 55 of the Annual Report) and we considered the extent to which
non-compliance might have a material effect on the financial statements. We also considered those laws and regulations
that have a direct impact on the preparation of the financial statements such as the Companies Act 2006, the UK Listing
Rules and UK taxation legislation. We evaluated management’s incentives and opportunities for fraudulent manipulation of
the financial statements (including the risk of override of controls) and we determined that the principal risks were related
to posting inappropriate journal entries to increase income or reduce expenditure or to misstate asset balances and
management bias in accounting estimates. Audit procedures performed included:
• Discussions with management, Internal Audit and the Audit and Risk Committee, including consideration of known or
suspected instances of non-compliance with laws and regulation and fraud;
• Evaluation of management’s controls designed to prevent and detect irregularities;
• Assessment of matters reported on the Company’s whistleblowing helpline and the results of management’s
investigation of such matters;
• Challenging assumptions and judgements made by management in relation to the Company’s significant accounting
estimates, in particular in relation to the impairment assessment of the Company’s investments in subsidiaries; and
• Identifying and testing journal entries based on our risk assessment.
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. In addition, 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.
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 audit 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 281
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT
AUDITORS’ REPORT (CONTINUED)
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTERS
We independently evaluated management’s assessment
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 2019 and to the valuations implied by other models,
including valuation models prepared for 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 recoverable amount 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.
IMPAIRMENT ASSESSMENT OF THE COMPANY’S
INVESTMENTS IN SUBSIDIARIES
(refer to note 3 in the Company financial statements)
Investments in subsidiaries are accounted for at cost
less impairment in the Company balance sheet.
At 31 March 2019, the Company holds investments in
subsidiaries with a historical cost of £5,916 million.
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.
At the start of the financial year, accumulated impairment
charges recorded totalled £1 169 million. In the current
financial year impairment triggers were identified in
connection with the Company’s investments in Mediclinic
Holdings Netherlands B.V. (which holds the Groups
Swiss operations) and CHF Finco Limited (Jersey) (which
holds the Groups investment in Spire) 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.
An impairment trigger was also identified in connection
with the Company’s investment in Mediclinic International
(RF) Pty Limited (which holds the Group’s South African
operations) due to the weakening of the South African
rand against the Great British pound. As a result, an
impairment loss of £943 million was recognised in the
current year, reflecting a write-down of the investments in
Mediclinic Holdings Netherlands B.V., CHF Finco Limited
(Jersey) and Mediclinic International (RF) (Pty) Limited to
their recoverable value at 31 March 2019. The total
accumulated impairment charges at 31 March 2019 amount
to £2,113 million.
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.
282 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
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 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.
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
£38 million (2018: £13.4 million)
How we
determined it
Based on approximately 1% of total assets (2018: based on 1% of total assets capped at 90%
of overall materiality applied as part of our Group audit as the Company was determined to
be a component of the Group audit in the prior year)
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.
For 2019, selected financial statement line items related to cash and equity of the Company
are included in the scope of the Group audit and were audited to a lower capped materiality
of £12.6 million. However, we determined that the Company did not require a full scope audit
of its complete financial information for the purposes of the Group audit in 2019. For 2018, the
Company financial information was a full scope component of the Group audit and all audit
procedures were performed based on a capped materiality level of £13.4 million.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our audit
above £0.7 million (2018: £0.7 million) 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 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 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. For example, the terms on
which the United Kingdom may withdraw from the
European Union are not clear and it is difficult to
evaluate all of the potential implications on the
Company’s trade, customers, suppliers and the
wider economy.
We have nothing to report.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 283
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT
AUDITORS’ REPORT (CONTINUED)
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 2019 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 179 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 60 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)
284 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
Other Code provisions
We have nothing to report in respect of our responsibility to report when:
• The statement given by the Directors, on page 179, 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 136 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)
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 179, 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.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 285
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION INDEPENDENT
AUDITORS’ REPORT (CONTINUED)
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 four years, covering the years ended 31 March 2016 to 31 March 2019.
Other matter
We have reported separately on the Group financial statements of Mediclinic International plc for the year ended
31 March 2019.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
22 May 2019
286 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
COMPANY STATEMENT
OF FINANCIAL POSITION
AS AT 31 MARCH 2019
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 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
2019
£’m
2018
£’m
3
5
5
5
5
5
5
6
5
5
4
3 803
4 747
28
3 831
74
6
690
3 032
3 976
(885)
(59)
–
–
3 802
1
28
29
26
4 773
74
6
690
3 976
5 154
(1 120)
(58)
1
(1)
4 746
1
26
27
3 831
4 773
These financial statements as set out on pages 287–294 were approved and authorised for issue by the Board of Directors
and signed on their behalf by:
CA van der Merwe
Chief Executive Officer
22 May 2019
PJ Myburgh
Chief Financial Officer
22 May 2019
Mediclinic International plc (Company no 08338604)
The notes on pages 290 – 294 form an integral part of these financial statements.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 287
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION COMPANY STATEMENT
OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2019
At 1 April 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
Loss for the year
Dividends paid in
the year
Settlement of share-
based payment reserve
At 31 March 2019
Share
capital
£’m
74
–
–
–
–
74
–
–
–
74
Capital
redemption
reserve
£’m
Share
premium
£’m
Retained
earnings
£’m
Share-
based
payment
reserve
£’m
Treasury
shares
£’m
6
–
–
–
–
6
–
–
–
6
690
–
–
–
–
690
–
–
–
690
5 154
(1 120)
(58)
–
–
3 976
(885)
(59)
–
3 032
1
–
–
1
(1)
1
–
–
(1)
–
(2)
–
–
–
1
(1)
–
–
1
–
Total
£’m
5 923
(1 120)
(58)
1
–
4 746
(885)
(59)
–
3 802
The notes on pages 290–294 form an integral part of these financial statements.
288 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
COMPANY STATEMENT
OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2019
OPERATING ACTIVITIES
Loss before tax
Adjustments for:
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
Net cash (used in)/generated from operating activities
INVESTING ACTIVITIES
Dividend received
Net cash generated from investing activities
FINANCING ACTIVITIES
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
2019
£’m
2018
£’m
(885)
(1 120)
6
3
4
6
(38)
943
–
(28)
(8)
2
(6)
28
28
(20)
(20)
2
26
28
(33)
1 169
1
(24)
(7)
–
(7)
24
24
(25)
(25)
(8)
34
26
The notes on pages 290–294 form an integral part of these financial statements.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 289
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE COMPANY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2019
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 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.
a)
b)
c)
d)
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.
Basis of measurement
The financial statements of the Company are prepared in accordance with International Financial Reporting
Standards (“IFRS”), as adopted by the European Union, including IFRS Interpretations Committee (“IFRS IC”)
applicable to companies reporting under IFRS. The financial statements are prepared on the historical cost
convention, as modified by the revaluation of certain financial instruments to fair value.
Functional and presentation currency
The financial statements and financial information are presented in pound sterling, rounded to the nearest million.
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.
Critical accounting estimate
The Company 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.
Key estimate
• Impairment of investment in subsidiaries (refer to note 3).
290 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
3.
INVESTMENT IN SUBSIDIARIES
This investment is stated at cost less impairment.
Shares at cost
Less: accumulated impairment charge
Closing balance
2019
£’m
5 916
(2 113)
3 803
2018
£’m
5 916
(1 169)
4 747
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, an impairment charge of £943m was recognised in respect of the carrying values of the
investments in Mediclinic CHF Finco Limited, Mediclinic Holdings Netherlands B.V. and Mediclinic International (RF)
(Pty) Ltd. Mediclinic CHF Finco Limited was impaired due to the impairment of the listed associate (Spire). Refer to
note 8 in the consolidated financial statements for more detail relating to the impairment calculation. Mediclinic
Holdings Netherlands B.V. was impaired due to the impairment of the properties and intangible assets of its
underlying investment. Any change in the discount rates, short-term cash flow projections or long-term growth
rates could give rise to material impairment charges in future periods. Refer to note 6 and 7 in the consolidated
financial statements for more detail relating to the impairment calculations. Mediclinic International (RF) (Pty) Ltd
was impaired mainly due to weakening of the South African rand.
Refer to the Annexure to the notes to the consolidated financial statements on page 271 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.
a)
b)
Transactions with key management personnel
Key management includes the directors (executive and non-executive) and
members of the Executive Committee
Directors’ fees
Amount due to a related party:
Mediclinic Hospitals LLC
2019
£’m
2018
£’m
1
28
1
26
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 page 271.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 291
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE COMPANY
FINANCIAL STATEMENTS (CONTINUED)
4.
RELATED PARTY BALANCES AND TRANSACTIONS (continued)
2019
£’m
2018
£’m
c)
Dividends received from related parties:
Mediclinic CHF Finco Limited
Mediclinic Holdings Netherlands B.V.
Mediclinic Middle East Holdings Limited
5.
SHARE CAPITAL AND RESERVES
Issued and fully paid 737 243 810 (2018: 737 243 810) shares of
10 pence each
Other reserves
5
7
16
28
74
As at 1 April 2017
Addition of share-based payment reserve
Settlement of share-based payment reserve
As at 31 March 2018
Settlement of share-based payment reserve
As at 31 March 2019
6.
DIVIDENDS
Share-based
payment
reserve
£’m
Treasury
shares
£’m
1
1
(1)
1
(1)
–
(2)
–
1
(1)
1
–
4
8
12
24
74
Total
£’m
(1)
1
–
–
–
–
The Company declared interim dividends for the 2018/19 period and final dividends for the 2017/18 period
amounting to £59m. The Company paid £20m (2018: £25m) of these dividends and the remainder of £39m (2018:
£33m) 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 have been disclosed in note 29.6 to the consolidated financial statements.
292 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
7.
AUDITOR’S REMUNERATION
The Company incurred an amount of £452 025 (2018: £448 758) to its auditor in respect of the audit of the
Company and Group’s financial statements for the year ended 31 March 2019. The fee includes an amount of
£nil (2018: £42 959) in respect of prior years.
Fees to the Company’s auditors for other services:
Audit-related services
8.
SHARE-BASED PAYMENT RESERVE
2019
£’m
0.11
0.11
2018
£’m
0.12
0.12
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. The remaining shares vested
during the financial year.
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 2018 (2018: 1 April 2017)
Vested during the year
As at 31 March
2019
Number of
shares
101 342
(101 342)
–
2018
Number of
shares
239 290
(137 948)
101 342
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 2019, the Company had unutilised tax losses of approximately £47m (2018: £40m). No deferred tax
asset has been recognised in respect of these losses.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 293
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION NOTES TO THE COMPANY
FINANCIAL STATEMENTS (CONTINUED)
10.
FINANCIAL INSTRUMENTS
a)
b)
c)
d)
Capital risk management
The Company manages its capital to ensure it is able to continue as a going concern while maximising the return
on equity. The Company does not have a formalised optimal target capital structure or target ratios in connection
with its capital risk management objective. The Company’s overall strategy remains unchanged from the prior year.
The Company is not subject to externally imposed capital requirements.
Financial risk management objectives
The Company is exposed to the following risks related to financial instruments: credit risk, liquidity risk 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.
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.
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 2019
Other payables
Related-party payables
31 March 2018
Other payables
Related-party payables
Carrying
amount
£’m
Contractual
cash flows
£’m
1 year
or less
£’m
1
28
29
1
26
27
1
28
29
1
26
27
1
28
29
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.
294 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
ADDITIONAL
INFORMATION
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
A
D
D
I
T
I
O
N
A
L
I
N
F
O
R
M
A
T
I
O
N
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 295
SHAREHOLDER
INFORMATION
SHARE CAPITAL AND SHAREHOLDERS
Structure
The Company’s ordinary issued share capital as at 31 March 2019 was 737 243 810 ordinary shares of £0.10 each which have
a primary listing on the LSE in the UK 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 231–232.
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 on page 170.
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 24 July 2019.
TABLE 1: DISTRIBUTION OF ORDINARY SHAREHOLDERS AS AT 31 MARCH 2019
LSE register (registered)
JSE register (beneficial) comprising:
certificated
dematerialised
Total
NUMBER OF
NUMBER OF
% OF ISSUED
SHAREHOLDERS
SHARES
SHARE CAPITAL
454
24 761
1 058
23 703
25 215
223 248 037
513 995 773
473 969
513 521 804
737 243 810
30.28
69.72
0.06
69.66
100.00
Restrictions on the transfer of
company shares
The South African Broad-Based Black Economic
Empowerment Act, No. 53 of 2003, as amended, 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 Ltd) (“Mediclinic SA”) implemented a black
ownership initiative with MP1 Investment Holdings (Pty) Ltd
(previously Circle Capital Ventures (Pty) Ltd) (“MP1”) and
Phodiso Holdings Ltd (“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
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.
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 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 approximately
5% to the then market value. Any exercise of a right to
purchase such shares by the Company itself would require
Partners to formalise the basis on which the Strategic
the approval of its shareholders.
296 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
RESTRICTIONS ON VOTING RIGHTS
The Company’s Articles 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 Act, has failed to do so within 14 days of such notice, for so long as the default continues.
SUBSTANTIAL SHAREHOLDERS
As at year-end, 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:
TABLE 2: 2019 SUBSTANTIAL SHAREHOLDERS
Remgro Ltd (through wholly owned
subsidiaries)
Public Investment Corporation SOC Ltd
Genesis Asset Managers LLP
ORDINARY
SHARES
328 497 888
58 392 076
37 989 258
% VOTING
RIGHTS
44.56
7.93
5.15
DATE
NOTIFIED
17/02/2016
10/12/2018
28/11/2017
The Company received no shareholder notifications under
the Disclosure Guidance and Transparency Rules between
the year-end and the Last Practicable Date.
2019 ANNUAL GENERAL MEETING
The Company’s AGM will take place at 15:00 (BST) on
Wednesday, 24 July 2019 at Rosewood London Hotel,
252 High Holborn, London WC1V 7EN, UK. All ordinary
shareholders have the opportunity to attend and vote, in
person or by proxy. All ordinary shareholders have the
opportunity to attend and vote, in person or by proxy.
The 2019 Notice of AGM can be found on the Investor
Relations section of the Company’s website at
https://investor.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 chairpersons of the Board sub-
committees, together members of the Group Executive
Committee, will be available to answer shareholders’
questions at the meeting and the Directors encourage
shareholders to participate at the event.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 297
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION SHAREHOLDER INFORMATION (CONTINUED)
DIVIDENDS
The Board proposes a final dividend of 4.70 pence per ordinary share for the financial year ended 31 March 2019 for
approval by the Company’s shareholders at the AGM to be held on Wednesday, 24 July 2019. 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 AGM (London)
Final dividend payment date
Tuesday, 11 June 2019
Wednesday, 12 June 2019
Thursday, 13 June 2019
Friday, 14 June 2019
Wednesday, 24 July 2019
Monday, 29 July 2019
The Company’s Dividend Policy is dealt with in the Financial Review on page 39.
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 232.
The dividends declared by the Company to its ordinary shareholders during the reporting period are summarised below:
TABLE 3: 2018/2019 DIVIDENDS DECLARED
Interim dividend
Final dividend
Total dividend
2019
3.20
4.70
7.90
2018
3.20
4.70
7.90
SHARE PRICE
The latest share price information can be found on the Company’s website at www.mediclinic.com or through a broker.
298 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
SHAREHOLDER SERVICES AND CONTACTS
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
Namibian transfer secretary
Computershare Investor Services (Pty) Ltd
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
Postal address: PO Box 2401, Windhoek, Namibia
Tel: +264 61 227 647
Fax: +264 61 248 531
Shareholders on the UK register
Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ, United Kingdom
Tel: +44 370 703 6022
Email: WebCorres@computershare.co.uk
Lines are open during normal business hours from 08:30–17:30 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, they may be donated to charity through ShareGift,
an independent charity share donation scheme. For further details please contact Computershare or ShareGift at
telephone number +44 20 7930 3737 or visit their website at www.sharegift.org.
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 299
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION COMPANY
INFORMATION
COMPANY NAME AND NUMBER
Mediclinic International plc
(incorporated and registered in England and Wales)
Company number: 08338604
REGISTERED OFFICE
Mediclinic International plc, 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom
Tel: +44 20 7954 9569 Fax: +44 20 7954 9886
Ethics Line: +27 12 543 5332/Toll-free 0800 005 316 (South Africa only)/ethics@mediclinic.com
Email: info@mediclinic.com
Website: www.mediclinic.com
LISTINGS
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
Dr Edwin Hertzog (ne) (Chairman) (South African), Dr Ronnie van der Merwe (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 and Swiss), Dr Felicity Harvey (ind ne) (British), Seamus Keating (ind ne)
(Irish), Danie Meintjes (ne) (South African), Dr Anja Oswald (ne) (Swiss), Trevor Petersen (ind ne) (South African),
Desmond Smith (Senior Independent Director) (South African), Pieter Uys (alternate to Jannie Durand) (South African)
COMPANY SECRETARY
Link Company Matters Ltd (previously named Capita Company Secretarial Services Ltd)
Jayne Meacham/Caroline Emmet
6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom
Tel: +44 20 7954 9569
Email: mediclinicInternational@linkgroup.co.uk
INVESTOR RELATIONS CONTACT
Mr James Arnold
Head of Investor Relations
14 Curzon Street, London, W1J 5HN, United Kingdom
Tel: +44 20 3786 8180/1
Email: ir@mediclinic.com
300 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
REGISTRAR/TRANSFER SECRETARIES
UK
Computershare Investor Services plc
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ, United Kingdom
Tel: +44 370 703 6022
Email: WebCorres@computershare.co.uk
South Africa
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196, South Africa
PO Box 61051, Marshalltown 2107, South Africa
Tel: +27 11 370 5000
Namibia
Transfer Secretaries (Pty) Ltd
4 Robert Mugabe Avenue, Windhoek, Namibia
PO Box 2401, Windhoek, Namibia
Tel: +264 61 227 647
CORPORATE ADVISORS
Auditor
PricewaterhouseCoopers LLP, London
Corporate broker and sponsors
Joint corporate brokers (UK): Morgan Stanley & Co International plc and UBS Investment Bank
JSE sponsor (SA): Rand Merchant Bank (a division of FirstRand Bank Ltd)
NSX sponsor (Namibia): Simonis Storm Securities (Pty) Ltd
Legal advisors
UK legal advisors: Slaughter and May
SA legal advisors: Cliffe Dekker Hofmeyr Inc.
Remuneration consultant
Deloitte LLP
Communication agency
FTI Consulting
Tel: +44 20 3727 1000
Email: businessinquiries@fticonsulting.com
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 301
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION FORWARD-LOOKING
STATEMENTS
This Annual Report contains certain forward-looking statements relating to the business of the Company and its
subsidiaries, including with respect to the progress, timing and completion of the Group’s development; the Group’s ability
to treat, attract and retain patients and clients; its ability to engage consultants and general practitioners and to operate
its business and increase referrals; the integration of prior acquisitions; the Group’s estimates for future performance and
its estimates regarding anticipated operating results; future revenue; capital requirements; shareholder structure; and
financing. In addition, even if the Group’s actual results or development are consistent with the forward-looking statements
contained in this Annual Report, those results or developments may not be indicative of the Group’s results or
developments in the future. In some cases, forward-looking statements can be identified by words such as “could”,
“should”, “may”, “expects”, “aims”, “targets”, “anticipates”, “believes”, “intends”, “estimates”, or similar. These forward-
looking statements are based largely on the Group’s current expectations as of the date of this Annual Report and are
subject to a number of known and unknown risks and uncertainties and other factors that may cause actual results,
performance or achievements to be materially different from any future results, performance or achievement expressed or
implied by these forward-looking statements. In particular, the Group’s expectations could be affected by, among other
things, uncertainties involved in the integration of acquisitions or new developments; changes in legislation or the
regulatory regime governing healthcare in Switzerland, South Africa, Namibia and the United Arab Emirates; poor
performance by healthcare practitioners who practise at its facilities; unexpected regulatory actions or suspensions;
competition in general; the impact of global economic changes; and the Group’s ability to obtain or maintain accreditation
or approval for its facilities or service lines. In light of these risks and uncertainties, there can be no assurance that the
forward-looking statements made in this Annual Report will in fact be realised and no representation or warranty is given
with regard to the completeness or accuracy of the forward-looking statements contained herein.
The Group is providing the information in this Annual Report as of this date, and disclaims any intention to, and makes no
undertaking to, publicly update or revise any forward-looking statements, whether as a result of new information, future
events or otherwise.
302 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
GLOSSARY
TERM
Act
AGM
Annual Report
Al Noor
Articles
MEANING
the United Kingdom Companies Act of 2006, as amended
the 2019 annual general meeting of the Company to be held on
Wednesday, 24 July 2019, the notice of which have been distributed to
shareholders by Friday, 21 June 2019 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 2019
the Al Noor Hospitals Group plc
the Company’s Articles of Association as adopted at the annual general
meeting on 20 July 2016
Board or Board of Directors
the Board of Directors of Mediclinic International plc
bps
basis points
Bourn Hall International
Bourn Hall International MENA Ltd, the holding company for the Bourn Hall
Fertility Centre in the UAE
Brexit
BST
the departure of the United Kingdom from the European Union
British Summer Time
cash conversion (%)
cash generated from operations divided by adjusted EBITDA
CAUTI
CCRG
CDLI
CDP
CEO
CFO
CGU
CIO
CLABSI
CO2e
Company
catheter-associated urinary tract infections
clinical and cost-related groupings
Carbon Disclosure Leadership Index
Climate Disclosure Project
Chief Executive Officer
Chief Financial Officer
cash-generating unit
Chief Information Officer
central line-associated blood stream
carbon dioxide equivalent
Mediclinic International plc
Controllable Employee Turnover
Controllable employment terminations for all permanent employees are
determined by a sub-set of 30 criteria, but specially excludes a sub-set of
21 criteria such as death, disability, dismissal due to operational requirements,
family responsibility, poor health and retirement.
2016 Corporate Governance Code
UK Corporate Governance Code, as published in 2016 by the FRC
2018 Corporate Governance Code
UK Corporate Governance Code, as amended and published in 2018 by
the FRC
CSI
CSR
CoBIT
DRG
corporate social investment
corporate social responsibility
Centre of Control Objectives for information technology
diagnosis-related grouping
MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 303
STRATEGIC REPORTGOVERNANCE AND REMUNERATIONFINANCIAL STATEMENTSADDITIONAL INFORMATION GLOSSARY (CONTINUED)
TERM
EBITDA
EHR
EMEA
EPS
ERM
ERP
ESG
Ethics Code
EU
external auditor
FRC
FY18
FY19/period under review/
reporting period
MEANING
operating profit before depreciation and amortisation, excluding other gains
and losses
electronic health record
Europe, Middle East and Africa
earnings per share
enterprise-wide risk management
enterprise resource planning
environmental, social and governance
Company’s Code of Business Conduct and Ethics
European Union
when referring to the Company’s external auditor, means
PricewaterhouseCoopers LLP
Financial Reporting Council
the prior financial year ended on 31 March 2018
the financial year ended on 31 March 2019
FY20/next financial year
the financial year ending on 31 March 2020
FCA
GDPR
GMT
GRI Standards
Group
the United Kingdom Financial Conduct Authority
General Data Protection Regulation
Greenwich Mean Time
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 plc and its subsidiaries, including its divisions in
Switzerland, Southern Africa and the United Arab Emirates
Group Executive Committee
the executive committee of Mediclinic International plc
HAI
Hirslanden
ICT
IFRS
IPC
IVF
JCI
JIBAR
JSE
KPI
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
information and communications technology
International Financial Reporting Standards, as adopted by the
European Union
infection prevention and control
in vitro fertilisation
Joint Commission International, an international quality measurement
accreditation organisation, aimed at improving quality of care
Johannesburg Interbank Average Rate
JSE Ltd, the stock exchange of South Africa based in Johannesburg
key performance indicator
304 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT
TERM
MEANING
Last Practicable Date
the date of approval of the Annual Report by the Board, being 22 May 2019
LIBOR
Listings Rules
LTIP
LSE
London Interbank Offered Rate
the listings rules of the FCA applicable to companies listed on the LSE, subject
to the oversight of the United Kingdom Listing Authority
long-term incentive plan
the stock exchange operated by London Stock Exchange plc, based in London
Mediclinic
Mediclinic International plc
Mediclinic Middle East
Mediclinic Southern Africa
MBRUHS
NSX
NHI Bill
Parker Report
PDMS
ROIC
Remgro
the Group’s operations in the UAE, trading under the Mediclinic brand, with
Mediclinic Middle East Holdings (registered in Jersey) as the intermediate
holding company of the Group’s operations in Dubai and 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
Mohammed Bin Rashid University of Medicine and Health Sciences in Dubai
the Namibian Stock Exchange based in Windhoek, Namibia
the South African National Health Insurance Bill, published on 21 June 2018
Parker Review Committee’s Report into the Ethnic Diversity of UK Boards,
issued in October 2017
patient data management system
return on invested capital
Remgro Ltd, a controlling shareholder of Mediclinic which through wholly
owned subsidiaries held a 44.56% stake in the Company as at 31 March 2019
SA Companies Act
the South African Companies Act, No. 71 of 2008, as amended
STI
TSR
TARMED
UAE
UK
VAP
Group Short-term Incentive for the 2020 financial year
total shareholder return
national outpatient tariff in Switzerland
the United Arab Emirates
the United Kingdom of Great Britain and Northern Ireland
ventilator-associated pneumonia
GREYMATTER & FINCH # 12980
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