ENHANCING
THE QUALITY
OF LIFE
2020 ANNUAL REPORT
STRATEGIC REPORT
Introduction
4 Section 172 statement
6 Non-financial information statement
7 Report profile
8 Performance summary
10 At a glance
Business overview
12 Market overview
14 Business model
16 Investment case
18 Value added statement
19 Five-year summary
Performance and outlook
20 Chair’s Review
28 Group Chief Executive Officer’s Report
36 Strategy, goals and progress
44 Continuum of care
46 Stakeholders summary
50 Clinical services overview
62 Sustainable development overview
78 Group Chief Financial Officer’s Report
92 Divisional Report – Hirslanden
100 Divisional Report – Mediclinic Southern Africa
106 Divisional Report – Mediclinic Middle East
Risk management
114 Viability statement
116 Emergency preparedness summary
119 Risk management, principal risks
and uncertainties
GOVERNANCE AND
REMUNERATION REPORT
128 Chair’s Introduction
130 Board of Directors
136 Group Executive Committee
138 Corporate Governance Statement
170 Audit and Risk Committee Report
184 Clinical Performance and
Sustainability Committee Report
188 Nomination Committee Report
194 Remuneration Committee Report
221 Statement of Directors’ Responsibilities
FINANCIAL STATEMENTS
224 Group financial statements
330 Company financial statements
ADDITIONAL INFORMATION
348 Shareholder information
351 Company information
352 Forward-looking statements
353 Glossary of terms
MEDICLINIC’S
CORE PURPOSE
IS TO ENHANCE
THE QUALITY
OF LIFE
To find out more visit:
www.mediclinic.com
CONTINUUM OF CARE
Expansion across the continuum of
care will widen the Group’s service
focus, improve accessibility and
create the opportunity to form a
lasting relationship with clients.
44
50
CLINICAL QUALITY
More than 75 clinical indicators
are measured monthly across the
divisions to identify trends and
opportunities for improvement.
MEDICLINIC CITY HOSPITAL
1
DIVISIONAL REPORTS
Across all three divisions there
are opportunities to grow in
existing markets, expand into
new markets and become an
integrated healthcare provider.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT STRATEGIC
REPORT
Care for our client is ingrained into
three of Mediclinic's organisational
values: being client centred,
trusting and respectful, and patient
safety focused.
Dr Ronnie van der Merwe
Group Chief Executive Officer
The Vermont Oxford Network (‘VON’) is an international
non-profit collaboration of more than 1 300 hospitals to
improve neonatal care globally with data-driven quality
improvement and research. Currently 30 Mediclinic
Southern Africa and six Mediclinic Middle East facilities
participate. At Hirslanden, neonatal intensive care is
handled by cantonal and university teaching facilities.
Refer to the 2020 Clinical Services Report at
annualreport.mediclinic.com for more information.
2
STRATEGIC REPORT
Introduction
4 Section 172 statement
6
7
8
10 At a glance
Non-financial information statement
Report profile
Performance summary
Business overview
12 Market overview
14 Business model
16 Investment case
18 Value added statement
19 Five-year summary
Performance and outlook
20 Chair's Review
28 Group Chief Executive Officer's Report
36 Strategy, goals and progress
44 Continuum of care
46 Stakeholders summary
50 Clinical services overview
62 Sustainable development overview
78 Group Chief Financial Officer's Report
92 Divisional Report – Hirslanden
100 Divisional Report – Mediclinic
Southern Africa
106 Divisional Report – Mediclinic Middle East
Risk management
114 Viability statement
116 Emergency preparedness summary
119 Risk management, principal risks
and uncertainties
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
STATEMENT OF DIRECTORS’
PERFORMANCE OF THEIR
STATUTORY DUTIES
IN ACCORDANCE WITH SECTION 172(1)
OF THE COMPANIES ACT 2006
INTRODUCTION
The board of directors of Mediclinic International plc
(‘Mediclinic’ or the ‘Company’) (the ‘Board’ or ‘Board of
Directors’) collectively, and its directors individually, believe
that they have acted in a manner which they consider, in
good faith, would be most likely to promote the success of
the Company to the benefit of all its stakeholders.
Below steps illustrate how the Board has met its
obligations as required by Section 172 of the United
Kingdom (‘UK’) Companies Act 2006 (the ‘Act’) (‘Section
172’). It is noted that the Board believes these actions
were guided by Mediclinic’s organisational culture which
promotes behaviour that is client centred, trusting and
respectful, patient safety focused, performance driven and
team orientated. Acting in the best interest of stakeholders
is key to pursuing the Company’s purpose to enhance the
quality of life.
• The Board agenda has been revised to include a
reminder of the directors’ duties under Section 172
at each meeting.
• Committee Chairs are available and welcome
engagement with shareholders, as was demonstrated
during the year by the Chair of the Remuneration
Committee in the development of the Group’s new
Remuneration Policy.
• Stakeholder engagement, by way of the Clinical
Performance and Sustainability Committee, is discussed
biannually at Board meetings. The discussion is supported
by a framework which sets out Mediclinic’s stakeholders;
the various stakeholder engagement mechanisms and
their effectiveness; key topics and concerns for each
stakeholder group; and how their interests and the
matters set out in Section 172 have been considered in
Board deliberations and decision-making.
• The Board approved the revised Mediclinic Group
Strategy and new Group Sustainable Development
Strategy which focus on long-term value creation.
• In the context of the revised Mediclinic Group Strategy;
the new Company purpose; and the standardisation
and refinement of the organisational culture, the annual
workforce engagement survey tests the extent to which
the workforce understands and identifies with the
Company’s culture. The results of the survey are reported
to the Board as part of the biannual workforce
engagement report.
• The Board designated an existing non-executive director,
Mr Danie Meintjes, as a responsible person to convey
workforce feedback (as consolidated via multiple
channels) to the Board and shareholders. The designated
non-executive director will monitor and oversee that
there are effective feedback processes in place to inform
the workforce on how their input was communicated and
4
Further information on the above and how the Board engages with and/or promotes engagement with the wider stakeholder group by the Company, including a number of case studies highlighting specific examples of engagement and relevant actions, can be found in the following sections of this Annual Report:• the Business model on page 14;• Stakeholders summary on page 46;• ‘Employee engagement’ and ‘Ethics, anti-bribery and anti-corruption’ in the Sustainable development overview on page 73 and 77 respectively;MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT I
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Management’s daily COVID-19
dashboard was circulated to the
Board on a regular basis from
February 2020 onwards.
considered by the Board. The designated non-executive
director works closely with the Group Chief Human
Resources and Corporate Development Officer in
accordance with an established work plan. The designated
non-executive director reports to the Board on workforce
engagement twice annually at specified Board meetings.
The first report to the Board was presented in September
2019, with a second report in May 2020.
• In May 2019, the Board of Directors approved a long-term
Diversity and Inclusion Strategy for meeting the Group’s
strategic goals by way of a diverse and inclusive Board of
Directors and workforce. With due regard for the interests
of employees across the Group, priority areas were
identified per division and an implementation framework
was approved.
• A thorough and independent process was conducted to
identify a successor to the current Chair of the Board. After
candidates’ skills, experience and values were taken into
account, Dame Inga Beale was appointed Chair Designate.
She demonstrated a clear understanding of the Group’s
strong culture and values, and will also align readily with
the business. Core to these matters are Mediclinic’s
stakeholder commitment to deliver sustainable high-quality
healthcare services, its purpose and its vision.
• The Company engaged with key shareholders during the
year to consult on the votes received at the 2019 annual
general meeting (‘AGM’) in relation to the Remuneration
Report and the directors’ authority to allot shares, and on
the revised Remuneration Policy.
• The Board received regular updates on the effect of the
COVID-19 pandemic on Mediclinic, its employees and
the communities in which the Group operates; and on
responses by local health authorities and governments.
Dr René Toua, the Group Chief Clinical Officer, is
responsible for coordinating the Company’s emergency
preparedness and response. Dr Toua presented updates
at each Board meeting in February and March 2020. In
addition, management’s daily COVID-19 dashboard was
circulated to the Board on a regular basis from February
2020 onwards. The interests of employees were reflected in
the decisions taken by the Board in relation to the FY21
budget, the final dividend for FY20 and remuneration
arrangements for employees and the executive directors.
The interests of employees, patients and communities were
also reflected in the decision by the executive and non-
executive directors (together with the divisional Chief
Executive Officers [‘CEOs’]) to donate 30% of their salaries
or fees for three months to South Africa’s Solidarity Fund
or other similar charities in the countries in which Mediclinic
has a presence.
• The directors’ biographies have been reviewed and
amended to indicate the specific reasons why their
contributions are, and continue to be, important to the
Company’s long-term sustainable success.
5
• Emergency preparedness summary on page 116;• ‘Stakeholder interests and Board engagement’, ‘Shareholder engagement’ and ‘Workforce engagement’ in the Corporate Governance Statement on pages 151–160; and • ‘Response to votes received at the 2019 AGM’ in the Remuneration Committee Report on page 194.MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
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 Act. Further details on all these matters can be found
in the 2020 Sustainable Development Report, as well as policy documents, available at www.mediclinic.com.
NON-FINANCIAL MATTER
RELEVANT POLICIES
READ MORE IN THIS REPORT
PAGE
REFERENCE
Anti-corruption and
anti-bribery
• Enterprise Risk Management
(‘ERM’) Policy
• Strategy, goals and progress
• Sustainable development
• Fraud Risk Management Policy1
• Regulatory Compliance Policy
• Anti-bribery Policy1
• Group Privacy and Data
Protection Policy
overview
(Material issue 3: Being an ethical
and responsible corporate citizen)
Business model
n/a
Employees
• Code of Business Conduct and
Ethics (‘Ethics Code’)
• Health and safety policies and
• Business model
• Strategy, goals and progress
• Business model
• Chair’s Review
• Group Chief Executive Officer’s
procedures
Report
• Employee relations policies
• Board Diversity Policy
• Group Diversity and Inclusion
Strategy
Environmental matters
• Group Sustainable
Development Policy
• Group Environmental Policy
Non-financial key
performance indicators
(‘KPIs’)
n/a
Principal risks
ERM Policy
• Strategy, goals and progress
• Sustainable development
overview (Material issue 2:
Building stakeholder trust)
• Strategy, goals and progress
• Sustainable development
overview (Material issue 1:
Neutralising environmental
impact)
• Clinical services overview
• Sustainable development
overview
Risk management, principal risks
and uncertainties
Respect for human rights
• Ethics Code
• Modern Slavery and Human
Sustainable development
overview
Trafficking Statement
• Group Diversity and Inclusion
Strategy
Social matters
Group purpose
• Business model
• Strategy, goals and progress
• Sustainable development
overview
36
76
14
36
14
20
28
36
69
36
66
50
62
119
62
14
36
62
Note
1 These policies include anti-corruption matters.
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PROFILE
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ABOUT THE COMPANY
The Company’s primary listing is on the London Stock
Exchange (‘LSE’) in the UK, with secondary listings on the
JSE Ltd (‘JSE’) in South Africa and the Namibian Stock
Exchange (‘NSX’) in Namibia. The Group’s registered office
is in London, UK.
ABOUT THIS REPORT
This annual report with financial statements (‘Annual
Report’) of Mediclinic is published as part of a suite of
reports in respect of both the 2019 calendar year and the
financial year ending 31 March 2020 (the ‘reporting period’
or ‘year under review’ or ‘period under review’ or ‘FY20’).
The reporting suite listed below is available on the Group’s
website from the date of the distribution of this report and
the Company’s notice of AGM by no later than 19 June 2020.
2020 Annual Report and Financial Statements
2020 Clinical Services Report
2020 Sustainable Development Report
2020 Notice of Annual General Meeting
SCOPE, BOUNDARY AND REPORTING CYCLE
This Annual Report presents the financial results; the
environmental, social and governance (‘ESG’) performance;
and the economic performance of Mediclinic for the
reporting period and reports on the operations of the
Company’s subsidiaries in Switzerland, South Africa and
Namibia, and the United Arab Emirates (‘UAE’) (collectively,
the ‘Group’). It also compares results with those of the
prior financial year (‘FY19’) and indicates focus areas for
the financial year ahead (‘FY21’).
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 believes may
influence stakeholders’ perception or decision-making.
The information aims to provide stakeholders with an
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. This
Annual Report was prepared in accordance with the
International Financial Reporting Standards (‘IFRS’), the
listing rules issued by the Financial Conduct Authority
(‘FCA’) (‘Listing Rules’), the listings requirements of the
JSE (‘Listings Requirements’), the 2018 Corporate
Governance Code and the Act (including the Companies,
Partnerships and Group [Accounts and Non-Financial
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 2018 Corporate
Governance Code, other than the exceptions explained
in the Corporate Governance Statement on page 138.
The Company’s reporting on sustainable development
included in this report (supplemented by the 2020
Sustainable Development Report which is available at
annualreport.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
Group’s annual financial statements were audited
by the Group’s independent external auditor,
PricewaterhouseCoopers LLP (the ‘external auditor’
or ‘PwC’), in accordance with International Standards
of Auditing (UK) (‘ISA’).
The Group follows various other voluntary external
accreditation, certification and assurance initiatives,
complementing the Group’s combined assurance model,
as reported on in the 2020 Clinical Services Report and
2020 Sustainable Development Report, available at
annualreport.mediclinic.com. The Group believes that this
adds to the transparency and reliability of information
reported to its stakeholders.
GLOSSARY OF TERMS
Capitalised terms used in this report are defined in the
Glossary of terms on page 353.
APPROVAL
The Board approved this report, including the Strategic
Report, Directors’ Report and Remuneration Report
contained herein, on 1 June 2020.
Dr Edwin Hertzog
Non-executive Chair
1 June 2020
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
PERFORMANCE
SUMMARY
BUSINESS REVIEW
A STRENGTHENED FRAMEWORK FOR PATIENT SAFETY
It is essential for clients to know that Mediclinic is a healthcare provider
they can trust – one that is transparent about the quality of care provided
and that considers patient safety paramount. In 2019, the Company did
crucial work in this regard by strengthening Ward-to-Board accountability.
Every division now has a Clinical Performance Committee, assisted where
possible by external advisors who have a direct link to the Clinical
Performance and Sustainability Committee, and then through to the main
Board. This framework is vital for underpinning the patient safety culture
and ensuring constant improvement.
AT THE FOREFRONT OF THE FIGHT AGAINST COVID-19
As a leading international healthcare services provider, Mediclinic is playing
a vital role in confronting the pandemic by leveraging its Group-wide
expertise. Each division has well-defined infection and prevention control
(‘IPC’) and communicable disease emergency preparedness programmes
and is working collaboratively with local health authorities in assessing and
implementing appropriate measures to deal with the pandemic. In addition
to COVID-19 admissions, the Group continues to make available its wide
range of acute care and emergency services.
LANDMARK PARTNERSHIPS AND EXPANSION ACROSS
THE CONTINUUM OF CARE
The regulatory environment is evolving in response to the rate of
technological and pharmaceutical development, the changes in service
delivery that this enables, and client needs. To address demand for more
convenient healthcare, the Group is expanding across the continuum of
care, with the mix of in-hospital and out-of-hospital treatment in step with
the changing environment, client needs and governmental regulations.
During the year under review, the Group, both on its own and with strategic
partners, added to its offering a specialist mental health hospital, three day
case clinics and an outpatient clinic, and concluded a network agreement
with Medbase, a market-leading Swiss primary care provider and part of
the Migros Group.
BETTER WAYS TO CARE, CONNECT AND CONSERVE
Organisations are evaluated on the value they create, not only for clients
but in their approach to the wider industry and the community. During the
reporting period, Mediclinic identified sustainable development as a critical
transformation driver, which resulted in the review and approval of a formal
Sustainable Development Strategy. The strategy and its resultant action
plans revolve around the Company’s sustainable development mission to
ensure that every day it improves sustainability by managing its resources
responsibly and efficiently to the benefit of its stakeholders and the
environment.
STRONG FINANCIAL POSITION AND LIQUIDITY
The Group delivered adjusted financial results for the year under review
broadly in line with expectations despite the impact of COVID-19-related
national lockdowns and associated actions suspending non-urgent elective
procedures in March 2020. Mediclinic entered this period of uncertainty in
a strong financial position and has proactively taken prudent steps to
preserve liquidity, including suspending all non-essential capital
expenditure and the Group dividend. As part of these measures, certain
covenant test waivers have been agreed in respect of the material
borrowings across all three divisions up to and including March 2021.
8
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT FINANCIAL REVIEW1
REVENUE UP 5%
to £3 083m; up 4% in constant currency
reflecting balanced organic growth and
incremental acquisitions
ADJUSTED EBITDA2 DOWN 3%
to £480m (pre-IFRS3 16)4; down 3% in
constant currency, reflecting regulatory
changes, sustainable development and
COVID-19
REPORTED LOSS OF £320M5
reflecting impairment charges at Mediclinic
Middle East (£481m), Hirslanden (£33m) and
Spire6 equity investment (£10m)
ADJUSTED EARNINGS
PER SHARE DOWN 8%
to 24.7 pence (pre-IFRS 16 basis4) reflecting
the operating result and increase in
depreciation and amortisation associated
with investments for growth
£518M CASH AND
AVAILABLE FACILITIES
Liquidity of the Group supported by
strong cash conversion of 109%
TOTAL DIVIDEND FOR
THE YEAR 3.20 PENCE
Dividend suspended in April 2020 as part
of a range of prudent measures to preserve
liquidity during the COVID-19 pandemic
763 000 INPATIENT ADMISSIONS
across the Group as the demand for quality
healthcare services remained strong
£192M ONGOING INVESTMENT
across the Group supporting client experience,
clinical excellence, maintenance, upgrades
and expansion
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REVENUE (£’M)
2 107
ADJUSTED EBITDA (£’M)
428
16
17
18
19
20
16
17
18
19
20
(pre-IFRS 16)
20
(IFRS 16)
2 749
2 876
2 932
3 083
501
515
493
480
541
OPERATING PROFIT/(LOSS) (£’M)
288
362
16
17
18
19
20
(pre-IFRS 16)
20
(IFRS 16)
81
-288
-199
-184
ADJUSTED EPS7 (£’M)
36.7
16
17
18
19
20
(pre-IFRS 16)
20
(IFRS 16)
29.8
30
26.9
24.7
24
OPERATING CASH FLOW (£’M)
16
17
18
19
411
492
466
451
20
(pre-IFRS 16)
20
(IFRS 16)
528
589
Notes
1 The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance. Refer to the ‘Financial review’ section of the
Group Chief Financial Officer’s Report on page 82 for an explanation and for a reconciliation to the equivalent IFRS measures.
2 Earnings before income, tax, depreciation and amortisation.
3 International Financial Reporting Standards
4 For comparative purposes, the FY20 results are also presented on a pre-IFRS 16 basis. The section on 'Earnings reconciliations' in the Group Chief
Financial Officer's Report provides a detailed reconciliation and comparison between IFRS 16 and pre-IFRS 16 financial results for the year under review.
5 Refers to loss attributable to equity holders.
6 Spire Healthcare Group plc.
7 Earnings per share.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
AT A GLANCE
A UNIQUELY INTEGRATED
INTERNATIONAL HEALTHCARE PARTNER
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.
SWITZERLAND
Hirslanden, the leading
private healthcare provider
in Switzerland, is recognised
for clinical excellence
and outstanding patient
experience
www.hirslanden.ch
SOUTH AFRICA
AND NAMIBIA
Mediclinic Southern Africa
is one of the three major
private healthcare providers
in the region with a relentless
focus on offering value
to all its partners and clients
www.mediclinic.co.za
THE UAE
Mediclinic Middle East has
established a trusted brand
and strong reputation in this
developing region by offering
clinical care of internationally
recognised standards
www.mediclinic.ae
THE UK
Mediclinic has a 29.9% stake
in Spire
www.spirehealthcare.com
Read more on Spire in the Group
Chief Executive Officer’s Report
on page 33 and the Group Chief
Financial Officer’s Report on page
91, and on the divisions in the
Divisional Reports from page 92.
UK
Switzerland
The UAE
South Africa
and Namibia
11 612
Beds
21
8
Sub-acute2 and
specialised hospitals3
14
Day case clinics4
Outpatient clinics5
76
Hospitals1
453
Theatres
33 140
Permanent and
fixed-term employees
Notes
1 Provides patient treatment with specialised medical and nursing staff, and medical equipment.
2 Provides comprehensive goal-orientated inpatient care designed for a patient who has had an acute illness, injury or exacerbation of a disease process.
3 Provides specialised in-hospital care, catering for single specialities such as a cardiac hospital, paediatric hospital, etc.
4 Provides elective procedures, surgical procedures and planned medical procedures, but admits and discharges patients on the same day.
5 Provides consultations (by general practitioner, specialist or allied healthcare professional) with no theatre facilities.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Contribution to
revenue (£’m)
Contribution to adjusted
IFRS 16 EBITDA (£’m)
Contribution to adjusted
IFRS 16 earnings (£’m)
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£3 083m
Total
£541m
Total
£177m
Hirslanden: £1 438m
Hirslanden: £245m
Hirslanden: £65m
Mediclinic Southern Africa: £907m
Mediclinic Southern Africa: £188m
Mediclinic Southern Africa: £73m
Mediclinic Middle East: £737m
Mediclinic Middle East: £110m
Mediclinic Middle East: £38m
Corporate: £1m
Corporate: £(2)m
Corporate: £1m
BETTER WAYS TO CARE
Mediclinic is focused on providing specialist-orientated, multidisciplinary 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
clients, medical practitioners, healthcare insurers and regulators in each of its markets.
Read more about the continuum of care on page 44.
Speciality1
Cardiology/Cardiothoracic surgery
General medicine
General surgery
Internal medicine
Laboratory
Nursing and allied health professionals
Obstetrics and gynaecology
Oncology
Orthopaedics
Paediatrics
Radiology
Total
Inpatient
cases
Day
surgery
cases
Outpatient
cases
8%
1%
19%
13%
1%
0%
7%
1%
15%
3%
1%
69%
1%
0%
2%
2%
0%
0%
1%
0%
1%
0%
0%
7%
0%
4%
1%
6%
3%
1%
1%
1%
1%
1%
5%
24%
Note
1 Speciality split based on FY20 healthcare revenue.
Speciality split
Inpatient cases 69%
Day surgery cases 7%
Outpatient cases 24%
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MARKET
OVERVIEW
MARKET LEADERS IN A
DEVELOPING LANDSCAPE
THE DEMAND FOR HEALTHCARE
SERVICES CONTINUES
TO GROW
AGEING POPULATION
1 billion
By 2030, the number of people aged over 65
will be more than 1 billion, or 13% of the total
population.1
DISEASE BURDEN
In 2017, global life expectancy at birth was
73 years
Healthy life expectancy at birth, however, was
only 63 years. This means that on average in 2017,
10 years of life were spent in poor health.2
TECHNOLOGY
More than
154 000
artificial intelligence patents have been filed
worldwide since 2010, a significant number
of which in healthcare (29.5%).3
CONSUMERISM
By 2025, the patient monitoring devices market –
wearables – is estimated to reach a worth of
$27bn4
Sources
1 ‘The Future State 2030’ Infographic, KPMG.
2 Global Burden of Disease 2017 study findings by the Institute for Health Metrics and Evaluation, University of Washington.
3 ‘Microsoft leads the AI patent race into 2019’, Forbes online.
4 ‘Patient Monitoring Devices Market Size By Product, By Type, By End-use, Industry Analysis Report, Regional Outlook, Application Potential, Competitive
Market Share and Forecast, 2019–2025’, Global Market Insights, Inc.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
THIS DEMAND DRIVES
COMPETITION FOR SKILLED
INDUSTRY PROFESSIONALS
THERE ARE FEW DIVERSIFIED,
INTERNATIONAL PROVIDERS OF
PRIVATE HEALTHCARE
GLOBAL HEALTHCARE WORKFORCE
THE BIG PICTURE
The World Health Organization (‘WHO’) projected
that global demand for healthcare workers will reach
The global healthcare provider network
management market was valued at
80 million
in 2030, with supply only reaching 65 million.
The world will be short of 15 million healthcare
workers by 2030.5
$48bn
in 2016 and is projected to reach $302bn
by 2025, growing at a compound annual growth
rate (‘CAGR’) of 23% from 2017 to 2025.10
Nurses comprise half the global
healthcare workforce.6
Practising nurses per 1 000 population
in 2017 or nearest year:
Switzerland7
17.0
South Africa8
4.94
UAE9
5.5
2016
$48bn
2025
$302bn
Taking into account the value people place on health, the
list of the top 10 most economically sound investments
is dominated by health. The Lancet Commission Global
Health 2035 found that every $1 spent in support of
lowering avoidable maternal and child mortality, and
deaths from now to 2035 would yield a return of $9–20.11
Sources
5 ‘Global Health Workforce Labor Market Projections for 2030’, 2017 Human Resources for Health.
6 ‘2018 update, Global Health Workforce Statistics’, WHO.
7 September 2019, Eidgenössisches Departement des Innern, Bundesamt für Statistik.
8 ‘Geographical Distribution of Nursing Manpower vs Total Population 2018’, South African Nursing Council.
9 2017 Statistics, Federal Statistics and Competitive Authority of the UAE.
10 ‘Global Healthcare Provider Network Management Market Size and Forecast to 2025’, Verified Market Intelligence.
11 ‘Evaluating the impact of Private Providers on Health and Health Systems’, Institute of Global Health Innovation, Imperial College London.
13
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT BUSINESS MODEL
Mediclinic’s business model enables it to quickly respond to opportunities and
risks, while safeguarding clients, employees and the interests of stakeholders.
The Group is expanding the horizon of what care can be.
THE
OUTCOME
83.9%
Group grand mean score
for Press Ganey® patient
experience survey1
3
Market-leading positions
in three geographies
THE CARE
THE
FOUNDATION
2%
83%
compounded growth in admissions
in the past five years
Participation in Gallup® employee
engagement survey
PUTTING PATIENTS FIRST
By taking a holistic view of clients’ needs,
Mediclinic is focused on improving all
aspects of the healthcare value equation
– clinical outcomes, client experience
and cost. The Group is ensuring that
clients are able to receive quality care
in the right care setting at a cost that
is fair, predictable and transparent. It
also maintains dialogue with clients
and communities through public health
awareness campaigns aimed at improving
lifestyle choices and overall health.
MAINTAINING CLINICAL
EXCELLENCE
With more than 115 healthcare facilities
across four countries, Mediclinic applies
stringent quality standards regardless
of location. The Group provides
care and facilities of international
standard with more than 10 different
accreditations and certifications and
various international benchmarking
initiatives to meet local requirements.
Learn more in the Clinical services
Learn more in the 2020 Clinical
overview on page 50.
Services Report available at
annualreport.mediclinic.com.
EXPERTISE
With experience and insight gained
over more than three decades of
maintaining market-leading positions
in diverse geographies, the Group has
created expertise that spans across
all aspects of the business – from
client care, patient safety, nursing
and specialised medicine to facility
management, procurement and
finance, and acquisitions.
EMPLOYEES
Mediclinic’s employees play a pivotal
part in achieving its strategic goals. To
empower every employee, the Group
continuously builds on a culture that is
client centred; trusting and respectful;
patient safety focused; performance
driven; and team orientated. Through
its strategies dedicated to diversity and
inclusion, and attracting and retaining
top talent, Mediclinic secures its future.
Learn more in the Divisional Reports
Learn more in the Sustainable
from page 92.
development overview on page 62.
14
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT We exist to care for our clients when they are at their most vulnerable. Herein lies our true
value: harnessing the exceptional talent, compassion and energy of Mediclinic employees
and partners to ensure our clients receive cost-effective, quality care and outstanding
client experiences. Dr Ronnie van der Merwe, Group Chief Executive Officer
8
Trusted by eight tertiary institutions
across all three divisions to help
train the healthcare workers of
tomorrow
±£114m
Economic contribution to
monthly salaries
Constituent of
FTSE4Good
Signatory of the
CDP (originally the
Carbon Disclosure
Project)
FINDING BETTER WAYS TO CARE
In order to align its service offering
with the needs of clients, Mediclinic
is expanding its core operations
to position itself as an integrated
healthcare provider across the
continuum of care. Through innovation,
acquisition, partnerships and
expansion, the Group is expanding to
provide a seamless suite of healthcare
services that prevent, treat and recover,
all under the umbrella of a single,
connected system.
LEVERAGING KNOWLEDGE
AND SCALE
The power of Mediclinic is that
it operates as a Group, not three
separate divisions. Close working
relationships enable learning to be
shared across geographies. Highly
specialised medicine and cancer
care, procurement synergies and
enterprise resource management
have been established as a direct
result – all enhancing Mediclinic’s
services and efficiency.
Learn more in the Continuum of
care summary on page 44.
STAKEHOLDERS
Mediclinic listens carefully to how
stakeholders feel and what they want.
Strong relationships lie at the heart
of its ability to enhance the quality
of life. By engaging on key issues, it
not only ensures close cooperation
and coordination with government
and regulatory role players, it’s
also able to realise public-private
partnerships (‘PPPs’) and seize
business opportunities which expand
its services, help it achieve its strategic
goals, and diversify revenue streams.
FUTURE VISION (ESG)
The Group provides care in a world
that is being reshaped by evolving
client needs, regulatory frameworks
and climate forces. This calls for a
sustainable approach in everything it
does, from the way it utilises natural
resources and engages with employees
to the type of investments it makes
and how it conducts business.
FINANCE
Mediclinic has a strong financial
profile, supported by an extensive
property portfolio. The Group
has good access to capital and a
disciplined capital allocation approach.
Learn more in the Sustainable
development overview on page 62.
Innovation
Learn more in the Stakeholders
summary on page 46 and the
Divisional Reports from page 92.
Learn more in the Group Chief
Financial Officer’s Report on
page 78.
ENABLED BY THE MEDICLINIC
GROUP STRATEGY:
PURPOSE
To enhance the quality of life
VISION
To be the partner of choice
that people trust for all their
healthcare needs
ORGANISATIONAL VALUES
Client centred
Trusting and respectful
Patient safety focused
Performance driven
Team orientated
STRATEGIC GOALS
Goal 1: To become an integrated
healthcare provider across
the continuum of care;
Goal 2: To improve our value
proposition significantly;
Goal 3: To transform our
healthcare services and
client engagement through
digitalisation;
Goal 4: To evolve as an
analytics-driven organisation;
Goal 5: To strengthen our
position as the employer
of choice;
Goal 6: To grow in existing
markets and expand into new
markets; and
Goal 7: To achieve superior
long-term financial returns.
TRANSFORMATION DRIVERS
Sustainable development
Learn more about the Mediclinic
Group Strategy on page 36.
EXPERTISE YOU CAN TRUST
Note
1 Score reflective of the 2019 calendar year
and negatively impacted by Hirslanden
experiencing an interruption in surveying.
15
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
INVESTMENT
CASE
1
2
From hospital management,
specialist services and
outpatient support to
procurement, business
partnerships and employee
growth, we do what we do
exceptionally well. We explore
and find better ways to care
– for our clients, our
communities, our employees
and our environment.
Dr Ronnie van der Merwe
Group Chief Executive Officer
16
CLIENT-CENTRED
APPROACH
• Internationally recognised clinical
expertise and a relentless focus
on improving patient safety and
clinical outcomes
• Dedicated to creating value every
day by providing cost-efficient,
quality care and outstanding
client experiences
• Transparent reporting
All Hirslanden hospitals score
above Initiative on Quality Medicine
(‘IQM’) clinical benchmark
In 2019, Mediclinic Southern Africa
launched public website that
reports patient safety indicators
All Mediclinic Middle East facilities
accredited by Joint Commission
International (‘JCI’)
PARTNER OF
CHOICE
• The preferred partner to both
medical practitioners and patients
across all the geographies in which
it operates
• Purpose-driven strategic approach
to strengthening the Group’s
position as the employer of choice
All three divisions increased their
grand mean score for Press Ganey®
patient experience survey in 2019
2 300+
& 2 250+
More than 2 300 physicians in
Switzerland and 2 2501 in South
Africa choose to partner with
the Group
3.99
Gallup® employee engagement
grand mean score (out of five)
for the Group
Note
1 Includes general practitioners who admit
directly to Mediclinic facilities.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
3
4
5
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
LEADING, TRUSTED
BRANDS ACROSS
DIVERSE MARKETS
• One of the largest private
healthcare providers across the
Europe, Middle East and Africa
(‘EMEA’) region with interests in
developed markets (Switzerland
and the UK) and emerging
markets (Southern Africa, the
UAE and Saudi Arabia).
8
Hirslanden hospitals in top
25 for Switzerland according
to Newsweek’s ‘World’s Best
Hospitals 2019’
6
CAPITALISE ON
GROWTH
OPPORTUNITIES
• Geographic diversity and
extensive healthcare expertise
allow the Group to take advantage
of profitable growth opportunities
in existing and new markets
• Advantageous position to expand
across continuum of care due to
experience in managing complex,
specialised inpatient facilities
• Asset-light growth enabled by
existing core business
• Strong cash generation supports
growth through disciplined capital
allocation
• Active pursuit of innovation,
technology, digitalisation and
analytics opportunities
Mediclinic Southern Africa
hospitals on ‘Discovery Health
Top 20 Hospitals 2019’ list
Continuum of care Continuing
to establish PPPs, strategic
collaborations and investments to
expand service offering
Mediclinic Middle East awarded
Superbrand status by the UAE
Superbrands Council for 2019
2020 Group is preparing to launch
precision medicine service and
Innovation Hub
SUSTAINABLE
LONG-TERM VALUE
• Broad approach to value creation
supported by ESG goals and
sustainable development mission
to ensure that every day the
Group improves sustainability
by managing its resources
responsibly and efficiently to the
benefit of its stakeholders and
the environment
• System relevance enhanced
through PPPs, strategic
collaboration and constructive
engagement with healthcare
funders and government
• Operational flexibility anchored in
extensive hospital ownership
• Agility to adapt operations to
changing dynamics and reduce
fragmentation by integrating
services
• Strategy of responsible leverage
• Remgro Ltd (‘Remgro’) as
supportive long-term investor
since inception
88% The Group owns 67 of its
76 hospital buildings
2019 Sustainable Development
Strategy formalised during 2019
2030 Group environmental goals
to be carbon neutral and have zero
waste to landfill by 2030
17
STRATEGIC REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
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
FIGURE 1: VALUE CONTRIBUTION BREAKDOWN (%)
20
19
Employees
Maintaining and replacing assets
Future growth
Finance cost
Tax
Shareholders
Non-controlling interests
18
FY20
£’m
%
FY19
£’m
%
3 083
(1 201)
9
2
2 932
(1 222)
9
3
1 893
100.0
1 722
100.0
1 388
71
18
87
59
73.3
3.8
1.0
4.6
3.1
1 233
68
21
66
59
71.7
3.9
1.2
3.8
3.4
1 623
85.8
1 447
84.0
152
118
270
8.0
6.2
14.2
136
139
275
7.9
8.1
16.0
FY20
%
73.3%
8.0%
6.2%
4.6%
3.8%
3.1%
1.0%
FY19
%
71.7%
7.9%
8.1%
3.8%
3.9%
3.4%
1.2%
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT FIVE-YEAR
SUMMARY
The Five-year summary is presented in sterling, rounded to the nearest million.
Income statements
Revenue
Adjusted EBITDA
Operating (loss)/profit
Adjusted operating profit
Reported (loss)/earnings
Adjusted earnings
Per share statistics
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 interests
Total equity
LIABILITIES
Non-current liabilities
Current liabilities
Total liabilities
IFRS 16
FY20
£’m
3 083
541
(184)
327
(320)
177
FY20
pence
(43.4)
(43.4)
24.0
24.0
3.20
FY20
£’m
5 741
1 213
6 954
2 890
113
3 003
3 182
769
3 951
FY19
£’m
2 932
493
81
330
(151)
198
FY19
pence
(20.5)
(20.5)
26.9
26.9
7.9
FY19
£’m
5 335
1 091
6 426
3 151
115
3 266
2 576
584
3 160
Total equity and liabilities
6 954
6 426
Pre-IFRS 16
FY18
£’m
2 876
515
(288)
370
(492)
221
FY18
pence
(66.7)
(66.7)
30.0
30.0
7.9
FY18
£’m
5 382
961
6 343
3 286
87
3 373
2 445
525
2 970
6 343
FY17
£’m
2 749
501
362
360
229
220
FY16
£’m
2 107
428
288
335
177
219
FY17
pence
FY16
pence
31.0
31.0
29.8
29.8
7.9
29.6
29.5
36.7
36.7
7.9
FY17
£’m
FY16
£’m
6 353
1 069
7 422
4 086
78
4 164
2 668
590
3 258
7 422
5 604
945
6 549
3 509
61
3 570
2 192
787
2 979
6 549
Statements of cash flows
Operating cash flow (£'m)
Adjusted EBITDA cash conversion (%)
FY20
FY19
FY18
FY17
FY16
589
109%
451
91%
466
90%
492
98%
411
96%
19
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CHAIR’S
REVIEW
THE VALUE OF TRUST
IN TIMES OF CRISIS
Dr Edwin Hertzog
Non-executive Chair of
the Board of Directors
CHALLENGING TIMES
As I write to you this year, the last
time I will have this honour, it’s
unfortunately during a time of great
global uncertainty. I have no doubt
that what we know today regarding
the COVID-19 pandemic will have
moved on by the time this letter is
published.
Mediclinic has a vital role in tackling
the current crisis. We leverage our
multi-geographical expertise and
views to aid coordinating responses
with regional and national
governments, healthcare authorities
and infectious diseases agencies to
support our communities.
Our people have been and continue
to be the most important factor in
the success of Mediclinic over nearly
four decades. They are the frontline
doctors, nurses and hospital staff
who have been expertly and
selflessly leading our response to
this crisis. It’s our responsibility
as a Board to ensure they are safe
and protected with the necessary
guidelines and protocols in place and
through the provision of appropriate
equipment and training. But their
commitment is something for which
the Board will be ever thankful. They
put their own health at risk by simply
doing their job.
Mediclinic is well prepared for the
current crisis and we will endeavour
to continue providing patients with
the services and care they require
during these challenging times.
However, business as usual is clearly
not an option at present. I thank our
patients for their understanding as
some find they have procedures
postponed due to government
restrictions and the priority of
serving the needs of COVID-19
patients alongside our continued
work in the acute care, emergency
and non-elective fields of medicine.
The Group has entered this period
of uncertainty on sound financial
footing, reflecting good fiscal
management and responsible
approach to leverage, positioning it
to face the potential impact of the
pandemic. Through proactive
engagement with our long-standing
banking partners, we have made
arrangements in respect of waiving
certain covenant tests in each of our
divisions that will allow us to focus all
our efforts on supporting our patients
and tackling the COVID-19 pandemic.
DELIVERING CLINICAL
EXCELLENCE
Once again, I can report that
during the year under review, our
commitment to putting Patients First,
What remains
steadfast during
this crisis is our
culture and the
commitment of
the Group’s Board
and executive
management
teams to all our
stakeholders.
763 000
inpatient admissions during the
reporting period
31%
of Group revenue from
surgical day cases and
outpatient consultations
and procedures
20
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The Group has
entered this period
on sound financial
footing, positioning
it to face the
potential impact
of the pandemic.
by way of delivering high-quality,
cost-effective healthcare services on
a sustainable basis, remained
steadfast. This approach aligns with
our purpose to enhance the quality
of life. Core to our long-term success
is the trust we build with all our
stakeholders. Delivering clinical
excellence is fundamental to building
that trust.
We deeply appreciate the 763 000
inpatients who chose Mediclinic as
their preferred healthcare provider
during the reporting period. As
healthcare services continue to
evolve, so do we, and more of the
care we offer is being delivered in an
outpatient or non-acute care setting,
while maintaining the effective clinical
outcomes for patients. This is also a
key component of both our strategic
goal to improve our client value
proposition and our new Sustainable
Development Strategy. We have to be
part of the solution in addressing the
affordability of healthcare and we will
continue to invest in this endeavour.
Already 31% of the Group’s revenue is
generated through surgical day cases
and outpatient consultations and
procedures.
Importantly, I am pleased to report
that the majority of patient safety
and clinical effectiveness indicators
continued to improve during the year
under review. Much of the progress
can be attributed to the stronger
collaborative effort established
between the clinical services teams of
the respective divisions and the
Group Corporate Office over the last
few years.
The Board is also extremely fortunate
to benefit from an experienced
Clinical Performance and
Sustainability Committee and in
particular from its Chair, Dr Felicity
Harvey, given her extensive
experience working in the UK’s
National Health Service (‘NHS’) and
the WHO.
21
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CHAIR’S REVIEW CONTINUED
Highlights this reporting period from
across the Group included:
22
AT GROUP LEVEL
• The integration of the Ward-to-
HIRSLANDEN
• The roll-out of an electronic health
Board accountability framework
continued, strengthening the
clinical service leadership across
the Group. Clinical Performance
Committees are now established in
all the divisions.
• The Patient Safety Committee
established in FY19 is making
progress on standardising and
enhancing collaboration across
the Group and the patient safety
workshop held as part of the
Mediclinic Group Conference
in October 2019, attended by
130 senior managers, helped to
reinforce our strengths and identify
focus areas.
• The Group continues to progress
with the implementation of a
clinical adverse event solution
suitable for the Group to further
advance patient safety.
• The clinical indicators in use have
been expanded across the Group
to ensure the divisions are able to
use the reporting to learn from one
another and action continuous
improvement.
record (‘EHR’), patient data
management system (‘PDMS’) and
radiology information system was
successfully expanded to onboard
additional facilities.
• The annual Hirslanden Doctors’
Summit in November 2019 was
attended by approximately 300 of
the division’s medical practitioners.
The event focused on the role of
doctors in the evolving healthcare
environment and gave insight into
the Group’s newly formulated
strategy.
• The Joint Accreditation Committee
ISCT-Europe & EBMT (‘JACIE’)
accredited the autologous blood
stem cell transplant service at
Klinik Hirslanden, the only private
hospital in Switzerland to earn
these credentials.
• In addition to various other PPPs,
the division announced it is
partnering with the University
Hospitals of Geneva (‘HUG’) to
establish a day case clinic,
with Kantonspital Baselland to
collaborate on the treatment of
musculoskeletal disorders and
with Bern University of Applied
Sciences to provide training
opportunities for medical students.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT MEDICLINIC SOUTHERN AFRICA
• Progress was made on a number
of initiatives aimed at improving
clinical performance.
• In a move to empower patients
and drive improvement, the
division launched a public website
that reports patient safety
indicators at hospital level. Here
clients can view the incidence
of falls, medication errors, near
misses and pressure ulcers as well
as the extended length of stay
index.
• During the reporting period
2 657 Care Expert cases were
completed, an increase of 28% on
the prior reporting period. This
means nearly 35% of all hip and
knee arthroplasties were done as
Care Expert cases. This integrated
product optimises hospital
efficiency and clinical quality
within a value-based model of
care, rather than fee-for-service.
• The division continues to actively
participate in formal and informal
engagement processes that
support the development of a
sustainable national healthcare
solution in South Africa. The Health
Market Inquiry (‘HMI’) published
its final findings in September
2019. The division continues to
monitor and engage with any
developments that may stem from
the HMI’s final recommendations.
MEDICLINIC CITY HOSPITAL
MEDICLINIC MIDDLE EAST
• Mediclinic Middle East commenced
with the roll-out of its EHR at
Mediclinic Parkview cluster clinics,
Mediclinic Khalifa city clinic and
Mediclinic Al Noor hospital during
the year under review, with
Mediclinic Airport Road planned
for 2020. The EHR was also
successfully integrated with the
health information exchange
(‘HIE’) in Abu Dhabi, making
Mediclinic Middle East the first
private provider to achieve this.
• The partnership with Bourn Hall
International MENA (‘Bourn Hall’)
has expanded with the completion
of the construction of an in vitro
fertilisation (‘IVF’) centre at
Mediclinic Al Bateen. The centre
will, upon opening, be managed
by Bourn Hall in which the division
has a minority stake.
• The division is preparing to
launch a comprehensive genetics
service in the UAE later in 2020.
Mediclinic Middle East has acquired
equipment for genome sequencing
and further preparations include
registration with the Ministry of
Health; appointment of two
molecular geneticists; and
finalisation of the test menu.
• During the reporting period, all
the division’s facilities were
successfully accredited or re-
accredited by the JCI, a leader in
healthcare accreditation and the
author and evaluator of rigorous
international standards in quality
and patient safety.
The division is
preparing to launch
a comprehensive
genetics service in the
UAE later in 2020.
23
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CHAIR’S REVIEW CONTINUED
OUR CULTURE AND COMMITMENT
TO STAKEHOLDERS
The Financial Reporting Council
(‘FRC’) published a revised version
of the UK Corporate Governance
Code in July 2018 which applied
to Mediclinic in respect of FY20.
The Board welcomed the new
requirements and their focus on the
themes of corporate and Board
culture, stakeholder engagement
and sustainability. Further detailed
reporting of this can be found in the
governance and remuneration
sections of this report.
Our culture and values must be
demonstrated by those at the
very top of the organisation. I have
long been a personal advocate
for diversity and transformation
across Mediclinic and all the other
organisations I’m involved with.
We believe that diversity across
Mediclinic, including but not limited
to social and ethnic backgrounds,
and cognitive and personal strengths,
promotes better performance and a
stronger organisational culture.
Mediclinic’s achievements in this area
have been recognised by the Parker
Review 2020 Report into the Ethnic
Diversity of UK Boards. The report
noted that Mediclinic was one of
54 FTSE 250 companies to have
fully met the requirement to ‘have
a director of colour on their board’.
This, coupled with our four female
directors who constitute 33% of
the current Board, demonstrates
Mediclinic’s sincere commitment to
driving diversity from the very top
of the organisation. I fully expect this
will remain a priority for Dame Inga
Beale, Chair Designate, once she
becomes Chair following my planned
retirement at the conclusion of the
2020 AGM.
We clearly value the significant roles
each stakeholder plays in the
successful delivery of our Group’s
strategy and operations. Last year,
I reported on the important change
we made in formally appointing
Mr Danie Meintjes as a designated
non-executive director with
responsibilities for workforce
engagement on the Board. Mr Meintjes
was selected by the Board to fulfil this
responsibility given his many years of
experience in human resources and
his engagement with our people
across all divisions through his
previous role as Group CEO of
Mediclinic.
An overview of our workforce
and our workforce engagement
programmes was communicated
by Mr Meintjes to the Board in
September 2019. This included the
outcomes and implementation
of follow-up actions arising from
the annual Gallup® employee
engagement survey conducted
across all divisions in November 2018
and a future engagement strategy.
A Group Diversity and Inclusion
Strategy was implemented in 2019
and progress on its implementation
and outcomes is also covered by
Mr Meintjes’ reports to the Board on
workforce engagement.
We invest in leadership development
and training programmes at all levels
24
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 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.
We also remain committed to
supporting our broader stakeholders
whether they be suppliers,
healthcare insurers, governments,
authorities or industry partners. It is
the Board’s commitment as part of
our Sustainable Development
Strategy to strengthen our corporate
culture to remain an ethical and
responsible corporate citizen. During
these times which are challenging for
all, this commitment becomes even
more important.
FINANCIAL PERFORMANCE
(PRE-IFRS 16)
Having delivered a solid first-half
financial performance, the Group
was on track to replicate this in the
second half of the year under review.
However, with the onset of COVID-19
from mid-March, normally a period of
seasonally high activity, most non-
urgent work was postponed to allow
hospitals and clinical professionals to
prepare for the expected increase in
COVID-19-related cases. An approach
Mediclinic fully supports.
At the Group level, in constant
currency, FY20 revenue was up 4%
and adjusted EBITDA was down 3%.
However, after the translation effect
of foreign currency movements, FY20
revenue was up 5% at £3 083m
(FY19: £2 932m) and adjusted
EBITDA decreased 3% at £480m
(FY19: £493m). Adjusted EPS for the
Group was down 8% to 24.7 pence
(FY19: 26.9 pence). The Group
reported available cash and banking
facilities at year-end of £518m.
The performance of all three divisions
reflects the sudden impact of social
lockdowns in March 2020 and the
postponement of non-urgent elective
procedures in response to the
COVID-19 pandemic. However, in
FY20:
• Hirslanden performance was in
line with expectations, delivering
modest revenue growth and
an expected lower adjusted
EBITDA margin, impacted by
regulatory changes including the
outmigration of care but partly off-
set by ongoing cost management
and efficiency savings.
It is the Board’s
commitment as part
of our Sustainable
Development Strategy
to strengthen our
corporate culture to
remain an ethical and
responsible corporate
citizen.
• Mediclinic Southern Africa
performance was also in line with
expectations, delivering solid revenue
growth with an expected lower
adjusted EBITDA margin reflecting
decisions to further enhance clinical
standards and to expand across the
continuum of care.
• Mediclinic Middle East reflected
good operational progress, but rate
of financial delivery was impacted by
the challenging macroeconomic
conditions, competitive environment
in the region and earlier restrictions
imposed compared to the other
divisions in response to the
COVID-19 pandemic. Revenue
growth was mid-single digit and
EBITDA broadly stable.
At year-end, the Group reported
non-cash exceptional items relating to
impairment charges at Mediclinic
Middle East, Hirslanden and Spire.
These impairments incorporate the
impact of changes in the market
and regulatory environments,
exacerbated by the near-term
uncertainty created by the COVID-19
pandemic.
MEDICLINIC CONSTANTIABERG
25
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
CHAIR’S REVIEW CONTINUED
I strongly believe that
the competitive
strength of our
divisions and the
Group’s robust
liquidity position are
good reasons for
underpinning our
confidence in the
medium-term outlook.
In this context, Mediclinic Middle
East and Hirslanden recorded
impairment charges of £481m on
intangible assets and £33m on fixed
assets respectively. On Spire, an
impairment charge of £10m was
recorded against the carrying value
of the equity-accounted investment.
As a result of these impairment
charges and other exceptional items,
the reported loss for the year under
review was £315m (FY19: loss of
£151m).
BOARD CHANGES AND
GOVERNANCE
At the 2019 AGM on 24 July 2019, I
indicated to the Board my intention
to retire as Chair of the Company
with effect from the conclusion
of the 2020 AGM. Having been
involved with Mediclinic at a Board
level since its inception 37 years ago,
it has been an exceptional privilege
and honour to be part of the Group’s
history. It has been a genuinely
fulfilling experience, as well as,
of course, a demanding and
challenging one. I owe a huge debt
of gratitude to many wonderful
colleagues as well as to supporting
shareholders.
On 26 March 2020, the Board was
delighted to welcome Dame Inga
Beale as an independent non-
executive director and Chair
26
Designate of the Company.
Dame Inga, a prominent British
businesswoman with extensive
global business management
and leadership experience, was
appointed in 2014 as the first female
CEO of Lloyd’s of London, the
insurance and reinsurance market, a
position which she held until 2018.
During her career, she has initiated
large-scale digital and cultural
transformation programmes; led
operational expansion; and
advocated for diversity and inclusion
as transformation drivers to
business. Her ethical approach and
community involvement speak to
our purpose of enhancing the
quality of life, as well as to the values
that shape the Mediclinic culture.
Dame Inga’s Group-wide onboarding
exercise has been adapted in view
of the COVID-19 pandemic and
associated travel restrictions,
with initial sessions taking place
via videoconference, to be
supplemented with in-person
meetings when circumstances allow.
However, she has been warmly
welcomed by all the divisions and
has already been making important
contributions to the Board and in
her capacity as a member of both
the Nomination Committee and
Remuneration Committee.
I would like to thank Mr Alan Grieve,
Senior Independent Director (‘SID’),
for leading the thorough recruitment
process along with the other
directors involved.
Mr Desmond Smith retired, as
planned, as an independent non-
executive director and SID at the
conclusion of the 2019 AGM. He was
succeeded as SID, Chair of the Audit
and Risk Committee and member of
the Nomination Committee from
that date by Mr Grieve.
Mr Tom Singer was appointed as an
independent non-executive director
and member of the Audit and Risk
Committee with effect from 24 July
2019. He was also appointed as
an additional member of the
Remuneration Committee with
effect from 13 November 2019.
Mr Seamus Keating stepped down
from the Board on 31 March 2020,
following his appointment as CEO of
First Derivatives plc. The Nomination
Committee has commenced the
process to identify and appoint a
new independent non-executive
director to succeed Mr Keating.
PROACTIVE ACTIONS
SUPPORTING GROUP LIQUIDITY
The Group is proactively managing
its financial and liquidity position
through various measures. These
include restricting capital
investment to all but essential and
committed projects; enhancing
working capital efficiently; and
adjusting operating expenses; and
agreeing certain covenant test
waivers in respect of its material
borrowings across all three divisions
up to and including March 2021.
As part of the Group’s broad
response to maintaining its liquidity
position through the crisis and to
maximise its support in the handling
of COVID-19, the Board has taken
the prudent and appropriate
decision to suspend the dividend.
The Board recognises the
importance of its dividend to
shareholders and will keep this
position under review. In line with
the unprecedented decision to
suspend the dividend, the executive
directors’ annual salary increases
and short-term incentives (‘STI’)
have also been suspended.
Having announced an interim
dividend of 3.20 pence per share at
the November 2019 half-year results,
the total dividend for FY20 is
3.20 pence per share (FY19: 7.90
pence per share). This represents a
13% payout ratio to adjusted EPS
which is below the Group policy of
25-35% as a result of the Board
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT suspending the dividend in April
2020. The Board would like to thank
shareholders for their understanding
during this uncertain time and
reassure them that we recognise the
important role the dividend plays.
SUPPORTING COVID-19
CHARITIES
In support of South Africa’s
establishment of a Solidarity Fund
aimed at assisting the most
vulnerable South Africans to deal
with the impact of COVID-19, the
Group CEO and Group Chief
Financial Officer (‘CFO’) are
voluntarily donating 30% of their
salaries for three months to this
essential national initiative. Similarly,
the divisional CEOs and all non-
executive directors of the Board are
voluntarily donating 30% of their
salaries or fees for the same period to
benefit charities with similar aims in
the countries in which Mediclinic has
a presence. In addition, the remaining
members of the Mediclinic Group
Executive Committee are voluntarily
donating similar amounts for three
months to charities of their choice.
LOOKING AHEAD WITH
YOUR SUPPORT
I strongly believe that the underlying
fundamentals of the private
healthcare market, together with
the competitive strength of our
divisions and the Group’s robust
liquidity position, are good reasons
for underpinning our confidence in
the medium-term outlook for the
Group after the COVID-19 crisis
has eased. I expect Mediclinic to
be well positioned to meet the
deferred demand arising from the
postponement of many non-urgent
procedures as we currently focus on
tackling the COVID-19 pandemic.
Mediclinic will manage these
circumstances, supporting our
patients and staff, in its usual
efficient, expert and responsible
manner.
What remains steadfast during
this crisis is our culture and the
commitment of the Group’s Board
and executive management teams
to all our stakeholders. Therefore,
I firmly believe we will retain our
market-leading positions.
OPERATIONSZENTRUM ZUMIKON
Combining this strength with our
clear purpose, vision and values,
all underpinned by the Group’s
strategic goals and Sustainable
Development Strategy, give me
confidence in our ability to deliver
sustainable long-term shareholder
value.
Finally, as always, I would like to
thank our valued shareholders for
their continued trust and support.
Dr Edwin Hertzog
Non-executive Chair
1 June 2020
27
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT GROUP CHIEF
EXECUTIVE
OFFICER’S
REPORT
LEADING WITH PURPOSE
THROUGH TURBULENT TIMES
Dr Ronnie van der Merwe
Group Chief Executive Officer
STRONG LEADERSHIP AND
EXPERTISE THROUGH THE
COVID-19 PANDEMIC
The Group’s performance for the vast
majority of FY20 was solid with
noticeable progress that advanced
the leading market positions of our
divisions. Only from mid-March 2020
did the impact from COVID-19
national lockdowns and associated
actions suspending non-urgent
elective procedures materialise.
Clearly, we are now operating in
unprecedented times, with COVID-19
presenting a new and significant
uncertainty for our business. We
benefit from the broad range of
expertise and skills we have among
the leaders of the Group and their
teams, which has provided
Mediclinic with unique insight to
effectively and efficiently respond to
the pandemic and to fulfil the vital
role it plays in tackling the crisis.
Thanks to this and our strong
financial position and liquidity, we
can focus on supporting our people,
doctors, clients and local health
authorities. We have taken proactive
actions across the Group both
operationally and financially.
Multidisciplinary taskforces have
been established at Group and
divisional level to plan around the
clinical, operational and financial
aspects of this pandemic. The
divisional taskforces are constantly
assessing and re-evaluating
Mediclinic’s responses to this
dynamic and evolving situation. The
Group taskforce, which is centrally
coordinated by Group Chief Clinical
Officer Dr René Toua, supports
the divisions and establishes
comprehensive contingency
planning that also includes
supply chain and information
communication technology (‘ICT’).
Our COVID-19 preparedness plans
have matured over the last months,
greatly enhanced by knowledge-
sharing across the geographies in
which we operate – each being at a
different stage of confronting the
pandemic. These plans address the
safety of our clients, frontline and
supporting employees, affiliated
doctors and contracted service
providers, all of which are of critical
importance.
I have been impressed by the
Group’s rapid ability to adapt and
innovate. The Group has invested
in a number of key initiatives to
help its staff and clients deal more
effectively with the crisis, including:
acquiring additional ventilators and
related consumable products;
expanding intensive care unit (‘ICU’)
capacity where possible; establishing
testing units; sourcing additional
personal protective equipment
(‘PPE’); establishing additional
laboratory facilities to support
testing; launching telemedicine and
pharmacy home delivery services for
prescription medication; creating
drive-through pharmacies;
identifying separation areas in
hospitals and ensuring these are
sufficiently prepared for IPC;
establishing alternative interim
facilities to admit asymptomatic and
low acuity cases; establishing 24/7
client call centres and crisis control
centres; developing online risk
assessment tools and software to
support various tracking and testing
initiatives; and providing staff and
clients with communication tools
and guidelines.
We follow the strict guidelines and
protocols established by the relevant
local health authorities that are
aimed at slowing the spread of the
disease and saving lives, with input
to policy formulation from the
divisions. In addition, clearly
defined IPC and communicable
disease emergency preparedness
programmes that govern admission,
containment, triage and treatment
of suspected or confirmed cases are
established in all divisions.
28
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT RESPONSE TO AN UNCERTAIN LANDSCAPE
COVID-19 is forcing the world to evolve and adapt. Every industry has been disrupted, and for some the implications
may be far-reaching and permanent. Healthcare is essential to combatting the physical effects of the pandemic;
however, as a sector we are not immune to its economic impact, nor are we certain how it will shape the future care
landscape. We are also aware that circumstances may change rapidly, and that the resolution of the pandemic may not
be a linear process, but necessitate navigating peaks spread over an extended period or in rapid succession. However,
Mediclinic is established and agile, and we are realistic about the challenges we face and the opportunities that may
result. We remain focused on overcoming the financial impact and pursuing innovative solutions presented by our
people and enabled by the constructive and collaborative relationships we share with our broad stakeholder base.
SITUATIONS
ACTIONS
PREPARE
Full range of
healthcare
services
offered across
all facilities
• IPC measures, processes and protocols were already well established, including hand hygiene,
environmental cleaning and active surveillance
• Formed multidisciplinary and specialist Group and divisional taskforces
• Ceased local and international travel and implemented biometric scanning
• Created ICT infrastructure to enable seamless transition from office-based operations to work-from-home
• Secured continuity of critical ICT systems
PROTECT AND RESPOND
Elective
procedures
postponed
and outpatient
services
affected, but
emergency
and acute care
continues
ADAPT
Elective
procedures
reintroduced;
return to
full range of
healthcare
services
through
innovative
channels
REFORM
Post-COVID-19
world
operations
resume
• Prioritise safety of frontline employees, affiliated doctors and clients
• Establish policies which enable rapid response and prioritise safety
• Continuously engage with frontline employees and affiliated doctors on the correct use of PPE and
treatment protocols
• Evaluate the latest trends and research, and share experiences and expertise through cross-divisional
initiatives and consultation
• Continuously consult with professional societies and global epidemiology experts to ensure best practice
approach for prevention, treatment and containment in each division
• Where possible, expand ICU capacity and optimise frontline capacity
• Risks are assessed daily, with due consideration for impacts on finance, human resources, supply chain,
ICT infrastructure and reputation
• Continuously engage with respective governments to ensure Mediclinic is positioned to provide assistance
in dealing with potentially huge caseload surges
• Suspected COVID-19 cases are tested, admitted and treated, as per the guidelines of the local government
• Emergency and trauma care, cardiac and vascular surgery, obstetrics and gynaecology, paediatric and
neonatology procedures and neurology, oncology and urology treatments are offered under strict conditions
• Develop detailed operational plans, in collaboration with affiliated doctors and healthcare authorities, to
allow for the safe and efficient reintroduction of non-urgent elective procedures and outpatient activity
• Taskforces remain operational and external consultation continues
• Constantly evaluate and adjust the Group’s approach based on scenario planning and crisis
management practices
• Actively prepare employees, affiliated doctors and facilities for the prolonged post-peak period during
which COVID-19 cases will be treated alongside non-COVID-19 cases in the same facilities
• Introduce telemedicine and home delivery of medication to reduce visits to healthcare facilities
• Some Corporate Office employees return to the office
• Launch projects based on the Mediclinic Group Strategy to develop towards the post-COVID-19 phase
Intermittent spikes in COVID-19 cases within countries or specific regions may temporarily affect
operations and require additional facility capacity and resources. It may cause the response level
of a single division to return to ‘Protect and respond’.
• A new healthcare landscape emerges
• Remain agile, overcome challenges and create opportunities
• Purpose-driven approach to enhance the quality of life remains
• Respond appropriately to trends and post-COVID-19 momentum to further accelerate digital services,
government collaboration, new product development, operational improvements and remote working
29
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT GROUP CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
The Group, with support from doctors
and health authorities, has developed
detailed operational plans to allow for
the safe and efficient reintroduction of
non-urgent elective procedures.
Although there will be a period of
adjustment as more healthcare
services return, we are constantly
evaluating and adjusting our approach
according to our scenario planning
and crisis management practices.
We anticipate new challenges and
opportunities will follow this period of
treating urgent and elective cases
while at the same time managing the
pandemic. Already, we have identified
and acted on COVID-19-related
opportunities in telemedicine,
government collaboration, new
product development and remote
working. Our expert teams are
continuously evaluating the possible
risks and rewards, as together we
work towards a better now and a
better after, for not only our
Company and people, but also our
clients and communities.
Read more about our emergency
preparedness in the Risk management
section of this report on page 114. Read
more about the financial impact of
COVID-19 and the proactive measures
we have taken to safeguard the business
in the Group Chief Financial Officer’s
Report on page 78.
ALIGNING OUR GROUP
STRATEGIC GOALS AND
TRANSFORMATION DRIVERS
COVID-19 aside, the global healthcare
landscape continues to change.
Industry megatrends present Mediclinic
with the opportunity to learn, adapt
and grow, as we have done in the past
and will continue to do. The initiative
of refining our strategic goals, which I
reported on last year, was completed
by the Group Executive Committee
during the reporting period. The
detail of the seven strategic goals and
two transformation drivers can be
found in Strategy, goals and progress
on page 36. How we apply these in
the pursuit of our vision to be the
partner of choice that people trust for
all their healthcare needs is detailed
in our Business model on page 14.
All elements of the Mediclinic Group
Strategy have dedicated Group
Executive Committee sponsors
who lead various work streams.
The leadership team has done
commendable work to align our
Group and divisional activities and
management cycles to ensure that
the entire organisation maintains
consistent focus regardless of our
regional differences.
As a healthcare provider, the Group
not only strives to create value every
day by providing cost-effective,
quality care and outstanding client
experiences, it also takes a broader
approach to value creation by taking
responsibility for operations beyond
its facilities. During the year under
review, we identified sustainable
development as a critical
transformation driver to the
Mediclinic Group Strategy.
A Sustainable Development Strategy
which governs ESG activities has
been developed to ensure that the
Group improves sustainability by
managing its resources responsibly
and efficiently to the benefit of its
stakeholders and the environment.
The Sustainable development overview
on page 62 provides more information
on how we conserve (environmental
impact), connect (social impact) and
comply (governance).
ACHIEVEMENTS DURING FY20
Throughout this Annual Report, and
particularly in the Divisional Reports
which start on page 92, you will find
details relating to achievements
during the year under review. In
addition to the efforts of the entire
organisation to help manage the
COVID-19 pandemic, I would like to
highlight a few other achievements
during the reporting period.
In line with our strategic goals,
across all three divisions there are
opportunities to grow in existing
markets, expand into new markets
and become an integrated healthcare
provider across the continuum of
care. These opportunities help build
on Mediclinic’s ability as a truly
integrated healthcare provider to
offer clients, doctors, healthcare
insurers and authorities the full
spectrum of clinical services they
require. In pursuit of this, I am
particularly encouraged by the
continued partnerships we have built
with other leading industry providers
and certain acquisitions, including:
• Hirslanden aligned its acute care
and day case expertise with the
significant primary care coverage
offered by Medbase (part of
Migros, Switzerland’s largest retail
company).
30
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
• Mediclinic Southern Africa
expanded into the growing area of
mental health by acquiring Denmar
Hospital, one of South Africa’s
largest specialist mental health
facilities.
• Mediclinic Middle East formed a
strategic partnership with the
Al Murjan Group (‘Al Murjan’) in
Saudi Arabia with the proposed
establishment of a new acute care
hospital in Jeddah.
In Dubai, the Mediclinic Parkview
Hospital completed its first full year
of operations since opening in
September 2018. The performance
of the hospital has far exceeded
expectations, demonstrating
Mediclinic’s ability to deliver large-
scale, complex growth projects. This
will be followed in the new financial
year by the opening of the Mediclinic
Airport Road Hospital Comprehensive
Cancer Centre and 100-bed
expansion in Abu Dhabi, where
despite the challenging environment
we delivered growth in FY20.
I am very proud of our human
resources managers across the
organisation who every day help
strengthen our position as the
employer of choice in a very
competitive market. Dialogue
between management, employees
and stakeholders is crucial for
the effective operation of any
organisation, and engagement
is essential to protect two of
Mediclinic’s most important assets:
its reputation and its culture; it also
enhances common understanding
and shapes positive behaviour.
In the year under review, more than
83% of employees, well above the
industry benchmark of 78%,
completed the annual Gallup®
employee engagement survey via
email or website, doing away with
more than 8 000 hardcopy surveys.
Electronic surveying allows for survey
data to be available much more
quickly, enabling quick responses to
identified issues. The survey was
furthermore enhanced with four
additional questions to determine the
perception of diversity and inclusion in
the workplace, which as the Chair has
already referenced in his review is a
key focus for the Group, specifically
pertaining to the main themes of
‘I belong’, ‘I am empowered’ and
‘I am valued’.
Care for our client is ingrained into
three of Mediclinic’s organisational
values: being client centred, trusting
and respectful, and patient safety
focused. To truly live these values, all
processes must start with the client in
the middle and enough time must be
spent on understanding their needs.
We encourage constant feedback by
way of continuous patient experience
surveys administered by Press
Ganey®. No fewer than 66 000
patient surveys were collected in the
reporting period, with all divisions
showing an increase in their overall
mean score. The divisions extensively
analyse these survey results to
actively improve patient experience.
The Clinical services overview on
page 50 provides more information.
GROUP FINANCIAL OVERVIEW
(PRE-IFRS 16)
The long-term financial strength of
the business will and must remain a
key priority, even more so given the
current challenging and uncertain
environment (refer to the Group
Chief Financial Officer’s Report on
page 78 for detail). In line with our
approach to responsible leverage,
in recent years we successfully
refinanced the debt facilities of all
three divisions, ensuring we have
long-dated maturity profiles across
our borrowing facilities. The benefit
of our proactive approach and
established relationships with our
lenders was evident when we agreed
certain covenant test waivers across
all the divisions for the coming
financial year to take account of the
COVID-19 pandemic and its near-
term impact on the Group. I wish to
thank our finance teams as they
diligently manage our working
capital and revenue cycle to ensure
we retain a strong liquidity position.
The performance
of Mediclinic
Parkview Hospital
in Dubai has far
exceeded
expectations.
Across all divisions, and in line
with the global trend, the need to
focus healthcare resources on the
COVID-19 pandemic resulted in the
postponement of most non-essential
elective procedures and outpatient
activities in March 2020. This was
intended to safeguard, as far as
possible, sufficient hospital capacity,
frontline clinical staff and PPE for the
peaks of the pandemic and related
increases in COVID-19 admissions.
These restrictions were gradually
being relaxed from the end of April
2020.
COVID-19-related cases are
reimbursed through the established
health insurance schemes in all
divisions, and in addition to COVID-19
admissions, the Group continues to
make available its wide range of acute
care services for urgent healthcare
requirements including emergency
and trauma care, urgent medical
care, cardiac and vascular surgery,
obstetrics and gynaecology,
paediatric and neonatology
procedures and neurology, oncology
and urology treatments. The Group
continued to experience solid
demand for these services during
April 2020. These necessary ongoing
procedures underpin Group revenues
with additional contribution from
elective and outpatient procedures
as these activities gradually begin
recommencing.
The Group was building on its solid
first-half performance and expected
the full-year to be in line with
expectations until mid-March 2020
31
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT GROUP CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
KLINIK IM PARK
£3 083m
Group FY20 revenue
5%
increase in revenue
32
when COVID-19 suddenly impacted
patient volumes. Despite this impact,
Hirslanden and Mediclinic Southern
Africa performed in line with
expectations while Mediclinic Middle
East was below expectations. As
a result, Group FY20 performance
was broadly in line with expectations
with revenue increasing by 5% to
£3 083m (FY19: £2 932m), while
adjusted EBITDA decreased by 3%
to £480m (FY19: £493m), with an
adjusted EBITDA margin of 15.6%
(FY19: 16.8%). As a result of non-cash
impairment charges at Mediclinic
Middle East, Hirslanden and Spire and
other exceptional items, the reported
loss for the year under review was
£315m (FY19: loss of £151m).
HIRSLANDEN
Hirslanden revenue was up 1%, while
adjusted EBITDA was down 7% with
a decrease in the adjusted EBITDA
margin, as guided, to 14.8% (FY19:
16.0%).
Hirslanden’s performance in FY20,
up to mid-March 2020, had been
solid and was expected to deliver
ahead of full-year guidance.
Especially encouraging was the
fourth quarter inpatient admissions,
which demonstrated modest volume
growth, in the first period when all
the major regulatory changes of
the past few years were finally in
the base. Prior to the COVID-19
pandemic, this trend in fourth
quarter inpatient volumes gave the
division confidence in its ability to
increase its market share and return
to growth in the future.
In line with the Group’s strategic
intent, Hirslanden continued to
implement a day case clinic strategy
which focuses on moving towards a
more efficient, lower-cost service
delivery model. This included the
acquisition of Operationszentrum
Zumikon, a leading day case clinic in
Zurich. The division furthermore
concluded agreements with the
cantons of Geneva and Basel-Land
to collaborate on a future day case
clinic and centre of excellence
(‘CoE’), respectively, established a
collaboration with Medbase and
delivered ongoing cost management
and efficiency savings.
MEDICLINIC SOUTHERN AFRICA
Mediclinic Southern Africa
delivered a solid performance
despite the region’s mature
healthcare market and weak
macroeconomic environment.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Be assured that we
are committed to
doing whatever it
takes to navigate
through these
troubled times.
Revenue was up 7%, supported
by growth in patient volumes,
which largely reflects acquisitive
growth across the continuum of
care. The adjusted EBITDA was flat
with margins in line with guidance
at 19.9% (FY19: 21.2%) reflecting
decisions to further enhance
clinical standards and to expand
across the healthcare continuum
with the Intercare acquisition
and new Mediclinic Stellenbosch
hospital and day case clinic both
incorporating lease hold properties
and rental charges.
The division, building on its
position as a leading acute hospital
provider, continued to strengthen
its primary care and day surgery
proposition. Mediclinic Southern
Africa this year added two co-
located day case clinics to its
operations, taking the total to six,
with five more planned over the
medium-term. Further growth
across the healthcare continuum
was delivered with the acquisition
of Denmar Hospital, a leading
mental health facility. These steps,
in addition to its investment in the
Intercare Group and the successful
inclusion of the division on all
major insurance network schemes,
MEDICLINIC GARIEP
supported the patient volume
growth during the year under
review.
MEDICLINIC MIDDLE EAST
Mediclinic Middle East delivered a
good operational performance albeit
the challenging macroeconomic and
competitive environment which
impacted the rate of financial delivery.
FY20 revenue was up 6%, adjusted
EBITDA was down 1% and the
adjusted EBITDA margin was below
expectations at 12.3% (FY19: 13.0%).
Despite the challenges, there were
several operational highlights during
the reporting period including a
gradual improvement in the Abu
Dhabi business with Mediclinic
Airport Road Hospital delivering a
strong performance and Mediclinic
Parkview Hospital in Dubai continuing
to outperform expectations since
opening in September 2018.
We have continued to work
relentlessly on building a strong
international brand and reputation in
this region where the competition
continues to grow. I believe the
investments we make to deliver ethical
and sustainable healthcare services
and build long-term trust with all our
stakeholders will differentiate
Mediclinic from the competition,
cementing our leading market
position, and ensure our success.
In the past I have described Mediclinic
Middle East as the growth engine
of the Group; I still believe this,
despite current conditions in the
region. Mediclinic has a history of
successfully navigating challenges,
and emerging successful,
more determined and with an
unquestionable reputation. I stand
by our strategy in the UAE. Our
presence in Dubai and Abu Dhabi
will offer us opportunities for growth
in the future as we build stronger
relationships with governments and
other partners. We demonstrated this
during the year under review with
our strategic long-term partnership
agreement with Al Murjan, enabling
us to enter the growing Saudi Arabian
healthcare market with the future
establishment of a leading private
hospital in Jeddah.
SPIRE
Mediclinic holds a 29.9% investment
in Spire. Spire’s reported performance
for its full-year financial period ended
31 December 2019 was in line with
expectations and guidance. The
3333
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT guidance, our exceptional employees
for their dedication and agility, and
our valued partners for their support.
I believe in our people and I trust in
our ability to persevere.
Lastly, I would like to take this
opportunity to applaud the outgoing
Chair, Dr Edwin Hertzog, for the
impeccable example he has set over
our many years of working together.
We not only share a passion for the
medical discipline of anaesthesiology,
but also for Mediclinic and its people.
Both on a professional and personal
level, he has demonstrated, without
fault, exceptional judgement and
professionalism, while always
remaining humble, approachable and
courteous.
He has been a mentor to countless
Mediclinic colleagues who have been
fortunate enough to work with him,
and will continue to inspire us with his
remarkable accomplishments.
On behalf of the Board, the Group
Executive Committee and all our
employees, I wish to thank Dr Hertzog
for the integral role he has played
in ensuring the success of the
organisation since he founded it
37 years ago. The strong
organisational values of the Group
and our purpose to enhance the
quality of life bear the hallmarks of
his leadership and integrity. We wish
him well for his retirement following
the AGM in July. While his presence
will be missed, we welcome Dame
Inga and look forward to the progress
we will make with another strong
and experienced Chair at the helm.
GROUP CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED
new management team at Spire is
collaborating well; delivering on their
strategic goals; and supported by
their own strong purpose of making a
positive difference to patients’ lives
through outstanding personalised
care.
liquidity concerns in the coming
financial year. In addition, our lending
banks have shown their support and
waived certain covenant tests for the
financial year ahead, which allows
the Group to focus firmly on its vital
role during the COVID-19 pandemic.
The pandemic and its consequent
national lockdowns and associated
actions suspending non-urgent
elective procedures are likely to have
a significant impact on the Group for
at least the next 12 months. This will
be partially offset by Mediclinic’s
response to the crisis, the ongoing
primary and acute care services
offered across the Group which
underpin revenues and, as already
experienced, the anticipated increase
in demand from postponed elective
procedures as restrictions are relaxed.
I am confident that the underlying
long-term fundamentals of the
private healthcare market remain
strong. Our medium-term outlook
post-COVID-19 is positive,
strengthened by our leading market
positions and the Group’s strong
financial and liquidity position. We
expect to be well positioned to meet
the deferred future demand arising
from the postponement of non-
urgent elective procedures once
the COVID-19 pandemic has eased
and the crisis has reaffirmed the
important role played by well-
established private acute care
operators in healthcare systems
around the world.
Beyond the current circumstances,
I also firmly believe that the steps
we have taken as a Group in the past
12 months to adapt the business to
address the changing healthcare
landscape will enable us to capitalise
on new growth opportunities across
the healthcare continuum with
digital initiatives clearly playing an
important role.
The outbreak of COVID-19 in the UK
also presents a new and significant
uncertainty for Spire. During the
COVID-19 crisis, Spire has shown its
unwavering support to the NHS. Spire
has agreed heads of terms to make
nearly all 39 of their UK hospitals
available to the NHS and its patients.
Under the NHS arrangements, Spire is
entitled to cash cost recovery for its
services. The NHS England contract
will continue until at least 28 June
2020, with a one-month notice period
to end the contract. In addition, its
lenders have agreed to waive the next
two covenant tests (on 30 June and
31 December 2020), which provides
further flexibility to Spire through,
and in the period after, its partnership
with the NHS.
Spire’s board believes that the NHS
arrangements and the agreements
with its lenders provide confidence
that it has sufficient liquidity and
financial stability, allowing the
company to focus on preparing for
the return to regular operations when
the arrangements with the NHS end.
The period of elective procedure
suspension caused by the COVID-19
pandemic has created the potential
for an increase in future demand
and further lengthening of waiting
lists. However, given the continued
significant uncertainty caused by the
pandemic, the Spire board remains
unable to provide market guidance for
their next financial year at this time.
OUTLOOK
Mediclinic entered the crisis in a
strong financial position and, based
on the Group’s actions and scenario
planning, currently foresees no
3434
I would also like to thank our
experienced Board for their
Dr Ronnie van der Merwe
Group Chief Executive Officer
1 June 2020
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Q&A
WITH DR RONNIE VAN DER MERWE
We exist to pursue better care and better outcomes. We can’t do this alone.
The COVID-19 pandemic holds
many challenges, one of which is
managing a healthcare landscape
that has seemingly doubled in
complexity. With new legislation
passed overnight and case
definitions constantly changing,
how does Mediclinic manage
and maintain stakeholder
relationships?
Containment measures, regulatory
and legislative requirements, and
public health initiatives indeed differ
vastly between countries, and even
between Swiss cantons and emirates
in the UAE. And what you believe
to be true today, may not be so
tomorrow. Guidelines and regulations
change as new facts and factors are
continuously revealed.
Our divisional expertise and strong
stakeholder relationships, however,
ensure that we are able to work
collaboratively with government,
industry associations, healthcare
insurers, associated doctors and
healthcare partners in maintaining
and improving emergency
preparedness. There is no secret
recipe in times like these. But by using
our purpose – to enhance the quality
of life – as a compass, many obstacles
become almost obsolete. We exist
to pursue better care and better
outcomes. We can’t do this alone.
This has been your second
year at the helm and during both
Mediclinic was confronted with
dramatic developments that carry
far-reaching implications –
regulatory changes in Switzerland
during FY19 and at the end of this
year under review, COVID-19.
Which strengths have you seen in
your leadership team that helped
the Group rise above the Swiss
challenges and will help you
persevere beyond the pandemic?
In the case of the Swiss regulatory
challenges, we accepted that
significant change was necessary
and called on a healthy sense of
urgency, the courage to tackle the
task head-on, thorough planning,
stretch targets, a high degree of
adaptability, rapid response and
making everyone believe that the
seemingly impossible can be done to
overcome the hurdles. These traits
are equally important in responding
to the COVID-19 pandemic. In
addition, we continuously remind
our leaders that this period of
stress-testing has created an
unprecedented opportunity to
streamline the entire organisation for
future success.
On a personal level, how do
you connect with the Company’s
purpose?
Large companies like Mediclinic
are complex entities that can be
compared to living organisms. I
strongly believe that those entities
with a stated higher purpose, to
which their people can align
themselves through good times and
bad, are better positioned for
success. The purpose motivates and
energises the people and serves as
guiding principle in behaviour and
decision-making, and this is certainly
the case for myself. Mediclinic’s
stated purpose is totally aligned with
my own experience as a clinician,
where I spent all my time enhancing
the quality of life of my patients.
Patients cannot always be healed,
but the right approach to diligent
medical care always enhances the
quality of their lives. An organisation
with the ability to truly achieve this
will rightfully develop a sterling
reputation, and that is what we are
building at Mediclinic.
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
3535
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
STRATEGY,
GOALS AND
PROGRESS
STRATEGY
The Group’s business model and strategic intent have been
refined to ensure that in every geography it is able to attract
returning clients who trust Mediclinic to enhance their quality
of life across the continuum of care. The Group is expanding
to provide a seamless suite of healthcare services that
prevent, treat, recover and enhance – all under the umbrella
of a single, connected system.
The goals, progress and focus areas reported on in this
section of the Annual Report are those of the Group;
additional objectives, initiatives and action plans exist at
divisional level to address strategic, operational and regulatory
considerations unique to their respective geographies.
Refer to the Business model on page 14 and the
Continuum of care on page 44 for more information.
GROUP PURPOSE
To enhance the quality of life
GROUP VISION
To be the partner of choice that people
trust for all their healthcare needs
DIN G
C E S
N
N
A
RIE
T
S
E
T
P
U
X
O
E
E
T
R
N
U
E
S
N
E
C
L
I
CREATE V
A
L
U
E
E
V
E
R
Y
D
A
Y
FINDING AND
DEFINING
BETTER WAYS
TO CARE
PROV I D E C O S
EFFICIENT, Q U A L I T
A R E
T -
Y C
STRATEGIC GOAL 1: TO BECOME AN INTEGRATED HEALTHCARE
PROVIDER ACROSS THE CONTINUUM OF CARE
Defining and developing a service model which will enable an integrated healthcare provider network
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Define Mediclinic continuum of
care model
• Established Group and divisional
continuum of care committees
• Complete analysis on the impact
of care migration
• Identify gaps in current business
• Completed market analysis per
• Finalise business plan
model when compared to
continuum of care model
• Gather data on the impact of care
migration
• Develop divisional continuum of
care business plans
• Develop system to manage care
across continuum of care
• Finalise hospital infrastructure for
the future
• Finalise staffing requirements
• Finalise future funding plan
division
• Defined categories and
corresponding disciplines
across continuum of care, and
subsequently the Mediclinic
continuum of care model
• Finalised funding plan of the
future
• Investigated systems to manage
patients across the continuum of
care (i.e. Care Direct)
• Commenced with defining
hospital infrastructure of the
future and determining digital and
data requirements
• Define impact of continuum of
care on hospital infrastructure of
the future
• Finalise system to manage care
across the continuum of care
• Continue to implement further
services along the continuum of
care according to the divisional
development plans
36
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
STRATEGIC GOAL 2: TO IMPROVE OUR CLIENT
VALUE PROPOSITION SIGNIFICANTLY
Enhancing the wellbeing of clients by improving all aspects of the value equation
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Significantly reduce the ‘cost of us’
• Significantly improve client
experience
• Commenced implementation
of fixed fee payment models
for private paying patients in
Mediclinic Southern Africa to
ensure fair and transparent
offerings
• Progressed with the creation of
indication boards to review and
guide the treatment decisions
of highly complex cases, e.g.
oncology, highly complex visceral
surgery, etc.
• Proactively migrated selected
elective cases to day case clinics
• Actively participated in network
arrangements with funders that
offer value-based contracting
• Shortened and standardised Press
Ganey® client experience survey
to allow for internal and external
benchmarking
• Expanded client experience
surveys to include emergency
centres, day case clinics and
paediatrics, and provide a wider
view of quality of client experience
• More closely aligned client
experience and patient safety
to create integrated view of
patient care
• Instituted various digital tools to
simplify client engagement and
support remote interactions
• Improve clinical outcomes
• Hosted Group patient safety
workshop for leadership (attended
by 130 management employees)
• Intellispace online foetal heart
rate monitors implemented in
23 Mediclinic Southern Africa
obstetric units allowing for remote
monitoring of patients and
improved care
• Commenced with implementing
a standardised adverse event
reporting system across the Group
• Quantify and monitor effect of
treatment at alternative care
settings (incl. digital and home-
based settings)
• Optimise preadmission and
discharge, as well as post-
discharge care
• Expand enhanced recovery after
surgery initiatives (erassociety.org)
• Create standardised framework
for indication quality boards for
oncology and highly specialised
medicine
• Improve Press Ganey® patient
experience survey response rate
per division to 22% or more
• Align divisional Press Ganey®
overall mean score targets
• Implement digital solution to
capture and report on patient
experience
• Standardise compliments and
complaints management and
reporting
• Implement standardised adverse
event and risk management tool
• Create and implement e-learning
curriculum for clinical quality
indicators focused on clinical care
• Standardise medication
management and obstetric
emergency training
• Establish doctor-specific KPIs
• Expand on remote patient
monitoring
37
STRATEGIC REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT STRATEGY, GOALS AND PROGRESS CONTINUED
STRATEGIC GOAL 3: TO TRANSFORM OUR HEALTHCARE SERVICES AND
CLIENT ENGAGEMENT THROUGH DIGITALISATION
Building and implementing new, client-centred solutions to connect data, improve systems and
processes, expand services and empower clients
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Provide digital capabilities for
• Completed digital blueprint for
• Develop patient engagement
enhanced client engagement, care
delivery, continuum of care and
business efficiencies
continuum of care and for clinical
solutions
• Enabled client relationship
management/contact centre
capability
• Establish the foundations of digital
healthcare
• Progressed HIT2020 at Hirslanden
• Established client digital platform
at Mediclinic Southern Africa
• Progressed Bayanaty project
(EHR) at Mediclinic Middle East
portals for each division
• Create digital clinical solutions
for the Group (e.g. telemedicine
platforms)
• Create digital solutions for
continuum of care
• Roll out virtual critical care
collaborative sessions across
Group (in light of COVID-19)
• Further progress the roll-out of
HIT2020 at Hirslanden, client
digital platform at Mediclinic
Southern Africa and Bayanaty
project (EHR) at Mediclinic
Middle East
• Ensure effective digital leadership,
governance and readiness across
the Group
• Appointed Group General
• Mature divisional digital working
Manager: Digital Transformation
groups
• Established central digital steering
• Leverage governance framework
group and divisional digital
working groups
• Established Group digital initiative
register
• Built digital lexicon reference
to align Group-wide digital
communication
for digital initiatives
• Establish digital alignment with
Innovation and Data Science
and Information Management
functions
• Maintain and review digital
initiatives register
STRATEGIC GOAL 4: TO EVOLVE AS AN ANALYTICS-DRIVEN
ORGANISATION
Translating healthcare and client data into decision enablers and combining insights
derived from data and experience to create new, scalable, client-centred services
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Enable fact-based strategic and
• Analytics and Reporting, Enterprise
• Establish and support cohort of
operational decisions
• Improve and manage data assets
• Implement data-driven innovation
Information Management and
Health Information Management
departments integrated to form
Data Science and Information
Management function
• Established Analytics function at
Mediclinic Middle East that forms
part of core Group function
• Established in-house machine
learning capability and
implemented state-of-the-art
machine learning tools
• Applied machine learning for
optimal emergency services staffing
analytical champions (citizen data
scientists) across the organisation
• Establish core Analytics functions
at all divisions
• Improve data visualisation capability
to improve storytelling from data
• Establish a graded data inventory
of data sources for the Group
• Automate data collection for
clinical indicators for all divisions
• Embed machine learning to
improve operational decision-
making and automation
• Establish ESG reporting solution
• Create management information
system
38
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT STRATEGIC GOAL 5: TO STRENGTHEN OUR POSITION AS
THE EMPLOYER OF CHOICE
Ensuring a culture that enables the achievement of strategic goals and the pursuit of
the Group’s purpose by attracting top talent and valuing diversity and inclusion
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Drive employee engagement
towards enhancing the quality of
life of clients
• Review performance management
across the Group
• Further entrench the Diversity
and Inclusion Strategy, incl. digital
campus
• Further entrench Group purpose,
vision and values
• Participate in United Nations
Women’s Empowerment Principles
initiative
• Conducted annual Group-wide
Gallup® employee engagement
survey with participation rate
of 83%
• Included first diversity and
inclusion culture survey within
engagement measurement
• Implemented action planning on
team-level based on engagement
survey results
• Commenced with implementation
of a Group-wide Diversity and
Inclusion Strategy
• Defined Group-wide leadership
development framework
• Reviewed current incentive plan
to align Mediclinic Group Strategy
with envisaged behaviour and
to attract and retain affected
employees
• Implemented new Group-
wide workforce engagement
requirements as per 2018
Corporate Governance Code
• Enhance Mediclinic’s market
• Completed first phase of
identity to attract talent
implementing integrated digital
recruitment module at Mediclinic
Middle East
• Developed Group careers website
• Reviewed current incentive plan
to align Mediclinic Group Strategy
with envisaged behaviour and
to attract and retain affected
employees
• Implement integrated digital
recruitment and recruitment
marketing module at Hirslanden
and Mediclinic Southern Africa
• Define and implement Group
employer marketing strategy
• Gain efficiency and effectiveness
• Continued to standardise
• Further integrate and consolidate
by transforming the human
resources organisation and service
delivery model
international processes and
further develop and implement
digitalisation of human resources
to lower associated service delivery
cost and increase service quality
• Standardised data and data
definitions to enable centralised
reporting, ensuring timeous and
focused decision-making
human resources system
landscape and progress with
implementation of HR Aligned
digitalisation initiative
• Optimise recruitment, onboarding
and offboarding processes to
increase efficiencies
• Continue implementation of
human resources shared services
at all divisions
• Finalise Group data warehouse to
standardise reporting and data
access
39
STRATEGIC REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT STRATEGY, GOALS AND PROGRESS CONTINUED
STRATEGIC GOAL 6: TO GROW IN EXISTING MARKETS
AND EXPAND INTO NEW MARKETS
Ensuring organic growth and acquired expansion add value to the organisation
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Develop and implement structured
approach to enter new markets
• Defined general criteria, aligned
• Proactively search for and
investigate growth opportunities
• Complete market analyses of
identified priority areas, incl.
country and site visits
• Create pipeline of opportunities
for future growth
with broader strategy, for
prioritising and evaluating growth
opportunities
• Established International Growth
Committee (subcommittee of
Group Executive Committee)
to identify and consider
possible international expansion
opportunities and provide
feedback on progress against
strategic growth objective to
Group Executive Committee
• Identified priority areas in Europe,
Middle East, North Africa, Sub-
Saharan Africa and internationally
to proactively investigate as
growth opportunities
• Entered into a partnership with Al
Murjan to establish internationally
accredited 200-bed private
hospital in Jeddah, Saudi Arabia
• Grow in existing markets based on
continuum of care goal
• Hirslanden and Swiss primary care
provider Medbase (part of Migros)
entered into network agreement
• Launch precision medicine
service at Hirslanden and
Mediclinic Middle East
• Expand outpatient radiology
and laboratory services across
Switzerland
• Acquire Klerksdorp hospitals
in South Africa, subject to
Competition Commission’s
Constitutional Court appeal
• Explore opportunities across the
continuum of care at Mediclinic
Southern Africa, incl. oncology,
dialysis and radiology
• Open new wing at Mediclinic
Airport Road Hospital in Abu
Dhabi
• Hirslanden acquired
Operationszentrum Zumikon, a
day case clinic in Zurich (effective
1 April 2020)
• Mediclinic Winelands Orthopaedic
Hospital and the Institute of
Orthopaedics and Rheumatology
formed specialist institute in South
Africa
• Mediclinic Southern Africa
acquired Denmar, a leading
specialised mental hospital
• Day case clinics opened at
Mediclinic Stellenbosch and
Mediclinic Nelspruit in South Africa
• Mediclinic Springs, a dedicated
paediatric outpatient clinic,
opened in Dubai
• Completed upgrade of Mediclinic
Al Noor Hospital entrance, ground
and mezzanine floors in Abu Dhabi
• Mediclinic Middle East completed
construction of an IVF centre at
Mediclinic Al Bateen in Abu Dhabi
40
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Attract, retain and engage doctors
• Established steering committee
• Implement doctor landscape at
and working groups
divisional level
• Formalised five priorities:
• Create standardised doctor
• Standardisation of doctor
landscape
• Data visualisation and
harmonisation
• Multichannel marketing
• Doctor relationship mobile
application
• Training fellowships
reporting metrics (non-clinical)
across divisions
• Develop unified marketing plan for
doctor recruitment
• Implement doctor engagement
surveys for all supporting Mediclinic
doctors across the Group
• Create and implement cross-
divisional training/academic
programme for doctors
STRATEGIC GOAL 7: TO ACHIEVE SUPERIOR LONG-TERM
FINANCIAL RETURNS
Analysing and realising further synergies across the Group and at divisional level
SUB-GOALS/OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Standardise and optimise
• Established investment criteria
• Ensure good decision-making
product portfolios and implement
e-procurement
and hurdle rates for investments
across all countries of operation
and capital allocation in line with
established investment criteria
• Develop strategy for finance
transformation
• Exploit synergies arising from
cloud strategy
• Progress with initiative to achieve
standard and consistent business
processes to unlock further
synergies in Finance function
• Establish framework for improved
efficiency in Finance function
by identifying processes for and
methods to standardise and/or
automate
• Develop Group blueprint for
standardised procurement
procedures and implement
pilot e-procurement project at
Hirslanden aimed at achieving
procurement synergies across
indirect spend categories
• Leverage cloud optimisation
synergies e.g. shared services, and
rapidly realise subsequent savings,
e.g. alternative international
network infrastructure
• Institutionalised investment review
process, aimed at evaluating all
investments, approved by Group
Executive Committee, investment
committee of the Board and the
Board
• Launched initiative within Finance
function to achieve improved
standardisation and consistency
of business processes, aimed at
realising Group efficiencies and
providing a process automation
platform
• Approved framework to enhance
Group-wide procurement
synergies and savings by
embracing digitalisation;
improving spend visibility and
control; simplifying human
interface; and driving adoption
of standardised procurement
processes across the Group
• Defined and commenced with
implementation of cloud strategy
• Included return on invested capital
(‘ROIC’) as formal long-term
incentive plan (‘LTIP’) measure, as
proposed in new Remuneration
Policy
41
STRATEGIC REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT STRATEGY, GOALS AND PROGRESS CONTINUED
TRANSFORMATION DRIVER 1: INNOVATION
Developing and implementing an innovation strategy to diversify conventional revenue streams
and ensure more personalised and precise client care
OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Increase relevance across the
• Appointed Group General
• Establish innovation teams
continuum of care
Manager: Innovation
• Develop new revenue streams
• Developed and approved
• Self-disrupt own business models
in time
• Expand innovation pipeline for
the Group
comprehensive Group Innovation
Strategy
• Develop innovation pipeline across
the Group assisted by innovation
management software
• Expand precision medicine
offering
• Establish foundation to enable
execution of Group Innovation
Strategy
TRANSFORMATION DRIVER 2: SUSTAINABLE DEVELOPMENT
Developing and implementing a sustainable development strategy to ensure that every day
Mediclinic improves sustainability by managing its resources responsibly and efficiently to the
benefit of its stakeholders and the environment
OBJECTIVES
PROGRESS DURING FY20
FOCUS AREAS FOR FY211
• Neutralise the Company’s
• Formalised a Group Sustainable
• Communicate Sustainable
environmental impact
Development Strategy
• Be the partner of choice that all
• Reviewed and updated the
stakeholders trust
• Strengthen the corporate
culture to remain an ethical and
responsible corporate citizen
Group’s material issues relating to
sustainable development
• Improved on reporting
standardisation across the Group
• Finalised statement on climate
change and becoming carbon
neutral by 2030
• Finalised statement on having
zero waste to landfill by 2030
Development Strategy internally
and externally
• Implement Sustainable
Development Strategy across the
Group
• Implement environmental
management system (ISO
14001:2015) at Hirslanden and
Mediclinic Middle East
• Develop and align Group corporate
social investment (‘CSI’) focus
• Develop and launch Group anti-
bribery and corruption campaign
to improve awareness
Note
1 Focus areas identified pre-COVID-19. It is possible that the pandemic could impact the timing of deliverables.
42
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 43
CONTINUUM
OF CARE
Innovation both inside and outside healthcare is
increasingly influencing the way clients perceive the
quality of care, as well as how and where it should be
offered. Within an evolving global healthcare landscape,
clients and regulators want care solutions that are
modern, convenient and, most importantly, affordable.
the continuum of care will widen the Group’s service
focus, improve accessibility and create the opportunity
to form a lasting relationship with clients and not only
when they become patients. The expansion also allows
the Group to deliver services in the most appropriate
care setting at an optimal cost.
SAFE, TRUSTED CLIENT-CENTRED CARE
Since 1983, Mediclinic has grown its expertise across
geographies. The Group has earned a reputation
of being a respected and trusted provider of
healthcare services in each of its markets. It has put
its Patients First.
The client is entrenched in three of Mediclinic’s
organisational values: being client centred, trusting and
respectful, and patient safety focused. Expansion across
PREVENT, CARE, ENHANCE AND RECOVER
By embracing new healthcare provision channels and
industry partners which align with the Group’s purpose
to enhance the quality of life, Mediclinic progressed with
its expansion across the continuum of care during the
year under review through acquisitions, partnerships,
collaborations and its own direct investments. It also
strengthened existing services through technology to
support other corporates and improve services offered
to clients.
PREVENT
• Public health awareness
campaigns in all three
geographies
• More than 110 approved
research studies across
the Group
CARE
• Hirslanden acquires Operationszentrum Zumikon, a day
case clinic in Zurich (effective 1 April 2020)
• Klinik Hirslanden in Zurich offers CAR T-cell therapy for
two types of lymphoma
RECOVER
• Mediclinic Springs, a
dedicated paediatric
outpatient clinic,
opens in Dubai
• Mediclinic Winelands Orthopaedic Hospital and the
Institute of Orthopaedics and Rheumatology form a
specialist institute in South Africa
• Day case clinics open at Mediclinic Stellenbosch and
Mediclinic Nelspruit in South Africa
• Hirslanden enters into network agreement with leading
Swiss primary care provider Medbase (part of Migros)
• Hirslanden enters into PPP with HUG to establish day case
clinic and with Kantonspital Baselland for musculoskeletal
disorder treatment
• Mediclinic Southern Africa acquires Denmar, a leading
specialised mental hospital
• Mediclinic Middle East establishes trauma and urgent care
centres, and a 24-hour paediatric service at Mediclinic
Welcare Hospital and Mediclinic Parkview Hospital
FY21 PROGRESS
• Precision medicine
at Hirslanden and
Mediclinic Middle East
• Day case clinics at Mediclinic Southern Africa
• Home delivery service for prescription medication and
drive-through pharmacies at Mediclinic Middle East
44
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
THE MEDICLINIC
CONTINUUM OF CARE
PARTNERSHIPS
A
S
I
L
A
T
I
G
I
D
N
O
I
T
P REVENT
E NHANCE
R E COVER
A
N
A
L
Y
C ARE
Telemedicine
RECENTLY LAUNCHED
Day case
clinics
Specialised
hospitals
IVF
Sub-acute
hospitals
TO ENHANCE
THE QUALITY
OF LIFE
V
A
L
U
E
Diagnostics
Outpatient
clinics
Acute-care
hospitals
Genetic services
COMING SOON
E
Q
U
A
Health awareness
and education
T
I
O
N
O
N
N
I
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
T
I
C
S
GROWTH
N
O
I
T
A
V
EXPANSION
IOR
INSTITUTE OF
ORTHOPAEDICS AND
RHEUMATOLOGY
WINELANDS
ORTHOPAEDIC HOSPITAL
SPRINGS
ENHANCE
• Mediclinic Middle East
completes construction
of an IVF centre at
Mediclinic Al Bateen in
Abu Dhabi
DIGITAL & CLIENT ENGAGEMENT
• Mediclinic Middle East’s EHR integrates
successfully with HIE in Abu Dhabi
• Mediclinic City Hospital in Dubai introduces
card readers linked to Emirates ID, for
automatic patient registration in the
emergency centre
• Mediclinic Southern Africa implements
Intellispace online foetal heart rate
monitors in 23 obstetric units
• Mediclinic Southern Africa publicly
publishes subset of hospital-specific
clinical performance results
I 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 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 want 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.
• Precision medicine
at Hirslanden and
Mediclinic Middle East
• Telemedicine at Mediclinic Southern
Africa and Mediclinic Middle East
Dr Ronnie van der Merwe
Group Chief Executive Officer
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
45
STAKEHOLDERS
SUMMARY
The Group’s focus areas for
enhancing relationships with
stakeholders revolve around four
core concepts: finding better ways to
care, to conserve, to connect and to
comply. To ensure continuous
engagement, it identifies which
strategic goals are aimed at
addressing the needs of specific
stakeholders and which
organisational values guide
engagement with these groups.
CLIENTS
COMMUNITIES
INSPIRED BY
INSPIRED BY
G1 G2
G3
G5
T1
T2
G3
G5
T2
GUIDED BY
GUIDED BY
HOW MEDICLINIC ENGAGES
• Press Ganey® patient experience
HOW MEDICLINIC ENGAGES
• Corporate social responsibility
index surveys
• Disclosure of clinical
performance results
• Systematic patient rounds
during hospital stay
• 24-hour helplines
• Health awareness days
• Brochures and magazines
• Websites and blogs offering
health-related information
• Social media
• Client alliance programmes
initiatives
• Supporting employee
volunteer initiatives
• Participation at national level in
health training and education
• Public-private initiatives and
joint ventures at Hirslanden,
Mediclinic Southern Africa and
Mediclinic Middle East
Key:
Strategic goals/transformation drivers
Values
G1 To become an integrated healthcare
G6 To grow in existing markets and expand
Client centred
provider across the continuum of care
into new markets
G2 To improve our value proposition
G7 To achieve superior long-term financial
Trusting and respectful
significantly
G3 To transform our healthcare services and
client engagement through digitalisation
returns
T1
Innovation
G4 To evolve as an analytics-driven organisation
T2 Sustainable development
G5 To strengthen our position as the
employer of choice
Patient safety focused
Performance driven
Team orientated
46
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTG4G6G7G1G2G4G6T1G7 EMPLOYEES AND
POTENTIAL
APPLICANTS
GOVERNMENTS
AND AUTHORITIES
HEALTHCARE
INSURERS
INSPIRED BY
INSPIRED BY
INSPIRED BY
G1 G2
G3
G4
G5 G6
G7
T1 T2
G1
G2
G3
T1
T2
G2 G3 G4
GUIDED BY
GUIDED BY
GUIDED BY
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
HOW MEDICLINIC ENGAGES
• Regular meetings regarding
possible cost savings, clinical
quality and healthcare delivery
improvements
• Annual tariff negotiations in
fair and transparent manner
HOW MEDICLINIC ENGAGES
• Annual Gallup® employee
engagement surveys
HOW MEDICLINIC ENGAGES
• Regular meetings
• Participation in conferences
• Training and development
and seminars
• Representation on industry
bodies and government
boards
• Participation in PPPs to enable
healthcare, training and
research
• Growth opportunities
• Intranet and social media
• Newsflashes and regular
electronic updates
• Performance reviews and
formal recognition
• Leadership video conferences
and roadshows
• Employee wellness
programmes
• Magazines and newsletters
• Non-executive director for
workforce engagement
The Group is committed to engaging with stakeholders in order to fully understand and assess their needs and
concerns when making decisions. Dialogue between management, employees and stakeholders is crucial for the
effective operation of any organisation. Engagement is essential to protect two of Mediclinic’s most important assets:
its reputation and its culture. It also enhances common understanding; shapes positive behaviour; ensures progress;
and enables effective decision-making.
STAKEHOLDER ENGAGEMENT AND BOARD DECISION-MAKING
CASE STUDY 1: NEW REMUNERATION POLICY
Since the 2019 AGM, the Remuneration Committee,
a committee of the Board, has reflected carefully on
the feedback received from shareholders and proxy
advisors as well as recent developments in the UK
remuneration environment. It was grateful for the
time and constructive feedback these stakeholders
provided, and based thereon, it reviewed the current
Remuneration Policy and its implementation. As part
of the review, a range of alternative approaches was
explored and advice sought from independent
specialists to ensure that a revised policy appropriately
aligns executive remuneration with the interests of
shareholders; supports the execution of the Group’s
long-term strategy in a way that is consistent with the
Company’s culture and values; and complies with the
2018 Corporate Governance Code. The revised policy
will be put to a shareholder vote at the 2020 AGM.
Refer to the Remuneration Committee Report on
page 194 for more information.
47
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTG4G5G6G1G5G6G7T2G7T1
STAKEHOLDERS SUMMARY CONTINUED
INDUSTRY
ASSOCIATIONS
INDUSTRY PARTNERS
INVESTORS
INSPIRED BY
INSPIRED BY
INSPIRED BY
G2
T1
G1 G2 G3 G4
G6 G7
T1
T2
G1 G2 G3 G4 G5 G6 G7
T1
T2
GUIDED BY
GUIDED BY
GUIDED BY
HOW MEDICLINIC ENGAGES
• Membership of industry
associations and
representation on governing
bodies
• Participation in research
commissioned by associations
• Participation in conferences
HOW MEDICLINIC ENGAGES
• Direct engagement based
on industry knowledge and
market reputations
• Cooperation and PPPs
• Introductions through advisors
HOW MEDICLINIC ENGAGES
• Investor Relations department
• Shareholder AGMs
• Financial results reporting and
presentations
• Investor meetings, roadshows
• Industry conferences and
and conferences
events
• Operational site visits
• Stock exchange
announcements
• Sell-side analyst and salesforce
meetings
• Corporate website
Key:
Strategic goals/transformation drivers
Values
G1 To become an integrated healthcare
G6 To grow in existing markets and
Client centred
provider across the continuum of care
expand into new markets
G2 To improve our value proposition
G7 To achieve superior long-term
significantly
G3 To transform our healthcare services and
client engagement through digitalisation
financial returns
T1
Innovation
Trusting and respectful
Patient safety focused
G4 To evolve as an analytics-driven organisation
T2 Sustainable development
Performance driven
G5 To strengthen our position as the
employer of choice
Team orientated
For more information on Mediclinic’s stakeholders and what matters to them, refer to
the Sustainable development overview on page 62, the section on ‘Stakeholder interests
and Board engagement’ in the Corporate Governance Statement on page 151 and the
2020 Sustainable Development Report available at annualreport.mediclinic.com.
48
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTG5G1G4G5G6T2G3G7 MEDIA
MEDICAL
PRACTITIONERS
SUPPLIERS
INSPIRED BY
INSPIRED BY
INSPIRED BY
G2 G3
G6 G7
T1
T2
G1 G2 G3 G4 G5 G6 G7
T1
T2
G6 G7
T2
GUIDED BY
GUIDED BY
GUIDED BY
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
HOW MEDICLINIC ENGAGES
• Media releases
HOW MEDICLINIC ENGAGES
• Regular meetings
HOW MEDICLINIC ENGAGES
• Regular meetings and business
• Press conferences
• Participation in hospital clinical
• Financial results reporting and
presentations
• Interviews and responses to
media enquiries
• Paid advertisements
• Monitoring industry-related
news and proactive response
• Social media
• The Future of Healthcare blog
committees
• Continuous professional
education events
• Electronic newsletters
• Networking and know-how
exchange events at Hirslanden
• Dedicated medical practitioner
portals at Hirslanden and
Mediclinic Southern Africa
• Medical practitioner
participation in hospital boards
• Biannual engagement events
at Mediclinic Middle East
• Annual Research Day at
Mediclinic Middle East
reviews
• Contract negotiations and
management post-signature
• Electronic product approval
processes
• Product demonstrations and
evaluations
• Training on product
specifications
• Attendance at trade fairs
• Factory visits
• Annual Modern Slavery Act
due diligence questionnaire
STAKEHOLDER ENGAGEMENT AND BOARD DECISION-MAKING
CASE STUDY 2: GROUP SUSTAINABLE
DEVELOPMENT STRATEGY
During the reporting period, the Mediclinic Group
Strategy was finalised by the Group Executive
Committee, with oversight and approval by the Board.
Sustainable development was identified as one of the
transformational drivers to the new strategy and, as a
result, a Sustainable Development Strategy was also
developed. The Board participated in discussions
regarding critical ESG focus areas and how aligning
activities across the divisions would elevate existing
initiatives and accelerate momentum. The Group
Sustainable Development Strategy and revised
material issues were subsequently considered by the
Clinical Performance and Sustainability Committee, a
committee of the Board. It approved the strategy
and resultant action plans in light of feedback from
communities, employees, investors and the media
regarding the increasing importance of progress and
transparency on ESG matters. Refer to the Clinical
Performance and Sustainability Committee Report on
page 184 for more information.
49
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTG1G4G5G1G2G3G4G5T1
CLINICAL
SERVICES
OVERVIEW
INTRODUCTION
Mediclinic puts patients at the heart of its operations to deliver high-quality healthcare services consistently. It
upholds the highest standards of clinical governance and ethical behaviour across its divisions; invests significant
time and resources in recruiting and retaining skilled employees; and makes considerable investment into its facilities
and equipment.
This Clinical services overview is a condensed version of the Group’s 2020 Clinical Services Report, available at
annualreport.mediclinic.com. It covers the most important clinical performance characteristics across the Group with
specific reference to its initiatives and clinical outcomes for the 2019 calendar year, unless stated otherwise.
It is also important to note that the COVID-19 pandemic falls outside the reporting period of the Clinical services
overview and will be discussed in detail in the 2021 Clinical Services Report.
Content
Clinical achievements summary
Message by Dr Felicity Harvey
Interview with Dr René Toua
Mediclinic’s healthcare landscape
The value equation
Analytics
Performance summary
Patient experience
Clinical performance
Clinical
outcomes
International benchmarking
Never events
Adverse events
Hand hygiene
Healthcare-associated infections
Device-associated infections
Surgical site infections
Antimicrobial stewardship
Mortality – adult
Mortality – neonatal
Re-admission, re-operation and extended stay
Accreditations, certifications, initiatives and partnerships
2020 Clinical
Services Report
Clinical services
overview
n/a
n/a
abbreviated
n/a
n/a
n/a
abbreviated
abbreviated
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
n/a
Clinical ethics summary
abbreviated
In addition to the information presented above, the 2020 Clinical Services Report provides information on
achievements, events, initiatives, patient feedback and case studies.
50
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
HIRSLANDEN
4.80
4.77
Speciality split
Cardiology 12%
General medicine 7%
General surgery 22%
Internal medicine 24%
Obstetrics and gynaecology 7%
Oncology 3%
Orthopaedics 23%
Radiology 2%
OUTPATIENT CARE
ROUTINE PROCEDURES
SPECIALISED TREATMENTS
ADVANCED TECHNOLOGY
RESEARCH AND TRAINING
Case mix index1 and length of stay
(measured in calendar days)
FIGURE 1: LENGTH OF STAY AND
CASE MIX INDEX
Hirslanden
19
18
19
18
1.47
1.45
Mediclinic Southern Africa
19
18
19
18
1.22
1.20
Mediclinic Middle East
19
18
19
18
1.08
1.08
Inpatient length of stay
Inpatient length of stay
CCRG case mix
CCRG case mix
3.88
3.76
2.90
2.90
Note
1 Case mix indices of the divisions were calculated by using the
internally developed clinical and cost-related grouping (‘CCRG’).
Case mix refers to the characteristics of patients served, where
some have more complex medical conditions which may influence
outcomes.
High case mix index for Hirslanden mainly due to high load of
complex and technologically advanced cases in an older population;
low case mix index for Mediclinic Middle East due to its younger
patient population.
Care settings
Inpatient 82%
Day cases 5%
Outpatient 13%
AVERAGE AGE OF PATIENT:
56 YEARS
AVERAGE LENGTH OF STAY:
4.80 DAYS
51
STRATEGIC REPORTMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CLINICAL SERVICES OVERVIEW CONTINUED
MEDICLINIC SOUTHERN AFRICA
MEDICLINIC MIDDLE EAST
Speciality split
Cardiology 9%
General medicine 7%
General surgery 23%
Internal medicine 23%
Laboratory services 0%
Obstetrics and gynaecology 11%
Oncology 1%
Orthopaedics 17%
Paediatrics 9%
ROUTINE PROCEDURES
SPECIALISED TREATMENTS
TRANSPLANT MEDICINE
ADVANCED TECHNOLOGY
RESEARCH AND TRAINING
Care settings
Inpatient 89%
Day cases 9%
Outpatient 2%
AVERAGE AGE OF PATIENT:
39 YEARS
AVERAGE LENGTH OF STAY:
3.88 DAYS
52
Speciality split
Cardiology 5%
General medicine 14%
General surgery 8%
Internal medicine 27%
Laboratory 9%
Nursing and allied health professions 4%
Obstetrics and gynaecology 7%
Oncology 4%
Orthopaedics 5%
Paediatrics 9%
Radiology 8%
OUTPATIENT CARE
ROUTINE PROCEDURES
SPECIALISED TREATMENTS
ADVANCED TECHNOLOGY
RESEARCH AND TRAINING
Care settings
Inpatient 24%
Day cases 11%
Outpatient 65%
AVERAGE AGE OF PATIENT:
33 YEARS
AVERAGE LENGTH OF STAY:
2.90 DAYS
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
Q&A
WITH DR RENÉ TOUA,
GROUP CHIEF CLINICAL OFFICER
How do you see digitalisation transforming
care at Mediclinic?
Digital solutions are necessary for the next stage in
healthcare. EHRs enable significantly improved care;
allow for digital transformation; create a rich dataset
that can be mined for better insight; provide data and
opportunities for research; and allow us to build a
long-term relationship with clients. In addition, EHRs
create opportunities to reduce cost and for greater
efficiency through automation. With the COVID-19
pandemic, we are also exploring telemedicine options.
The use of analytics is one of the pillars
supporting the Group’s clinical services. What are
some of the most exciting applications?
Our use of analytics goes beyond measuring and
benchmarking clinical performance – it informs how
we profile clinical risk, develop treatment pathways,
analyse healthcare trends and create alternative
reimbursement models. In short, it enables us to
optimise our care and offer our clients the best
possible treatment. Mediclinic has also invested in
machine learning capability to enable patient-facing
analytics, which is an exciting move to a more
proactive system based on prevention, wellness, faster
diagnosis and precision of treatment. In December
2019, several departments integrated to form the Data
Science and Information Management function in
order to unlock greater efficiencies and to formulate
and implement a holistic data management and
analytics strategy in 2020.
What does the achievement of quality care
mean for investors?
The healthcare industry is transforming from
fee-for-service to value-based remuneration.
Organisations are evaluated on the value they
create, not only for patients but in their approach
to the wider industry and the community. Mediclinic’s
focus on clinical performance and patient-centred
care contributes to better clinical outcomes, better
patient experience and lower cost, which means
better financial outcomes.
Refer to page 4 of the 2020 Clinical
Services Report for the full interview.
53
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
CLINICAL SERVICES OVERVIEW CONTINUED
CLINICAL SERVICES OVERVIEW
PERFORMANCE SUMMARY
A summary of the key focus areas and progress against established sub-goals during the calendar year.
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
PROGRESS
Group-wide
CLINICAL GOVERNANCE
• Refined and optimised
the clinical governance
structure to enforce
the Ward-to-Board
accountability
framework
• Commenced
• Appointed additional
implementation of
Ward-to-Board
accountability
framework
• Introduced doctors’
committee at divisional
level
Hospital Clinical
Managers
• Continued with
implementation of new
clinical performance,
oversight and
governance model in
collaboration with
supporting medical
practitioners
CLINICAL PERFORMANCE
• Roll-out of new clinical
indicators, including the
standardised infection
ratio (‘SIR’) model for
surgical site infections
(‘SSI’) and refinement
of existing indicator
definitions and
expansion of categories
• Supported the divisions
in eradicating never
events and decreasing
the number of serious
adverse events (‘SAEs’)
• Enhanced collaboration
between divisions with
working groups on
obstetric safety and
surgical safety
• Assessed adherence
to the safe surgery
checklist through
16 unannounced audits
with an average score
of 92%
• Identified patient
pathways that qualify
for standardisation,
especially in terms of
fast-track orthopaedics
• Indications board policy
prepared and applied to
surgery of the vertebral
column and vessel
surgery at pilot hospitals
• Defined criteria of
system provider model
and determined level of
adherence at hospital
level
• Developed action plans
in collaboration with
medical practitioners to
prevent adverse events
• Developed hospital-
specific action plans
aimed at improving
clinical performance
• Enhanced the national
hand hygiene strategy
to further improve hand
hygiene compliance
• Implemented additional
components of the
antimicrobial
stewardship strategy
• Reviewed and refined
the comprehensive IPC
strategy
• Implemented clinical
initiatives aimed at
significantly improving
obstetric care
• Completed final
phase of the national
stroke management
implementation plan
• Publicly published
subset of hospital-
specific clinical
performance results
54
• Implemented Ward-to-
Board accountability
framework
• Implemented quality
management framework
• Defined and aligned
clinical risk management
strategy to the Group
• Developed clinical model
for cost per event
(‘CPE’) and diagnostic-
related grouping (‘DRG’)
use
• All facilities successfully
accredited/re-accredited
by the JCI
• Refined hospital-level
clinical structures
• Refined clinical strategy
for Abu Dhabi and
Al Ain
• Further developed and
expanded coordinated
care initiatives
• Defined clear strategy
for establishing CoEs
• Established trauma and
urgent care centres
• Established 24-hour
paediatric service at
Mediclinic Welcare
Hospital and Mediclinic
Parkview Hospital
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT PROGRESS
Group-wide
Hirslanden
Mediclinic Southern Africa Mediclinic Middle East
DIGITALISATION AND ANALYTICS
• Supported Hirslanden
and Mediclinic Middle
East with EHR
implementation
• Supported Mediclinic
Southern Africa in the
evaluation of EHR
systems
• Established a machine
• Radiology information
• Dedicated taskforce
system pilot at Klinik Im
Park completed and
rolled out to Klinik
Stephanshorn
• Roll-out of PDMS for
intensive care and
anaesthesia at Klinik
Hirslanden
appointed to manage
EHR process and
continued action plans
aimed at improving
implementation
readiness
learning capability
• Introduced standardised
• Continued EHR roll-out
• Ensured compliance
with HIE requirements in
Abu Dhabi
documentation
approach for medical
practitioners in the EHR
and commenced pilot
project at Klinik
Stephanshorn
INDUSTRY EVENTS
n/a
• Hosted Hirslanden
Doctors’ Summit
n/a
MEDICATION SAFETY, IMPLANTS AND DISPOSABLES, AND DIAGNOSTICS
• Refined and optimised
the medication
management process
• Developed additional
action plans to improve
medication safety
• Commenced with
specialist group
meetings for cardiology
and orthopaedics in
order to standardise
implants and
disposables
NURSING AND MEDICAL PRACTITIONERS
• Enhanced collaboration
• Developed a model to
on nursing
validate doctors’
performance
• Improved nursing skills
mix and repositioned
Nursing Unit Managers
to improve clinical
outcomes
• Hosted second
Mediclinic Middle East
Annual Research Day
• Improved the utilisation
of generic medication
• Investigated robotic
pharmacy system
• Continued the
centralisation and
consolidation strategy
for laboratories
• Continued
implementation of
standardised appraisal
process for medical
practitioners and
commenced roll-out for
nursing staff
PATIENT SAFETY
• Patient safety workshop
• Continued roll-out of
• Hosted three
• Completed Agency for
in October 2019
attended by 130 leaders
across the Group
patient-related outcome
measurement
• Completed Patient
Safety Policy
compliance audit
multidisciplinary patient
safety workshops across
the division
Healthcare Research and
Quality Hospital Survey
on patient safety culture
55
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CLINICAL SERVICES OVERVIEW CONTINUED
BETTER WAYS TO CONNECT
The wellbeing of the Group’s clients forms the foundation of the business
with Mediclinic’s core purpose being to enhance the quality of life.
PATIENT EXPERIENCE
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.
TABLE 1: PRESS GANEY® RESULTS FOR THE 2019 CALENDAR YEAR
Participating since
February 2017
October 2014
October 2014
Hirslanden1
Mediclinic Southern Africa
Mediclinic Middle East1
Total participating facilities
Total surveys collected
Likelihood of recommending
the hospital/clinic2
Mean score out of 100
17
12 191
92.1%
50
52 958
85.0%
6
2 939
88.6%
88.3 (2019: 87.4)
82.7 (2019: 82.0)
86.0 (2019: 85.6)
Notes
1 Caution must be exercised when interpreting the 2019 patient experience results for Hirslanden and Mediclinic Middle East. No feedback was collected for
Hirslanden by Press Ganey® for several months and the Al Ain region in Mediclinic Middle East had a low response rate.
2 Incomparable with prior year data due to new measurement categories.
PATIENTS FIRST
HOW MEDICLINIC PUT PATIENTS FIRST IN 2019
Patient safety workshop
held for leadership across
the Group
Employee-facing patient
safety campaigns
Public health awareness
campaigns
Indicators for clinical
performance expanded
Surgical safety checklist
rolled out in all facilities
More day case clinics
12 health technology
assessments
conducted
Clinical Performance
Committees for all
three divisions
Public website with
hospital-specific clinical
performance indicators for
Mediclinic Southern Africa
PRESS GANEY® PATIENT EXPERIENCE SURVEY STREAMLINED TO INCREASE PARTICIPATION
56
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
At Hirslanden and Mediclinic Middle East,
Comprehensive Cancer Centres deliver
world-class cancer care.
FOCUS ON PATIENT SAFETY
Held as part of the Mediclinic Group Conference
in October 2019, a patient safety workshop was
attended by 130 senior managers from the three
divisions. Furthermore, Mediclinic Middle East
conducted a survey on safety culture by the Agency
for Healthcare Research and Quality; the survey is
planned for 2020 in the other two divisions, in
conjunction with the introduction of a safety pledge.
Extensive training has been done on the criteria
for never events to standardise reporting between
divisions.
GREATER CONVENIENCE
All three divisions have day case clinics to meet client
needs: Hirslanden has two1, Mediclinic Southern Africa
has six, with a further four operated by Intercare, and
Mediclinic Middle East two.
EXCELLENCE IN CANCER CARE
At Hirslanden and Mediclinic Middle East,
Comprehensive Cancer Centres deliver world-class
cancer care. At Hirslanden, the designated tumour
boards for breast and prostate cancer were joined
by multidisciplinary medical boards in oncology,
urology and lung cancer at the hospitals in Aarau,
Bern and Biel. The Hirslanden breast cancer centres
collaborated with University Basel and the Swiss
Group for Clinical Cancer Research. An information
technology ('IT') tool for benchmarking clinical
outcomes between the centres is in development.
A PIPELINE FOR NURSING TALENT
Two Mediclinic Southern Africa learning centres have
been accredited to present the three-year Diploma in
Nursing. The division signed an agreement with the
South African Nursing Council to conduct their exams
in India, which will facilitate the recruitment of nurses.
OPPORTUNITIES
• Implementing standardised measures for clinical
performance in outpatient clinics
• Developing performance indicators for ambulatory
surgery units
Note
1 At 1 April 2020, Hirslanden’s day case clinics increased to three with the acquisition of Operationszentrum Zumikon.
BETTER WAYS TO UNLOCK VALUE
Across the divisions, projects focus on improving the quality of care;
reducing costs for patients; and providing innovative services.
HIRSLANDEN
• CAR T-cell therapy offered at Klinik Hirslanden, first
Swiss private hospital to offer this treatment for two
types of lymphoma cancer
• Initiatives to improve obstetrics outcomes, supported
by Intellispace online foetal heart rate monitors in
23 obstetric units and head-cooling equipment in
20 neonatal critical care units
• Expansion across the continuum of care through a
• Increase in Care Expert procedures, an integrated
collaboration with Medbase
• Cooperation with the Bern University of Applied
Sciences to provide internships for the master’s degree
of Nurse Practitioner
MEDICLINIC SOUTHERN AFRICA
• Nursing Odyssey project to address issues that impact
the quality of nursing
• Stroke training days at 49 Mediclinic Southern Africa
product that optimises hospital efficiency and clinical
quality
MEDICLINIC MIDDLE EAST
• Acquired equipment for genome sequencing in
preparation for UAE’s first precision medicine lab
• JCI accreditation and re-accreditation of all facilities
• Created framework of requirements for CoEs
• Academic affiliations for the training of medical
hospitals to standardise clinical pathway
students and paediatric residents
57
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CLINICAL SERVICES OVERVIEW CONTINUED
BETTER WAYS TO CARE
Clinical governance lays the foundation for the structures and processes
that ensure the best possible outcomes for patients.
CLINICAL OUTCOMES
MEDICLINIC CLINICAL
MANAGEMENT MODEL
SUPERIOR
CLINICAL
PERFORMANCE
VALUE-BASED
CARE
CLINICAL
COST-EFFICIENCY
CLINICAL
EFFECTIVENESS
PATIENT SAFETY
(including IPC)
CLINICAL GOVERNANCE
CLINICAL INDICATORS
More than 75 clinical indicators are measured monthly
in line with a standardised set of definitions and
classifications. Many of these outcome indicators are
self-reported and others are derived from administrative
data. These indicators are monitored for trends and used
to identify opportunities for improvement.
Clinical indicator improvements during the year include
the roll-out of the SIR model for SSIs; the refinement
of existing indicator definitions; and the expansion of
categories.
STATISTICAL SIGNIFICANCE
Statistical significance is determined to identify areas of
improvement that create knowledge leveraging and
sharing opportunities to the benefit of all divisions. By
also identifying areas of concern, it allows the Group to
determine key focus areas for future initiatives.
Where variation in the current year’s data is found to be
statistically significant as compared to prior reporting
periods, the applicable data in the graph is marked with
an orange dot and an explanation is provided, if available.
For more information on statistical significance and how it
is calculated, refer to the 2020 Clinical Services Report.
PATIENT SAFETY
Achieving patient safety requires a collective
commitment to building a patient safety culture. This
means that each employee focuses on reporting and
learning from near misses and adverse events that
may cause patient harm. An open culture, where
teams are comfortable discussing patient safety
incidents and concerns, is fostered through the
inclusive completion of systems analysis of SAEs in
hospitals. Teams learn from the adverse events to
mitigate future incidents.
NEVER EVENTS
Across the divisions, the WHO surgical safety
checklist is followed to decrease errors and adverse
events, and increase teamwork and communication
during surgery.
The implementation of the safe surgical checklist
remains a key focus area, with good progress made
across all divisions during the year. Mediclinic
reports only on a subset of surgical and procedural
never events at present, focusing on: the correct
identification of patients, procedures and sites, and
the prevention of retained foreign objects.
58
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT FIGURE 2: NEVER EVENTS1
Rate per 1 000 patient days
(Number of events in brackets)
Hirslanden
19
18
17
0.002 (1)
0.006 (3)
0.004 (2)
Mediclinic Southern Africa
19
18
17
0.014 (27)
0.009 (17)
0.009 (17)
Mediclinic Middle East
0.007 (1)
19
18
17
0.00 (0)
0.022 (3)
Note
1 The measurement and reporting of never events have been refined during
the year to ensure comparable rates across the Group. The never event
rate is reported to the third decimal to negate the obscuring effect of
rounding.
ADVERSE EVENTS
An important aspect of improving the quality and safety
of patient care is preventing adverse events that could
harm patients, including hospital-associated pressure
ulcers, falls and medication errors.
HIRSLANDEN
FIGURE 3: ADVERSE EVENTS – HIRSLANDEN
Rate per 1 000 patient days
Statistically significant
Hospital-associated pressure ulcers
0.87
0.95
0.73
19
18
17
Falls
19
18
17
Medication errors
19
18
17
0.00
1.17
1.41
2.46
2.46
2.52
The 8.42% decrease in the hospital-associated pressure
ulcer rate from 0.95 in 2018 to 0.87 in 2019 is not
statistically significant. The fall rate remained stable at
2.46. Hirslanden commenced reporting on medication
errors in 2018. The 17.02% decrease in the medication
error rate from 1.41 in 2018 to 1.17 in 2019 is statistically
significant. Analysis of the fluctuation is difficult as
the current reporting system is restrictive with limited
classification and system factor analysis abilities.
MEDICLINIC SOUTHERN AFRICA
FIGURE 4: ADVERSE EVENTS –
MEDICLINIC SOUTHERN AFRICA
Rate per 1 000 patient days
Statistically significant
Hospital-associated pressure ulcers
0.23
0.23
0.22
19
18
17
Falls
19
18
17
1.07
1.03
1.02
Medication errors
19
18
17
0.98
1.19
1.58
The rate of hospital-associated pressure ulcers
remained stable at 0.23. The 3.88% increase in
fall rate from 1.03 in 2018 to 1.07 in 2019 is not
statistically significant. Preventing falls remains a key
focus area and the Falls Policy was reviewed during
the period and aligned to the Group policy.
Medication errors per 1 000 patient days reduced by
17.65% from 1.19 in 2018 to 0.98 in 2019, a statistically
significant decrease, mainly due to a reduction
in administration errors. The involvement of
pharmacists in incorrect medication error reporting
has resulted in additional reporting mechanisms for
potential medication errors. The data collection to
date has been used to guide hospitals to identify
specific areas for quality improvement and
prevention of medication errors, and to provide a
measurement tool to track progress.
Preventing falls remains a key
focus area and the Falls Policy
was reviewed during the period
and aligned to the Group policy.
59
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT CLINICAL SERVICES OVERVIEW CONTINUED
MEDICLINIC MIDDLE EAST
FIGURE 5: ADVERSE EVENTS
– MEDICLINIC MIDDLE EAST
Rate per 1 000 patient days
Statistically significant
Hospital-associated pressure ulcers
19
18
17
Falls
19
18
17
0.23
0.18
0.40
0.52
0.42
0.51
Medication errors
19
18
17
2.94
3.55
3.51
The increase in the hospital-associated pressure
ulcer rate by 27.78% from 0.18 in 2018 to 0.23 in 2019
is not statistically significant. A pressure injury
prevention project team was reactivated in response
to the increase and major compliance improvements
noted since August.
The 23.81% increase in the fall rate from 0.42 in 2018
to 0.52 in 2019 is not statistically significant and is
mainly due to patient and parent non-compliance
to fall prevention instructions. The fall awareness
campaign includes educational videos for
employees, fall prevention posters in patient rooms
and creating a fall prevention booklet for patients
and visitors.
The medication error rate decreased by 17.18% from
3.55 in 2018 to 2.94 in 2019, a statistically significant
change. Both outpatient and inpatient medication
errors are reported and are classified as prescription,
dispensing and administration errors. Focused
medication audits and physician education and
training are ongoing in all facilities.
60
FACILITY FOCUS
BUILDING A BETTER SERVICE
Through its expansion across the continuum
of care, Mediclinic can accompany clients
throughout their healthcare journey.
DAY CASE CLINIC
WHERE: Lucerne, Switzerland
WHEN: Opened in late 2018, fully operational
in 2019
Hirslanden strategically developed this day case
clinic in response to changes in Swiss healthcare
policy that saw several procedures reclassified
from inpatient to outpatient.
PAEDIATRIC CLINIC
WHERE: Dubai, UAE
WHEN: October 2019
The facility offers general paediatrics and family
medicine, along with paediatric physiotherapy,
psychology, and occupational and speech
therapy. Having various disciplines in one setting
is not only convenient for families, but less
traumatic for children.
ORTHOPAEDIC AND RHEUMATOLOGY
HOSPITAL
WHERE: Stellenbosch, South Africa
WHEN: August 2019
In a pioneering partnership with the Institute of
Orthopaedics and Rheumatology, the hospital
brings together a multidisciplinary team for
high-level musculoskeletal expertise.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT FACILITY FOCUS
CLINICAL ETHICS SUMMARY
Issue
Mediclinic’s response
Advanced care planning, end-of-life and
terminal care
Clinical governance structures to report, audit and address in line with
local regulations and legislation
Assisted reproductive technology and IVF
• Centres governed by local regulatory and legal framework
• Compliance monitored by licensing authorities
Competence and scope of practice
Clinical governance structures to monitor and address concerns
Doctor cover, availability and response
Doctor qualifications and performance,
and illegal practice
Drug trials and medical research
Employee and patient protection
• On-call rosters at emergency centres
• Reporting system for non-compliant independent doctors, human
resources process for employed doctors
• Formal process verifies registration, qualifications and credentials
• Feedback from peers solicited
• Established prevention policies and investigations of, inter alia,
deteriorating clinical quality indicators and complaints
• Aligned with the Declaration of Helsinki and local legislation
• Approval by independent, accredited ethics committee and
recorded on a registry
• No unofficial drug testing allowed
• Clinical research approval committee and policies
• Occupational health specialists at each hospital
• Healthcare employees screened for pulmonary tuberculosis, and
screened and vaccinated against Hepatitis B if necessary
• HIV/Aids diagnosis and support offered to affected employees in
accordance with local regulations
• In case of Methicillin-resistant Staphylococcus aureus, healthcare
employees screened and decolonised if necessary
• Annual flu vaccine, other vaccines when indicated
• Radiation exposure monitored centrally by Hirslanden
Ethical behaviour and billing, and falsification
of diagnosis and documentation
• Regular documentation and clinical coding audits at hospital level
• Human resources policies for misconduct and criminal behaviour
• Ethics lines for reporting
Euthanasia
Neither practised nor condoned
Forced female circumcision
Informed consent required for any medical or surgical intervention
Genetics
• Testing and counselling according to local regulations and
Inappropriate care
Organ trade
Pharmacy
legislation
• Data privacy principles and rules apply to results
Managed by indication boards at Hirslanden, CPE at Mediclinic
Southern Africa and Mediclinic Middle East
Organ donation and receipt process carefully documented and in line
with applicable legislation
Policies, procedures and audits to comply with legislation, ethical and
operational requirements
Remuneration, kickbacks
Perverse incentives prohibited
Reporting and disclosure of adverse events
• Formal adverse event reporting system at hospital level
• Recorded events discussed at clinical hospital committees
Technology (including robotics)
• Equipment must be CE1 certified and approved by the local regulator
and/or certified by the Food and Drug Administration of the United
States of America
• Used for approved indication as dictated by guidelines
• Clinical safety proven before new technology implemented
Termination of pregnancy
• Strict control measures to ensure legal compliance
• Freedom of choice for employees regarding participation
Note
1 CE certification mark indicates conformity with health, safety and environmental protection standards for products sold within, manufactured in or
designed to be sold in the European Economic Area.
61
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SUSTAINABLE
DEVELOPMENT
OVERVIEW
Sustainability is particularly
important to me as it’s a
responsibility I’ve taken on in many
of the organisations I’ve worked for.
Mediclinic’s coherent sustainability
strategy brings together initiatives
across the Group. It sheds light on
our use of resources and how much
we value them – not just natural
resources, but financial capital and
human assets. The targets we have
set for 2030 – to be carbon neutral
and send no waste to landfill – show
just how seriously we take this.
Dr Felicity Harvey
Chair of the Clinical Performance and
Sustainability Committee
62
INTRODUCTION
As a healthcare provider, Mediclinic not only strives
to create value every day by providing cost-effective,
quality care and outstanding client experiences, it
also takes a broader approach to value creation by
taking responsibility for its operations beyond just its
facilities. The Group provides care in a world that is
being reshaped by evolving client needs, regulatory
frameworks and climate forces. This calls for a
sustainable approach in everything it does, from the
way it utilises natural resources and engages with
employees to the type of investments it makes and
how it conducts business.
The strategy and its resultant action plans revolve
around the sustainable development mission to ensure
that every day Mediclinic improves sustainability by
managing its resources responsibly and efficiently to
the benefit of stakeholders and the environment.
This Sustainable development overview is a
condensed version of the Group’s 2020 Sustainable
Development Report, available at annualreport.
mediclinic.com. It covers the most important
sustainable development activities across the Group
with specific reference to its initiatives and outcomes
for the 2019 calendar year, unless stated otherwise.
It is important to note that the COVID-19 pandemic
falls outside the reporting period of the Sustainable
development overview and will be addressed in the
2021 Sustainable Development Report.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CONTENT
Accolades and achievements
Message from the Group Chief Executive Officer
Management and governance structures
Stakeholders
Materiality assessment
Overview
Climate change
Carbon emissions
Energy efficiency
Water usage
Biodiversity
Waste
Environmental management systems
Overview
Clients
Value proposition
Employees
Interview with Mr Magnus Oetiker
Recruitment
Retention
Employee engagement
Diversity and inclusion
Wellness and safety
Optimised supply chain
Future workforce
Corporate social investment
Human rights
Overview
Information assets
Data privacy
Ethics, anti-bribery and anti-corruption
High-quality healthcare infrastructure
Material issue 1:
Neutralising
environmental
impact
Material issue 2:
Building stakeholder
trust
Material issue 3:
Being an ethical
and responsible
corporate citizen
Independent assurance
2020 SUSTAINABLE
DEVELOPMENT
REPORT
SUSTAINABLE
DEVELOPMENT
OVERVIEW
abbreviated
n/a
n/a
abbreviated
abbreviated
n/a
abbreviated
abbreviated
abbreviated
n/a
abbreviated
abbreviated
abbreviated
abbreviated
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abbreviated
abbreviated
abbreviated
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abbreviated
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abbreviated
n/a
n/a
abbreviated
abbreviated
n/a
63
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
STAKEHOLDER ENGAGEMENT
COMMITTED TO
• Publicly reporting on sustainability development
performance and progress
• Remaining accountable to stakeholders
• Communicating effectively with stakeholders
KEY STAKEHOLDERS
• Clients
• Communities
• Employees and potential
applicants
• Governments and
authorities
• Healthcare insurers
• Industry associations
• Industry partners
• Investors
• Media
• Medical practitioners
• Suppliers
Strong relationships with stakeholders lie at the heart
of the Group’s ability to enhance the quality of life. By
engaging on key issues, Mediclinic remains accountable
to its stakeholders and actively realises its position as a
leading international provider of private healthcare.
Mediclinic’s key stakeholders are those groups who have
a material impact on, or are materially impacted by, the
Group and its operations: clients, communities, employees
and potential applicants, governments and authorities,
healthcare insurers, industry associations, industry partners,
investors, media, medical practitioners and suppliers.
The Group’s key stakeholders, methods of engagement,
topics discussed or concerns raised are outlined in the
2020 Sustainable Development Report. The Board’s
engagement with stakeholders is also reported on in the
Corporate Governance Statement on page 151.
Mediclinic’s commitment to its stakeholders to conduct
its business in a responsible and sustainable way, and
to respond to stakeholder needs, is entrenched in the
Group’s values and supported by the Group’s Ethics Code.
Stakeholders’ legitimate expectations have been taken
into account in setting the Group’s key sustainability
priorities, as reported on in the 2020 Sustainable
Development Report.
AWARDS AND ACCOLADES SUMMARY FOR THE
REPORTING PERIOD
GROUP
• Constituent of FTSE4Good, an index that recognises companies for strong ESG practices.
• Signatory of the CDP UK (originally the Carbon Disclosure Project), which supports companies to
measure and disclose their environmental impact.
In our mission to
create value, we
have undertaken to
listen carefully to
how stakeholders
feel and what they
want by reaching
out in a variety
of ways.
Dr Ronnie van der Merwe
Group Chief Executive Officer
64
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Mediclinic is committed to ensure that every day it improves
sustainability by managing its resources responsibly and efficiently
to the benefit of its stakeholders and the environment.
Mediclinic sustainable development mission statement
MATERIALITY ASSESSMENT
Mediclinic has various economic, social and
environmental responsibilities, including creating
employment opportunities; training and developing
employees; using natural resources responsibly and
investing in local communities.
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.
The Clinical Performance and Sustainability Committee’s
assessment identified the following three material
issues:
• Neutralising environmental impact;
• Building stakeholder trust; and
• Being an ethical and responsible corporate citizen.
FIGURE 1
MATERIALITY
ASSESSMENT
MATRIX
Material issue 1
N E U T R A LISING ENVIRONMENTA
L IM
P
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a
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t e m
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A n e ff e c t
m a n a g e m e n t
VALUE
Patient experience
Information assets
Ethics, anti-bribery
and anti-corruption
e
C
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and retention
C T
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For more information on the
Group’s strategic priorities
during FY20, refer to Strategy,
goals and progress on page 36.
BUILDI N G S T A K E H O L D E
i a l i s
u
s
M a t e r
T
S
U
R
R T
e 2
65
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
CONSERVE
MATERIAL ISSUE 1: NEUTRALISING ENVIRONMENTAL IMPACT
To neutralise the Company’s environmental impact
WHY THIS IS IMPORTANT TO THE BUSINESS
Mediclinic acknowledges that climate change poses a material risk to its operations and the environment, and that
appropriate action is required to reduce its impact. In addition, responsible use of resources can 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.
The Group’s main environmental impacts are the consumption of resources (water and energy) and the disposal of
healthcare risk waste and healthcare general waste. Mediclinic is committed to achieving carbon-neutral status and
zero waste to landfill by 2030.
During the calendar year, there were no incidents of material non-compliance with any environmental legislation,
regulations, accepted standards or codes applicable to the Group, with no significant fines imposed.
RISKS TO THE BUSINESS
• Business interruptions due
to water shortage or lack
of electricity
• Increased operational costs
MATERIAL ISSUE 1 IN NUMBERS1&2
Average total CO2 emissions
(kg/bed day)
Average water usage
(kℓ/bed day)
due to cost of electricity, water
and healthcare risk waste
Group
• Reputational damage
• Impact of carbon tax and
climate change legislation
• Potential fines and penalties
MITIGATION OF RISKS
• Group Sustainable Development
Strategy with environmental
objectives
• Risk management process and
systems of internal control
embedded within the Group
• Opportunities for minimising
environmental impact identified
in each division
• Annual review of ERM Policy
• Group Environmental Policy
(available on the Group’s
website) and environmental
policies at operational level
• Group-wide implementation
and international certification
of environmental management
systems
163kg
11kg
112kg
2019:
162kg
2019:
12kg
2019:
106kg
Group
Hirslanden
0.9kℓ
0.6kℓ
2019:
1.0kℓ
2019:
0.7kℓ
Mediclinic
Southern
Africa
0.5kℓ
2019:
0.6kℓ
Hirslanden
Mediclinic
Southern
Africa
Mediclinic
Middle East3
366kg
2019:
376kg
Mediclinic
Middle East3
1.6kℓ
2019:
1.6kℓ
Average energy consumption
(GJ/bed day)
Waste recycled
(tonnes)
Group
Hirslanden
Mediclinic
Southern
Africa
0.9GJ
0.5GJ
0.3GJ
2019:
0.7GJ
2019:
0.5GJ
2019:
0.3GJ
Group
Hirslanden
Mediclinic
Southern
Africa
1 968t
494t
1 223t
2019:
1 639t
2019:
284t
2019:
1 147t
Mediclinic
Middle East3
1.8GJ
2019:
1.3GJ
Mediclinic
Middle East
251t
2019:
208t
Notes
1 Data reported in line with the 2019 CDP Report and succeeds the data as provided in the 2019 Sustainable Development Report.
2 Mediclinic has no operations in the UK and only reports on the data of its divisions.
3 The intensity measures of CO2 emissions, water usage and energy consumption per bed day of Mediclinic Middle East are not comparable with Hirslanden
and Mediclinic Southern Africa as this division has more outpatient clinics (i.e. no beds) than hospitals and the extreme weather conditions in the UAE
negatively impact energy and water consumption.
66
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
CARBON EMISSIONS
Achieving carbon neutrality by 2030
Mediclinic’s commitment to carbon-neutral status is
supported by a sound business case, as emission-
reduction activities yield benefits such as cost saving
and secured energy supply. Rising electricity costs are
also an incentive to reduce consumption by investing
in energy-efficient equipment and renewable energy
sources. Beyond that, the Company acknowledges its
responsibility to contribute to a healthy environment.
With the assistance of external consultants, the divisions
measure their carbon footprint using the Greenhouse Gas
Protocol. These measures include, in varying degrees:
vehicles; and fleet and pool vehicles (mobile fuels).
• Indirect emissions from the consumption of purchased
electricity (scope 2 emissions).
• Indirect emissions in the supply chain (scope 3
emissions) and from Mediclinic’s business travel
activities; employee commuting; upstream and
downstream third-party distribution; the consumption
of office paper; electricity transmission; and
distribution losses and waste.
• Non-Kyoto Protocol greenhouse gas emissions such
as from Freon, which is used in air-conditioning and
refrigerant equipment. Data of these emissions were
converted into a carbon dioxide equivalent (‘CO₂e’)
using recognised calculation methods, emission
factors and stating assumptions made, where relevant.
• Direct emissions (scope 1 emissions) from Mediclinic-
owned or -controlled equipment (stationary fuels); air-
conditioning and refrigeration gas refills; anaesthetic
and other gas consumption; emergency response
The carbon emissions per division, reported per
calendar year, are reported in the 2020 Sustainable
Development Report as summarised in Tables 1–3.
TABLE 1: HIRSLANDEN TOTAL CARBON EMISSIONS
Scope 1: Direct emissions (tonnes)
6 743
7 349
2015
2016
2017
6 317
2018
6 376
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 (CO₂e/bed day [kg])
389
389
8371
415
759
n/a
7 891
13
882
n/a
8 620
13
665
1 2182
n/a
7 819
12
n/a
8 009
12
Notes
1 The scope 2 indirect emissions increased due to the integration of Klinik Linde as well as a change in the source of purchased electricity.
2 Increase in emissions due to a change in calculation methods.
3 2019 data not available at the time of publishing this report.
TABLE 2: MEDICLINIC SOUTHERN AFRICA TOTAL CARBON EMISSIONS
Scope 1: Direct emissions (tonnes)
23 841
24 687
24 193
22 422
20161
2016
2017
2018
2019
6 042
455
n/a3
0
6 497
11
2019
20 790
Scope 2: Indirect emissions from
purchased electricity (tonnes)
Scope 3: Indirect emissions from supply chain,
business travel and waste removal (tonnes)
159 571
156 781
149 109
143 338
157 3702
36 037
49 488
47 270
42 981
44 743
Non-Kyoto Protocol emissions (tonnes)
3 966
5 236
2 841
TOTAL CO₂e (tonnes)
CO₂e/full-time employee
CO₂e/m2
CO₂e/bed day (kg)
223 415
236 192
223 413
13.3
0.31
111
14.0
0.30
117
13.7
0.27
112
2 200
211 073
13.3
0.25
106
1 233
224 136
14.0
0.26
112
Notes
1 Reported on financial year basis, thus 1 April 2015–31 March 2016.
2 Increase in emissions from purchased electricity resulted from a 9% increase in Eskom emission factor during 2019.
67
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
TABLE 3: MEDICLINIC MIDDLE EAST TOTAL CARBON EMISSIONS
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/m2
CO₂e/bed day (kg)
20161
20171&2
20183
1 731
5 594
4 191
2019
2 9594
12 148
19 892
38 371
52 7895
3 464
4 722
7 656
14 6036
621
17 964
3.677
0.198
226
3 476
33 684
5.764
0.160
220
3 561
53 779
7.560
0.174
376
2 056
72 407
9.758
0.212
366
Notes
1 2016 and 2017 data are reported per financial year basis.
2 Data not directly comparable with previous year as prior to 2017 only Dubai-based facilities were reported on.
3 Data not directly comparable with previous years as Mediclinic Parkview Hospital and new data points (i.e. air conditioning, additional business travel and
third-party vehicle consumption) included for the first time.
4 Deviation due to modification in methodologies used.
5 Increase due to overall growth of the division.
6 Increase in scope 3 emissions due to the inclusion of employee commute as well as an increase in the reporting scope.
ENERGY EFFICIENCY
Electricity is the main contributor to the Group’s carbon footprint. All divisions are taking steps to reduce their
electricity consumption intensity through the adoption of the ISO 14001:2015 environmental management system.
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.
TABLE 4: DIRECT AND INDIRECT ENERGY CONSUMPTION (GJ)
Direct
energy
purchased
Direct
energy
produced
Indirect
energy
consumed
Energy
consumption2
Intensity
Total
Per bed day
Hirslanden
Mediclinic
Southern
Africa
Mediclinic
Middle East1
2017
2018
2019
2017
2018
2019
2017
2018
2019
108 859
108 957
105 670
98 (solar
collectors)
156 453
265 312
n/a
n/a
149 650
258 608
163 650
269 320
98 634
1 576
534 999
635 209
111 972
2 862
543 175
658 009
116 688
11 665
544 742
673 096
22 154
33 499
17 679
0
0
0
141 730
163 884
154 813
188 312
249 310
266 989
0.46
0.45
0.46
0.32
0.33
0.34
1.20
1.28
1.8
Notes
1 The intensity measures of energy consumption per bed day of Mediclinic Middle East are not comparable with Hirslanden and Mediclinic Southern Africa
as this division has more outpatient clinics (i.e. no beds) than hospitals and the extreme weather conditions in the UAE negatively impact energy and
water consumption.
2 Increase in consumption due to overall growth of the Group.
68
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
DIVISIONAL CONSIDERATIONS
HIRSLANDEN
MEDICLINIC SOUTHERN AFRICA
MEDICLINIC MIDDLE EAST
• Electricity purchased mainly
• Renewable energy through
from nuclear plants for all but
one hospital, as well as the
Corporate Office
• 16 of 17 hospitals registered as
CO2-reduced businesses and
monitored annually by EnAW
photovoltaic systems
• Solar panels for water heating
• Supervisory control and
data acquisition (‘SCADA’)
systems to monitor electricity
consumption
• LED light fittings and
movement sensors
• Regular servicing of air
conditioners
• Solar panels for new buildings
• Shading devices to minimise
direct heating
• Replacement of ventilation,
• Three verification methods for
• Sustainable materials used
heating and cooling systems
with energy-efficient ones and
adjustment of operating times
• LED light fittings
• Renewal of information and
ICT infrastructure
electricity data
• Energy-efficient practices
wherever possible
WATER USAGE
Using and re-using water resources sustainably
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.
For hospitals, good quality fresh water is essential for
maintaining hygiene, quality patient care and infection
control. The Group benefits from the expertise gained
across its divisions as they address water use challenges
unique to their geographies.
WASTE MANAGEMENT
Achieving zero waste to landfill by 2030
Stringent protocols are followed to ensure that waste
management within the Group complies with all
legislation, regulations and municipal by-laws.
The Group regards the handling of waste in an
environmentally sound, legal and safe manner as its
ethical, moral and professional duty. During 2019, there
were no incidents at the Group’s facilities or offices
leading to significant spills.
In line with the objective to achieve zero waste to landfill
by 2030, Mediclinic evaluates waste materials with the
view to refuse, reuse, reduce, recycle and/or recover.
ENVIRONMENTAL MANAGEMENT SYSTEMS
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 engages with governments and authorities,
industry associations and industry partners on
environmental policy matters that affect the business,
including climate change. Suppliers are encouraged to
implement environmental programmes and obtain
certifications. All divisions comply with national
legislation concerning the environment, the details of
which are elaborated on in the 2020 Sustainable
Development Report.
CONNECT
MATERIAL ISSUE 2: BUILDING STAKEHOLDER TRUST
To be the partner of choice that stakeholders trust
WHY THIS IS IMPORTANT TO THE BUSINESS
Mediclinic employees and associated medical
practitioners form the foundation from which the
Group is able to offer its services to clients and
communities, which in turn allows it to unlock value for
all stakeholders and pursue its vision to be the partner
of choice that people trust for all their healthcare needs.
The Group is dedicated to partnering with all its
stakeholders. As a result, the Group is positioned
to have long-term relationships that extend beyond
isolated interactions and trusted to deliver measurable,
quality outcomes and transparent reporting.
RISKS TO BUSINESS
• Poor employee engagement and wellness
• Ageing nursing workforce with decreasing
entrants to profession
• Delayed new nursing qualifications framework,
causing a gap in the education pipeline in
South Africa
• Inability to recruit healthcare practitioners
to meet business demand
• Poor clinical outcomes and services
• Medical malpractice liability
• Reputational damage
69
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
RISK MITIGATION
• Group Sustainable Development Strategy with
social objectives
• Effective execution of employee engagement
action plans
• Implementation of Mediclinic Diversity and
Inclusion Strategy
• Development of a Global Employer Marketing Strategy
• Extensive training and skills development programmes
• Monitoring of medical practitioner satisfaction
through continuous dialogue
• Establishment of a Global Leadership Development
Framework
• Further entrenchment of the organisational purpose,
values and behaviours
MATERIAL ISSUE 2 IN NUMBERS
Standardised definitions
During the period under review, human resources definitions were
standardised across the Group and as such some discrepancies may
occur when compared to prior year disclosures.
Total workforce is defined as all employees employed on a full-time
or temporary basis.
Full-time employees are defined as employees appointed in
approved roles without a pre-determined time limit. These
employees are employed under contract which requires them to
work a minimum number of hours, as defined.
Controllable turnover is defined as the number of employees leaving
within a period due to preventable reasons. Controllable employment
terminations for all permanent employees are determined by a subset
of 26 criteria, but specifically excludes a subset of 20 criteria such as
death, disability, dismissal due to operational requirements, family
responsibility, poor health and retirement.
Press Ganey® inpatient experience
index grand mean score (out of 100)
Controllable employee
turnover rate2
Gallup® employee engagement
grand mean score (out of five)
Group1
83.9
2019:
84.5
Hirslanden
10.0%
2019:
6.9%
Group
3.99
2019:
3.98
Hirslanden1
88.3
2019:
87.4
Mediclinic
Southern Africa
7.6%
2019:
7.6%
Hirslanden
4.00
2019:
4.01
Mediclinic
Southern Africa
82.7
2019:
82.0
Mediclinic
Middle East
7.2%
2019:
6.7%
Mediclinic
Southern Africa
3.97
2019:
3.94
Mediclinic
Middle East
86.0
2019:
85.6
Employees showing high levels of
engagement3 as a percentage of
total workforce
Mediclinic
Middle East
4.00
2019:
4.02
Training spend as approximate
percentage of payroll
Total absenteeism rate5
Group
46%
2019:
45%
Hirslanden4
5.5%
2019:
4.6%
Hirslanden
4.4%
2019:
4.4%
Hirslanden
46%
2019:
45%
Mediclinic
Southern Africa
3.4%
2019:
3.7%
Mediclinic
Southern Africa
2.5%
2019:
2.9%
Mediclinic
Southern Africa
46%
2019:
44%
Mediclinic
Middle East
0.8%
2019:
0.5%
Mediclinic
Middle East
0.8%
2019:
0.7%
Mediclinic
Middle East
45%
2019:
47%
Contribution to CSI6
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
CHF2.1m
2019
CHF2.1m
ZAR26.7m
2019
ZAR27.6m
AED2.3m
2019
AED1.4m
Notes
1 Current reporting period totals were impacted by an interruption in surveying at Hirslanden late in 2019. This negatively skewed the Group results as a
result of a large portion of the normal sample size not being available.
2 Increase in turnover rate contributable to the sale of Klinik Belair and a change in the term definition.
3 Gallup® defines engaged employees as those who are involved in, enthusiastic about and committed to their work and workplace.
4 Excludes on-the-job training.
5 Actual days lost expressed as a percentage of total days scheduled to be worked by the workforce during the year.
6 2019 figures reported are per financial year.
70
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
VALUE
=
CLINICAL
OUTCOMES
CLIENT
EXPERIENCE
COST
VALUE PROPOSITION
IMPORTANCE
Three critical areas define the value equation in healthcare –
clinical outcomes, client experience and cost.
At the heart of Mediclinic lies its Patients First philosophy,
supported by the organisational values of being client centred;
trusting and respectful; and patient safety focused. Mediclinic’s
value proposition is a key factor in pursuit of its purpose and
realisation of its vision.
The Group’s unique approach to the value equation is reported
on in the 2020 Clinical Services Report.
Value is only possible if all three aspects of the equation are
driven and supported by Mediclinic employees.
COST
Various Group initiatives focus on managing the affordability
of healthcare, including fair and transparent tariff negotiations,
need-based expansion, healthcare reform, and efficient and cost-
effective operations. The latter is achieved through streamlining
and centralising its procurement processes (refer to page 75).
71
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SUSTAINABLE DEVELOPMENT OVERVIEW
CONTINUED
FIRST CHOICE FOR EMPLOYEES
EMPLOYER OF CHOICE
A GROUP APPROACH
The Group 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, this function
is positioned as an enabling business partner
that can deliver visible, credible and value-
adding services.
EMPLOYEE OVERVIEW
FIGURE 2: TOTAL WORKFORCE1
GROUP
TOTAL 33 090
2019: 32 399
2018: 31 505
Switzerland
South Africa
& Namibia
10 307 16 063
2019: 10 442
2018: 9 635
2019: 15 804
2018: 16 068
The UAE
6 719
2019: 6 152
2018: 5 801
Note
1 Total workforce refers to permanent and fixed-term
employees. Mediclinic International plc has one employee
based in the UK.
Increase in Hirslanden workforce from 2018 to 2019 largely
attributable to acquisition of Clinique des Grangettes in
October 2018.
Increase in Mediclinic Southern Africa workforce from
2019 to 2020 largely attributable to the opening of new
day case clinics.
Increase in Mediclinic Middle East workforce from 2018 to
2020 largely attributable to overall business growth.
Q&A
What does being an employer of choice mean
for Mediclinic?
We want people to want to work for us. We want them
to see Mediclinic as the most exciting employer in the
healthcare industry. We strive to expose our people to new
and interesting challenges so that they can experience
growth in their working environment and have the
opportunity to excel in what they do best every day. We are
a values-driven organisation. Our people live these values in
a practical manner and reap the benefits of diversity in our
daily work. We want our people to not only enjoy what they
do, but understand that they are contributing to something
bigger: Mediclinic’s pursuit of its purpose to enhance the
quality of life. It’s not just about being an employee, it’s
about making a meaningful, sustainable contribution to the
communities in which we operate.
How does Mediclinic’s purpose of enhancing the
quality of life resonate with employees?
Most of our frontline healthcare employees choose their
profession as a result of intrinsic motivation rather than for
financial gain. In this sense, the purpose of our Company
– simply put, the reason why we exist – is aligned to our
employees’ motivation: to enhance the quality of life of our
clients. To be the employer of choice, we must focus on this
intrinsic motivation and constantly ensure high employee
engagement levels.
What is the biggest challenge to realising this goal?
As a listed company, we have to manage meeting the
expectations of various stakeholders and supporting the
intrinsic motivation of our employees – many perceive
this as a trade-off. The global healthcare industry is under
pressure to offer affordable, quality service to communities
and healthcare insurers. We must thus operate in an
effective and efficient manner throughout. It is important to
include our employees in reconciling these ambitions and to
ensure they understand how affordable healthcare services
contribute to our clients’ quality of life.
Refer to page 40 of the 2020 Sustainable Development
Report for the full interview.
72
Mr Magnus Oetiker, Group Chief Human Resources and Corporate Development Officer, shares how strengthening Mediclinic’s reputation as preferred employer pays off. MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
EMPLOYER OF CHOICE
EMPLOYEE OVERVIEW
RECRUITMENT
As an international healthcare provider, Mediclinic
competes in a very competitive employer market. Its
recruitment approach is reviewed regularly to ensure
it anticipates the industry challenges and changes,
as well as mitigates the global shortage of healthcare
professionals, specifically specialist nurses and
clinicians. In support thereof, Mediclinic also proactively
monitors global and regional industry and recruitment
trends.
In the year, a Group Careers Website was launched
in support of the Mediclinic strategic goal of
strengthening its position as the employer of choice.
This is the first step towards offering candidates a
seamless engagement experience with interaction
across the entire recruitment, selection and onboarding
process.
This system will serve as a central touch point to attract
best talent; manage internal recruitment processes;
and enhance candidates’ experiences and perceptions.
Mediclinic Middle East is the first division to fully make
use of this site. Implementation at Hirslanden and
Mediclinic Southern Africa will follow.
Employee value proposition and recruitment
marketing
The annual Your Voice employee engagement survey
is administered in partnership with the global analytics
and advisory leader, Gallup®. Every year the results are
scrutinised for generic themes that affect employee
engagement and retention.
In 2020, these results will be used to review the Group’s
employee value proposition from an internal employee
perspective and combined with external research
findings to form the basis of an enhanced and targeted
Group Recruitment Marketing Strategy.
Local hiring and global sourcing
The Group is committed to providing employment and
development opportunities to citizens in each of the
countries in which it operates. Employment of foreign
nationals is only considered where no suitable local
candidates with permanent residence can be found.
International sourcing becomes a viable option only
once all alternatives have been exhausted.
RETENTION
Retention strategies are aimed at understanding
patterns of turnover that exceed healthy turnover
benchmarks. An important tool in creating insight in
these patterns is by conducting exit interviews in a safe,
non-threatening manner.
to thrive and by creating an inclusive environment.
Annually, employees are invited to share their
perception of the workplace through the Your Voice
survey (see below), which provides the opportunity
to proactively assess employees’ sense of belonging
and whether they feel valued and empowered to do
their best every day.
Remuneration, benefits and rewards
The Group remunerates employees in a manner that
supports its purpose, vision, culture and strategic goals,
while attracting, retaining and motivating scarce skills.
In this, fair, reasonable and market-related remuneration
practices are maintained.
In line with the organisational value of high-
performance behaviour, employees are rewarded for
achieving strategic objectives which comprise financial
and operational objectives, including measures of
clinical performance. Eligible managers receive STI and
senior management receive a combination of STI and
long-term incentives.
Various additional benefits are offered to employees
throughout the Group with regional differences due to
local market practices and regulatory compliance.
EMPLOYEE ENGAGEMENT
Dialogue between management, employees and
stakeholders is crucial for the effective operation of any
organisation. Engagement is essential to protect two of
Mediclinic’s most important assets: its reputation and
its culture.
Mediclinic encourages and enables engagement
across employee levels and divisions via various
channels, including: the annual Your Voice employee
engagement survey and resultant action plans; training
and performance management; electronic and personal
communication; access to various supporting resources
such as interactive call centres, occupational health
clinics and programmes, an ethics line etc.
An Employee Engagement Report is submitted to the
Board of Directors twice a year.
Your Voice
Since 2015, Mediclinic, in partnership with Gallup®,
has 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.
Two of the most impactful ways to optimise retention
are by providing opportunities for a diverse workforce
In the year, more than 83% of employees completed the
survey, placing Mediclinic well above the 78% healthcare
industry benchmark.
73
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
More than 83% of employees
completed the survey, placing
Mediclinic well above the 78%
healthcare industry benchmark.
Training and development
The Group is dedicated to building a culture of
continuous development. By enhancing the skill-set
of its employees, Mediclinic empowers the entire
organisation and unlocks individual potential.
A global leadership development methodology
framework is established to ensure alignment of
leadership development objectives and sharing of best
practice, materials and tools to the benefit of the entire
organisation. Leadership dialogue is influenced at all
divisions, creating a shared language on managerial
level that, despite divisional differences, focuses on key
business areas.
Managers are held accountable for Your Voice employee
engagement action planning. This enables career
development discussions, as well as the identification
and management of training needs.
Succession planning
Talent reviews, which assess the pipeline to key Group
and divisional positions, are conducted annually and
are strengthened by the oversight of the Nomination
Committee, a committee of the Board of Directors, as
well as divisional talent review committees. An annual
Group Talent Review provides a holistic overview to
ensure a healthy pipeline to key roles.
A standardised process is followed, with divisional
considerations. The standardised Group-wide human
resources system assists with talent management by
empowering the relevant committees and line managers
with accurate and current information to identify high-
potential talent who can be assessed and develop
towards key roles. The talent management tools will
increasingly provide employees with greater access to
review and pursue career opportunities.
Leadership development opportunities, such as Group
and divisional leadership conferences, are used for
learning, collaboration and leadership development
to ensure insight into the future of Mediclinic and the
healthcare industry, and leadership’s contribution thereto.
Leadership networks are also explored and encouraged.
Successors are supported with tailored development
plans and progress is monitored. The plans are based on
a newly developed Group Competency Framework to
ensure bespoke development goals are aligned to the
competency requirements of each role and the Mediclinic
Group Strategy.
During the calendar year, the Group invested in
e-learning technology that provides managers across
the Group with access to a digital campus which
contains material on management development
subjects. Implementation has commenced, but will be
phased and continue during the coming year.
Performance management
Each division has a well-entrenched performance
management system that is based on best practice
principles, even though the process is not standardised
through the Group. The Group strategic goals serve
as the basis for planning of objectives, activities and
deliverables on a functional, departmental and individual
level.
Continuous performance conversations are encouraged,
with formal annual/six-monthly performance tracking
conversations between managers and employees.
Labour relations
Constructive relationships with employee
representatives are crucial to strengthening the
Group’s position as the employer of choice.
All policies and procedures are in accordance with
applicable local labour legislation and are evaluated
regularly to ensure they remain as such. Policies which
deal with employee matters (i.e. misconduct, incapacity,
and disciplinary and grievance procedures) are shared
during onboarding of new employees and are made
available to all employees.
Policy and guidelines govern action during workplace
disruption (i.e. industrial action) to minimise the impact
on healthcare services. Union representation is rare and
in most cases an elected workplace forum regularly
meets with facility management to ensure sound labour
relations.
74
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
DIVERSITY AND INCLUSION
Mediclinic strives to be truly diverse across all levels of
the organisation. In May 2019, the Board of Directors
approved a long-term Diversity and Inclusion Strategy
for meeting the Group’s strategic goals by way of a
diverse and inclusive Board of Directors and workforce.
Refer to the Nomination Committee Report on page
190 and to the Corporate Governance Statement
from page 144 for more detail and information on
representation at Board and executive level.
The diversity and inclusion initiative was launched
to leadership at the Mediclinic Group Conference in
October 2019, and subsequently introduced in the
annual Your Voice employee engagement survey.
The summarised employment equity report and
comprehensive information on diversity and inclusion
can be found in the 2020 Sustainable Development
Report.
WELLNESS AND SAFETY
To build a culture of wellness, Mediclinic takes a holistic
approach which includes physical, social, emotional,
occupational, environmental and financial support,
by offering a variety of onsite and offsite services
and activities across the Group. Health and safety
policies and procedures govern the health, safety and
cleanliness of all Mediclinic facilities.
OPTIMISED SUPPLY CHAIN
During 2019, the Group Executive Committee approved
a five-year group procurement vision to optimise end-
to-end supply chain performance. This will increase
spend visibility and streamline internal procedures,
governance and controls by embracing digital
technologies and analytics.
Refer to Strategy, goals and progress on page 36 and
the Divisional Reports from page 92 for initiatives to
improve cost-effectiveness.
Mediclinic’s Supply Chain Risk Management Policy
and Ethics Code, which are available on the Group’s
website, confirm that suppliers who, inter alia, support
the Group’s vision and brand are eligible and that the
Company relies on suppliers to deliver products and
services of the highest quality.
FUTURE WORKFORCE
In light of the continued global shortage of healthcare
employees and in line with its purpose to enhance the
quality of life, Mediclinic actively invests in the future
workforce. Across the divisions there are training
opportunities for healthcare students and support of
applicable studies.
CORPORATE SOCIAL INVESTMENT
The Group contributes to the wellbeing of the
communities within which it operates by investing in
continuing initiatives that address socio-economic
concerns. CSI activities are structured around the
improvement of healthcare through training and
education, sponsorships, donations, employee
volunteerism, public-private initiatives and joint ventures.
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 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 linked to the Group’s
operations or services by its suppliers or other
business relations;
• respect patients’ rights, including but not limited to
privacy, confidentiality, dignity, no discrimination, full
information on health status and treatment, a second
opinion, access to medical records, self-determination
and participation, refusal of treatment and the right to
complain;
• value diversity and equal opportunities for all in the
workplace; and
• not tolerate any form of unfair discrimination,
such as 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.
During 2019, no material incidents of discrimination,
violations involving rights of indigenous peoples and/or
human rights reviews or impact assessments were
observed or reported throughout the Group.
MODERN SLAVERY AND HUMAN TRAFFICKING
The Mediclinic Modern Slavery and Human Trafficking
Statement, which is available on the Group’s website,
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.
75
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT 154 CALLS ACROSS THE GROUP
SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED
COMPLY
MATERIAL ISSUE 3: BEING AN ETHICAL AND
RESPONSIBLE CORPORATE CITIZEN
To strengthen the corporate culture to remain an ethical and responsible corporate citizen
WHY THIS IS IMPORTANT TO THE BUSINESS
In its commitment to ethical behaviour, the Group enforces sound governance and compliance principles. An array
of policies, processes and standards support the Group’s compliance programmes and provide a framework for
business conduct and ethics.
These policies are intended to support an environment in which the organisational values of the Group are
embraced and lived daily by encouraging a culture of transparency and vigilance. It is shared and adopted by all
relevant employees and, where necessary, training is provided. A targeted drive to enhance awareness is planned for
the next reporting period.
RISKS TO THE BUSINESS
• Fines and possible prosecution
• 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
MITIGATION OF RISKS
• Group Sustainable Development
Strategy with governance
objectives
• 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
and Internal Audit functions
• Compliance risks assessed as
part of risk management process,
including regular internal self-
assessments, with necessary
advice and support by the
various company secretarial and
legal departments within the
Group
• Group Compliance and Data
Protection Manager appointed
to implement compliance
framework and monitor
compliance maturity
• Emergency preparedness
76
MATERIAL ISSUE 3 IN NUMBERS
Calls to ethics lines1
Investment in capital projects
and new equipment2
Group
Hirslanden
Mediclinic
Southern
Africa
Mediclinic
Middle
East
154
2019: 131
27
2019: 28
118
2019: 83
9
2019: 20
Group
£108m
2019: £148m
Hirslanden
CHF51m
2019: CHF55m
Mediclinic
Southern
Africa
ZAR582m
2019: ZAR506m
Mediclinic
Middle
East
AED174m
2019: AED376m
Investment in equipment
replacement and property upgrades2
Expenditure on repair
and maintenance2
Group
£84m
2019: £83m
Group
£68m
2019: £53m
Hirslanden
CHF43m
2019: CHF40m
Hirslanden
CHF48m
2019: CHF41m
Mediclinic
Southern
Africa
ZAR730m
2019: ZAR672m
Mediclinic
Southern
Africa
ZAR286m
2019: ZAR262m
Mediclinic
Middle
East
AED46m
2019: AED76m
Mediclinic
Middle
East
AED67m
2019: AED33m
Notes
1 Sixteen high-priority cases were reported to the Group’s ethics lines during the calendar year, 14 have
been investigated and closed, while two are still under investigation.
2 As capital expenditure is audited annually by the external auditor, PwC, the amounts disclosed are
per financial year.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The Group adopts zero tolerance to
unethical business conduct, including
bribery, fraud and corruption.
ETHICS, ANTI-BRIBERY AND
ANTI-CORRUPTION
Mediclinic’s position as trusted
healthcare provider is underpinned by
its commitment to ethical standards.
The Group’s Ethics Code guides
principled business conduct. A three-
year compliance monitoring programme
exists and a Group-wide anti-bribery and
corruption campaign is planned.
The Group adopts zero tolerance to
unethical business conduct, including
bribery, fraud and corruption.
Any employee or external stakeholder
is able to anonymously report any
wrongdoing throughout the Group
in confidence to the ethics lines.
All reports are dealt with in a non-
discriminatory manner. No form of
retaliation against an employee or other
person making a report in good faith
shall be tolerated. A dedicated ethics
contact person per division is available
to deal with matters pertaining to
the Ethics Code. Over the years, the
majority of calls were of a grievance
nature. Only in exceptional cases has
information been received which led to
the discovery of unethical, corrupt or
fraudulent behaviour.
The Group’s Anti-bribery Policy governs
the granting and acceptance of gifts,
hospitality and entertainment, which
will only be approved if it is acceptable
business practice, there is a proper
business case and no potential
to adversely affect Mediclinic’s
reputation. 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.
Refer to Risk management, principal
risks and uncertainties on page 119 and
the Audit and Risk Committee Report
on page 170 for more information on the
Group’s management of these matters.
A summary of the Group’s approach to
clinical ethical issues is set out in the
Clinical services overview on page 61.
During 2019, 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 paid in
this regard.
MAINTAINING HIGH-QUALITY
HEALTHCARE INFRASTRUCTURE
To ensure a safe and user-friendly
environment for both its patients and
employees, the Group continuously
invests in capital projects, new
equipment to expand and refurbish
its facilities, replacement of existing
equipment, and the repair and
maintenance of existing property
and equipment. Refer to the Group
Chief Executive Officer’s Report on
page 28, Strategy, goals and progress
on page 36 and the Divisional Reports
from page 92 for more information.
The process of independent assurance
and external accreditation ensures that
international standards are adhered to
in all aspects of hospital operations.
For more details on accreditation, refer
to page 71 of the 2020 Sustainable
Development Report.
CALLING OUT
UNETHICAL
BEHAVIOUR
Independently
operated
ethics line
Number
widely
published
Anonymous,
confidential
reporting
Reports
referred for
investigation
No discrimination
or retaliation for
whistleblowing
Risk services
monitor
investigation
and actions
Quarterly reports
to Audit and Risk
Committee
Regular feedback to
Clinical Performance
and Sustainability
Committee
77
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT GROUP CHIEF
FINANCIAL
OFFICER’S
REPORT
FOCUSING OUR FINANCIAL
STRENGTHS TO SUPPORT
OUR CRITICAL ROLE
Mr Jurgens Myburgh
Group Chief Financial Officer
The Group is well
positioned to face
the uncertainty and
anticipated financial
impact of the
COVID-19 pandemic.
INTRODUCTION
In fulfilling its vital role in combatting
the COVID-19 pandemic, Mediclinic
must emphasise the safety of its
people and patients; seek to ensure
the continuity of operations in a
responsible manner; and deliver the
Group strategy while adapting to the
changing healthcare environment.
The severity, duration and full impact
of the COVID-19 pandemic and
its economic aftermath on all
businesses, including Mediclinic,
remain uncertain. The Group’s focus
is not to predict the exact outturn,
but to prepare for potential
outcomes that seem reasonably
possible.
The Group has put in place
appropriate structures and
processes to monitor and mitigate
against existing and emerging risks
to the business. While recognising
the ongoing acute care and
emergency services offered across
the Group which underpin revenues,
there remains a risk to elective
procedures and outpatient
activity from a continuation or
reintroduction of lockdown and
other measures in response to the
pandemic; the availability of staff;
and a disruption in the supply chain.
These will be partially offset by
the Group’s response to the crisis,
and the potential increase in
demand from postponed elective
procedures and outpatient activity
as restrictions are relaxed. Despite
the measures taken, there remains
a significant risk to the Group’s
financial performance for at least
the next 12 months.
To financially plan for the impact of
the pandemic, the Group analysed
monthly scenarios informed by
epidemiological forecasts; the
anticipated medium-term economic
impact of lockdown and other
measures in response to the
pandemic; and its combined
estimated impact on revenue,
profitability and cash flows. For
ease of reference, the Group
has defined the phases and
a description of the operating
environments.
78
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT PHASE
DESCRIPTION OF OPERATING ENVIRONMENT
PREPARE
Pre-
COVID-19
• Prior to the outbreak of COVID-19, the Group had in place well-established IPC measures,
processes and protocols
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
PROTECT AND RESPOND
Initial
COVID-19
• Social lockdowns implemented which largely include restrictions on elective procedures
and outpatient activity during the early stages of the spread of COVID-19 to help ensure
necessary resources are made available
• Positive COVID-19 cases in hospitals build from relatively low numbers while acute and
emergency care mostly continues
• Expected to be the period which has the most material impact on the Group’s financial
performance
ADAPT
Standard
operations
resume
alongside
COVID-19
REFORM
COVID-19
rescinds
• New protocols and operating practices introduced to allow the safe and efficient gradual
reintroduction of elective procedures and outpatient activity as lockdown measures are relaxed
• Pent-up demand for postponed elective procedures likely to support initial volumes
• Introduce telemedicine and home delivery of medication to reduce visits to healthcare
facilities
• Intermittent spikes in COVID-19 cases within countries or specific regions may temporarily
affect operations and require additional facility capacity and resources
• Provide frontline hospital employees and affiliated doctors with clear instructions and
necessary PPE while reassuring patients during this uncertain period through continuous
engagement
• A new healthcare landscape emerges
• The Group will be presented with new opportunities and challenges as it continues to deliver
on its purpose of enhancing the quality of life and vision of being the partner of choice that
people trust for all their healthcare needs
• Respond appropriately to trends and accelerate strategic initiatives
April 2020 represented the
aforementioned ‘Protect and respond’
period across the Group with revenue,
in constant currency, down around
35% versus the prior period. The
revenue decline in April 2020
compared with the prior period at a
divisional level was 30% at Hirslanden,
40% at Mediclinic Southern Africa
and 30% at Mediclinic Middle East. As
a result of the relatively high fixed
cost base associated with operating
acute care hospitals, the revenue
declines in April 2020 materially
impacted EBITDA in all divisions. In
April 2020, the EBITDA loss was
CHF15m at Hirslanden, ZAR100m
at Mediclinic Southern Africa and
AED10m at Mediclinic Middle East.
The Group EBITDA loss, in constant
currency, was around £20m
compared with a profit of £40m in
April 2019.
The relaxing of initial social lockdown
measures and the phased
reintroduction of elective procedures
and outpatient activity has occurred
across the Group. The latter began
in Switzerland from 27 April 2020, in
South Africa from 1 May 2020 and
in Dubai from 8 May 2020. In Abu
Dhabi, no restrictions were imposed
on elective procedures.
In this context, the Group has
observed noticeable increases in
inpatient admissions and outpatient
attendance throughout May 2020 in
line with the aforementioned ‘Adapt’
period. In May 2020, the Group
expects, in constant currency, a
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
79
sequential monthly improvement in
revenue up around 30%, while down
around 15% versus the prior period,
with the impact at a divisional level
expected to be down around 5% at
Hirslanden, around 25% at Mediclinic
Southern Africa and around 20% at
Mediclinic Middle East. Given the
operating leverage of the Group
and the improved revenue trends
observed in May 2020, the Group
expects to deliver a material
sequential improvement in EBITDA,
with indications that all three divisions
will make a positive contribution.
Given the seasonal increase in
demand during the second half of the
year, as typically experienced at
Hirslanden and Mediclinic Middle East,
the Group EBITDA performance is
expected to improve in the second
half of FY21 compared with the first
half of FY21. During the ‘Adapt’
period, there may be times when
restrictions are temporarily
reintroduced. If these are prolonged
periods, the Group would review and
consider optimising costs accordingly.
The observed trading in April and
May 2020, along with the respective
categories outlined on page 79,
provide, in the absence of FY21
guidance, a basis on which to monitor
trends and the potential impact of
future government interventions
across geographies which will drive
the performance of the Group during
this period of uncertainty. These
trends are presented not as guidance
or a forecast, but to demonstrate how
the Group is likely to perform during
the different phases of the pandemic,
without seeking to predict which
outcome is most likely.
For the purposes of assessing
liquidity and going concern, the
Group has modelled scenarios
reflecting suitable assumptions over
the next 12–18-month period that
serve to inform the decisions the
Group takes regarding future cost
savings, cash generation, debt
covenants and levels of investment.
The Group’s financial performance to
date in FY21 across all three divisions
has been ahead of the modelled
scenarios. In addition, due to the
proactive response taken by the
Group to maintain its liquidity
position, over the two-month period
since the end of FY20, the cash and
available facilities of the Group were
around £490m, demonstrating the
operational resilience and financial
discipline across the Group.
As part of the Group’s proactive
response to maintaining its liquidity
position and optimising its response
to the crisis, a broad range of
consequent actions was taken
including:
• All non-urgent and non-committed
capital programmes have been
postponed or reduced during the
initial months of the pandemic;
• Non-essential administrative costs
generally and relating to projects
specifically have been postponed
or reduced;
• Measures have been taken to
further optimise working capital
management;
• Loan amortisation payments have
been deferred, where possible;
• The Board has taken the decision
to suspend the dividend – it
recognises the importance of the
dividend to shareholders and will
keep this position under review;
• Executive directors’ annual salary
increases and STI have been
suspended; and
• Salary increases have been
postponed for all managerial
positions (at Mediclinic Middle East
for all employees) while such
increases for facility-based frontline
employees were implemented to
honour their engagement in
combatting the COVID-19
challenges.
Additional mitigating steps are
available to the Company if required,
including further reductions in
operating costs, rent waivers and
government intervention packages.
These steps, if introduced, would
provide additional support to the
liquidity analysis and modelled
scenarios. In addition, a level of
discretionary capital expenditure has
been retained, largely during the
second half of FY21, which could be
further curtailed in the short-term, if
required.
The Group’s original FY21 capex
budget, in constant currency, is
£243m (FY20: £192m). The current
monthly expenditure run rate is
approximately 25% of the original
budget and is expected to increase as
the impact of COVID-19 on the
business passes. The Group will
continue to monitor operating cash
flow generation and consequent
liquidity to revisit this important
investment decision.
At 31 March 2020, the Group had
material headroom to covenants in its
existing borrowings and a strong
liquidity position heading into the
global pandemic. The cash and
available facilities of the Group at
year-end were £518m and the Group
leverage ratio was 3.4x (excluding
IFRS 16 lease liabilities). A further
unutilised bank facility in Switzerland
of CHF250m was re-activated after
year-end as part of the proactive
measures taken with lenders. Across
the Group, prompt payment by
insurers in addition to the proactive
measures taken by the Group to
preserve liquidity have supported
efforts to improve working capital.
Based on the assumptions applied
and the effect of mitigating actions
set out above, all within the control of
the Group, the analyses demonstrate
that the divisions will continue to be
able to meet their obligations for the
periods modelled.
Debt is ring-fenced to each division,
with no cross guarantees or cross
defaults. Borrowings are denominated
in the same currency as the divisions’
underlying revenue and therefore not
exposed to foreign exchange rate
risk. All three divisions have recently
refinanced their debt and, therefore,
maturities are relatively long dated.
The nearest term material maturity is
80
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT a Swiss bond for CHF145m due in
February 2021. The unutilised bank
facility of CHF250m is available to fully
repay the bond.
As a matter of prudence, the divisions
proactively engaged with lenders to
obtain certain covenant test waivers
where the financial impact from the
disruption caused by COVID-19 may
have resulted in covenants being
exceeded before coming back into
compliance as operations normalise.
For Mediclinic Middle East, the first of
such waived covenant compliance
tests are to be performed at the end of
June 2021, whereas for Mediclinic
Southern Africa and Hirslanden this will
be performed at the end of September
2021. All remaining covenant tests have
sufficient headroom based on the
range of modelled scenarios.
While there are no alternative
covenants at Hirslanden and Mediclinic
Southern Africa, at Mediclinic Middle
East there is an interim covenant based
on agreed targets which provides
appropriate headroom on the
modelled scenarios. If required, the
Group has the opportunity to mitigate
any potential covenant breach. The
Mediclinic Middle East waived financial
covenants may be reintroduced from
the second half of FY21 dependent on
improved operational performance and
at mutually agreed new levels based
on revised forecasts. Pending this
agreement, the interim covenant will
remain in place until and including
31 March 2021. This approach is
evidence of the long-term, supportive
and constructive relationships with the
Group’s lenders aimed at addressing
matters as they arise.
Mr Jurgens Myburgh
Group Chief Financial Officer
1 June 2020
Q&A
WITH MR JURGENS MYBURGH
What has been the key challenge of COVID-19 from
a financial perspective?
Understandably, COVID-19 has introduced unprecedented
levels of uncertainty into the clinical and operating
environment, which meant that from a finance perspective
we needed to consider various financial scenarios to inform
contingency plans aimed at protecting the liquidity and
financial sustainability of the Group. I’m pleased to say that
across the Group we have proactively taken necessary steps
to support this position. This allows the Group to focus on
the vital role it plays during the pandemic and to prepare
for the anticipated increase in demand from postponed
treatments once the peak of the pandemic subsides.
How do you think about the landscape of healthcare
post-COVID-19?
I think first and foremost we need to focus on the health
and wellbeing of our patients, supporting doctors and
employees during this international crisis. In trying to think
beyond that, it is possible that healthcare might become
more digitally oriented with groups like Mediclinic
demonstrating the benefits from having geographic
diversification and breadth of services, skills and expertise
across the healthcare continuum. This will continue to
inform how we think about allocating capital across a
multitude of opportunities to optimise value creation for the
Group and shareholders.
What have you learned from the current crisis and
its potential aftermath?
Again, our philosophy and culture of Patients First, which
has always been a key strength of the business, has
informed how we respond to the crisis. From a financial
perspective, the importance of cash flow generation,
liquidity and the strength of relationships with financial
partners that understand the business and are willing and
able to support it through something like this are crucial and
we are sincerely appreciative of how our partners have
responded to our requirements. We pride ourselves on open
and transparent engagement with all stakeholders and the
benefits of this approach have already become apparent as
we navigate the crisis.
81
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT FINANCIAL REVIEW
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 they
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:
• they track the adjusted operational
performance of the Group and its
operating segments by separating
out exceptional items;
• they are used by management for
budgeting, planning and monthly
financial reporting;
• they are used by management in
presentations and discussions with
investment analysts; and
• they are used by the directors in
evaluating management’s
performance and in setting
management incentives.
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;
• remeasurement of redemption
liability (written put option) due to
changes in estimated performance;
• impairment charges and reversal of
impairment charges;
• insurance proceeds; and
• tax impact of the above items,
prior reporting period 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
in reporting 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 reporting period. It is the Group’s
intention to continue to consistently
apply this definition in the future.
GROUP FINANCIAL PERFORMANCE
The Group adopted the new IFRS 16
Leases on 1 April 2019 using the
simplified approach. Consequently,
comparative information was not
restated. For comparative purposes,
the FY20 results are also presented
on a pre-IFRS 16 basis. The section
On an IFRS 16 basis,
the Group’s FY20
revenue was £3 083m,
adjusted EBITDA
£541m, adjusted
operating profit
£327m, adjusted
earnings £177m
and adjusted
EPS 24.0 pence.
82
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
on ‘Earnings reconciliations’ provides
a detailed reconciliation and
comparison between IFRS 16 and
pre-IFRS 16 financial results for the
year under review.
On an IFRS 16 basis, the Group’s
FY20 revenue was £3 083m,
adjusted EBITDA £541m, adjusted
operating profit £327m, adjusted
earnings £177m and adjusted EPS
24.0 pence.
PRE-IFRS 16
On a pre-IFRS 16 basis, the Group’s
revenue increased by 5% to £3 083m
(FY19: £2 932m) and EBITDA was
down 3% to £480m (FY19: £493m).
The adjusted EBITDA margin declined
from 16.8% to 15.6%.
Depreciation and amortisation was up
2% to £171m (FY19: £168m). Adjusted
depreciation and amortisation was
up 5% to £171m (FY19: £163m) in line
with expectations and due to the
continued investment to support
growth and to enhance patient
experience and clinical quality.
The Group recorded an operating loss
of £199m (FY19: profit of £81m).
Adjusted operating profit was down
5% to £312m (FY19: £330m).
Operating profit was adjusted for the
following exceptional items:
• recognition of an impairment
charge to Mediclinic Middle East
goodwill of £481m. In line with the
requirements of IFRS, the Group
performed an annual review of
the carrying value for goodwill.
Changes in the Dubai and Abu
Dhabi market that became evident
during the annual financial planning
exercise for FY21 and future years
affected key inputs to the review
that gave rise to impairment
charges against goodwill of £481m.
The Mediclinic Middle East goodwill
was carried at £1 340m, at the
previous year-end balance sheet
date of 31 March 2019. The
impairment charge is non-cash;
• recognition of an impairment
charge to Hirslanden fixed assets.
Non-financial assets are considered
for impairment when impairment
indicators are identified at an
individual cash-generating unit
(‘CGU’) level. At the end of the
reporting period, CGUs were tested
for impairment and the carrying
value of one CGU was determined
to be higher than its recoverable
amount and, as a result, an
impairment charge of £33m
was recognised in the income
statement;
• impairment reversal of £4m relating
to Hirslanden properties;
• impairment charges of £2m relating
to Mediclinic Southern Africa; and
• fair value adjustments on derivative
contracts of £1m.
Prior reporting period operating
profit was adjusted for the following
exceptional items:
• recognition of an impairment
charge of £186m to property,
equipment and vehicles to
individual CGUs at Hirslanden;
• recognition of an impairment
charge of £39m and £16m to
Hirslanden and Linde trade names
respectively;
• accelerated depreciation of £5m in
Hirslanden relating to abandoned
building project cost; and
• a loss on disposal of certain
non-core businesses at Mediclinic
Middle East of £1m.
Net finance costs are up by 9% at
£62m (FY19: £57m) mainly due to the
remeasurement of the redemption
liability of £5m related to Clinique des
Grangettes. Adjusted net finance cost
was flat at £57m.
The Group’s reported effective tax
rate of (9.3)% (FY19: 5.4%) is
significantly skewed mainly due to
the impairment charges at Mediclinic
Middle East and Hirslanden of £514m
and the reduction of Swiss property
deferred tax liabilities of £29m
resulting from corporate tax reforms
in Switzerland. Adjusted taxation was
£57m (FY19: £57m) with an adjusted
effective tax rate for the reporting
period of 22.2% (FY19: 20.4%).
The Group recorded a loss
attributable to equity holders of
£315m in FY20 (FY19: loss of £151m).
Adjusted earnings were down 8% at
£182m (FY19: £198m). Adjusted EPS
were down 8% at 24.7 pence (FY19:
26.9 pence).
Earnings were further adjusted for the
following exceptional items:
• At the year-end, the Group
performed an impairment test of its
equity investment in Spire. Key
assumptions applied in the value-
in-use calculation were updated
and as a result an impairment loss
of £10m was recorded against the
carrying value.
The prior reporting period reported
loss was adjusted for the following
exceptional items:
• recognition of an impairment
charge on the equity investment in
Spire of £164m; and
• a change in the basis of estimating
deferred tax on the Swiss
properties giving rise to a tax credit
of £17m.
The tables on the next pages show
the reconciliation from reported to
adjusted results on an IFRS 16 and on
a pre-IFRS 16 basis and the table
thereafter shows the adjustments
required to reconcile between these
two bases.
83
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT EARNINGS RECONCILIATIONS – IFRS 16 EARNINGS RECONCILIATION
FY20 Statutory results
Revenue
Operating (loss)/profit
(Loss)/profit attributable to
equity holders1
Reconciliations
Total
£’m
3 083
(184)
(320)
Hirslanden
£’m
1 438
90
60
Mediclinic
Southern
Africa
£’m
907
149
Mediclinic
Middle East
£’m
737
(423)
Spire
£’m
Corporate
£’m
–
–
1
–
71
(442)
(8)
(1)
Operating (loss)/profit
(184)
90
149
(423)
–
126
(4)
33
–
–
37
–
1
1
245
188
(1)
53
–
–
481
110
188
149
110
(423)
245
90
(4)
33
–
–
119
60
5
(4)
33
–
–
–
(26)
(3)
65
–
1
1
–
151
71
–
–
1
1
–
–
–
–
–
–
481
(1)
57
–
–
–
481
(1)
–
–
–
73
38
–
–
–
–
–
–
-
–
–
–
–
–
–
–
–
(3)
1
–
–
–
(2)
(2)
–
–
–
–
–
–
–
–
–
–
–
10
–
–
2
–
–
–
–
–
–
–
–
(1)
(442)
(8)
(1)
Add back:
Other gains and losses
Depreciation and amortisation
Reversal of impairment of
property
Impairment of property,
equipment and vehicles
Impairment of intangible assets
EBITDA
No adjustments
Adjusted EBITDA
Operating (loss)/profit
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
(4)
217
(4)
34
482
541
541
(184)
(4)
34
- Impairment of intangible assets
482
- Fair value adjustments on
derivative contracts
(1)
Adjusted operating profit/(loss)
327
(Loss)/profit attributable to
equity holders1
- Remeasurement of redemption
liability (written put option)
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
- Impairment of intangible assets
- Fair value adjustments on
derivative contracts
- Impairment of associate
- Tax rate changes2
- Tax on exceptional items
Adjusted earnings
Weighted average number of
shares (millions)
Adjusted EPS (pence)
(320)
5
(4)
34
482
(1)
10
(26)
(3)
177
737.2
24.0
84
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT EARNINGS RECONCILIATIONS – PRE-IFRS 16 EARNINGS RECONCILIATIONS
FY20 Statutory results
Revenue
Operating (loss)/profit
(Loss)/profit attributable to
equity holders1
Reconciliations
Total
£’m
3 083
(199)
(315)
Hirslanden
£’m
1 438
87
62
Mediclinic
Southern
Africa
£’m
907
145
Mediclinic
Middle East
£’m
737
(431)
Spire
£’m
Corporate
£’m
–
–
1
–
71
(439)
(8)
(1)
Operating (loss)/profit
(199)
87
145
(431)
Add back:
Other gains and losses
Depreciation and amortisation
Reversal of impairment of
property
Impairment of property,
equipment and vehicles
Impairment of intangible assets
EBITDA
No adjustments
Adjusted EBITDA
Operating (loss)/profit
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
- Impairment of intangible assets
- Fair value adjustments on
derivative contracts
(4)
171
(4)
34
482
480
480
(199)
(4)
34
482
(1)
Adjusted operating profit/(loss)
312
(Loss)/profit attributable to
equity holders1
- Remeasurement of redemption
liability (written put option)
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
- Impairment of intangible assets
- Fair value adjustments on
derivative contracts
- Impairment of associate
- Tax rate changes2
- Tax on exceptional items
Adjusted earnings
Weighted average number of
shares (millions)
Adjusted EPS (pence)
(315)
5
(4)
34
482
(1)
10
(26)
(3)
182
737.2
24.7
–
97
(4)
33
–
–
33
–
1
1
213
180
180
145
–
1
1
–
147
71
–
–
1
1
–
–
–
–
213
87
(4)
33
–
–
116
62
5
(4)
33
–
–
–
(26)
(3)
67
(1)
40
–
–
481
89
89
(431)
–
–
481
(1)
49
–
–
–
481
(1)
–
–
–
73
41
Notes
1 Profit attributable to equity holders in Hirslanden is shown after the elimination of intercompany loan interest of £17m.
2 Tax rate changes of £26m are shown after taking non-controlling interest of £3m into consideration.
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(3)
1
–
–
–
(2)
(2)
–
–
–
–
–
–
–
–
–
–
–
10
–
–
2
–
–
–
–
–
–
–
–
(1)
85
(439)
(8)
(1)
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT EARNINGS RECONCILIATIONS – IFRS 16/PRE-IFRS 16 ADJUSTMENTS
Hirslanden
£’m
Mediclinic
Southern
Africa
£’m
Mediclinic
Middle East
£’m
–
(3)
2
–
(4)
–
–
(8)
3
Total
£’m
–
(15)
5
(15)
(3)
(4)
(8)
–
(46)
–
(29)
–
(4)
–
(13)
–
–
–
–
–
–
–
–
–
–
–
–
(61)
(32)
(8)
(21)
(61)
(15)
(32)
(3)
(8)
(4)
(21)
(8)
–
–
–
–
(3)
2
–
–
–
–
–
–
–
–
2
–
–
–
–
(4)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(8)
3
–
–
–
–
–
–
–
–
3
FY20 Statutory results
Revenue
Operating (loss)/profit
Profit/(loss) attributable to equity
holders
Reconciliations
Operating (loss)/profit
Add back:
Other gains and losses
Depreciation and amortisation
Reversal of impairment of
property
Impairment of property,
equipment and vehicles
Impairment of intangible assets
EBITDA
No adjustments
Adjusted EBITDA
Operating (loss)/profit
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
- Impairment of intangible assets
- Fair value adjustments on
derivative contracts
–
–
–
–
Adjusted operating (loss)/profit
(15)
Profit/(loss) attributable to equity
holders1
- Remeasurement of redemption
liability (written put option)
- Reversal of impairment of
property
- Impairment of property,
equipment and vehicles
- Impairment of intangible assets
- Fair value adjustments on
derivative contracts
- Impairment of associate
- Tax rate changes
- Tax on exceptional items
Adjusted earnings
Weighted average number of
shares (millions)
Adjusted EPS (pence)
5
–
–
–
–
–
–
–
–
5
–
0.7
86
Spire
£’m
Corporate
£’m
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
–
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT EARNINGS RECONCILIATIONS – PRE-IFRS 16 2019 EARNINGS RECONCILIATIONS
FY19 Statutory results
Revenue
Operating profit/(loss)
(Loss)/profit attributable to
equity holders1
Reconciliations
Total
£’m
2 932
81
Hirslanden
£’m
1 368
(123)
Mediclinic
Southern
Africa
£’m
886
157
(151)
(102)
72
Mediclinic
Middle East
£’m
677
49
43
Operating profit/(loss)
81
(123)
157
49
Add back:
Other gains and losses
Depreciation and amortisation
Impairment of properties
Impairment of intangible assets
EBITDA
No adjustments
Adjusted EBITDA
Operating profit/(loss)
- Impairment of properties
- Impairment of intangible assets
- Accelerated depreciation and
amortisation
- Fair value adjustments on
derivative contracts
- Loss on disposal of businesses
3
168
186
55
493
493
81
186
55
5
2
1
–
101
186
55
219
219
(123)
186
55
5
–
–
(1)
31
–
–
187
187
157
–
–
–
–
–
Adjusted operating profit/(loss)
330
123
157
(151)
(102)
72
(Loss)/profit attributable to
equity holders1
- Impairment of properties
- 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 EPS (pence)
186
55
5
–
–
–
(17)
(47)
80
186
55
5
2
1
164
(17)
(47)
198
737.2
26.9
–
–
–
–
–
–
–
–
3
36
–
–
88
88
49
–
–
–
2
1
52
43
–
–
–
2
1
–
–
–
72
46
Note
1 Profit attributable to equity holders in Hirslanden is shown after the elimination of intercompany loan interest of £16m.
Spire
£’m
Corporate
£’m
–
–
(161)
–
–
–
–
–
–
–
–
–
–
–
–
–
–
(161)
–
–
–
–
–
164
–
–
3
1
(2)
(3)
(2)
1
–
–
–
(1)
(1)
(2)
–
–
–
–
–
(2)
(3)
–
–
–
–
–
–
–
–
(3)
87
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT IFRS 16 LEASES
The Group adopted the new IFRS 16
Leases standard effective on 1 April
2019. Since the Group has applied the
simplified approach on adoption,
comparative figures were not restated.
The effect of the adoption of IFRS 16
on the income statement is as follows:
• EBITDA increased by £61m;
• Depreciation charge increased
by £46m;
The effect of the adoption of IFRS 16
on the statement of financial position:
• Opening retained earnings
• Operating profit increased
decreased by £37m;
by £15m;
• Finance costs increased by £21m;
and
• Right-of-use asset of £640m
booked on 1 April 2019; and
• Lease liability of £665m booked
• Profit for the reporting period
on 1 April 2019.
decreased by £5m.
RECONCILIATION OF ADJUSTED IFRS 16 AND PRE-IFRS 16 NUMBERS PER DIVISION
IFRS 16 TABLE
Adjusted EBITDA
Adjusted depreciation and amortisation
Adjusted operating profit
Adjusted finance cost
Adjusted earnings
IFRS 16
£’m
Hirslanden
£’m
Mediclinic
Southern
Africa
£’m
Mediclinic
Middle East
£’m
541
217
327
92
177
(32)
(29)
(3)
(6)
2
(8)
(4)
(4)
(4)
–
(21)
(13)
(8)
(11)
3
Pre-IFRS 16
£’m
480
171
312
71
182
FOREIGN EXCHANGE RATES
Although the Group reports its results
in sterling, the divisional profits are
generated in Swiss franc, South
African rand and UAE dirham.
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 £175m
(FY19: £142m) and was credited to
the statement of comprehensive
income. The main reason for the
increase was the strengthening of the
year-end Swiss franc and UAE dirham
rates against the 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 reporting period would increase/
decrease by £7m (FY19: increase/
decrease by £8m) 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 reporting period
would increase/decrease by £9m
(FY19: increase/decrease by £7m)
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 reporting period would
increase/decrease by £4m (FY19:
increase/decrease by £5m) due to
exposure to the £/AED exchange rate.
During the reporting period, the
average and closing exchange rates
were as follows:
Average rates
Swiss franc
South African rand
UAE dirham
Year-end rates
Swiss franc
South African rand
UAE dirham
88
FY20
FY19
1.25
18.76
4.67
1.20
22.08
4.56
1.30
18.01
4.82
1.30
18.90
4.79
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CASH FLOW
The Group continued to deliver strong cash flow and converted 109% (FY19: 91%) of adjusted EBITDA into cash
generated from operations.
Cash from operations (a)
Adjusted EBITDA (b)
Cash conversion ([a]/[b] x 100)
FY20
£’m
589
541
109%
FY19
£’m
451
493
91%
INTEREST-BEARING BORROWINGS
Interest-bearing borrowings decreased from £1 982m at 31 March 2019 to £1 951m at 31 March 2020. The change in the
closing balance is mainly due to a stronger Swiss franc closing rate against the sterling offset by Swiss loan repayments.
Borrowings
Lease liabilities
Less: cash and cash equivalents
Net debt
Total equity
Debt-to-equity capital ratio
FY20
£’m
1 951
703
(329)
2 325
3 003
77.4%
FY19
£’m
1 982
-
(265)
1 717
3 266
52.6%
ASSETS
Property, equipment and vehicles
increased from £3 524m at 31 March
2019 to £4 358m at 31 March 2020,
mainly due to the inclusion of
right-of-use assets of £675m at
31 March 2020 due to the adoption
of the IFRS 16 Leases standard. The
increase also included £221m on
capital projects and fixed asset
additions in line with the continued
investment programme expanding
the asset base to support growth
and enhance patient experience
and clinical quality. In addition
to the depreciation charge, the
balance was further reduced by
the impairment charge of £33m
recognised on fixed assets in
Hirslanden and increased by
the change in the closing exchange
rate.
Intangible assets decreased from
£1 586m at 31 March 2019 to £1 171m
at 31 March 2020 mainly due to
the impairment charge of £481m of
Mediclinic Middle East goodwill. The
closing balance increased by the
change in the closing exchange rates.
Adjusted and reported depreciation
and amortisation was calculated as
follows:
IFRS 16
FY20
£’m
Pre-IFRS 16
FY19
£’m
Pre-IFRS 16 depreciation and amortisation
IFRS 16 depreciation on right-of-use assets
Reported depreciation and amortisation
Accelerated depreciation and amortisation
Adjusted depreciation and amortisation
171
46
217
-
217
In line with the continued investment to support growth and to enhance patient experience and clinical quality,
the adjusted pre-IFRS 16 depreciation and amortisation charge increased by 5% to £171m.
168
-
168
(5)
163
89
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT SWISS PENSION BENEFIT
OBLIGATION
Hirslanden provides defined
contribution pension plans in terms of
Swiss legislation to employees, the
assets of which are held in separate
trustee-administered funds. These
plans are funded by payments from
employees and Hirslanden, taking into
account the recommendations of
independent qualified actuaries.
Because of the strict definition of
defined contribution plans in
International Accounting Standard
(‘IAS’) 19, these plans are classified as
defined benefit plans, since the funds
are obliged to take some investment
and longevity risk in terms of Swiss
law. The IAS 19 pension liability was
valued by the actuaries at the end of
the year under review and amounted
to £71m (FY19: £52m), 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 plan assets.
In constant currency, the pension
liability increased by £2m whereas
the plan assets decreased by £11m.
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 reporting period, the fair value of
the redemption liability related to the
written put option amounted to
£101m (FY19: £88m).
FINANCE COSTS
Pre-IFRS 16 net finance costs are up
by 9% at £62m (FY19: £57m) mainly
due to the discontinued capitalisation
of borrowing costs following the
opening of Mediclinic Parkview
Hospital.
Pre-IFRS 16 net finance cost
Remeasurement of redemption liability (written put option)
Adjusted pre-IFRS 16 net finance cost
Interest on lease liabilities
Adjusted IFRS 16 net finance cost
Add back: remeasurement of redemption liability (written put option)
IFRS 16 net finance
FY20
£’m
62
(5)
57
21
78
5
83
FY19
£’m
57
-
57
-
57
-
57
INCOME TAX
The Group’s effective tax rate
changed significantly for the period
under review to (8.6)% (FY19: 5.4%),
mainly due to exceptional non-
deductible expenses which include
the impairment of goodwill and the
impairment of the equity investment.
In addition, a reduction in deferred
tax liabilities resulted from corporate
tax reforms in Switzerland. Excluding
these exceptional items, the effective
tax rate would be 22.3% (FY19:
20.4%) for the reporting period. On
a pre-IFRS 16 basis, the adjusted
effective tax rate is 22.2%. Comparing
the adjusted effective tax rate with
the prior reporting period, the
increase is mainly due to the release
of previously recognised deferred tax
assets and the non-recognition of
deferred tax assets on Swiss tax
losses. Adjusted income tax was
calculated as follows:
Income tax expense/(credit)
Tax on exceptional items
- Reversal of impairment of properties
- Impairment of properties
- Impairment of intangible assets
- Tax adjustment relating to Swiss properties
- Swiss tax rate changes
Adjusted income tax expense1
Note
1 On a pre-IFRS 16 basis, the adjusted income tax expense for FY20 amounts to £57m.
90
IFRS 16
FY20
£’m
Pre-IFRS 16
FY19
£’m
24
32
(1)
4
-
-
29
56
(7)
64
-
35
12
17
-
57
GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
TAX STRATEGY
The Group is committed to
conducting its tax affairs consistent
with the following objectives:
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 cooperative compliance
with tax authorities. It also actively
considers the implications of any
planning for the Group’s wider
corporate reputation.
SPIRE HEALTHCARE GROUP
The investment in Spire is equity
accounted, recognising the reported
IFRS 16 profit of £7.2m for Spire’s
financial year ended 31 December
2019 (12 months ended 31 December
2018 pre-IFRS 16: £11.3m). Mediclinic’s
FY20 equity accounted share of
profit from Spire amounted to £2.2m
(FY19 on pre-IFRS 16 basis: £3.4m).
At 31 March 2020, the market value of
the investment in Spire was £94m,
which was below the carrying value.
An impairment test was performed by
updating the key assumptions applied
in the value-in-use calculation
performed.
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.
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 £10m was
recorded against the carrying value
in the period under review.
DIVIDEND POLICY AND
PROPOSED DIVIDEND
The Group’s existing dividend policy
is to target a payout ratio of between
25% and 35% of adjusted earnings.
The Board may revise the policy at its
discretion. As part of the Group’s
response to maintaining its liquidity
position through the crisis and to
maximise its support in combatting
the COVID-19 pandemic, the Board
has taken the prudent and
appropriate decision to suspend
the dividend.
KLINIK IM PARK
91
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
DIVISIONAL REPORTS
SWITZERLAND
HIRSLANDEN
It fills me with pride that we as a team –
employees and doctors – have successfully
navigated the challenging and demanding
market and regulatory environment. That
success is due to the clear realigned focus on
our core competencies of patient-oriented
specialised services across the continuum
of care in combination with important
partnerships in the field of primary care.
Dr Daniel Liedtke
Chief Executive Officer:
Hirslanden
-7%
Adjusted EBITDA
(pre-IFRS 16)
68.0%
Bed occupancy rate
+0.6%
Inpatient admissions
-1.1%
Average revenue
per admission
+1%
Revenue
88.3
Press Ganey® patient experience
survey score (out of 100)
4.00
Gallup® employee engagement
survey score (out of 5)
17
Hospitals
2
3
Day case clinics
Outpatient clinics
1 893
Beds
110
Theatres
10 417
Employees (total heads)
92
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT G E R M A N Y
3
F R A N C E
3
1
Zurich
16
17
2
3
2
12
7
Bern
5
1
4
6
2
15
10
1
11
S W I T Z E R L A N D
A U S T R I A
13
14
Geneva
8
9
I TA LY
3
Outpatient clinics
Hospitals
Canton of Aarau
1 Hirslanden Klinik Aarau1
Canton of Appenzell Ausserrhoden
2 Klinik Am Rosenberg
Canton of Basel-Land
3 Klinik Birshof
Canton of Bern
4 Klinik Beau-Site
5 Klinik Linde1
6 Klinik Permanence
7 Salem-Spital1
Canton of Geneva
8 Clinique La Colline
9 Clinique des Grangettes1
Canton of Lucerne
10 Klinik St. Anna1
11 St. Anna in Meggen
Canton of St. Gallen
12 Klinik Stephanshorn1
Canton of Vaud
13 Clinique Cecil1
Day case clinics
Canton of Lucerne
1 St. Anna im Bahnhof
Canton of Zurich
2 Operationszentrum Bellaria
3 Operationszentrum Zumikon 2
Outpatient clinics
14 Clinique Bois-Cerf
Canton of Bern
Canton of Zug
15 AndreasKlinik Cham Zug1
Canton of Zurich
16 Klinik Hirslanden1
17 Klinik Im Park1
1 Praxiszentrum am Bahnhof Bern
2 Praxiszentrum am Bahnhof Düdingen
Canton of Schaffhausen
3 Praxiszentrum am Bahnhof Schaffhausen
Notes
1 Hospital with obstetrics department.
2 Acquisition of Operationszentrum Zumikon effective 1 April 2020.
93
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
Until the impact of the
COVID-19 pandemic in
mid-March 2020,
performance during
FY20 was ahead of
expectations.
CLINIQUE DES GRANGETTES
COVID-19
Switzerland introduced national
lockdown measures on 16 March
2020, which included the suspension
of elective procedures for all
hospitals. Hirslanden has been
extensively engaged by the cantonal
authorities and involved in their
COVID-19 response planning. Since
relaxing lockdown measures on
27 April 2020, including the
resumption of elective procedures,
patient volumes and occupancy have
improved markedly. In light of the
latest epidemiological forecasts, the
Swiss Federal Council has announced
further easing of COVID-19
restrictions from 6 June 2020.
Hirslanden and other private
operators have collaborated strongly
throughout the crisis to provide
the necessary care for patients in
Switzerland. Cantons have generally
designated COVID-19 hospitals in
their regions to specialise in the
treatment of positive cases requiring
hospitalisation. Where requested,
Hirslanden has fulfilled this role while
further supporting cantonal hospitals
by treating non-COVID-19 patients
referred to its hospitals in addition to
acute cases from its own supporting
doctors.
The existing Hirslanden Healthline
offering has gradually evolved during
the pandemic to a telemedicine
service. The service currently
provides patients with health-
related information and combines
appointment scheduling and
consulting relating to Hirslanden’s full
range of medical services, with further
developments underway.
The Swiss Federal Government
implemented a short-time working
initiative early in the crisis where
due to the suspension of elective
procedures, certain hospital employees
are underutilised. In these cases, the
government compensated employers
with 80% of the employees’ salaries.
This initiative allows Hirslanden to
proactively manage its workforce
during this uncertain period.
FINANCIAL REVIEW (PRE-IFRS 16)
At the end of the reporting period,
Hirslanden operated 17 hospitals,
two day case clinics and three
outpatient clinics with 1 893 beds and
94
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 10 417 employees (7 624 full-time
equivalents). It is the largest private
acute care hospital group in
Switzerland servicing approximately
one third of inpatients treated in
Swiss private hospitals. Hirslanden
accounted for 47% of the Group’s
revenues (FY19: 47%) and 44% of its
adjusted EBITDA (FY19: 44%).
Hirslanden continued to make
excellent progress in adapting the
business to the regulatory changes
affecting the Swiss healthcare
system and delivered a solid
financial performance under the
circumstances. Until the impact of the
COVID-19 pandemic in mid-March
2020, performance during FY20
was ahead of expectations that
incorporated the impact of identified
clinical treatments transferring from
an inpatient to a lower outpatient
tariff. This process has gradually
occurred across Swiss cantons over
the past two years, with official
national implementation effective
from 1 January 2019 and no further
changes currently scheduled. In
response, Hirslanden is executing a
day case clinic strategy which focuses
on a conveniently located, more
efficient and lower-cost service
delivery model; established a
collaboration with Medbase (part of
Migros Group); delivered ongoing
cost management and efficiency
savings; and adjusted the Hirslanden
2020 and other strategic projects.
Encouragingly, Hirslanden’s efforts to
adapt the division were delivering
modest admissions growth in the
fourth quarter from January until the
onset of the COVID-19 pandemic.
Including the contribution from the
Clinique des Grangettes acquisition
(consolidated from 1 October 2018),
FY20 revenue increased in line with
expectations by 1% to CHF1 804m
(FY19: CHF1 778m). Inpatient revenue
was down 0.5% and admissions up
0.6%. Outpatient and day case
revenue, which contributed some
21% (FY19: 19%) to total revenue in
the reporting period, was up 8%. The
general insurance mix marginally
increased to 49.2% (FY19: 48.7%).
Inpatient revenue per case was down
1.1% as a result of the lower insurance
mix. Average occupancy was at
68.0% (FY19: 70.4%) due to a decline
in the average length of stay from
4.5 to 4.4 days.
The revenue contribution in FY20
from Clinique des Grangettes was
CHF112m (FY19: CHF58m). The
hospital contributed growth of
around 2.5% and 6% inpatient
admissions and outpatient revenue
respectively, and supported the
supplementary component of the
insurance mix during the year under
review.
Despite the impact of COVID-19 in
March 2020, adjusted EBITDA was
broadly in line with expectations
down 7% to CHF266m (FY19:
CHF285m) with an adjusted EBITDA
margin of 14.8% (FY19: 16.0%). The
decline reflects the expected impact
of outmigration through to the end of
December 2019.
Adjusted depreciation and
amortisation decreased marginally by
2% to CHF122m (FY19: CHF124m).
Adjusted operating profit decreased
by 11% to CHF144m (FY19: CHF161m).
Adjusted net finance costs were flat
at CHF50m (FY19: CHF51m).
In May 2019, the Swiss public voted to
adopt the Federal Act on Tax Reform
and AHV Financing, confirming the
reform of corporate taxation in
Switzerland. Due to this reform,
several cantons decreased their tax
rates. Excluding permanent
differences, the effective tax rate in
FY20 reduced to 17.9% (FY19: 18.5%).
Hirslanden contributed £67m to
the Group’s adjusted earnings
(representing 37%) compared with
£80m (representing 40%) in the prior
reporting period.
Hirslanden converted 116% (FY19: 97%)
of adjusted IFRS 16 EBITDA into cash
generated from operations, reflecting
strong collections in March 2020. This
led to a further reduction in secured
debt facilities in the second half of the
reporting period by CHF31m, taking
the total reduction for FY20 to
CHF117m, of which CHF67m was
optional.
In October 2019, Hirslanden
completed the sale of the small,
28-bed Klinik Belair hospital for a
total consideration of CHF14m. This
aligns with the division’s strategy of
operating across the continuum of
care in delivery regions to ensure
synergies and quality care can be
achieved across Hirslanden’s network
of facilities. Hirslanden recognised a
reversal of the impairment charge in
relation to the Klinik Belair property
of CHF5m which is excluded from
adjusted earnings. The revenue
contribution in FY20 from Klinik
Belair was CHF7m (FY19: CHF16m)
and the disposal impacted FY20
reported inpatient admissions by
around 0.5%.
In line with the requirements of IFRS,
non-financial assets are considered
for impairment when impairment
indicators are identified at an
individual CGU level. In Switzerland,
the changes in the market and
regulatory environment continued to
affect key inputs to the review and
gave rise to impairment charges
recorded against property and
equipment of CHF39m before tax.
The impairment charges are non-cash
and excluded from the adjusted
earnings metrics. The impairment
calculations remain sensitive to
reasonably possible changes in key
assumptions, including cash flow
projections and long-term growth
and discount rates.
ADAPTING AND GROWING
ACROSS THE CONTINUUM
OF CARE
The execution of Hirslanden’s day
case clinic strategy is progressing
well. This strategy, which focuses on a
conveniently located, more efficient,
lower-cost service delivery model, is
fully operational at two Hirslanden
locations – Bellaria in Zurich and
St. Anna im Bahnhof at the train
station in Lucerne. In addition,
Hirslanden has acquired
Operationszentrum Zumikon,
one of Zurich’s leading day case
95
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
clinics. The day case clinic will build
on the relationship and strong
reputation already established with
the Klinik Hirslanden hospital, with
the transaction effective from
1 April 2020.
The division is confident in its
strategy to establish further day case
clinics over the coming years in order
to attain a leading market position
in this growing area of healthcare
delivery. During the year under review,
Hirslanden appointed an experienced
Day Case Clinic Manager to advance
this strategy. Hirslanden expects to
add an additional day case clinic in
FY21 in St. Gallen. Where a standalone
day case clinic is not currently
planned, the hospitals have initiated
in-house day case solutions which
seek to achieve more efficient,
lower-cost delivery models compared
with the normal inpatient process.
In line with the Group’s vision of
being the partner of choice that
people trust for all their healthcare
needs and the strategic goal of
becoming an integrated healthcare
provider across the continuum of
care, Hirslanden recently finalised a
pioneering collaboration agreement
with Medbase, the leading Swiss
specialist in family healthcare
and part of the Migros Group
(Switzerland’s largest retail company).
The collaboration combines
Hirslanden’s acute care, day case and
specialist diagnostics expertise with
Medbase’s qualified family healthcare,
aftercare and prevention across
Switzerland. Hirslanden is leveraging
synergies with an equally high-quality
partner to consistently develop
a range of services across the
continuum of care in order to increase
the respective market shares and
efficiency of both companies.
With the planned sale of the three
Hirslanden outpatient clinics in
Schaffhausen, Bern and Düdingen
(excluding radiology) to Medbase
expected on 2 June 2020 and the
combined growth initiative in the
form of a joint venture in specialised
outpatient radiology, Hirslanden is
expanding its strengths in specialised
diagnostics and medicine. The
agreement also includes close
collaboration in digital services.
During the year under review,
Hirslanden announced two important
collaborations with Swiss public
healthcare providers. In Geneva,
HUG and Hirslanden have agreed
to create the largest PPP day case
clinic for outpatient surgery in
Switzerland by the end of 2024. The
partnership reflects the desire to
respond in a coordinated and efficient
manner to the increasing demand
in the area of outpatient surgery.
Hirslanden was specifically chosen
by HUG due to its knowledge and
expertise in delivering cost-efficient,
high-quality care in the day case
clinic environment. In the canton
of Basel-Land, Hirslanden and the
Kantonspital Baselland have agreed
to form a joint venture to establish
a CoE and research and teaching
facility for musculoskeletal patient
care. This will provide excellent
medical care for inpatients and
outpatients across the northwestern
region of Switzerland.
To support Hirslanden’s drive for
improved medium-term operational
efficiencies and cost management,
the division advanced several projects.
As part of the Hirslanden 2020
strategic project, the division is
benefitting from the initial HIT2020
phased ICT roll-out to standardise and
centralise back-office administrative
processes. Hirslanden has introduced
mass invoicing, automated recording
and processing of doctors’ invoices;
and enhanced capacity planning to
increase hospital utilisation and
employee efficiencies. The roll-out
was completed at Klinik Stephanshorn
in October 2019, taking the total
number of Hirslanden hospitals on the
HIT2020 platform to three in addition
to the Corporate Office.
DISCIPLINED INVESTMENT TO
SUSTAIN A LEADING MARKET
POSITION
In FY20, Hirslanden invested CHF51m
(down 7% on FY19) in expansion
capital projects and new equipment
and CHF43m (up 9% on FY19) in
Hirslanden recently
finalised a pioneering
collaboration
agreement with
Medbase, the leading
Swiss specialist in
family healthcare.
96
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT KLINIK HIRSLANDEN
maintenance and the replacement of
existing equipment and upgrade
projects. The HIT2020 project is now
reaching its peak levels of operating
and capital investment spend. In the
context of managing the operational,
clinical and financial uncertainties
of COVID-19, the roll-out of HIT2020
is proceeding on a resource-
dependent basis.
The Group maintains a disciplined
approach to capital allocation while
ensuring clinical standards and the
quality of patient care remain
appropriate. At Hirslanden, this
approach, in response to the
significant regulatory changes over
recent years, has resulted in annual
maintenance and expansion capex
reducing from CHF163m in FY17 to
CHF94m in FY20. Hirslanden has
maintained its excellent clinical
standards with all hospitals at or
above the clinical IQM benchmark for
all Swiss and German hospitals.
Given the continued focus on capital
allocation during this period of
uncertainty resulting from the
COVID-19 pandemic, the division
expects to moderate its FY21 capital
budget. Of the CHF110m originally
budgeted in FY21, the current
monthly expenditure run rate is
approximately 10% of the budget
and will increase as the impact of
COVID-19 on the business dissipates.
The Group will continue to monitor
operating cash flow generation and
consequent liquidity to revisit this
important investment decision.
MARKET OVERVIEW
Switzerland’s healthcare system has
the reputation of being one of the
highest quality systems in the world.
Though continuously evolving,
demand for healthcare services
remains strong. With rising
healthcare costs, the call for greater
transparency and cost efficiency is
increasing. Despite this, people
expect the highest quality at a
reasonable price. Improving this
value equation remains the
objective of both private and public
healthcare services providers.
In addition, society’s needs in terms
of health are changing: clients and
Key to this leading
market position is
the fact that it has
the largest network
of doctors in
Switzerland with
over 2 500 specialists,
almost 6 000 nurses
and therapists, and
a wide range of
high-end technologies.
97
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT patients have expectations of
Hirslanden and want a partner that
can accompany them through life
as an advisor and support them
in managing their own health –
regardless of time or place. Due
to the rapid advancement of
technologies and medicine,
expectations extend beyond
treatment and recovery to
prevention and enhancement of
wellbeing. With this considered,
Hirslanden is effectively positioning
itself to meet these expectations and
benefit in future.
For decades, Hirslanden has been
the leading private Swiss provider
in quality service-oriented specialist
diagnostics and medicine as well as
care and therapy, with exceptional
core competencies that it leverages.
Key to this leading market position
is the fact that it has the largest
network of doctors in Switzerland
with over 2 500 specialists, almost
6 000 nurses and therapists,
and a wide range of high-end
technologies. As part of its
strategic realignment, Hirslanden
is focusing on these core
competencies in order to create
added value for clients and society
in the form of integrated, efficient
healthcare close to their homes.
For areas and services outside of
specialised medicine, targeted
partnerships are being pursued with
other organisations across the
continuum of care, i.e. in the field of
family healthcare. As a result
Hirslanden is ideally placed to
combine specialised outpatient
and inpatient medicine in order to
become even more efficient and
effective. The Swiss healthcare
system also benefits from this, as the
intelligent linking of a wide range of
services offered by various providers
is essential to an affordable, effective
and well-functioning healthcare
system.
The recently finalised pioneering
collaboration agreement with
Medbase is a good example of
Hirslanden’s strategic realignment.
Hirslanden will benefit from
considerable synergies working with
an equally high-quality partner with
a complementary range of services.
Collaboration was also achieved
through PPPs, most notably in
Geneva with HUG to develop the
largest day case clinic in Switzerland
and a joint venture with
Kantonspital Baselland for the
treatment of musculoskeletal
disorders. The newly created
medical network in Basel-Land will
ensure holistic care and provide a
comprehensive range of inpatient
and outpatient services in the field
of the musculoskeletal system
(including rehabilitation) as well as
geriatric traumatology. Through
this, Hirslanden gains market share
in orthopaedics and with its lean
structure and efficient processes,
better positions itself to meet the
needs of patients.
Outpatient care is a global trend
and a national priority for the
Swiss healthcare system over the
next 10 years. Hirslanden is thus
consistently pursuing the strategy
it has adopted in outpatient
surgery and is leading the changes
in the Swiss day case clinic
sector. The acquisition of the
Operationszentrum Zumikon day
case clinic fits seamlessly into this
strategy, as Hirslanden develops
its network of day case clinics to
offer nationwide coverage through
owned facilities and selective
partnerships.
98
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT OUTLOOK
The current healthcare market
environment presents opportunities
and challenges in Switzerland while
the disruptions caused by the
COVID-19 pandemic create
uncertainty.
However, Hirslanden is well prepared
given its strategic realignment to
meet the health and wellbeing needs
of patients and clients across the
continuum of care. During the
pandemic, it has strengthened its
relationship with patients by offering
telemedicine and digital services,
both of which will play important
roles in the healthcare delivery model
of tomorrow. Hirslanden also
reaffirmed its commitment to
continuously improving efficiency in
back-office functions by promoting
innovation, i.e. the large-scale use
of robotic process automation; the
standardisation of its ICT landscape;
and maximisation of benefits realised
through exploring synergies across
the Group.
Hirslanden has played a leading role
in combatting the crisis together
with the cantons. This will add to
its already leading position in the
communities in which it operates, as
well as enhance the cooperation
between private and public
institutions in the healthcare sector.
The latter unlocks opportunities to
expand locally through partnerships
and acquisitions across the
continuum of care, as already
demonstrated in FY20.
In the future, Hirslanden will also
offer preventative healthcare services
and advice to healthy clients in order
to enhance their quality of life.
Genomics will play an important role
in providing personalised advice on
wellbeing and lifestyle, and also to
treat clients with personalised
medicine. Hirslanden will make these
services available in Switzerland in
the near-term, which will improve
clinical outcomes. It remains
Hirslanden’s goal to further expand
its standing as the leading provider of
specialised medicine and specialised
diagnostics across the continuum of
care in Switzerland.
Q&A
WITH DR DANIEL LIEDTKE
What achievement by the division were you most
proud of in FY20?
It fills me with pride that we as a team – employees and
doctors – have successfully navigated the challenging and
demanding market and regulatory environment. That
success is due to the clear realigned focus on our core
competencies of patient-oriented specialised services
across the continuum of care in combination with important
partnerships in the field of primary care. Furthermore, I am
very proud that during the COVID-19 pandemic this team
clearly demonstrated the Group purpose of enhancing the
quality of life.
How has the division shown agility and expertise in
dealing with the COVID-19 pandemic?
It was impressive how fast we were able to work together
as a cross-functional crisis team, both at hospital and
Corporate Office level, to ensure operations remain as
effective and efficient as possible. None of this would have
been possible without well-trained, fully dedicated medical
staff and strong operational leadership facing the crisis
with determination and expertise. From the very start of
the crisis, we’ve played a leading role in overcoming the
pandemic together with the cantonal and federal
governments.
What are your thoughts looking ahead
to the future?
Even though the COVID-19 pandemic will be remembered as
a global crisis with tragic implications, living with the virus
has already become the new normal. Against this backdrop
we have shown that we are able to manage daunting
challenges as a team, with a clear can-do attitude. I am
confident that this attitude will also guide us in shaping the
Swiss healthcare environment of the future along the
physical and digital continuum of care.
99
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
SOUTH AFRICA
& NAMIBIA
MEDICLINIC
SOUTHERN AFRICA
A key achievement during the year
under review was the continued
improvement in clinical performance,
patient experience and staff
engagement with highest ratings
achieved to date.
Mr Koert Pretorius
Chief Executive Officer:
Mediclinic Southern Africa
Flat
Adjusted EBITDA
(pre-IFRS 16)
67.9%
Bed occupancy rate
+2.5%
Bed days sold
+4.0%
Average revenue
per bed day
+7%
Revenue
82.7
Press Ganey® patient experience
survey score (out of 100)
3.97
Gallup® employee engagement
survey score (out of 5)
52
Hospitals
8
Sub-acute and
specialised hospitals
10
Day case clinics
8 792
Beds
305
Theatres
15 958
Employees (total heads)
100
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 28
N A M I B I A
Windhoek
30
29
8
34
Pretoria
12
9
6
5
10
7
3
3
2 2
1
4
11
13 5
4
15
Johannesburg
35
4
14
20
22
Pretoria
Johannesburg
33
3
8 10
2
31 32
1
Bloemfontein
S O U T H A F R I C A
26 7
23
21 6
27
25
24
17 8
16
18
19
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
52
Cape Town
43
40
41
48
Limpopo
Western Cape
20 Mediclinic Lephalale
36 Mediclinic Cape Gate
21 Mediclinic Limpopo
37 Mediclinic Cape Town
22 Mediclinic Thabazimbi
38 Mediclinic Constantiaberg
23 Mediclinic Tzaneen
39 Mediclinic Durbanville
Mpumalanga
24 Mediclinic Ermelo
25 Mediclinic Highveld
26 Mediclinic Nelspruit
27 Mediclinic Secunda
Namibia
28 Mediclinic Otjiwarongo
29 Mediclinic Swakopmund
30 Mediclinic Windhoek
Northern Cape
31 Mediclinic Gariep (part
of Mediclinic Kimberley)
40 Mediclinic Geneva
41 Mediclinic George
42 Mediclinic Hermanus
43 Mediclinic Klein Karoo
44 Mediclinic Louis Leipoldt
45 Mediclinic Milnerton
47 Mediclinic Panorama
48 Mediclinic Plettenberg Bay
49 Mediclinic Stellenbosch
50 Mediclinic Strand
51 Mediclinic Vergelegen
3 Intercare Sub-Acute
Hospital Irene
4 Intercare Medfem Hospital
5 Intercare Sub-Acute
Hospital Sandton
6 Intercare Sub-Acute Hospital
Tyger Valley
7 Mediclinic Winelands
Orthopaedic Hospital
8 Welkom Medical Centre
Sub-Acute Hospital
Day case clinics
Century City
2 Intercare Day Hospital
Hazeldean
3 Intercare Day Hospital Irene
4 Intercare Day
Hospital Sandton
5 Mediclinic Durbanville
Day Clinic
46 Mediclinic Paarl
1 Intercare Day Hospital
14 Mediclinic Vereeniging
32 Mediclinic Kimberley
52 Mediclinic Worcester
15 Wits Donald Gordon
Medical Centre1
KwaZulu-Natal
16 Mediclinic Howick
17 Mediclinic Newcastle
18 Mediclinic Pietermaritzburg
19 Mediclinic Victoria
33 Mediclinic Upington
North West
34 Mediclinic Brits
35 Mediclinic Potchefstroom
Sub-acute and
specialised hospitals
6 Mediclinic Limpopo Day Clinic
7 Mediclinic Nelspruit Day Clinic
1 Denmar Specialist
Psychiatric Hospital
8 Mediclinic Newcastle
Day Clinic
2 Intercare Sub-Acute Hospital
9 Mediclinic Stellenbosch
Hazeldean
Day Clinic
10 Welkom Medical Centre
Day Clinic
Note
1 Associated company being equity accounted (Mediclinic Southern Africa holds 49.9%).
101
46
45
47
Cape
Town
1
39
5
44
36
6
37
38
7
49
9
51
50
42
Hospitals
Free State
1 Mediclinic Bloemfontein
2 Mediclinic Hoogland
3 Mediclinic Welkom
Gauteng
4 Mediclinic Emfuleni
5 Mediclinic Gynaecological
Hospital
6 Mediclinic Heart Hospital
7 Mediclinic Kloof
8 Mediclinic Legae
9 Mediclinic Medforum
10 Mediclinic Midstream
11 Mediclinic Morningside
12 Mediclinic Muelmed
13 Mediclinic Sandton
10
Day case clinics
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT
DIVISIONAL REPORTS CONTINUED
Aligned with the
Group’s strategy to
expand across the
continuum of care,
Mediclinic Southern
Africa completed the
acquisition of Denmar
Hospital, a leading
mental health facility.
MEDICLINIC STELLENBOSCH
COVID-19
South Africa implemented national
lockdown measures on 27 March
2020 to help contain the spread of
COVID-19. In line with this decision,
Mediclinic Southern Africa suspended
elective procedures and closed
standalone day case clinics in order
to focus all available resources on the
pandemic. These restrictions were
relaxed on 1 May 2020 resulting in
a gradual improvement in patient
volumes and occupancy.
Discussions with national
government and provincial
Departments of Health regarding
the private sector’s assistance in
combatting the pandemic are
ongoing. Engagement with the
national government has been
conducted through centralised
structures, under the auspices of
Business for South Africa. Mediclinic
Southern Africa will continue to
engage at national and provincial
level regarding any regulations or
contracting proposals. Command
centres are being established by the
public and private healthcare sectors
in each province to support ongoing
collaboration and care coordination.
Intercare, Mediclinic’s primary care
partner, rolled out telemedicine in
early April 2020. To date, more
than 100 of Intercare’s doctors have
embraced the technology with more
than 3 000 telemedicine consultations
successfully conducted. In late May
2020, Mediclinic Southern Africa
launched a telemedicine solution to
further complement its range of care
delivery services supporting the
response to the pandemic.
FINANCIAL REVIEW (PRE-IFRS 16)
In Southern Africa (including South
Africa and Namibia), at the end of the
reporting period, Mediclinic operated
52 hospitals, eight sub-acute and
specialised hospitals and 10 day case
clinics (four of which operated by
Intercare) with 8 792 licensed beds
and 15 958 employees (19 874 full-time
equivalents including agency staff).
Mediclinic Southern Africa is the third
largest private healthcare provider in
Southern Africa by number of licensed
beds. Mediclinic Southern Africa
accounted for 29% of the Group’s
revenue (FY19: 30%) and 38% of its
adjusted EBITDA (FY19: 38%).
Despite the impact of COVID-19 in late
March 2020, Mediclinic Southern
102
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Africa’s revenue increased in line with
expectations by 7% to ZAR17 031m
(FY19: ZAR15 960m). Bed days sold
increased by 2.5% and average
revenue per bed day increased by
4.0%. The average length of stay was
up 0.5% while the occupancy rate
was 67.9% (FY19: 69.2%), reflecting
the ramp-up stage of the Intercare
capacity and the COVID-19 impact in
late March 2020.
The revenue contribution in FY20 from
investments made in growth, including
Intercare (consisting of four day case
clinics, four sub-acute hospitals and
one specialised hospital, effective
since 1 December 2018) and the
Denmar Hospital, a leading mental
health facility acquired on 1 December
2019, was around ZAR237m (FY19:
ZAR60m). Due to the intrinsically
higher volumes at Intercare, these
investments accounted for the
majority of growth in the division’s
inpatient bed days sold during the
reporting period of 2.5%.
Adjusted EBITDA was flat at
ZAR3 388m (FY19: ZAR3 385m) with
the adjusted EBITDA margin in line
with expectations at 19.9% (FY19:
21.2%). The margin reflects costs
incurred to further enhance clinical
standards and to expand across the
continuum of care with the Intercare
acquisition and the new Mediclinic
Stellenbosch hospital and day case
clinic both incorporating leasehold
properties and consequent rental
charges.
Depreciation and amortisation
increased by 10% to ZAR613m
(FY19: ZAR556m) mainly due to
increased spend on hospital
infrastructure upgrades and medical
equipment. Operating profit
decreased by 2% to ZAR2 775m
(FY19: ZAR2 829m).
Net finance costs decreased by 7% to
ZAR478m (FY19: ZAR513m) due to
increased capitalisation of the cost of
qualifying assets as well as interest
received on cash balances.
Mediclinic Southern Africa
contributed £73m to the Group’s
adjusted earnings (representing
40%), compared with £72m
(representing 36%) in the prior
reporting period.
The division converted 104% (FY19:
96%) of adjusted IFRS 16 EBITDA into
cash generated from operations,
mainly due to improved collections.
INVESTING TO SUPPORT
CONTINUED LONG-TERM
GROWTH
In FY20, Mediclinic Southern Africa
invested ZAR582m (up 15% on FY19)
in expansion capital projects and new
equipment and ZAR730m (up 9%
on FY19) in maintenance and the
replacement of existing equipment
and upgrade projects. These
investments comprised existing
hospital expansions completed at
Mediclinic Vergelegen, Mediclinic
George and the Wits Donald Gordon
Medical Centre, in addition to the
re-location of Mediclinic Stellenbosch
and opening of a co-located new day
case clinic. In conjunction with the
opening of Mediclinic Stellenbosch,
Mediclinic Winelands Orthopaedic
Hospital opened in August 2019. The
hospital is situated at the previous
Mediclinic Stellenbosch site and will
focus on delivering specialist medical
care in the disciplines of orthopaedic
surgery and rheumatology. The
hospital has entered into a partnership
with the Institute of Orthopaedics and
Rheumatology to deliver exceptional
outcomes to the Winelands and
greater Cape Town community. Two
additional day case clinics, Mediclinic
Nelspruit and Mediclinic Cape Gate,
were also developed with the latter
completed in April 2020.
Aligned with the Group’s strategy to
expand across the continuum of care,
Mediclinic Southern Africa completed
the acquisition of the Denmar Hospital
on 1 December 2019. This leading
mental health facility in Pretoria
provides the division with its first
specialised hospital dedicated to
supporting patients suffering from an
increasing number of mental health-
related illnesses.
In response to the Group’s approach
to COVID-19, Mediclinic Southern
Africa expects to moderate its FY21
capital budget to preserve liquidity.
Of the ZAR1 570m originally
budgeted in FY21, the current
monthly expenditure run rate is
approximately 25% of budget. The
Group will continue to monitor
operating cash flow generation and
consequent liquidity to revisit this
important investment decision.
The division’s day case clinic roll-out
is premised on co-locating the
facilities with the main hospitals to
adapt to outmigration of care. While
admissions had previously been
impacted by declining day cases
due to competition and outmigration,
a reversal of this trend in FY20,
excluding Intercare, gives the division
further confidence in its strategy to
invest across the continuum of care.
Mediclinic plans to, over the medium-
term, open a further four day case
clinics at Mediclinic Winelands,
Mediclinic Bloemfontein, Mediclinic
Pietermaritzburg and Mediclinic
Panorama respectively, which will add
an additional nine operating theatres
to its 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 in January 2019. Mediclinic
appealed against this decision
and the case was heard by the
Competition Appeal Court in October
2019. In February 2020, the
Competition Appeal Court approved
the proposed acquisition. However,
the Competition Commission has filed
with the Constitutional Court an
application for leave to appeal the
recent judgment by the Competition
Appeal Court. Mediclinic has filed an
answering affidavit opposing the
application for leave to appeal and
will participate accordingly should the
matter be set down for a hearing.
REGULATORY UPDATE
The South African Competition
Commission completed its
market inquiry into the private
healthcare sector in South Africa in
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
The solvency ratios
of medical schemes
remain very sound
with the average
ratio last reported
in September 2019
at 33.3% compared
to a required level of
25% in South Africa.
September 2019. The findings have
not been unduly onerous and
implementation thereof would largely
require legislative intervention. Should
this happen Mediclinic will participate
in all public engagement
opportunities in developing the legal
and governing framework.
The South African Government
continues to explore the introduction
of a National Health Insurance (‘NHI’)
system. The NHI Bill is now before the
Parliamentary Portfolio Committee
on Health, which is tasked with
further deliberating the Bill and
assessing written and verbal
comment thereon. In this regard,
Mediclinic has sought and continues
to seek counsel from legal, economic
and actuarial experts to understand
the potential impact of the NHI
Bill and the extent to which the
proposals are legally sound. The
division has prepared its presentation
to the Parliamentary Portfolio
Committee on Health and will be
ready to address its members once
called to do so. Mediclinic will
continue to contribute constructively
towards achieving universal
healthcare. Mediclinic believes that
an enhanced healthcare system
can be achieved through greater
collaboration across the public and
private sectors to find common
solutions that leverage existing
expertise and capacity.
MARKET OVERVIEW
The South African and Namibian
private medical insurance markets
remained stable in environments with
low economic growth and high
unemployment. The solvency ratios
of medical schemes remain very
sound with the average ratio last
reported in September 2019 at 33.3%
compared to a required level of 25%
in South Africa.
The mature market continues to offer
very limited incremental growth
opportunities for Mediclinic Southern
Africa to expand existing private
acute hospitals. However, in line with
the Group’s strategy of becoming an
integrated healthcare provider, a
select number of opportunities exist
for investment across the continuum
of care, in settings other than acute
hospitals. These include the
establishment of day case clinics
given the continued outmigration of
care trend, in addition to sub-acute
and specialised hospitals. The gradual
increase in network arrangements
with insurers continues and Mediclinic
has been successful in maintaining
relationships with many insurers
through these 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
104
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT aimed at providing the uninsured
market with financial certainty across
an extensive list of diagnostic and
surgical procedures. This service was
expanded during the year under
review and now includes day case
clinics. Alternative reimbursement
models in total account for 26% of the
division’s revenue.
OUTLOOK
Mediclinic Southern Africa remains
well positioned for future success and
for maintaining a leading market
position, despite the impact of
COVID-19.
The focus remains on further
developing Mediclinic Southern
Africa’s strategy to improve its client
value proposition significantly, and to
seek related value-based contracting
opportunities. The division will
continue to focus strategically on
the value it delivers to patients by
pursuing continued improvement
in cost to clients, client experience
and clinical outcomes. It will also seek
to transform its healthcare services
and client engagement through
digitalisation. At the same time,
Mediclinic Southern Africa remains
committed to improving its
operational efficiency and to
attracting, retaining and engaging
qualified employees, especially nursing
employees and medical practitioners.
Mediclinic Southern Africa is also
committed to embedding a
transformation strategy that
encompasses diversity and inclusion
to meet business imperatives while
ensuring legislative compliance.
The COVID-19 pandemic will sadly have
a significant impact on many people’s
lives. However, there will likely also be
many positive implications and new
opportunities available to businesses.
Acting swiftly and decisively to
embrace these opportunities and to
support society will be vital. Mediclinic
Southern Africa will further evaluate its
operating and delivery models to make
potential improvements, particularly
though the use of technology, to how
it functions, delivers services to its
clients, and engages and works with its
supporting doctors.
Q&A
WITH MR KOERT PRETORIUS
What achievement by the division were you most
proud of in FY20?
I was proud of our solid financial performance despite the
challenging macroeconomic conditions and impact of
COVID-19. This created the foundation for us to successfully
deliver on numerous operational and strategic goals
during the year under review. A key achievement was the
continued improvement in clinical performance, patient
experience and staff engagement with highest ratings
achieved to date.
How has the division shown agility and expertise in
dealing with the COVID-19 pandemic?
The response from our hospitals, to prepare disaster
management plans in a very short period of time, has been
amazing. This was done with the proactive support of
our doctors, who selflessly assisted us to prepare a
comprehensive response. All our teams have been positive,
supportive and encouraging. More than 500 people at the
Corporate Office were set up to work from home within
three days, which demonstrates our agility and team spirit.
What are your thoughts looking ahead to the
future?
The COVID-19 pandemic is a human tragedy and it will
present many challenges, especially for the most vulnerable
people in our societies. The level of civilization of any
society is measured by the way it supports these people.
We therefore have a big responsibility to act professionally
and decisively to address the negative consequences of
the pandemic. The crisis will also have many unintended
positive implications for us and we need to embrace these
opportunities and to utilise them to our advantage. I am
convinced that we will be able to achieve this due to the
expertise and resilience of our people.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
THE UAE
MEDICLINIC
MIDDLE EAST
I am pleased at the progress we have
made in cementing our long-term
relationship with the UAE Government
and healthcare regulatory authorities,
with Mediclinic becoming a trusted
partner and advisor on healthcare-
related matters.
Mr David Hadley
Chief Executive Officer:
Mediclinic Middle East
7
Hospitals
927
Beds
106
-1%
Adjusted EBITDA
(pre-IFRS 16)
51.3%
Bed occupancy rate
+5.4%
Inpatient admissions
+2.9%
Outpatient cases
+6%
Revenue
86.2
Press Ganey® patient experience
survey score (out of 100)
4.00
Gallup® employee engagement
survey score (out of 5)
2
18
Day case clinics
Outpatient clinics
38
Theatres
6 764
Employees (total heads)
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 1
5
6
7
15
Dubai
7
10
13
17
6
14
2
2
A R A B I A N G U L F
Dubai
Abu Dhabi
9
11
1
44
16
3
3
1
8
18
2
Al Ain
5
U N I T E D A R A B
E M I R AT E S
12
S A U D I A R A B I A
18
Outpatient clinics
Hospitals
Outpatient clinics
1 Mediclinic Airport Road Hospital
1 Mediclinic Al Bawadi
11 Mediclinic Khalifa City
2 Mediclinic Al Ain Hospital
2 Mediclinic Arabian Ranches
12 Mediclinic Madinat Zayed
3 Mediclinic Al Jowhara Hospital
3 Mediclinic Al Madar
13 Mediclinic Meadows
4 Mediclinic Al Noor Hospital
4 Mediclinic Al Mamora
14 Mediclinic Me‘aisem
5 Mediclinic City Hospital
5 ENEC
15 Mediclinic Mirdif
6 Mediclinic Parkview Hospital
6 Mediclinic Al Qusais
16 Mediclinic Mussafah
7 Mediclinic Welcare Hospital
7 Mediclinic Al Sufouh
17 Mediclinic Springs
8 Mediclinic Al Yahar
18 Mediclinic Zakher
Day case clinics
1 Mediclinic Deira
2 Mediclinic Dubai Mall
9 Mediclinic Baniyas
10 Mediclinic Ibn Battuta
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
MEDICLINIC AIRPORT ROAD HOSPITAL
Mediclinic Middle East
agreed a strategic
partnership with Saudi
Arabian investment
company Al Murjan.
108
COVID-19
Dubai and Abu Dhabi gradually
implemented national lockdowns and
curfews from March 2020. In Dubai,
elective procedures were suspended
until 8 May 2020, when certain day
procedures were permitted. On
27 May, the majority of procedures
were reintroduced. In Abu Dhabi,
such restrictions were not
implemented, although inpatient
admissions and outpatient cases
were significantly impacted. Since
restrictions started to lift in May 2020,
volumes have gradually increased.
Governments in Dubai and Abu
Dhabi are supporting private
healthcare providers through
numerous initiatives and licence
changes as they assist with
combatting the pandemic. Mediclinic
is now providing telemedicine and
pharmacy home delivery services so
that patients can be diagnosed and
supplied with prescribed medication
without the need for face-to-face
consultation at a facility. More than
7 000 telemedicine consultations
and 5 000 pharmacy home
deliveries have been carried out by
the division since the outbreak of
the pandemic.
In Dubai and Abu Dhabi, Mediclinic is
supporting government by treating
COVID-19 patients in certain hospitals
and through operating several
alternative interim facilities that care
for and monitor asymptomatic and
low-acuity patients. In addition, the
division is involved in various projects
supporting communities including
large-scale screening and established
a new laboratory for COVID-19
and antibody testing with over
100 000 tests conducted. Mandatory
health insurance across the region
reimburses the division for COVID-19-
related treatments and care.
FINANCIAL REVIEW (PRE-IFRS 16)
Mediclinic Middle East at the
end of the reporting period operated
seven hospitals, two day case
clinics and 18 outpatient clinics
with 927 licensed beds and
6 764 employees (6 764 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
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT and Abu Dhabi (including Al Ain).
Mediclinic Middle East accounted for
24% of the Group’s revenue (FY19:
23%) and 19% of its adjusted EBITDA
(FY19: 18%).
The UAE continues to present
opportunities for the provision of
high-quality private healthcare
services, driven by an ageing local
population facing an increased
prevalence of lifestyle-related medical
conditions and an expatriate market.
The regulatory environment is
maturing with an increasing focus on
quality and clinical outcome measures
and the introduction of DRGs in
Dubai, and HIE and CoEs in both
Dubai and Abu Dhabi.
Mediclinic Middle East expects to
sustainably deliver an increase in
revenue and gradual improvement in
EBITDA margins over time. This will
be achieved by continued business
and operational improvements in
Abu Dhabi and the ramp-up
benefits from investments into new
facilities, expansions, upgrades, new
clinical service offerings and
regional growth opportunities
across the continuum of care. The
Group has confidence in its
Mediclinic Middle East growth
strategy. However, the current UAE
macroeconomic and competitive
landscape, exacerbated by the lower
oil price, COVID-19 pandemic and
below-inflation regulated tariff
increases since 2018, are impacting
the pace of progression.
In FY20, Mediclinic Middle East
revenue growth was challenged
by the macroeconomic and
competitive environment, increasing
6% to AED3 445m (FY19:
AED3 262m) while inpatient
admissions were up 5.4% and
outpatient cases were up 2.9%.
Specifically in the fourth quarter of
the reporting period, volumes were
further impacted by significant
flooding in the region during
January 2020 and the COVID-19
lockdowns and restriction on
outpatient and non-urgent elective
procedures being imposed in
March 2020.
In Dubai, revenue growth for the
reporting period was 9%, reflecting
the significant contribution from the
new Mediclinic Parkview Hospital
and an improved stable performance
at Mediclinic Welcare Hospital offset
by the impact at Mediclinic City
Hospital from the new hospital
opening and a modest decline in
oupatient clinic volumes.
In Abu Dhabi, revenue growth for
the reporting period was 1%,
benefitting from the investments
made to enhance the business and
operational performance over recent
years. Strong performance at
Mediclinic Airport Road Hospital was
offset by Mediclinic Al Noor Hospital
which was impacted by specific
initiatives and a modest decline in
outpatient clinic volumes.
FY20 adjusted EBITDA decreased by
1% to AED422m (FY19: AED425m)
with the adjusted EBITDA margin
decreasing to 12.3% (FY19: 13.0%).
Adjusted depreciation and
amortisation increased by 9% to
AED187m (FY19: AED171m), as
expected, mainly due to the
commissioning of Mediclinic
Parkview Hospital. Operating profit
decreased by 7% to AED236m
(FY19: AED254m).
Net finance costs increased by 32%
to AED40m (FY19: AED31m), as
expected, mainly due to the
discontinued capitalisation of
borrowing costs following the opening
of Mediclinic Parkview Hospital.
The division contributed £41m to
the Group’s adjusted earnings
(representing 23%) compared with
£46m (representing 23%) in the prior
reporting period.
The division converted 98% (FY19:
70%) of adjusted IFRS 16 EBITDA
into cash generated from operations,
mainly due to improved collections.
With the reverse acquisition of the
Al Noor Group, which became
effective on 15 February 2016,
Mediclinic recognised goodwill
of AED6 325m. In line with the
requirements of IFRS, goodwill is
tested annually for impairment or
whenever an impairment indicator
has been identified. In the UAE,
the weak macroeconomic and
sustained competitive environment,
exacerbated by the significant
reduction in oil prices and the
COVID-19 pandemic, affected key
inputs to the review and gave rise to
impairment charges amounting to
AED2 190m. The impairment
charges are non-cash and excluded
from the adjusted earnings metrics.
The impairment calculations remain
sensitive to reasonably possible
changes in key assumptions,
including cash flow projections and
long-term growth and discount
rates. Mediclinic Middle East is a
leading private healthcare provider
in the UAE, is profitable and
generates good free cash flows.
INVESTING FOR SUSTAINABLE
LONG-TERM GROWTH
Mediclinic Middle East continues to
work relentlessly on building a strong
brand and reputation in the region.
The investments made to deliver
ethical and sustainable healthcare
services and build long-term trust
with all stakeholders are expected to
differentiate Mediclinic from the
competition, cementing its leading
market position and employer-of-
choice status. In November 2019, the
JCI re-accredited and accredited all
Mediclinic Middle East hospitals and
clinics. This is the first division-wide
JCI process that Mediclinic Middle
East has completed and underlines
its focus to provide high-quality
healthcare services in the UAE.
Leveraging its strong international
reputation and clinical expertise,
in line with the Group’s strategic
goal to expand into new markets,
Mediclinic Middle East agreed a
strategic partnership with Saudi
Arabian investment company
Al Murjan. The partnership will
establish an internationally
accredited 200-bed private hospital
in Jeddah, Saudi Arabia, expected
to open around mid-2022. Mediclinic
Middle East will support Al Murjan
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
with expertise and advisory services
in the planning, design, construction
and commissioning phases of the
hospital project, which began in the
first quarter of 2020, in addition to
operating the facility. Mediclinic will
leverage the operational capabilities
of the UAE Corporate Office in Dubai
to manage the Al Murjan Hospital
and will use this opportunity to
identify and consider further
expansion across Saudi Arabia.
In Dubai, Mediclinic Parkview
Hospital is rapidly growing its market
share and performed very strongly
throughout the period under review.
The hospital, the Group’s largest ever
greenfield construction project by
value, was completed in two and a
half years, ahead of schedule, and
within the AED680m original
budget. Since opening in September
2018, the ramp-up of the hospital’s
patient volumes has exceeded
expectations. The current success
of the hospital is attributed to
Mediclinic’s strong brand and
reputation in Dubai; the detailed
planning and preparation for its
opening, including the recruitment
of doctors and medical employees;
and the hospital’s strategic location
serving the population expansion
that has occurred to the south of
Dubai. The hospital furthermore
established services and specialities
in high demand from the surrounding
population, such as a comprehensive
maternity unit, Level III neonatal
intensive care, 24/7 paediatrics, and
accident and emergency care.
Performance at Mediclinic City
Hospital, the division’s flagship in
Dubai and renowned across the
region for its complex tertiary care,
the Comprehensive Cancer Centre
and highly specialised medicine,
continued to be impacted by the
opening of the new Mediclinic
Parkview Hospital. This is largely as a
result of additional independent
doctors who set up practices at the
new hospital. Mediclinic City Hospital
initiated several plans to address the
impact, including the onboarding of
new doctors, earlier in the reporting
period. The benefits of these
initiatives were supporting strong
performance and encouraging
momentum towards the end of the
period under review, until COVID-19
impacted operations.
In Abu Dhabi, Mediclinic Airport Road
Hospital performed well with inpatient
and outpatient volumes up 11% and
8% respectively during the reporting
period. In addition, the hospital
benefitted from the introduction of
medical oncology; improved dialysis
services; a growing reputation among
clinical professionals; and the
recruitment of some leading Emirati
doctors. Construction of the new
Comprehensive Cancer Centre and
expansion plans are expected to be
completed mid-2020 and opened by
September 2020. Once doctors have
transferred to the new wing, work will
commence in the existing hospital
building for 12 months to refurbish
wards, upgrade theatres and
reconfigure the outpatient
department.
In November 2019, major renovation
of the ground and mezzanine floor
at the Mediclinic Al Noor Hospital
in Abu Dhabi was completed. This
has significantly enhanced one of
Mediclinic’s busiest hospitals with a
new main entrance, lobby, reception,
accident and emergency unit,
pharmacy, outpatient clinic,
treatment rooms, paediatrics
department and internal medicine
department. While the building work
impacted performance during the
reporting period, challenges
implementing the new EHR at the
hospital further delayed the ramp-up
of patient volumes. This recovered
towards the end of the period under
review, until the impact of COVID-19.
Mediclinic Middle East is preparing to
launch a comprehensive genetics
service in the UAE later in 2020. The
ability to provide next-generation
sequencing as part of a clinical
service offering is a cornerstone for
precision medicine. This is an
emerging approach to disease
treatment and prevention that takes
into account variability in genes,
environment and lifestyle for each
individual client.
In FY20, Mediclinic Middle East
invested AED174m (down 54%
on FY19, which included capex
associated with the new Mediclinic
Parkview Hospital) in expansion and
AED46m (down 40% on FY19) in
maintenance capex. Expansion
capex in the reporting period largely
related to the projects at Mediclinic
Airport Road Hospital and Mediclinic
Al Noor Hospital and the EHR. The
EHR is expected to deliver seamless
care and improved service quality
for patients, as well as improved
administration efficiency for the
division. Since going live in FY19 at
Mediclinic Parkview Hospital and
Mediclinic Ibn Battuta, it is being
systematically rolled out across the
division during FY20 and FY21.
The division also opened its first
dedicated paediatric outpatient
clinic, Mediclinic Springs,
strategically located in Dubai’s
Springs community, providing
in-demand, dedicated paediatric
services to families in the
surrounding communities. It serves
as an extension to the well-
established Mediclinic Meadows
clinic. In addition, the division
acquired properties relating to
existing clinics for a total of around
AED50m.
In response to the Group’s approach
to COVID-19, Mediclinic Middle East
expects to moderate its FY21 capital
budget to preserve liquidity. Of the
AED331m originally budgeted in
FY21, which incorporates the element
of forecast FY20 capex for Mediclinic
Airport Road Hospital that is now
allocated to FY21, the current
monthly expenditure run rate is
approximately 40% of the budget
with scope for further reduction. The
Group will continue to monitor
operating cash flow generation and
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Since opening in
September 2018, the
ramp-up of Mediclinic
Parkview Hospital’s
patient volumes has
exceeded expectations.
consequent liquidity to revisit this
important investment decision.
REGULATORY UPDATE
The division continues to maintain an
active dialogue with government
authorities on regulatory changes
within the UAE healthcare sector.
Preparations are ongoing for the
implementation of DRGs for
inpatient procedures in Dubai. The
implementation has been delayed
due to the COVID-19 pandemic and is
currently expected in June 2020.
Mediclinic continues to test the
systems through a shadow billing
process which has been operating
since July 2018. The Dubai Health
Authority (‘DHA’) is following a
collaborative approach in the design
and implementation of the DRGs and,
in addition to sharing and discussing
the test version of the DRG
methodology with the market, it
shared hospital-level results and
impact studies. Currently, it is
expected that the DRGs will have a
neutral impact on the division’s
inpatient revenue, as prescribed by
the DHA. Additional qualified medical
practitioners have been appointed as
case managers to ensure an effective
change-over. Training has been carried
out in the division’s Abu Dhabi
facilities where DRGs have been in
operation since 2011.
The Abu Dhabi Department of
Health (‘DoH’), through industry
engagement, had intended to
introduce the concepts of CoE and
Certificate of Need to further improve
the quality of care in the emirate.
However, due to COVID-19 these are
now delayed. 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. Mediclinic Middle East
will establish CoEs at its two largest
hospitals in Abu Dhabi. At Mediclinic
Airport Road, a Comprehensive
Cancer Centre and paediatric CoE will
be established; at Mediclinic Al Noor
Hospital a paediatric CoE will also
be established. The DoH 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 at
the end of the 2020 calendar year.
HIEs are being established in Dubai
and Abu Dhabi. Testing of the
integration between Mediclinic’s EHR
system and the Abu Dhabi HIE was
successfully conducted during 2019
and the systems are successfully
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT DIVISIONAL REPORTS CONTINUED
The imminent extension
and new Comprehensive
Cancer Centre at
Mediclinic Airport Road
Hospital is an exciting
addition.
interfacing. In near-real time
Mediclinic is able to send data to
the DoH on patient demographics,
allergies, radiology, lab reports,
medication orders and dispensing.
Dubai’s HIE platform has been
announced and Mediclinic is working
with the DHA to plan the project
timelines.
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.
Before COVID-19, the macroeconomic
conditions, which for the region
correlate with the oil price, were
challenging. However, the Group
remains confident in its Middle East
growth strategy with the newest
hospital, Mediclinic Parkview Hospital,
continuing to perform ahead of
expectations, The imminent extension
and new Comprehensive Cancer
Centre at Mediclinic Airport Road
Hospital is an exciting addition.
COVID-19 has given Mediclinic the
opportunity to expedite growth plans
across the continuum of care, in areas
MEDICLINIC AL NOOR HOSPITAL
such as telemedicine, pharmacy
delivery, laboratory and homecare.
Competition in the UAE’s private
healthcare sector remains strong.
However, there is a significant degree
of variability in the types of services
offered, the breadth and depth of
clinical expertise, business and
operating practices, patient
experience and clinical outcomes.
With a maturing regulatory
environment and increasing focus on
greater transparency coupled with
the macroeconomic challenges, it is
proving hard for some providers
to operate in the region and market
consolidation is likely.
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
unfortunately are still prevalent in
some areas of the market, and to
focus on quality performance and
outcome measures. The COVID-19
crisis has seen a further deepening
of cooperation and partnership
between the private and
governmental healthcare sectors,
and Mediclinic Middle East is seen as
pivotal to the UAE’s COVID-19
response. The senior management
teams will continue to provide the
authorities their unwavering support,
with Mediclinic remaining an integral
part of the healthcare delivery
system in the region.
OUTLOOK
In 2019, the UAE witnessed improved
growth in gross domestic product
(‘GDP’) compared to 2018, increasing
by an estimated 2.9% (UAE Central
Bank). This was primarily driven by
above-expected growth in the
hydrocarbon sector. Although GDP
growth was anticipated to continue
in 2020 prior to the COVID-19
pandemic, this is now unlikely to be
the case after the resulting decline in
economic activity, collapse in the oil
price and the postponement of Expo
2020. However, the International
Monetary Fund predicts the UAE’s
GDP to recover in 2021, as the
COVID-19 situation normalises,
consumer confidence returns and oil
prices rise. In response to current
market conditions, the UAE
Government announced in May
2020, a two-phased recovery plan to
help shape the economy in the
post-COVID-19 world. The first phase
includes an AED282.5bn incentives
112
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Q&A
WITH MR DAVID HADLEY
What achievement by the division were you most
proud of in FY20?
Against a backdrop of tough economic conditions and the
entrance of significant new competitors to the market, I was
proud of our revenue growth during the year under review,
despite being behind our initial expectations. This was
underpinned by the success of Mediclinic Parkview Hospital.
I am also pleased at the progress we have made in cementing
our long-term relationship with the UAE Government and
healthcare regulatory authorities, with Mediclinic becoming a
trusted partner and advisor on healthcare-related matters.
We are also very proud of the fact that we have managed to
begin our journey into the growing healthcare market of
Saudi Arabia.
How has the division shown agility and expertise in
dealing with the COVID-19 pandemic?
In each emirate we have had to adapt rapidly to new
regulations and scenarios which change on a daily basis. We
have been actively working with governments across the UAE
on a number of initiatives, which have included the rapid
set-up and deployment of field hospitals, quarantine facilities,
mass testing centres and COVID-19 laboratories, as well as
telemedicine, pharmacy home delivery and homecare services.
I am confident that the agility we have shown in responding to
the pandemic so far will stand us in great stead as we move
forward in a new post-COVID-19 world.
What are your thoughts looking ahead to the future?
I have always been proud of the way our employees have
worked together as a team. Now, more so than ever, they are
showing solidarity, agility, integrity and a can-do attitude.
Their commitment is not only noticed by Mediclinic’s
executive management but by key external stakeholders,
including patients and government. Thanks to these efforts,
we are now held in even greater regard by the authorities
and we are working with them on strategies to further
advance healthcare in the UAE.
113
plan to support private sectors most
impacted by the pandemic. In the
second phase, continuing the
diversification strategy away from
the dependence on hydrocarbons,
which was already leading to new
opportunities for industries, including
private healthcare, there will be the
injection of a long-term stimulus plan
coupled with major investment in
sectors such as the digital and green
economies.
Prior to COVID-19, Mediclinic’s focus
was to build on the opportunities
which have arisen along the
continuum of care, including the
utilisation of digital innovations and
genomics. COVID-19 has widened
these opportunities while sharpening
the division’s focus. In parallel, to
deliver on the Group’s long-term
growth strategy, Mediclinic Middle
East will continue supporting its
medical practitioners to grow their
patient volumes through providing
new services across the continuum
of care underpinned by the brand
and reputation of a leading
international healthcare group;
ensuring timely delivery of projects
under construction; and effectively
integrating new investments into the
division.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTSTRATEGIC REPORT VIABILITY STATEMENT
ASSESSMENT OF LONGER-TERM PROSPECTS
The Group’s purpose is to enhance the quality of life with
a vision to be the partner of choice that people trust for all
their healthcare needs. Mediclinic’s business model enables
it to quickly respond to opportunities and risks, while
safeguarding employees, clients and the interests of
stakeholders. The Group seeks to achieve superior
long-term financial returns by managing its resources to
the benefit of all stakeholders.
Refer to the Business model on page 14, the Investment
case on page 16 and Strategy, goals and progress on
page 36.
ASSESSMENT OF VIABILITY
The assessment of viability is an extension of the risk
management and annual financial planning process which
informs the Group’s business plan. 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 benefit of investments made in the present period.
The business plan reflects the Group’s strategy, associated
risks and the directors’ best estimate of its 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 an extension
of the key assumptions to the forecast period. The
budgets and five-year plans, including the Group strategic
goals and objectives, are iteratively reviewed and finally
approved by the divisional executive committees, the
Group Executive Committee and the Board.
The five-year period extends beyond the maturities of a
material portion of the Group’s borrowings in each division.
The Group expects to be able to refinance existing
borrowings on broadly similar terms and conditions before
the existing facilitates expire. The maturity profile of the
Group’s borrowings is shown in note 3.1 (c) of the
Group financial statements on page 257.
In the context of the uncertainty that COVID-19 presents
to business, including the healthcare sector, the Group
delayed the conclusion of its annual financial planning
process and approval by the Board to incorporate the
material impact that COVID-19 is expected to have on
financial performance. The COVID-19-adjusted budget is
informed by:
• The economic impact of COVID-19 and its aftermath;
• The expected impact of the above on revenue; and
• The mitigating actions in respect of any anticipated loss
of revenue.
The Group has put in place appropriate structures and
processes to monitor and mitigate against existing and
emerging risks to the business. While recognising the
ongoing acute care and emergency services offered
across the Group which underpin revenues, there remains
a risk to elective procedures and outpatient activity from a
continuation or reintroduction of lockdown and other
measures in response to the pandemic, the availability of
staff and a disruption in the supply chain. This will be
partially offset by the Group’s response to the crisis, and
the potential increase in demand from postponed elective
procedures and outpatient activity as restrictions are
relaxed. Despite the measures taken, there remains a
significant risk to the Group’s financial performance for at
least the next 12 months.
The Group has taken several actions to preserve liquidity
throughout the impact of the COVID-19 pandemic on the
business. These include the postponement of all non-
urgent and non-committed capital programmes, agreeing
certain covenant test waivers with the lenders up to
and including 31 March 2021 and the suspension of the
dividend.
In addition, month-by-month scenario analyses were
performed up to September 2021 per division. Refer to
the Group Chief Financial Officer’s Report and note 3.1
of the Group financial statements. On a divisional level,
the potential impact of each scenario and certain
scenarios in combination, which included a severe but
plausible COVID-19 downside case scenario, were
modelled and assessed on EBITDA or profit after tax (as
appropriate), net debt and debt covenants over the
five-year forecast period. In the base case, revenue was
projected to be impacted severely in the first half of the
financial year, with some months, on a constant currency
basis, down between 44% and 50% compared with the
prior year and a gradual recovery in the second half of
the financial year. In the COVID-19 downside case, the
Group’s revenue was forecast to be impacted further by
up to 15% per month, on a constant currency basis in
FY21 compared with the base case. The severe but
plausible downside scenarios were established taking
account of the potential for a longer and deeper impact
from COVID-19 on the Group’s business performance.
• The spread of COVID-19 in the countries of operation,
incorporating the general capabilities of the
governmental systems (including the health system as a
whole) to contain and treat the COVID-19 pandemic;
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 176).
The principal risks as detailed on pages 120–123 were
114
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 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 assessment.
The principal risks and related key assumptions
underlying each of the divisions’ business plans that were
stress tested are set out below:
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
KEY ASSUMPTION
STRESS TESTED
Reductions in tariffs and fees
Reduction in volumes
PRINCIPAL RISK
DIVISION STRESS TESTED
• Economic and business environment
• Regulatory and compliance risk
• Pandemics and infectious diseases
• Competition
• Economic and business environment
• Regulatory and compliance risk
• Pandemics and infectious diseases (includes
impact of lockdown and other measures in
response to the COVID-19 pandemic)
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
Deterioration in insurance mix
• Regulatory and compliance risk
Increases in interest rate
• Availability and cost of capital
Hirslanden
Hirslanden
Downturn in the
macroeconomic and business
environment
Shortage and availability of
qualified and experienced
healthcare employees
• Economic and business environment
Hirslanden
Mediclinic Southern Africa
Mediclinic Middle East
• Availability, recruitment and retention of skilled
Mediclinic Southern Africa
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
Deterioration in accounts
receivable collection
• Operational and credit risk
Hirslanden
• Information systems security and availability
Hirslanden
risk
• 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.
Due to the uncertainty associated with its severity,
duration and full extent, there remains a risk that the
actual impact of the COVID-19 pandemic and its
economic aftermath could be worse than the severe
but plausible downside scenario. Depending on the
circumstances, there would be further mitigating
actions available to the Group to seek to mitigate
this risk.
While recognising that there remains significant risk to
the Group’s financial performance for at least the next
12 months, the directors 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 on 31 March 2025. In making their
assessment, the directors have assumed that there will
be no material change compared to the current post-
COVID-19 environment in the assumed business and
regulatory environments as such assumptions are
subject to a level of uncertainty and judgement for
outcomes which cannot be projected and foreseen.
115
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
EMERGENCY
PREPAREDNESS
SUMMARY
The system that prepares, protects
and mobilises Mediclinic during the
COVID-19 pandemic
ACTIONS
• Access control at all facilities
• Redeploying suitable employees to support
emergency operations
• Acquiring additional ventilators and related
consumable products
• Expanding ICU capacity where possible
• Establishing additional laboratory facilities
• Proactive procurement of critical PPE, medication,
consumables and ICU equipment
• Donation to charities supporting COVID-19 of up to 30%
of salaries or fees for three months by Group Executive
Committee members and Board of Directors
Investors
Media
Medical practitioners
Communication
via live broadcasts,
virtual meetings
CONTINUOUS
EXTERNAL
STAKEHOLDER
CONSULTATION
Clients
24/7 call centres,
online risk
assessment tools,
awareness campaigns
Governments
and authorities
Healthcare
insurers
Industry associations
Consultation with more than
55 professional societies and
epidemiology experts
Suppliers
CONSEQUENT SOLUTIONS
• Rapid deployment of telemedicine
• Drive-through pharmacy services
• Home delivery service for
prescription medication
• Central procurement and
resource management
• Design of rapidly deployable
negative pressure room
116
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
DIVISIONAL LEVELGROUP LEVEL INTERNAL
EXISTING IPC SPECIALISTS
AND PROCESSES
IPC and communicable
disease emergency
preparedness programmes
govern admission,
containment, triage and
treatment of suspected or
confirmed COVID-19 cases
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
HOSPITAL
AND BUSINESS
INCIDENT
RESPONSE
PLANNING
CENTRAL
COORDINATION
OF TASK TEAMS
AND CLINICAL
GOVERNANCE
INCIDENT
MONITORING
TASKFORCES
GROUP
MULTIDISCIPLINARY
AND
SPECIALIST
TASKFORCES
WHAT
WHO
WHEN
DAILY
WEEKLY
AT LEAST
WEEKLY
CLINICAL
TASKFORCE
Group Chief Clinical
Officer, divisional
chief clinical officers,
Group General
Manager: Clinical
Performance
Group Chief Clinical
Officer, divisional chief
clinical officers, divisional
chief operational officers,
Group CEO, Group CFO
and Group and divisional
representatives across
clinical, communications,
investor relations,
finance, human
resources, ICT,
innovation, operational,
procurement and risk
management disciplines
INTERNAL
EMPLOYEE PROTECTION
AND EDUCATION
• Continuous
communication
• Work-from-home
arrangements for
qualifying employees
• COVID-19 training
• PPE use protocols
• Screening and self-
isolation of employees
• Redeploying vulnerable
frontline employees to
lower-risk units
MEDICLINIC INTERNATIONAL PLC
ANNUAL REPORT
117
DIVISIONAL LEVELGROUP LEVEL
PATIENT FEATURE
LIFE-SAVING RECIPROCATED
Through the donation of PPE, Mrs Veronica Schmitt,
a Mediclinic client, is helping to look after the doctors
who once saved her life.
It began with a visit to the
emergency centre. ‘I’d just come
back from London in late February
and I was having trouble breathing.
The outbreak was top of mind there
and I was worried that I might have
COVID-19. Luckily, I tested negative
– it was bacterial pneumonia,’ recalls
Mrs Veronica Schmitt (32). But
looking around the emergency
centre of Mediclinic Bloemfontein in
South Africa, she realised that soon
PPE would be in high demand. Her
plan? To make face masks and
donate them to the hospital.
Just a few months previously she’d
been in that same emergency
centre and doctors had saved her
life. ‘When I came to, I was very
distraught. But the nurses and
doctors held my hand and set me at
ease.’ She resolved to pay their care
and compassion forward.
‘I’m a self-taught seamstress that
always has fabric lying around, so I
thought the shortage of masks was
a problem I could solve. I started
researching the requirements, but it
was a process of trial and error to
make them. After I’d tried three
patterns, I ended up designing my
own mask that fits the nose and
chin. Now I can make 10–15 masks
in an hour. Each consists of four
layers and uses 100% tightly woven
cotton and surgical spunbond to
filter out disease-carrying particles.’
When not making masks,
Mrs Schmitt works as a digital
forensic scientist and is part of an
118
international collective to improve
healthcare through computer
security. Through her global network
she learned of the efforts to 3D print
face shields and expanded her
production. ‘As part of the Ruach 3D
initiative, we’re also producing full
face shields. Our goal is to provide
PPE for all the frontliners – to date
we’ve done 229 face shields and
350 masks.’
Twelve years ago, the operation to
fit the pacemaker that would change
her life was in jeopardy due to
a lack of funds. Her cardiologist at
the time, Dr Nico van der Merwe,
arranged for donation of a device
and Mediclinic Bloemfontein waived
some of the fees. ‘I fell in love with
healthcare right then,’ she says.
Today Mrs Schmitt is providing
essential PPE to that same hospital.
‘When I talk to some of the doctors
who have received our donations,
I realise they know me, I know them.
We’ve walked a long road together
over the years. They didn’t know
that when they saved my life,
I would end up contributing to
keeping them safer.’
‘We under-estimate the effect we
have on the lives of the thousands
of patients that receive treatment
in our facilities every year,’ says
Mediclinic Group CEO Dr Ronnie
van der Merwe. ‘This is a striking
example of how grateful some of
our patients are, and how they
reciprocate the care they received
from us.’
Mrs Veronica Schmitt
We under-estimate the
effect we have on the
lives of the thousands
of patients that receive
treatment in our
facilities every year.
Dr Ronnie van der Merwe
Group Chief Executive Officer
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT RISK MANAGEMENT,
PRINCIPAL RISKS
AND UNCERTAINTIES
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
The Board is ultimately accountable for the Group’s risk
management processes and internal control system.
It has delegated responsibility to the Audit and Risk
Committee for overseeing and reviewing the efficacy of
these arrangements as well as that of the Group’s internal
and external auditors. The Board receives regular updates
on the activities of the Audit and Risk Committee.
RISK MANAGEMENT
The Group’s ERM policy is reviewed annually and follows
the framework set by the international Committee of
Sponsoring Organisations of the Treadway Commission.
The policy defines the risk management objectives,
methodology, risk appetite, risk identification, assessment
and treatment processes, and the responsibilities of the
various risk management role players in the Group. 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
and business process); the movement in risk during
the reporting period; and key measures taken to
mitigate these risks, are listed in the table below and
on pages 120–125.
REFERENCE
RISK CATEGORY
BUSINESS PROCESSES
Strategic and business environment
• Strategy formulation and implementation
• Strategic investments and projects
Financial and reporting
• Revenue cycle
• Procure-to-pay cycle
• Financial management and control
• Treasury
• Health information (including coding)
Operational
• Infrastructure
• Marketing and corporate communication operations
Information technology
• ICT and related projects
Regulatory compliance
• Legal and secretarial
• Governance, risk and compliance
• Environmental management
Clinical
People
• Clinical
• Nursing
• Pharmacy
• Coding
• Human resources
• Payroll cycle
119
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
RISK MANAGEMENT, PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
PRINCIPAL RISKS AND
UNCERTAINTIES
The principal risks are determined
through a strategic risk review
process whereby each division’s
executive committee as well as the
Group Executive Committee
reassess the top risks which could
impact on the achievement of
strategic objectives. Related risks
are aggregated and grouped to
determine the principal risks.
Changes to principal risks
The entry for ‘Pandemics and
infectious diseases’ was previously
included under ‘Clinical risks’ and
is now shown as a separate
principal risk.
Higher
d
o
o
h
i
l
e
k
i
L
1
9
5
8
6
7
4
2
3
13
11
12
10
Lower
Impact
Higher
PRINCIPAL
RISKS
MOVEMENT IN
FY20
RISK DESCRIPTION
RISK MITIGATION
1 Pandemics and
infectious
diseases
The increasing
risk relates to
the COVID-19
pandemic.
2 Economic and
business
environment
The global
economic
environment
and outlook
deteriorated.
An epidemic occurs when an
infectious disease infects many
people rapidly; a pandemic occurs
when it spreads to multiple countries
and continents.
These risks refer to the Group’s
ability to respond effectively to the
potential adverse clinical, operational
and business effects caused by a
pandemic or infectious disease.
• Effective triage system
• Hospital and business incident
response planning
• Central coordination of task teams
and clinical governance
• Incident monitoring
• Financial scenario planning
• Communication strategy
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.
• Systems to monitor developments
and trends in the economic and
business environments and early
warning indicators
• Proactive monitoring and
The business environment risks
include the power of funders and the
potential negative impact on tariffs
and fees resulting from the shift of
the relative negotiating power away
from healthcare service providers
towards funders.
negotiation by the Group’s Funder
Relations functions
• Focus on quality and continuum of
care to reinforce the Group’s
market position
120
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT PRINCIPAL
RISKS
MOVEMENT IN
FY20
3 Regulatory and
compliance
The increasing
risk relates to
the continued
healthcare
reform and the
introduction
of new
legislation or
regulations.
Providers in the
healthcare
market remain
competitive.
The increased
risk relates to
the continued
external threats
arising from
cyberattacks
and breaches.
The increased
risk relates to
increased
demand from
clients and
stakeholders
for adoption of
digital solutions
and innovation.
4 Competition
5 Information
systems
security and
cyberattacks
6 Disruptive
innovation and
digitalisation
I
S
T
R
A
T
E
G
C
R
E
P
O
R
T
RISK DESCRIPTION
RISK MITIGATION
These risks relate to adverse
changes in legislation and
regulations impacting on the Group
or where the failure to comply with
legislation and regulations may result
in losses, fines, penalties or damage
to reputation. The Group is also
exposed to an increasing compliance
monitoring cost.
The risks include healthcare reform
by regulators aimed at reducing the
cost of healthcare; broadening the
access to quality healthcare; and
increasing quality standards
monitoring by regulators.
• Proactive engagement with
stakeholders
• Health policy units created to
conduct research and to provide
strategic input into reform
processes
• Active industry participation
across all divisions
• Company Secretarial, Legal and
Compliance functions support
operational management; monitor
regulatory developments; and,
where necessary, obtain expert
legal advice for the effective
implementation of compliance
initiatives
• Compliance risks identified and
assessed as part of compliance
management processes
These risks relate to the uncertainty
created by existing and/or emerging
competitors with strong strategies.
• Proactive monitoring
• Strategic planning processes
• Quality and value of care
processes
The risks include the outmigration
of care (partly driven by further
technological developments) and
the development of alternative care
models.
Information systems security risk
and cyberattack risks relate to the
unauthorised access to information
systems through external or internal
attack or unauthorised breaches
resulting in the unavailability of
systems, failure of data integrity and
loss of confidential data.
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 at which new
technologies (and combinations
thereof) change and transform
industries, and to what extent an
organisation can exploit these
opportunities by being responsive
and innovative, while managing
associated risks.
• 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
• Proactive monitoring
• Systems to monitor developments
and trends in the economic and
business environments and early
warning indicators
121
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
RISK MANAGEMENT, PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
PRINCIPAL
RISKS
MOVEMENT IN
FY20
RISK DESCRIPTION
RISK MITIGATION
7 Availability,
recruitment
and retention
of skilled
resources and
medical
practitioners
8 Business
projects
9 Clinical
10 Availability
and cost of
capital
(including
financing and
liquidity risks)
Vacancies and
turnover ratios
in respect
of skilled
resources and
medical
practitioners
are expected
to remain at
similar levels
to the prior
reporting
period.
This risk
decreased
during the year
under review.
Clinical
processes
across all
divisions
remained a key
focus area for
the Group.
Risk exposure
remained at a
comparable
level to the
prior reporting
period.
Interest rates
are expected to
remain at
comparable
levels during
2020. Long-
term financing
arrangements
are in place.
There is a shortage of skilled labour,
particularly a shortage of qualified
and experienced nursing employees
in Southern Africa.
• Systems to monitor satisfaction,
movement and profiles of medical
practitioners
• Details on the relationship and
The availability and support of
admitting medical practitioners,
whether independent or employed,
are critical to the Group’s services.
The Group plans to adapt to the
evolving operational and regulatory
environment and healthcare market.
These risks refer to issues or
occurrences that could interfere with
successful completion of projects,
including timelines, cost and quality.
These risks relate to all clinical risks
associated with the provision of
clinical care resulting in undesirable
clinical outcomes.
Clinical risks are managed daily at all
facilities. High-priority clinical risk
areas include patient safety culture,
adverse obstetric outcomes,
medication errors, surgical and
procedural adverse events and
multidrug-resistant organisms.
Such risks may also result in damage
to Mediclinic’s reputation and impact
on brand equity1.
These risks relate to the cost, terms
and availability of capital to finance
strategic expansion opportunities
and/or the refinancing or
restructuring of existing debt
affected by prevailing capital market
conditions.
All three divisions have recently
refinanced their debt and, therefore,
maturities are relatively long dated.
The nearest term material maturity is
a Swiss bond due in February 2021.
An unutilised bank facility is in place
to fully repay the bond.
engagement with medical
practitioners provided in the 2020
Sustainable Development Report
• Employment, recruitment and
retention strategies explained in
the 2020 Sustainable
Development Report
• Extensive training and skills
development programme and
foreign recruitment programme
explained in the 2020 Sustainable
Development Report
• Effective project governance
practices, methodologies and
reporting
• Experienced project management
teams
• Proactive monitoring and
oversight
• Refer to the 2020 Clinical Services
Report for a detailed analysis of
the strategies to manage and
monitor clinical risks
• A Group-wide clinical risk register
implemented per division
• Accreditation processes
• Clinical governance processes
• Monitoring of clinical performance
indicators
• Focus on quality management
processes
• Stakeholder engagement and
disclosure strategies
• Clinical audits
• Long-term planning of capital
requirements and cash-flow
forecasting
• Scrutiny of cash-generating
capacity within the Group
• Proactive and long-term
agreements with banks and other
funders relating to funding
facilities
• Systems to monitor compliance
with requirements of debt
covenants
• Further details on capital risk
management and the Group’s
borrowings contained in the
Group financial statements
Note
1 Brand equity refers to the commercial value derived from the consumer perception of the Group’s brand names rather than the services provided under
those brand names.
122
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT PRINCIPAL
RISKS
MOVEMENT IN
FY20
RISK DESCRIPTION
RISK MITIGATION
11 Operations
and credit
The operational
and credit risks
did not change
significantly
and remained
stable.
12 Quality of
service and
operational
stability
These risks did
not change
significantly
and remained
stable.
Operational risks refer to diverse
types of operational events with
a potential for financial loss,
operational interruptions or
reputational damage.
Credit risks relate to possible loss
due to a funder’s inability to pay the
outstanding balance owing; default
by banks and/or other deposit-taking
institutions; or the inability to recover
outstanding amounts due from
patients.
Credit risk with respect to trade
receivables consists mainly of
medical schemes and insurance
companies which are required to
maintain minimum reserve levels. In
Switzerland and the UAE a large part
of trade receivables are owed by
cantonal or government-funded
programmes that support healthcare
providers with early release of
payments due to them during
COVID-19 business disruptions.
These risks refer to the quality of
service and the stability of the
operations, including:
• incidents of poor service or where
operational management fails to
respond effectively to complaints;
• operational interruptions which
refer to any disruption of the
facility and may include the threat
of disrupted electricity or water
supply; and
• fire and allied perils causing
damage or business interruption.
13 Business
investments
and
acquisitions
The investment
and governance
processes were
strengthened
during the year
under review.
These risks relate to increased financial
exposure due to major strategic
business investments and acquisitions.
They include the sensitivity of the
assumptions made when capital is
allocated and the effective
implementation of major investment
decisions.
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• Preservation of a sound internal
financial control environment
• Effective operational risk
management processes
• Effective monitoring and oversight
of operations
• Regulated minimum solvency
requirements for funders
• Monitoring of approved funders
• Group Treasury Policy
• Patient satisfaction surveys (both
internal and external)
• Complaints monitoring
• Training programmes and
supervision of service levels
• Emergency backup electricity
generation
• Emergency and disaster planning
• Extensive fire-fighting and
detection systems, including
comprehensive maintenance
processes
• Comprehensive insurance cover
for financial impact of potential
disasters
• Strategic planning processes
• Due diligence processes
• Investment mandates
• Board oversight
• Post-acquisition management
processes
Key
Risk exposure has increased due to change in business environment; increased investments; increased
dependency of operations on IT; information sensitivity; and associated cost.
Proactive and continuous monitoring; favourable results of negotiations; effective treasury; and risk
management processes have resulted in lowering of risk exposure.
Risk exposure has remained largely unchanged as the operating and regulatory environments have
remained stable, and enhanced risk mitigation measures have kept the risk at same level.
123
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
RISK MANAGEMENT, PRINCIPAL RISKS AND UNCERTAINTIES CONTINUED
COVID-19 PANDEMIC
Mediclinic facilities and the communities in which the
Group operates have been affected by the spread of
the COVID-19 pandemic. Mediclinic responded quickly
to the potential consequences. A central taskforce was
established to centrally coordinate the Group’s response
and ensure that clinical protocols and best practices are
shared across the Group. The taskforce supports the
divisions with the establishment of contingency plans with
due consideration for any impact on supply chain, ICT,
finance, risk and human resource capacity. Mediclinic is
AREA OF IMPACT
MITIGATING STEPS
working closely with governments and regulators in each
of its respective geographies to combat the pandemic
and support the different initiatives being implemented.
The Group continues to monitor the developments and is
constantly re-evaluating its response to this dynamic and
rapidly evolving situation.
The areas considered to have the biggest potential
operational impacts on Mediclinic, together with the
related mitigating steps are set out in the table below:
Preparedness to deal with
potential surge of patients
with COVID-19
Various initiatives create additional capacity in frontline resources, including:
• suspending non-essential elective procedures and outpatient activities;
• redeploying employees to support emergency areas within hospitals;
• identifying suitably qualified and skilled employees who are available to be
redeployed if needed (i.e. clinically qualified employees working in non-clinical
positions and employees in teaching positions);
• acquiring additional ventilators and related consumable products; and
• expanding ICU capacity where possible.
Safety and quality of care
of both COVID-19 and
non-COVID-19 patients
• Equipped with clearly defined IPC and communicable disease emergency
preparedness programmes that govern admission, containment, triage and
treatment of suspected or confirmed COVID-19 cases.
• Equipped with experienced IPC teams.
• Established additional laboratory facilities to support COVID-19 testing.
• Launched telemedicine and pharmacy home delivery services for prescription
medication; created drive-through pharmacies.
• Identified separation areas in hospitals and sufficiently prepared these for IPC and
treatment.
• Established alternative interim facilities to admit asymptomatic and low-acuity
cases.
• Established 24/7 patient call centres and crisis control centres.
• Maintain updated websites and developed online risk assessment tools; software
development to support various tracking and testing initiatives; and guidelines
available to employees and patients.
• Established appropriate measures and programmes to provide employees with
COVID-19 training.
• Adherence to all the necessary precautions to limit the spread of COVID-19 in
Mediclinic facilities.
• Adherence to protocols on the safety of healthcare workers and the use of PPE,
including screening and self-isolation of employees based on official case-
definitions.
• Identification and redeployment of employees with underlying health conditions
to lower-risk units.
Safety of healthcare workers,
doctors and employees where
the contagiousness of the
disease could reduce
availability of healthcare
workers and supporting staff
Supply chain risks where
certain supplies are difficult
to source due to high global
demand and global shortages
• Response strengthened by the Group’s global sourcing capability.
• Coordinated and proactive measures taken by Procurement functions on three
continents to secure the supply of critical PPE, medication, consumables and
ICU equipment.
124
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The Group has established the necessary structures and processes to
monitor and mitigate existing and emerging risks to the business, with
the main focus areas being people, supply chain and liquidity.
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As with most industries and companies, the full impact
of the COVID-19 pandemic on Mediclinic is currently
uncertain. The Group has established the necessary
structures and processes to monitor and mitigate existing
and emerging risks to the business, with the main focus
areas being people, supply chain and liquidity.
The pandemic and its consequent national lockdowns
and associated actions suspending non-urgent elective
procedures are likely to have a significant impact on the
Group’s financial performance for FY21. This will be offset
by Mediclinic’s response to the crisis in addition to the
ongoing range of primary and acute care services offered
across the Group.
At 31 March 2020, the Group had material headroom to
covenants in its existing debt facilities and a strong
liquidity position heading into the global pandemic. To
further support the Group’s liquidity position, all non-urgent
and non-committed capital programmes have been
postponed.
As part of the Group’s proactive measures, certain covenant
test waivers have been agreed in respect of its material
borrowings across all three divisions up to and including
March 2021. This allows the Group to focus on the vital role
it plays during the pandemic and to prepare for the
anticipated increase in demand from postponed treatments
once the peak of the pandemic subsides. The Group has no
material near-term debt maturities with the next being at
Hirslanden where a CHF145m Swiss bond is due in February
2021. An unutilised bank facility is available to fully repay
the bond.
BREXIT
The UK left the European Union (‘EU’) at the end of
January 2020 and entered into a withdrawal agreement
with the EU. The agreement introduced a transition
period until 31 December 2020 during which the UK and
EU trading relationship remains in place.
The Group does not expect that a new trade agreement
between the UK and the EU will have a material impact
on any of its divisions in Switzerland, South Africa,
Namibia or the UAE, however, Mediclinic may be
impacted through its investment in Spire as these
operations are UK-based.
The board of Spire has reported Brexit 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
relate to:
• supply chain risks where more than 80% of the goods
that Spire uses to operate its hospitals come into the UK
from or via the EU;
• 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.
125
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
GOVERNANCE
AND
REMUNERATION
REPORT
Across all three geographies,
Mediclinic offers training
opportunities to the workforce
of tomorrow.
Dr Ronnie van der Merwe
Group Chief Executive Officer
In light of the continued global shortage of healthcare
employees, Mediclinic actively invests in the future
workforce. Across the divisions there are training
opportunities for healthcare students and support
of applicable studies and PPPs are expanding to
collaborate with even more leading tertiary institutions.
Refer to the 2020 Clinical Services Report and
2020 Sustainable Development Report at
annualreport.mediclinic.com for more information.
126
GOVERNANCE AND
REMUNERATION REPORT
128 Chair’s Introduction
130 Board of Directors
136 Group Executive Committee
138 Corporate Governance Statement
170 Audit and Risk Committee Report
184 Clinical Performance and Sustainability
Committee Report
188 Nomination Committee Report
194 Remuneration Committee Report
221 Statement of Directors’ Responsibilities
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
127
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CHAIR’S
INTRODUCTION
The Board and management team of Mediclinic are
committed to maintaining strict principles of corporate
governance and the highest standards of integrity and
ethics, which are embedded in the Group’s purpose,
vision and organisational culture. Mediclinic’s corporate
governance structures support the effective delivery of
the Group’s strategy and the Group’s commitment to
responsible corporate citizenship in every country and
community in which it operates. These are fundamental
to building and maintaining a sustainable business in
a challenging and ever-changing environment. The
Corporate Governance Statement that follows provides
feedback on the governance framework, how it was
applied and the Board’s key areas of focus during the
period under review.
Mediclinic’s purpose, vision and organisational culture,
including its values, provide the foundation for its approach
to business. These aspects are actively managed by the
Group’s leadership, closely monitored by the Board and
embedded across all levels of its operations, as evidenced in
the Strategic Report and this section of the Annual Report.
During FY19 and FY20, Mediclinic reviewed its corporate
governance arrangements in the light of the 2018 Corporate
Governance Code and formalised or strengthened existing
procedures where required.
and process. Our delegated authorities enable decisions
to be made by the right people at the right level, while
ensuring accountability to the Board and an appropriate
level of scrutiny, debate and support from directors.
However, the Board will continue to review the
effectiveness of these arrangements and build on them
as necessary to ensure the Group’s corporate governance
framework remains effective and reflective of good
governance practice.
Mediclinic has a strong track record of following a holistic
approach which balances its financial returns with its
ethical responsibility towards all its stakeholders and the
environment. The Group has also had to respond to the
opportunities and challenges presented by the growing
impact of climate change. An important step we have
taken during the year under review has been the recent
adoption of the Mediclinic Sustainable Development
Strategy which brings together the various ESG initiatives
across the Group and enables the implementation of
a structured, consistent and systematic approach in
this regard. The Board and, in particular, the Clinical
Performance and Sustainability Committee will be
monitoring closely the progress and outcomes of this
strategy, albeit we recognise that the original timelines
may need to be adjusted in the wake of the COVID-19
pandemic.
The validity and resilience of our corporate governance is
being tested in new ways by the COVID-19 pandemic. At
the date of this report, it has continued to provide the
Group with a robust and clear decision-making framework
At the Company’s 2019 AGM, the resolutions to approve
Mediclinic’s Directors’ Remuneration Report (Resolution 2)
and to authorise the directors to allot ordinary shares
The validity and resilience of our corporate governance is being
tested in new ways by the COVID-19 pandemic. At the date of this
report, it has continued to provide the Group with a robust and clear
decision-making framework and process.
128
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT (Resolution 18) received 71.44% and 78.88% support from
shareholders respectively. In accordance with the 2018
Corporate Governance Code, the Company sought to
engage with key shareholders to ensure it fully understood
the reasons behind the result. The outcome of this
engagement is described in the Remuneration Committee
Report on page 194 and in the ‘Shareholder engagement’
section of the Corporate Governance Statement on page
156 respectively.
Every director has continued to demonstrate their
commitment to Mediclinic throughout FY20 and up to the
date of this report, through their meeting attendance and
the high quality of their contributions at those meetings.
The attention paid by the Nomination Committee to
long-term succession planning and refreshment of the
Board ensured a smooth transition after Mr Desmond
Smith’s retirement following the Company’s 2019 AGM,
with Mr Alan Grieve assuming the role of SID and Chair
of the Audit and Risk Committee, and the appointment of
Mr Tom Singer as an independent non-executive director
and member of the Audit and Risk Committee and
Remuneration Committee, following a rigorous and
thorough process. Mr Singer’s financial background and
expertise in UK-listed international hospitality and branded
consumer businesses have been valuable additions to the
Board’s existing skill-set.
Dame Inga Beale as an independent non-executive director
and Chair Designate at the conclusion of a thorough,
independent and well-executed process. She has a clear
understanding of our strong culture and values, and will
align readily with our business. Core to these matters are
our stakeholder commitment to deliver sustainable
high-quality healthcare services and our purpose to
enhance the quality of life. Dame Inga will expertly lead the
Board in pursuit of these objectives, including overcoming
the challenges posed by the COVID-19 pandemic. Lastly, on
behalf of the Board, I once again thank Mr Seamus Keating
for his commitment and valued contributions to the Board
and the Group over the past seven years and we wish him
well in his new demanding role.
Further details of our corporate governance framework
are included in this Annual Report, as well as in the
2020 Clinical Services Report and the 2020 Sustainable
Development Report available at annualreport.mediclinic.com.
I remain confident that the Board, supported by
an effective senior management team and governance
structure, is well placed to continue to drive long-term
value for stakeholders and maintain Mediclinic’s market-
leading positions.
As SID, Mr Grieve went on to lead the panel tasked
to identify my successor. Board members and senior
management alike were delighted to welcome
Dr Edwin Hertzog
Non-executive Chair
129
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT BOARD OF
DIRECTORS
The biographies of the directors and their committee membership
at 1 June 2020 (the ‘Last Practicable Date’) are set out below.
DR EDWIN
HERTZOG
NON-EXECUTIVE CHAIR
NATIONALITY South African
DATE OF APPOINTMENT
Non-executive Chair since
February 2016.
RESPONSIBILITIES AND CONTRIBUTION TO THE COMPANY
As Chair, Dr Edwin Hertzog provides strong leadership to
the Board, ensures the effective performance of the Board
and leads by example by promoting a culture of openness
and rigorous debate. He upholds the highest standards of
corporate governance and works closely with the Group CEO
to ensure implementation of Board-approved actions. He also
facilitates constructive Board relations and the effective
contribution of all non-executive directors and seeks to
ensure that the Company maintains effective communications
with shareholders and that the Board has a good
understanding of their views. He is Chair of both the
Nomination Committee and the Investment Committee and
is a member of the Clinical Performance and Sustainability
Committee.
SKILLS AND EXPERIENCE His long and successful career in
healthcare provides valuable insights into leading an
international healthcare business, with Dr Hertzog having held
various senior leadership positions, both at management and
Board level. He has extensive knowledge and experience of
chairing boards, developing and implementing strategy,
capital markets as well as investor and stakeholder
management.
Dr Hertzog has more than 36 years’ experience in executive
and non-executive roles within the Group. He was appointed
as the first managing director of Mediclinic International
Ltd (then Medi-Clinic Corporation Ltd) in 1983 and was
instrumental in its listing on the JSE three years later. He also
served as executive Chair of Mediclinic International Ltd from
1992 until August 2012, whereafter he became non-executive
Chair. He has led the Board as non-executive Chair since
February 2016. He also served as a non-executive deputy
Chair of Remgro and was previously the Chair of the Council
of Stellenbosch University.
KEY EXTERNAL APPOINTMENTS Dr Hertzog has no external
public appointments.
QUALIFICATIONS Dr Hertzog holds an MBChB (Stellenbosch
University); MMed (Anaes) (Stellenbosch University); an FCA
(SA) (Fellowship of the College of Anaesthetists of South
Africa); and a PhD in Philosophy honoris causa (Stellenbosch
University).
DAME INGA BEALE
CHAIR DESIGNATE AND
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY British
DATE OF APPOINTMENT
Independent non-executive
director and Chair Designate
since March 2020.
judgement. Since her appointment, Dame Inga has been working
very closely with the Chair to ensure that the coming change
in the leadership of the Board will be a smooth transition and
that the Board will continue to be effective in its performance,
promoting the long-term sustainable success of the Company,
generating value for shareholders and contributing to wider
society. She will also be working closely with other Board
members and the senior management team to gain a thorough
understanding of the business. She is a member of the
Nomination Committee and Remuneration Committee.
RESPONSIBILITIES Dame Inga Beale currently serves as a
non-executive director of the Company and will succeed
Dr Hertzog when he retires after the Company’s 2020 AGM.
As an independent non-executive director, Dame Inga is
responsible for supporting the development of the Group’s
strategy, providing strategic guidance and scrutinising
management’s performance and she provides constructive
challenge and advice, drawing on her skills, experience and
CONTRIBUTION TO THE COMPANY AND REASONS FOR
ELECTION As an experienced leader, Dame Inga has close to
40 years of experience in global financial services, insurance
and risk management in particular, and contributes a wealth
of skills and experience to the Board. She brings valuable
experience gained through her role as the CEO of Lloyd’s of
London, where she initiated large-scale digital and cultural
transformation programmes and led the business’ expansion
into Dubai, China and India. She played a critical role in
130 MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
advancing diversity and inclusion initiatives across Lloyd’s
and the international insurance sector. Her background
provides a valuable balance to the Board and brings a
different perspective to the Board’s debates.
SKILLS AND EXPERIENCE Dame Inga has extensive business
management and leadership experience. From 2014 to 2018
she served as the first female CEO of Lloyd’s of London, the
insurance and reinsurance market. Previously she held
various senior leadership positions across the insurance
sector, both in Switzerland and internationally, including at
Converium, Zurich Insurance Group, Canopius and GE
Insurance Solutions.
KEY EXTERNAL APPOINTMENTS Dame Inga currently
serves as an independent member of the global strategy
board of Clyde & Co LLP and as an independent non-
executive director on the boards of Crawford & Company
and London First. She also serves on the London Mayor’s
Business Advisory Board, is Patron of Insuring Women’s
Futures and Chair of the UK HIV Commission.
QUALIFICATIONS Dame Inga is a chartered insurer having
qualified as an Associate of the Chartered Insurance
Institute in 1987 and was appointed as Dame Commander
of the Order of the British Empire in 2017 for services to
the UK economy.
DR RONNIE VAN
DER MERWE
GROUP CHIEF EXECUTIVE
OFFICER
NATIONALITY South African
DATE OF APPOINTMENT
Group CEO since June 2018.
RESPONSIBILITIES Dr Ronnie van der Merwe is responsible for
driving and implementing operational decisions and strategy
approved by the Board. He provides detailed insight into the
operations of the business, enabling the Board to determine
the feasibility and practicality of proposed strategies, goals and
direction. He is a member of both the Clinical Performance and
Sustainability Committee and the Investment Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION As a qualified anaesthesiologist in private
practice, Dr Van der Merwe gained extensive experience in
trauma and elective anaesthesia, intensive care management,
and the management of acute and chronic pain. During his
involvement in the medical insurance industry, he gained
healthcare data management and analytics expertise. He also
displays proficiency in clinical leadership and management, as
well as in developing and implementing strategic goals.
MR JURGENS
MYBURGH
GROUP CHIEF FINANCIAL
OFFICER
NATIONALITY: South African
DATE OF APPOINTMENT
Group CFO since August 2016.
RESPONSIBILITIES As Group CFO, Mr Jurgens Myburgh has
the primary responsibility for overseeing the financial planning
and reporting, risk management and internal controls of the
Group. In addition, he oversees the Group’s Corporate
Finance, Investor Relations and Group Procurement functions.
He is also a member of the Investment Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Mr Myburgh is a qualified chartered accountant
with broad financial and accounting experience obtained
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Dr Van der Merwe has extensive knowledge of Mediclinic’s
international operations and a strong track record of managing
quality and effectiveness. He established the Advanced
Analytics, Clinical Information, Clinical Services and Health
Information Management functions at Mediclinic, contributing
to the growth of the Group.
SKILLS AND EXPERIENCE Dr Van der Merwe has Group-wide
experience and possesses in-depth knowledge of Mediclinic’s
workings, having held a variety of senior roles within the
Company. He joined the Company in 1999 and as Chief Clinical
Officer took responsibility for various aspects of the business
prior to his appointment as executive director and Group CEO
of Mediclinic. He was an executive director of Mediclinic
International Ltd from 2010, up to the reverse takeover of Al Noor
Hospitals Group plc. He was appointed as an executive director
and Group CEO of Mediclinic, with effect from 1 June 2018 and
also serves as a non-executive director on the board of Spire
since 24 May 2018 under the terms of the shareholder agreement
between Spire and Mediclinic.
KEY EXTERNAL APPOINTMENTS Non-executive director of Spire.
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 has completed the Advanced
Management Program (Harvard Business School).
during his career of over 20 years. Since joining the Group,
he has emphasised the importance of capital management
and allocation informed by cost of capital across the Group
and driven a structured approach to growth.
SKILLS AND EXPERIENCE Mr Myburgh has gained
considerable financial and accounting experience since
qualifying as a chartered accountant with KPMG in 2000.
He joined The Standard Bank of South Africa Ltd in 2001
and was appointed as Head of Mergers and Acquisitions
in 2009. Following this he served as CFO at Datatec Ltd,
an international ICT Group, before joining Mediclinic as
Group CFO in August 2016.
KEY EXTERNAL APPOINTMENTS Mr Myburgh has no
external public appointments.
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.
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
131
MR ALAN GRIEVE
SENIOR INDEPENDENT
DIRECTOR
NATIONALITY British and Swiss
DATE OF APPOINTMENT
Independent non-executive
director since February 2016.
SID and Chair of the Audit
and Risk Committee since
July 2019.
RESPONSIBILITIES As an independent non-executive
director, Mr Alan Grieve is responsible for supporting the
development of the Group’s strategy, providing strategic
guidance and scrutinising management’s performance. He
provides constructive challenge and advice, drawing on his
skills, experience and judgement.
As SID, Mr Grieve also acts as an intermediary for other
directors and shareholders and as sounding board for
the Chair. He leads the annual appraisal of the Chair’s
performance and meets with the non-executive directors
when necessary. He is available to shareholders should
they have any concerns, should contact outside the
standard communication channels be required. He is
Chair of the Audit and Risk Committee and is a member
of both the Nomination Committee and the Investment
Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Working as an executive and non-executive
DR MUHADDITHA
AL HASHIMI
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY Emirati
DATE OF APPOINTMENT
Independent non-executive
director since November 2017.
RESPONSIBILITIES As an independent non-executive
director, Dr Muhadditha Al Hashimi is responsible for
supporting the development of the Group’s strategy,
providing strategic guidance and scrutinising
management’s performance. She provides constructive
challenge and advice, drawing on her skills, experience
and judgement. She is a member of the Clinical
Performance and Sustainability Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Dr Al Hashimi has extensive knowledge
and experience of the healthcare sector and provides
substantial strategic and tactical expertise in operations,
fiscal management and negotiating strategic
transactions. Dr Al Hashimi contributes valuable insights,
especially into the Middle East operations of the
Company, and has an excellent understanding of the
132
director across a wide range of business areas,
Mr Grieve has gained comprehensive experience in
finance and audit and risk management; he also has
extensive knowledge of the healthcare sector. This
equips him with a strong basis for assessing, and
where appropriate, challenging, the financial and risk
management framework, which makes him ideally
suited to chair the Audit and Risk Committee.
SKILLS AND EXPERIENCE Mr Grieve has significant
financial and accounting experience. He began his
career in accountancy at the respective auditing firms
now known as PwC and EY. He worked for Richemont,
the Swiss luxury goods group, as Company Secretary
from 1998 to 2004 and as Director of Corporate Affairs
from 2004 to 2014. 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) between 2008 and 2012.
He served as CFO of Reinet Investments Manager SA
and Reinet Fund Manager SA from 2008 to 2011 and
was the CEO from 2012 until he retired in 2014.
He remains on the board of both companies as a
non-executive director.
KEY EXTERNAL APPOINTMENTS Mr Grieve serves
as a non-executive director on the boards of Reinet
Investments Manager SA and Reinet Fund Manager SA.
QUALIFICATIONS Mr Grieve holds a BA Hons Business
Administration (Heriot-Watt University) and is a
member of the Institute of Chartered Accountants of
Scotland.
broader geopolitical landscape, making her a valuable
member of the Board.
SKILLS AND EXPERIENCE Dr Al Hashimi has more than
19 years’ experience in the healthcare and higher education
industry in the UAE, together with strategic and tactical
expertise in operations and fiscal management. Previous
roles include that 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 Center in Dubai; Deputy
CEO of Tatweer LLC; CEO of Dubai Healthcare City (both
members of Dubai Holding); and a Director of Education of
the Harvard Medical School Dubai Center.
KEY EXTERNAL APPOINTMENTS Dr Al Hashimi is
currently a member of the board of trustees and of the
Audit and Compliance Committee of the University of
Sharjah, and a member of the board of trustees of the
UAE Nursing and Midwifery Council and the UAE Genetic
Diseases Association. She is the Campus Director of
Higher Colleges of Technology Sharjah Women’s College
in the UAE.
QUALIFICATIONS Dr Al Hashimi holds a BS in Medical
Technology (University of Minnesota); an MSc in Clinical
Laboratory Services (University of Minnesota); and a
Doctor of Public Health (University of Texas).
BOARD OF DIRECTORS CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT MR JANNIE
DURAND
NON-EXECUTIVE DIRECTOR
NATIONALITY South African
DATE OF APPOINTMENT
Non-executive director since
February 2016.1
RESPONSIBILITIES As the non-executive director
representative of Remgro, Mr Jannie Durand is responsible
for supporting the development of the Group’s strategy,
providing strategic guidance and scrutinising management’s
performance. He provides constructive challenge and advice,
drawing on his skills, experience and judgement. He is a
member of the Investment Committee and Nomination
Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Mr Durand has extensive knowledge and
more than 20 years of experience in the investment industry
and brings substantial strategic and tactical expertise. He
contributes valuable insights to the Board’s discussions, in
particular by drawing on his skills and experience of the
investment and capital markets, finance and accounting,
risk management, development and implementation of
strategy, as well as investor relations. Mr Durand ensures
he is available to attend all Board meetings. When he was
unable to attend two scheduled meetings of the Investment
Committee, he ensured Mr Pieter Uys attended as his
alternate and fully briefed Mr Uys beforehand.
DR FELICITY
HARVEY CBE
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY British
DATE OF APPOINTMENT
Independent non-executive
director since October 2017.
RESPONSIBILITIES As an independent non-executive
director, Dr Felicity Harvey is responsible for supporting the
development of the Group’s strategy, providing strategic
guidance and scrutinising management’s performance. She
provides constructive challenge and advice, drawing on her
skills, experience and judgement. She is the Chair of the
Clinical Performance and Sustainability Committee and a
member of the Nomination Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Dr Harvey’s clinical (and public health)
background provides valuable balance to the Board and
brings a different perspective to the Board’s discussions
and to the Clinical Performance and Sustainability
Committee, which she chairs, particularly as developments
in technology continue to accelerate. With increasing focus
on matters such as sustainability, Dr Harvey, as the Chair of
the Clinical Performance and Sustainability Committee,
SKILLS AND EXPERIENCE Mr Durand served as a non-
executive director of Mediclinic International Ltd from 2012
up until the combination of the businesses of the Company
(then Al Noor Hospitals Group plc) and Mediclinic
International Ltd in 2016. He joined the Rembrandt Group
in 1996 and in 2012 was appointed as the CEO of Remgro,
which holds a 44.56% interest in the Company. In his role
as CEO of Remgro, Mr Durand brings more than 20 years’
experience in the investment industry.
KEY EXTERNAL APPOINTMENTS Mr Durand currently acts
as a non-executive chair for the following listed companies
within the Remgro group: Distell Group Holdings Ltd,
RCL Foods Ltd, RMB Holdings Ltd and Rand Merchant
Investment Holdings Ltd.
QUALIFICATIONS Mr Durand holds a 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.
Note
1 Mr Uys, the Head of Strategic Investment at Remgro, was appointed as
the alternate director to Mr Durand in April 2016. Prior to joining Remgro,
Mr Uys was a founding member and ultimately became the CEO of
the Vodacom Group. Mr Uys holds an MEng in Electronic Engineering
(Stellenbosch University) and an Executive MBA (Stellenbosch University).
plays an important role in supporting management in
developing and implementing the Company’s sustainability
strategy.
SKILLS AND EXPERIENCE Throughout her career, Dr Harvey
has gained an in-depth knowledge of the health sector, mainly
through her work in the medical field. She was previously
Director General for Public and International Health at the UK
Department of Health; Director of the UK Prime Minister’s
Delivery 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. Dr Harvey qualified in medicine in 1980 and was
appointed CBE in 2008.
KEY EXTERNAL APPOINTMENTS Dr Harvey is a non-
executive director of Guy’s and St Thomas’ NHS Foundation
Trust, London; a visiting professor at the Institute of Global
Health Innovation, Imperial College London; a trustee of
Royal Trinity Hospice, London; and the Chair of the WHO
Independent Oversight and Advisory Committee for Health
Emergencies.
QUALIFICATIONS Dr Harvey holds an MBBS (St Bartholomew’s
Medical College, University of London); a PgDip in Clinical
Microbiology (The Royal London Hospital College, University
of London); and an MBA (Henley Management College). She is
an Honorary Fellow of the Royal College of Physicians and a
Fellow of the Faculty of Public Health.
133
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT MR DANIE MEINTJES
NON-EXECUTIVE DIRECTOR
NATIONALITY South African
DATE OF APPOINTMENT
Non-executive director since
August 2018 and the designated
non-executive director for
workforce engagement since
April 2019.
RESPONSIBILITIES As a non-executive director, Mr Danie
Meintjes is responsible for supporting the development of
the Group’s strategy, providing strategic guidance and
scrutinising management’s performance. He provides
constructive challenge and advice, drawing on his skills,
experience and judgement. In addition to his role as
a non-executive director, as non-executive director
responsible for workforce engagement, Mr Meintjes
supports the Board in ensuring that workforce policies
and practices are consistent with the Company’s values
and support Mediclinic’s long-term success.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION As the former Group CEO and prior to that,
as divisional Human Resources Executive, Mr Meintjes led
Mediclinic’s efforts to engage with, and invest in, the
Company’s workforce. With his career background and
in-depth knowledge of the Company, he is uniquely
positioned to effectively oversee the Company’s
DR ANJA OSWALD
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY Swiss
DATE OF APPOINTMENT
Independent non-executive
director since July 2018.
RESPONSIBILITIES As an independent non-executive
director, Dr Anja Oswald is responsible for supporting the
development of the Group’s strategy, providing strategic
guidance and scrutinising management’s performance. She
provides constructive challenge and advice, drawing on
her skills, experience and judgement. She is a member of
the Nomination Committee and Remuneration Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Dr Oswald has extensive experience in the
healthcare and medical operational sector. Her role as CEO
of a well-established, private clinic provides her with a
deep understanding and unique insights into day-to-day
operations in the broader political and regulatory context
of private healthcare in Switzerland. Dr Oswald brings a
engagement processes and evaluate the effectiveness and
progress in this regard. He brings significant operational,
strategic and risk management experience to the Board as
well as extensive knowledge of the healthcare sector.
SKILLS AND EXPERIENCE Mr Meintjes served as the CEO
of Mediclinic from 2010 up to his retirement on 1 June 2018,
remaining on the Board as a non-executive director until
31 July 2018. He was appointed as an executive director
and Group 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 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. In
2006 he was seconded to serve as a senior executive of
the Group’s operations in Dubai and appointed as the
CEO of Mediclinic Middle East in 2007. He served as a
non-executive director of Spire from 2015, a position from
which he retired on 24 May 2018.
KEY EXTERNAL APPOINTMENTS Mr Meintjes serves as a
non-executive director of Capitec Bank Holdings Ltd and
Capitec Bank Ltd as well as Mercantile Bank Ltd.
QUALIFICATIONS Mr Meintjes holds a BPL Hons in Industrial
Psychology (University of the Free State) and completed the
Advanced Management Program (Harvard Business School).
wealth of knowledge and practical experience to the
Board, making her a valued member.
SKILLS AND EXPERIENCE Dr Oswald was previously
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. She was also
CEO of a start-up company in the healthcare sector and
worked several years as a medical doctor in various
hospitals.
KEY EXTERNAL APPOINTMENTS Dr Oswald is the
CEO of the Klinik Sonnenhalde and President of the
Association of Private Hospitals in Basel. She also serves
on the boards of Integrierte Psychiatrie Winterthur, the
Alliance for a Free Healthcare System in Switzerland and
Zippsafe AG.
QUALIFICATIONS Dr Oswald holds an MD-PhD specialising
in Orthopaedic Surgery and Traumatology, as well as in
Sports Medicine (University of Basel); an Executive MBA
(University of Rochester-Bern); and a certificate of the
Swiss Board School at the International Center for
Corporate Governance of the University of St. Gallen.
134
BOARD OF DIRECTORS CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT MR TREVOR
PETERSEN
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY
South African
DATE OF APPOINTMENT
Independent non-executive
director since February 2016.
RESPONSIBILITIES As an independent non-executive
director, Mr Trevor Petersen is responsible for supporting
the development of the Group’s strategy, providing
strategic guidance and scrutinising management’s
performance. He provides constructive challenge and
advice, drawing on his skills, experience and judgement.
Mr Petersen chairs the Remuneration Committee and is a
member of the Audit and Risk Committee.
CONTRIBUTION TO THE COMPANY AND REASONS FOR
RE-ELECTION Mr Petersen brings significant experience,
in-depth knowledge and corporate history of Mediclinic
and the healthcare sector, having served as a director
through the successful merger of Mediclinic International
and Al Noor Hospitals Group plc in February 2016.
Through his position as Chair of the South African
Institute of Chartered Accountants in 2006 and 2007,
Mr Petersen gained valuable experience in finance and
accounting, which now informs his roles as the Chair of
the Remuneration Committee and a member of the
Audit and Risk Committee.
SKILLS AND EXPERIENCE Prior to the combination of
the businesses of the Company (then Al Noor Hospitals
Group plc) and Mediclinic International Ltd in 2016,
Mr Petersen 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 to 2009 and as the
partner-in-charge of Cape Town and Chair 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 Chair of its national body in 2006
and 2007.
KEY EXTERNAL APPOINTMENTS Non-executive director
of Media24 (Pty) Ltd.
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.
MR TOM SINGER
INDEPENDENT NON-
EXECUTIVE DIRECTOR
NATIONALITY British
DATE OF APPOINTMENT
Independent non-executive
director since 24 July 2019.
RESPONSIBILITIES As an independent non-executive
director, Mr Tom Singer is responsible for supporting
the development of the Group’s strategy, providing
strategic guidance and scrutinising management’s
performance. He provides constructive challenge and
advice, drawing on his skills, experience and judgement.
He is a member of the Audit and Risk Committee and
the Remuneration Committee.
CONTRIBUTION TO THE COMPANY AND REASONS
FOR ELECTION Mr Singer’s skills and experience,
gained through his long and successful career in finance
across a broad range of UK and international branded
consumer businesses, including in the healthcare sector,
provides important input. He also brings a thorough
understanding of the UK-listed company environment.
His career and background make him ideally suited to
serve as a member of the Audit and Risk Committee.
SKILLS AND EXPERIENCE Previously Mr Singer
served as CFO of InterContinental Hotels Group PLC,
a leading international hotel group, and British United
Provident Association (‘BUPA’), a provider of health
insurance, care homes for the elderly and other
health-related services including private hospitals.
Earlier in his career, Mr Singer was CFO and Chief
Operating Officer of William Hill PLC and Finance
Director of Moss Bros PLC, having started his career
in professional services and spending a total of
12 years at Price Waterhouse and McKinsey.
KEY EXTERNAL APPOINTMENTS Mr Singer currently
serves as non-executive director on the board of
DP Eurasia NV, an operator of pizza restaurants in
Turkey and Russia.
QUALIFICATIONS Mr Singer holds a BSc Hons
Finance and Accounting (University of Bristol); is a
qualified chartered accountant; and attended the
Advanced Management Programme (INSEAD).
135
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT GROUP EXECUTIVE
COMMITTEE
The Group CEO is supported by an experienced and capable executive management team, with extensive
industry experience and organisational knowledge. The success of Mediclinic is testament to the strong
management team and its ability to execute on the Mediclinic Group Strategy.
The biographies of the Group CEO and Group CFO are provided on page 131 of this Annual Report.
MR GERT HATTINGH
GROUP CHIEF CORPORATE SERVICES OFFICER
NATIONALITY South African
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 Group Chief Corporate
Services Officer.
QUALIFICATIONS Mr Hattingh holds a BAcc Hons (Stellenbosch University); completed the
Advanced Management Program (Harvard Business School); and is a qualified chartered
accountant registered with the South African Institute of Chartered Accountants.
DR DIRK LE ROUX
GROUP CHIEF INFORMATION OFFICER
NATIONALITY South African
Dr Dirk le Roux joined Mediclinic in August 2014 as the Group ICT Executive and was
appointed to his current position of Group Chief Information Officer (‘CIO’) on 11 August 2014.
Prior to joining Mediclinic, he served in various managerial roles, including as Managing
Director of ThinkWorx Consulting, CIO at Media24 (Pty) Ltd, General Manager of IT Strategy
and Risk at Absa Bank Ltd and 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 (North-West University); a PgDip in Data Metrics (Unisa); and a BEng in Civil
Engineering (University of Pretoria).
MR MAGNUS OETIKER
GROUP CHIEF HUMAN RESOURCES AND CORPORATE DEVELOPMENT OFFICER
NATIONALITY Swiss
Mr Magnus Oetiker worked for Hirslanden in various management positions from 2000 to
2016. He served on this division’s executive committee from 2008 in various roles, while
also taking responsibility for human resource management, funder relations and strategy.
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 Group Chief Human Resources and Corporate
Development Officer of Mediclinic.
QUALIFICATIONS Mr Oetiker holds a BSc in Business Administration (Zurich University of
Applied Sciences) and an Executive MBA (University of Zurich).
136
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT DR RENÉ TOUA
GROUP CHIEF CLINICAL OFFICER
NATIONALITY South African
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 worked 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 Chair of the Medical Advisory Committee. She was appointed Group
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 (University of Stellenbosch Business School).
DR DANIEL LIEDTKE
CHIEF EXECUTIVE OFFICER: HIRSLANDEN
NATIONALITY Swiss
Dr 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 CEO of Hirslanden.
QUALIFICATIONS Dr Liedtke holds a Doctor of Business Administration (Charles Sturt
University); a Master of Health Administration (FHS St. Gallen); a DO in Osteopathic
Medicine (Swiss Conference of Cantonal Health Directors); a BSc in Physiotherapy (Swiss
Confederation); and a Certificate in Car Electronics (Federal certificate).
MR KOERT PRETORIUS
CHIEF EXECUTIVE OFFICER: MEDICLINIC SOUTHERN AFRICA
NATIONALITY South African
Mr Koert Pretorius joined Mediclinic in 1998 as the Regional Manager for 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 the acquisition of Al Noor Hospitals Group plc.
QUALIFICATIONS Mr Pretorius holds a BCompt in Accounting Science (University of the
Free State) and a Master of Business Leadership (Unisa).
MR DAVID HADLEY
CHIEF EXECUTIVE OFFICER: MEDICLINIC MIDDLE EAST
NATIONALITY British
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 CEO of
Mediclinic Middle East in 2009 and has served on the Group Executive Committee since 2011.
QUALIFICATIONS Mr Hadley holds a BComm (Unisa) and an MBA with distinction (University
of Liverpool).
137
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT 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 THE UK CORPORATE
GOVERNANCE CODE AND LISTING RULES
A revised version of the UK Corporate Governance Code
was published by the FRC in July 2018 (www.frc.org.uk).
The 2018 Corporate Governance Code came into effect
for the Group’s FY20 and this Corporate Governance
Statement, together with the various Board committee
reports and relevant sections of the Strategic Report
included in this Annual Report, describes the Board’s
application of and compliance with the 2018 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 2018 Corporate Governance Code, other than the
exceptions noted below:
• Provision 9 (regarding the independence criteria of the
Chair on appointment)
Under the 2018 Corporate Governance Code, the
Company’s Chair, Dr Hertzog, is not considered to
be an independent director given his involvement in
various executive roles at Mediclinic International Ltd
since 1983 until his appointment as non-executive
Chair in 1992. Given his in-depth industry knowledge
and experience, the Board considered it in the best
interests of the Company that he serve as Chair until
his retirement at the conclusion of the Company’s
2020 AGM, when he will be succeeded by Dame Inga
Beale (subject to her election as a director at the AGM).
Dame Inga is currently an independent non-executive
director of the Company and is expected to remain
independent when she succeeds Dr Hertzog as Chair.
• Provision 17 (regarding the Nomination Committee
leading the process for Board appointments and
making recommendations to the Board)
The Nomination Committee recommends
appointments to the Board (refer to page 189 for
more). In accordance with the Company’s relationship
agreement with its principal shareholder, Remgro
(the ‘Relationship Agreement’), further details of
which are provided on page 166, 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. His appointment was therefore not led by the
Nomination Committee. No new Board appointments
were made in terms of the Relationship Agreement
during the year under review.
• Provision 3 (regarding regular engagement by the
Chair with major shareholders)
The Company has not met the requirement under
the first part of Provision 3 of the 2018 Corporate
Governance Code, whereby ‘the chair should seek
regular engagement with major shareholders in
order to understand their views on governance
and performance against the strategy’. Provision 3
also states that the chair should ensure that the
board as a whole has a clear understanding of
the views of the shareholders. The Board believes
that appropriate mechanisms for engaging with
shareholders are in place, which allow directors to
acquire a good understanding of major investors’ key
areas of concern and support. These arrangements
also ensure that the Company complies with
Principle E of the Code, which requires the
board to ensure effective engagement with, and
encourage participation from, shareholders and
other stakeholders. The principal engagement with
the capital markets lies mainly with the Group CEO,
Group CFO and the Head of Investor Relations,
138
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
The Board has full and effective
control of the Company
and approved all material
resolutions. It has adopted a
robust corporate governance
framework described in this
report which assists it in
exercising its responsibilities.
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. The Company also
uses QuantiFire, a third-party independent
service provider, to obtain formal feedback from
investors on a quarterly basis and these reports
are considered at the following Board meeting.
In addition, the Company intends to introduce
Dame Inga to shareholders when it becomes
practical to do so during FY21.
• Provision 36 (regarding post-employment
shareholding requirements)
Refer to page 195 of the Remuneration
Committee Report for more information on
adherence with Provision 36 of the
2018 Corporate Governance Code pertaining
to formal post-employment shareholding
requirements.
In addition to complying with all other applicable
corporate governance requirements in the UK in
accordance with the Company’s 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 in Namibia respectively.
BOARD STRUCTURE
AND ROLES
The Board has full and effective control of the
Company and approved all material resolutions. It has
adopted a robust corporate governance framework
described in this report which assists it in exercising its
responsibilities.
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, i.e. 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.
DIVISION OF RESPONSIBILITIES
A Board Charter sets out the key responsibilities of the
Chair, SID, non-executive directors, executive directors,
the Group CEO and the Company Secretary, and
outlines the roles of the various Board committees.
The division of responsibilities between the Chair and
the Group CEO, as summarised in Figure 1, is detailed
in writing and in a standalone policy approved by the
Board. The segregation of the roles of the Chair and
the Group CEO enhances the Board’s independent
oversight of the executive management and ensures
that no one individual on the Board has unfettered
powers or authority.
139
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
FIGURE 1: CORPORATE GOVERNANCE FRAMEWORK5
BOARD
CHAIR
SENIOR
INDEPENDENT
DIRECTOR
NON-
EXECUTIVE
DIRECTORS
COMPANY
SECRETARY
EXECUTIVE
DIRECTORS
GROUP CEO
AND CFO
COMMITTEES
AUDIT AND RISK COMMITTEE
CLINICAL PERFORMANCE AND
SUSTAINABILITY COMMITTEE
INVESTMENT COMMITTEE
NOMINATION COMMITTEE
REMUNERATION COMMITTEE
GROUP EXECUTIVE COMMITTEE
Notes
1 Dr Hertzog will retire as Chair of the Board at the conclusion of the Company’s 2020
AGM and will be succeeded by Dame Inga Beale (see note 3 below).
2 Mr Alan Grieve succeeded Mr Desmond Smith as SID and Chair of the Audit and Risk
Committee upon Mr Smith’s retirement from the Board at the conclusion of the AGM on
24 July 2019.
3 Mr Tom Singer was appointed as an independent non-executive director and member
of the Audit and Risk Committee on 24 July 2019 and member of the Remuneration
Committee on 13 November 2019. Dame Inga Beale was appointed as an independent
non-executive director, Chair Designate and member of the Nomination Committee
on 26 March 2020. On 1 June 2020, Dame Inga was appointed as a member of the
Remuneration Committee with immediate effect and as Chair of the Nomination
Committee with effect from Dr Hertzog’s retirement at the conclusion of the Company’s
2020 AGM. Mr Seamus Keating stepped down from the Board and the Audit and Risk,
Remuneration and Clinical Performance and Sustainability committees on 31 March
2020. The Nomination Committee has commenced the process to identify a suitable
replacement for Mr Keating.
4 Messrs Jannie Durand and Danie Meintjes are non-independent non-executive directors.
The other seven non-executive directors are independent.
5 The composition of the Board and its committees is shown at the Last Practicable Date.
140
BOARD1, 2, 3, 4
MEMBERSHIP
One non-executive Chair, two
executive directors, seven
independent non-executive
directors and two non-
independent non-executive
directors
KEY RESPONSIBILITIES
• Provides effective,
entrepreneurial oversight
of the Company within a
robust corporate governance
framework
• Promotes the long-term
sustainable success of the
Group, delivering value to
shareholders and contributing
to wider society
• Establishes and monitors the
Group’s purpose, strategy and
values, and ensures alignment
with the culture it promotes
• Agrees the nature and extent
of the principal risks the Group
is willing to take
• Establishes and oversees a
prudent and effective risk
management and internal
control framework, including
whistleblowing arrangements
• Identifies and manages
conflicts of interest
• Ensures effective engagement
with shareholders and other
stakeholders
• Ensures the workforce policies
and practices are consistent
with the Company’s values and
support its long-term success
• Defines the matters reserved
for decision by the Board or its
committees
The biographies of the Board
members are set out on
pages 130–135.
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT NON-EXECUTIVE CHAIR1
Dr Edwin Hertzog
KEY RESPONSIBILITIES
• Leads the Board
• Ensures the effective performance of the
Board in directing the Group
• Works closely with the Group CEO to ensure
the implementation of Board-approved
actions
• Ensures effective communication with
shareholders and that the Board as a whole
has a clear understanding of shareholders’
views
The Chair’s other significant commitments are
indicated in his biography on page 130.
SENIOR INDEPENDENT DIRECTOR2
Mr Alan Grieve
KEY RESPONSIBILITIES
• Provides a sounding board for the Chair
• Serves as an intermediary for other directors
and shareholders
• Leads the annual appraisal of the Chair’s
performance and the independence of
non-executive directors
• Leads the search for a new Chair, when
necessary
NON-EXECUTIVE DIRECTORS2, 3, 4
Dr Muhadditha Al Hashimi, Dame Inga Beale,
Mr Jannie Durand, Mr Alan Grieve,
Dr Felicity Harvey, Mr Danie Meintjes, Dr Anja
Oswald, Mr Trevor Petersen, Mr Tom Singer
KEY RESPONSIBILITIES
• Support the development of the strategic
direction of the Group
• Scrutinise and hold to account the
performance of management and individual
executive directors
• Offer specialist advice and provide
constructive challenge, drawing on their skills,
experience and judgement
• Satisfy themselves on the integrity of the
Group’s financial reporting and on the
effectiveness of its internal control and risk
management systems
• Approve the appointment or removal of
directors
• Keep abreast of the views of shareholders
and other stakeholders
EXECUTIVE DIRECTORS
Dr Ronnie van der Merwe – Group CEO
Mr Jurgens Myburgh – Group CFO
KEY RESPONSIBILITIES
• 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
with the support of the rest of the Group
Executive Committee
GROUP CHIEF EXECUTIVE OFFICER
Dr Ronnie van der Merwe
KEY RESPONSIBILITIES
• Leads and oversees the Group Executive
Committee
• Leads the preparation and review of the
Mediclinic Group Strategy
• Manages the business of the Group under
the framework of delegated authorities
from the Board
• Progresses, develops and oversees the
implementation of Board-approved actions
and the strategic direction of the Group and
its commercial objectives
• Ensures the Group’s purpose, vision,
organisational culture (including the values)
and corporate governance framework are
embedded across the organisation and
reflected in employee behaviour
COMPANY SECRETARY
Link Company Matters Limited
KEY RESPONSIBILITIES
• Acts as Secretary to the Board, Board
committees and to the Management
Disclosure Committee, attending all meetings
• Provides advice and guidance to the Board
collectively, and directors individually,
with regard to their duties, responsibilities
and powers, and on matters of corporate
governance
• Ensures the effective administration of
proceedings and matters related to the
Board, the Company and its shareholders
• Acts as point of contact for shareholders on
corporate governance matters
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
AUDIT AND RISK
COMMITTEE2, 3
MEMBERSHIP
Three independent non-
executive directors
KEY RESPONSIBILITIES
• Reviews and monitors the
integrity of the Group’s
financial and narrative
reporting
• Reviews and monitors the
effectiveness of the Group’s
risk management processes
and system of internal control
• Reviews and monitors the
effectiveness of the Group’s
Internal Audit function
• Reviews and monitors the
Group’s relationship with
the external auditor and the
effectiveness of the external
audit
NOMINATION
COMMITTEE3
MEMBERSHIP
Four independent non-executive
directors and two non-executive
directors
KEY RESPONSIBILITIES
• Reviews succession planning
within the Board, the Group
Executive Committee and their
direct reports
• Reviews the structure, size
and composition, including
diversity and independence, of
the Board and its committees
• Identifies and recommends
potential candidates to be
appointed as directors or
members of Board committees,
as the need arises
• Establishes and oversees
the process for the annual
evaluation of the Board, its
committees, the Chair and
individual directors
• Establishes the Board Diversity
Policy and reviews progress
on further improving diversity
within the Board, the Group
Executive Committee and their
direct reports
REMUNERATION
COMMITTEE3
MEMBERSHIP
Four independent
non-executive directors
KEY RESPONSIBILITIES
• Determines and agrees with the
Board on the Group’s remuneration
strategy and policy, having regard
for the alignment of incentives and
rewards with the Group’s culture
• Reviews and provides guidance on
remuneration and related policies
for the workforce across the Group
and takes these into account when
setting the Remuneration Policy
• Establishes and oversees
the operation of appropriate
parameters for the Group’s
performance-related pay schemes
• Determines the remuneration and
benefits package for individual
executive directors, other members
of the Group Executive Committee
and certain other executives, and
ensures these support and are
linked to the Mediclinic Group
Strategy and promote its long-
term sustainable success
CLINICAL PERFORMANCE AND
SUSTAINABILITY COMMITTEE3
INVESTMENT
COMMITTEE
GROUP EXECUTIVE
COMMITTEE
MEMBERSHIP
Two independent non-executive
directors, one non-executive
director and one executive
director
KEY RESPONSIBILITIES
• Monitors clinical performance
throughout the Group
• Promotes a 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
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
MEMBERSHIP
Group CEO, Group CFO, Group Chief
Clinical Officer, Group Chief Corporate
Services Officer, Group Chief Human
Resources and Corporate Development
Officer, Group CIO and the three
divisional CEOs
KEY RESPONSIBILITIES
• Manages the Group’s businesses
• Takes responsibility for the
Mediclinic Group Strategy and the
execution thereof
• 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
Notes
2 Mr Alan Grieve succeeded Mr Desmond Smith as SID and Chair of the Audit and Risk Committee upon Mr Smith’s retirement from the Board at the
conclusion of the AGM on 24 July 2019.
3 Mr Tom Singer was appointed as an independent non-executive director and member of the Audit and Risk Committee on 24 July 2019 and member of the
Remuneration Committee on 13 November 2019. Dame Inga Beale was appointed as an independent non-executive director, Chair Designate and member
of the Nomination Committee on 26 March 2020. On 1 June 2020, Dame Inga was appointed as a member of the Remuneration Committee with immediate
effect and as Chair of the Nomination Committee with effect from Dr Hertzog’s retirement at the conclusion of the Company’s 2020 AGM. Mr Seamus
Keating stepped down from the Board and the Audit and Risk, Remuneration and Clinical Performance and Sustainability committees on 31 March 2020.
The Nomination Committee has commenced the process to identify a suitable replacement for Mr Keating.
142
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT MEETING ATTENDANCE
The names of 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 130.
Attendance of Investment Committee meetings held during the period 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
committee meetings is considered part of the formal annual review of their performance. When a director is unable to
attend a Board or committee meeting, they communicate their comments and observations on the matters to be
considered in advance of the meeting via the Chair, the SID or the relevant Board committee’s Chair for raising, as
appropriate, during the meeting.
TABLE 1: BOARD MEETING ATTENDANCE
NAME1
DESIGNATION
Directors at 31 March 2020
DATE OF
APPOINTMENT
(to the Board)
NUMBER OF
SCHEDULED MEETINGS
ATTENDED2
Dr Edwin Hertzog3
Non-executive Chair
Dr Ronnie van der Merwe
Group Chief Executive Officerr
Mr Jurgens Myburgh
Group Chief Financial Officer
Mr Alan Grieve4
Senior Independent Director
15/02/2016
01/06/2018
01/08/2016
15/02/2016
Dr Muhadditha Al Hashimi5
Independent Non-executive Director
01/11/2017
Dame Inga Beale6
Mr Jannie Durand
Dr Felicity Harvey
Mr Seamus Keating7
Mr Danie Meintjes
Dr Anja Oswald8
Mr Trevor Petersen
Mr Tom Singer9
Independent Non-executive Director
26/03/2020
Non-executive Director
15/02/2016
Independent Non-executive Director
03/10/2017
Independent Non-executive Director
05/06/2013
Non-executive Director
15/02/2016
Independent Non-executive Director
25/07/2018
Independent Non-executive Director
15/02/2016
Independent Non-executive Director
24/07/2019
Directors who retired during FY20
Mr Desmond Smith10
(Former) Senior Independent Director
15/02/2016
7/7
7/7
7/7
7/7
6/7
1/1
7/7
7/7
7/7
7/7
6/7
7/7
5/5
2/2
TABLE 2: INVESTMENT COMMITTEE MEETING ATTENDANCE
NAME1
DESIGNATION
Dr Edwin Hertzog3
(Committee Chair)
Non-executive Chair
Dr Ronnie van der Merwe
Group Chief Executive Officer
Mr Jurgens Myburgh
Group Chief Financial Officer
Mr Alan Grieve4
Mr Jannie Durand12
Mr Pieter Uys12
Mr Danie Meintjes13
Senior Independent Director
Non-executive Director
Alternate to Mr Durand
Non-executive Director
DATE OF
APPOINTMENT
(to the Board)
NUMBER OF
SCHEDULED MEETINGS
ATTENDED11
19/02/2016
25/07/2018
01/08/2016
19/02/2016
19/02/2016
07/04/2016
19/02/2016
2/2
2/2
2/2
2/2
0/2
2/2
1/2
Notes
1 The composition of the Board and its committees is shown at 31 March 2020.
2 The attendance reflects the number of scheduled Board meetings held during FY20. Between the Company’s financial year-end and the Last Practicable Date,
the Board held two scheduled meetings and all members who were eligible to attend did so.
3 Dr Hertzog will retire from the Board and its committees after the conclusion of the Company’s 2020 AGM and will be succeeded as Non-executive Chair of the
Board by Dame Inga Beale.
4 Mr Alan Grieve was appointed as SID on 24 July 2019, following the retirement of Mr Desmond Smith.
5 Dr Muhadditha Al Hashimi was unable to attend one Board meeting for unexpected, urgent and unavoidable personal reasons.
6 Dame Inga Beale was appointed as an independent non-executive director of the Company on 26 March 2020 and was therefore only eligible to attend one
Board meeting during FY20.
7 Mr Seamus Keating stepped down from the Board with effect from close of business on 31 March 2020.
8 Dr Anja Oswald was unable to attend one Board meeting due to another unexpected, urgent and unavoidable commitment.
9 Mr Tom Singer was appointed to the Board on 24 July 2019 and attended all subsequent scheduled Board meetings.
10 Mr Desmond Smith retired from the Board on 24 July 2019. He attended all scheduled meetings of the Board that he was eligible to attend up to that date.
11 The attendance reflects the number of scheduled meetings of the Investment Committee held during FY20. The Investment Committee held five additional ad
hoc meetings during the reporting period to deal with urgent matters, which were attended by all members of the Investment Committee or at least the quorum
required under its terms of reference. The Investment Committee held no meetings between the Company’s financial year-end and the Last Practicable Date.
12 Mr Durand was unable to attend two scheduled meetings of the Investment Committee, but ensured Mr Pieter Uys, his alternate director, was able to attend in his
place, having fully briefed him beforehand.
13 Mr Danie Meintjes was unable to attend one scheduled meeting of the Investment Committee due to another unexpected, urgent and unavoidable commitment.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
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 under review and up to
the date of signing the financial statements can be
found on page 130.
As referred to in the Chair’s Introduction and described
in more detail in the Nomination Committee Report,
there have been a number of changes to the Board
during FY20:
• Mr Desmond Smith retired from the Board following
the Company’s 2019 AGM with Mr Alan Grieve
assuming the role of SID and Chair of the Audit and
Risk Committee;
• Mr Tom Singer was appointed as an independent non-
executive director and member of the Audit and Risk
Committee on 24 July 2019 and as a member of the
Remuneration Committee on 13 November 2019;
• Dame Inga Beale was appointed as independent non-
executive director, Chair Designate and member of
the Nomination Committee on 26 March 2020; and
• Mr Seamus Keating stood down from the Board on
31 March 2020.
Dame Inga Beale will succeed Dr Hertzog as Chair of
the Board upon his retirement at the conclusion of the
Company’s 2020 AGM.
At the date of this Annual Report, the Board comprised
the non-executive Chair, two executive directors, seven
independent non-executive directors and two non-
executive directors. The Company complies with the
2018 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 the 2018 Corporate Governance Code and
also considers how they conduct themselves in Board
meetings, including how they exercise judgement and
independent thinking, as set out in the ‘Assessment of the
independence of non-executive directors’ on page 165.
The Company’s Chair, Dr Hertzog, is not considered
to be an independent director given his involvement
as Chief Executive of Mediclinic International Ltd until
his appointment as Chair in 1992 and his position as
non-executive Deputy Chair of Remgro, the principal
shareholder of the Company. Nonetheless, given his
in-depth industry knowledge and experience, the Board
considered it in the best interests of the Company that
he continues to serve as Chair until his retirement at the
conclusion of the Company’s 2020 AGM.
Mr Meintjes does not meet the criteria to be considered
an independent non-executive director due to his
former position as Group CEO of the Company until
2018. The Board considered his proposed re-election as
144
a non-executive director and, after careful deliberation,
concluded his re-election would be in the best interests
of the Group, its shareholders and other stakeholders,
taking into account the overall composition of the Board
and the knowledge and experience of the industry and
the business that Mr Meintjes has gained over 30 years
in different capacities across the organisation.
In accordance with the Company’s Relationship
Agreement (details provided on page 166) with
Remgro, its principal shareholder, Remgro is entitled
to appoint up to a maximum of three directors to
the Board. Mr Durand was appointed to the Board
in accordance with the terms of the Relationship
Agreement on 15 February 2016 and represents Remgro
on the Board of Directors. No new Board appointments
were made under the Relationship Agreement during
the period under review.
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, educational and professional backgrounds,
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 189
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 Mr Singer
and Dame Inga during the year under review. Since
the report on improving the gender balance in FTSE
leadership issued by the Hampton-Alexander Review
in November 2016, four out of six appointments to the
Board of the Company went to female candidates. As
a result, at the date of this Annual Report, the Board
has 33% female representation, in line with the 2020
target recommended by the Hampton-Alexander
Review. This proportion may change throughout
the year, as a successor to Mr Keating is appointed
and Dr Hertzog retires from the Board. Following
Dr Hertzog’s retirement, Dame Inga will become
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT one of approximately 24 female chairs of FTSE 350
companies. With two directors of diverse ethnicity,
the Board also meets the target on ethnic diversity at
Board level as contained in the report based on the
independent review by Sir John Parker into the ethnic
diversity of UK boards (the ‘Parker Report’).
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 Diversity Policy statement is set out on
page 190. 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 ‘Workforce engagement’ on page 157.
FIGURE 2: BOARD COMPOSITION AND DIVERSITY1
Independence2 (%)
64%
18%
18%
Independent non-executive directors
Non-executive directors
Executive directors
Gender
Ethnicity3 (%)
Tenure (%)
Non-executive directors
Female: 33%
Male: 67%
Diverse ethnicity: 17%
<1 year: 20%
White: 83%
1–3 years: 30%
7–9 years: 20%
10+ years: 30%
Relevant industry experience (number of directors)
Country of residence (number of directors)
11
7
4
5
12
3
6
2
1
3
Healthcare
Medical/clinical/similarly complex businesses
Marketing and customer focused
IT, cybersecurity
Stakeholder management4
Sustainability
South Africa
Switzerland
UAE
UK
Notes
1 The composition of the Board is shown at the Last Practicable Date.
2 Excludes Chair of the Board.
3 Diverse ethnicity refers to individuals with evident heritage from African, Asian, Middle Eastern and South American regions, or from another ethnic group, as
defined by the Parker Report.
4 Refer to the Stakeholders summary on page 46 for more information on all the Group’s stakeholders.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
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 Chair to meet privately with the SID and
non-executive directors to discuss any concerns arising.
TABLE 3: BOARD’S AREAS OF FOCUS
Key:
STRATEGIC GOALS
PRINCIPAL RISKS AND UNCERTAINTIES CATEGORIES
As described in Strategy, goals and
progress on page 36.
As described in Risk management, principal risks
and uncertainties on page 119.
STRATEGIC GOALS
Become an integrated healthcare provider
across the continuum of care
Improve our client value proposition
significantly
Transform our healthcare services
and client engagement through digitalisation
Evolve as an analytics-driven
organisation
Strengthen our position as the employer
of choice
Grow in existing markets and expand into
new markets
Achieve superior long-term financial
returns
Strategic and business environment
Financial and reporting
Operational
IT
Regulatory compliance
Clinical
People
TRANSFORMATION DRIVERS
T1
Innovation
T2
Sustainable development
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT BOARD’S FOCUS AREAS
STRATEGIC GOALS
PRINCIPAL RISKS
PURPOSE, STRATEGY AND CULTURE
Oversaw and approved the evolution of the
corporate strategy for the Group, including its
purpose, vision and values, and the associated
strategic goals, with due consideration for evolving
market conditions and the impact of the COVID-19
pandemic
Monitored progress on the execution of the Group
and divisional strategic goals against the timelines
by way of in-depth presentations by the Group
Executive Committee every six months; annual
deep-dive reports on each division by the
divisional CEOs; and regular reporting at each
Board meeting by the Group CEO
Ensured the Group’s purpose, culture and values
are embedded in operational policies and
practices. Monitored the Group’s culture to ensure
it remains appropriate and is aligned with the
Mediclinic Group Strategy, its purpose and values,
based on reports on internal audit and compliance;
ethics and fraud (including whistleblowing); doctor
and patient satisfaction surveys; clinical
performance; and employee engagement
(including turnover, diversity and inclusion)
Refer to Strategy, goals and progress on page 36.
Considered the Group’s capital expenditure plans
in light of the Mediclinic Group Strategy, evolving
market conditions and the impact of the COVID-19
pandemic
Considered requests for approval of and
monitored investments and business development
transactions for a size or nature that required
Board approval, such as the acquisition of Denmar
mental hospital in South Africa
Refer to the Chair’s Review on page 20, the Group Chief Executive Officer’s Report on page 28 and the
Divisional Reports from page 92.
CLINICAL PERFORMANCE
Discussed regular reports from the Group Chief
Clinical Officer and the Clinical Performance and
Sustainability Committee on matters such as the
clinical strategy for the Group and each division;
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
Refer to the Clinical services overview on page 50.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT
CORPORATE GOVERNANCE STATEMENT CONTINUED
CORPORATE GOVERNANCE STATEMENT
BOARD’S FOCUS AREAS
STRATEGIC GOALS
PRINCIPAL RISKS
OPERATIONAL PERFORMANCE
Discussed regular reports from the Group CEO on
the operating performance of the divisions and
central functions
Discussed in-depth reports from the divisional
CEOs on each division
Discussed initiatives being undertaken to counter
declines in tariffs and outmigration of care, and to
drive greater cost efficiencies
Refer to the Group Chief Executive Officer’s Report on page 28 and the Divisional Reports from page 92.
FINANCIAL PERFORMANCE, REPORTING, TAX STRATEGY AND DIVIDENDS
Discussed regular reports from the Group CFO on
the forecast and actual financial performance of
each division and the Group relative to the budget
for FY20
Reviewed and approved the half-year and full-year
trading updates via a Board committee, the
half-year financial report, the annual report and the
corresponding results announcement and investor
presentations, with support from the Management
Disclosure Committee, as appropriate
Reviewed and approved the Group and divisions’
budget for FY21 and the updated five-year plans,
incorporated the anticipated short- and medium-
term impact of COVID-19 pandemic
Reviewed and approved the Group Tax Strategy
Considered and approved decisions regarding the
interim and final dividends for FY20
Refer to the Group Chief Financial Officer’s Report on page 78.
RISK MANAGEMENT AND INTERNAL CONTROLS
Reviewed biannual feedback provided by the
Group General Manager: Risk on the Group’s risk
appetite, risk management framework, internal
control system and statutory and regulatory
compliance
Reviewed the going concern and long-term
viability statements, based on the principal risks
and uncertainties of the Group
Conducted a robust assessment of the Group’s
emerging and principal risks and uncertainties and
mitigating actions
Conducted a robust assessment of the
effectiveness of the Group’s risk management
processes and internal control system
Refer to Risk management, principal risks and uncertainties on page 119 and the Audit and Risk Committee Report
on page 170.
148
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
BOARD’S FOCUS AREAS
STRATEGIC GOALS
PRINCIPAL RISKS
INFORMATION AND COMMUNICATIONS TECHNOLOGY
Considered regular reports from the Group CIO 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
Refer to the Audit and Risk Committee Report on page 170.
LEADERSHIP
Considered feedback from the Nomination
Committee in relation to the composition of the
Board and its committees, succession planning and
diversity
Considered progress towards the targets set by the
Hampton-Alexander Review for the Board and for
the Group Executive Committee and its direct
reports and compliance with the Parker Report’s
ethnic diversity targets
Considered and approved the recommendations
of the Nomination Committee regarding the
appointments to the role of SID, Chair of the Audit
and Risk Committee, non-executive directors and
Chair of the Board
Reviewed the outcomes and agreed and
implemented 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 188 and the section on ‘Evaluation of the Board, committees and
Chair’ on page 161.
SHAREHOLDERS, WORKFORCE AND OTHER STAKEHOLDERS
Regularly reviewed its duties under Section 172 of
the Act and had due regard for these in the Board’s
discussions and decision-making, as described in
the Section 172 statement on page 4
Reviewed the Group’s key stakeholders and methods
of engagement, and was satisfied that these
remained effective
Received regular reports on shareholder views,
including regular investor feedback reports from the
independent service provider, QuantiFire
Received and discussed biannual reports from the
designated non-executive director for workforce
engagement outlining feedback and insight from
across all levels of the Group, supplemented by
feedback from management and direct contact from
director site visits
Refer to the Stakeholders summary on page 46, the Sustainable development overview on page 62 and the
‘Stakeholder interests and Board engagement’ section on page 151.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT
CORPORATE GOVERNANCE STATEMENT CONTINUED
BOARD’S FOCUS AREAS
STRATEGIC GOALS
PRINCIPAL RISKS
SUSTAINABLE DEVELOPMENT
Discussed and approved the Group Sustainable
Development Strategy
Monitored the broad-based black economic
empowerment (‘B-BBEE’) initiatives undertaken
by the Group in South Africa
Refer to the Sustainable development overview on page 62 and the Clinical Performance and Sustainability
Committee Report on page 186.
CORPORATE GOVERNANCE
Evaluated continued compliance with the 2018
Corporate Governance Code and wider statutory
and regulatory requirements
Considered regular updates on governance and
regulatory developments
Ensured effective follow-up regarding
shareholders’ concerns reflected in the voting
outcomes of the Company’s 2019 AGM and took
their feedback into consideration in preparing a
response
Considered feedback from the Board committees
Reviewed and approved all Group policies and
procedures, including those in respect of:
- the Board Charter and committees’ terms of
reference;
- authority levels and matters reserved for the
Board;
- business conduct and ethics;
- anti-bribery;
- sustainable development;
- Board diversity;
- treasury strategy; and
- tax strategy
Reviewed and approved directors' proposed
external appointments (including the expected
time commitments) and ensured that any conflicts
of interest, including those arising from significant
shareholdings, were clearly identified and
managed, as set out on page 165 of this report
150
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
STAKEHOLDER INTERESTS
AND BOARD ENGAGEMENT
Mediclinic recognises its accountability to its
stakeholders. Effective communication with
stakeholders, not just at Board level but across the
entire 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 table below sets out the Group’s key stakeholders,
how the Board gains an understanding of their key
areas of interest or concern and how these have been
taken into consideration in the Board’s discussions and
decision-making. The Board has reviewed the Group’s
mechanisms for engagement with its key stakeholders
and is satisfied that they are effective.
TABLE 4: BOARD ENGAGEMENT
STAKEHOLDER
IMPORTANCE
WHAT MATTERS
TO THEM
BOARD ENGAGEMENT/CONSIDERATION
DURING DISCUSSIONS AND
DECISION-MAKING
Clients
Communities
The wellbeing of the
Group’s clients forms
the foundation of
the business with
Mediclinic’s core
purpose being to
enhance the quality
of life.
They can trust
Mediclinic to deliver
quality, safe and
cost-effective
healthcare by means of
world-class facilities
and technology while
ensuring the best
possible client
experience and
protecting personal
data.
Development and
upliftment of
communities within the
Group’s ambit and
improved health
outcomes through
greater awareness,
better public
healthcare training and
pro bono procedures.
Mediclinic is
committed to growing
its established
relations with the
communities within
which it operates and
follows an approach of
mutual understanding,
trust and reliability.
Significant
investments are made
annually towards
healthcare and
education in these
communities.
• The client is entrenched in three of
Mediclinic’s organisational values:
being client centred, trusting and
respectful, and patient safety focused
• Regularly reviews clinical
performance indicators
• Introduced and monitors reports on
Ward-to-Board accountability
• Reviews Press Ganey® patient
experience index and implementation
of resulting action plans
• Regularly considers ethics reports
• Regularly reviews information
security and data privacy arrangements
• Considers impact of decisions
regarding facilities, services and
investments on clients
• Reviewed and approved a Group
Sustainable Development Strategy
and will monitor its implementation
• Considered and approved ‘Building
stakeholder trust’ (in particular
relating to training and development)
as Material issue 2 for the Group and
‘Being an ethical and responsible
corporate citizen’ as Material issue 3
for the Group. Refer to the
Sustainable development overview
on page 62.
• Encourages the implementation of
appropriate corporate social
responsibility initiatives
• Encourages PPPs and joint ventures
at Hirslanden, Mediclinic Southern
Africa and Mediclinic Middle East
• Considers impact of decisions
regarding facilities, services and
investments on communities
151
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
STAKEHOLDER
IMPORTANCE
WHAT MATTERS
TO THEM
BOARD ENGAGEMENT/CONSIDERATION
DURING DISCUSSIONS AND
DECISION-MAKING
Employees and
potential applicants
The Group’s
employees are a highly
valued asset; their
expertise, trust and
respect are paramount
to Mediclinic’s success.
The shortage of
doctors, nurses and
skilled employees
means recruitment
and retention are key
issues.
Recognition, flexible
work environment,
competitive
remuneration and
employment in an
ethical, safe and fair
working environment,
with opportunities
for training and
development.
Governments and
authorities
Healthcare insurers
Mediclinic’s business
model relies on
total compliance
with all legislative
and regulatory
requirements. The
Group engages at all
levels of government
as part of normal
business practices.
All role players in
healthcare funding,
such as the medical
insurance companies
and schemes,
administrators and
managed care
companies, play a key
role in Mediclinic’s
business, with
privately insured
patients remaining the
Group’s largest client
base.
Compliance with
healthcare legislation
and regulations,
participation in
initiatives and
collaboration on issues
such as skills shortages
and the cost of private
healthcare. Affordable
access to quality
healthcare.
A service that provides
quality care while
efficiently managing
cost. Integrated clinical
services are prized
and hospital network
arrangements actively
pursued. Regulations
governing healthcare
provider price exist in
Switzerland and the
UAE, and pay-for-
quality initiatives are
planned for Dubai and
Abu Dhabi.
• Reviews regular reports on the
workforce from the nominated
non-executive director for workforce
engagement and monitors
implementation of resultant action
plans. Information covered includes:
– employee retention and turnover
– annual Gallup® employee
engagement surveys
– implementation of the Group
Diversity and Inclusion Strategy
– training and performance
management
– internal communication
• Monitors remuneration arrangements
across the Group
• Communication with employees
through electronic communication
and video broadcasts, and roadshows
by the Group CEO and/or divisional
CEOs
• Encourages a constructive dialogue
with the Group’s regulators
• Monitors clinical, regulatory and
legal compliance through regular
management reports
• Regularly reviews the clinical
performance indicators across
the Group
• Encourages the management
and public reporting of clinical
performance information
• Encourages and monitors the
implementation of major projects to
improve the quality, efficacy and
efficiency of the Group’s services
• Encourages a constructive dialogue
with the Group’s healthcare insurers
• Encourages the development of
innovative health insurance products
that meet clients’ evolving needs
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
STAKEHOLDER
IMPORTANCE
WHAT MATTERS
TO THEM
BOARD ENGAGEMENT/CONSIDERATION
DURING DISCUSSIONS AND
DECISION-MAKING
• Encourages membership of industry
associations and representation on
governing bodies
• Supports participation in research
commissioned by associations
• Mediclinic has a philosophy of taking
long-term growth decisions that
support its core business and future
positioning
• Evaluates and encourages
cooperations and PPPs
Industry
associations
Engagement with key
stakeholders via an
industry body could
in certain instances
be more effective
than individual
representation.
Mediclinic leverages
these associations to
ensure its active
participation in
national conversations.
Industry partners
Partnerships, joint
ventures and
cooperations with
other leading
healthcare providers
that complement
Mediclinic’s services
will enable the Group
to become an
integrated healthcare
provider across the
continuum of care.
Staying abreast of
legislation and
regulations that affect
the healthcare industry
and keeping the public
informed about
challenges facing
private healthcare.
Specific issues in
Switzerland: day case
surgery initiatives;
regulations on medical
equipment; minimum
case numbers for
physicians; minimum
quotas for basic insured
patients; decline of
privately insured
patients; involvement
of authorities in
supplementary
insurance contracts;
and stricter regulations
as of 1 January 2020
on integrity and
transparency in the
therapeutic products
sector.
Cultural alignment and
an understanding of
respective strengths
and weaknesses.
A comprehensive
and objective
understanding of
operations is crucial, as
is well-defined and
mutually beneficial
operational and
financial frameworks.
These partnerships
require collaboration in
developing strategic
plans to deliver long-
term future growth
opportunities.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
STAKEHOLDER
IMPORTANCE
WHAT MATTERS
TO THEM
BOARD ENGAGEMENT/CONSIDERATION
DURING DISCUSSIONS AND
DECISION-MAKING
Investors
As the owners and
providers of equity
and debt capital to
the Group, investors
are an important
stakeholder. The
established investor
relations programme
involves regular
and transparent
communication with
investors while
ensuring the Board
understands the views
of investors on all
relevant matters.
Media
Medical
practitioners
The media acts as an
intermediary between
Mediclinic and its
stakeholders on
Company and industry
developments, and
assists to build and
sustain a professional
Company reputation.
Any initiative to
improve the quality
of clinical care needs
the support and
engagement of the
treating medical
practitioners.
• Considers investors’ views and
feedback, including detailed feedback
obtained through an investor
perception study
• 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 major shareholders
regarding areas of concern and key
developments and takes feedback
into account as appropriate
• Reviewed and approved a Group
Sustainable Development Strategy
and will monitor its implementation
• Considers impact of decisions
regarding facilities, services,
investments and dividends on
financial performance and
shareholder returns
• Invites and engages with the media
during results presentations and AGMs
• Dedicated communication strategies
have been developed for major
industry affairs issues
• Monitors Company and industry-
related news and encourages a
proactive approach where appropriate
• Reviews doctor satisfaction surveys
and resultant action plans
• Provides support through the
Ward-to-Board accountability
framework and promotes the sharing
of good practices across the Group
• Supports introduction of appropriate
new technology and monitors the
implementation of major projects
• Considers impact of decisions
regarding facilities, services and
investments on doctors
Profitable growth and
financial sustainability
(including more
recently for coping
with the COVID-19
pandemic), with
diverse opportunities
for long-term value
creation. Investors
need to understand the
Group’s strategic and
ESG goals (including
its response to climate
change), as well
as the regulatory
environment, financial
performance and
operational drivers
of each division.
Alignment of
Remuneration Policy
and outcomes with
shareholder interests
and Chair succession
planning.
Engagement,
transparency and
access to accurate
information.
Quality facilities,
equipment and nursing
care to ensure patient
safety and satisfaction.
Involvement in
strategic clinical
issues and the
implementation of
EHRs, as well as
opportunities for
continued professional
development.
Adaptability to meet
the needs of an
evolving healthcare
industry.
154
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
STAKEHOLDER
IMPORTANCE
WHAT MATTERS
TO THEM
BOARD ENGAGEMENT/CONSIDERATION
DURING DISCUSSIONS AND
DECISION-MAKING
Suppliers
Fair and transparent
negotiations, and
timeous payment for
products and services
rendered.
• Reviews and approves the Company’s
arrangements regarding modern
slavery
• Reviews and approves payment
practices and performance reporting
in the UK
• Supports introduction of appropriate
new technology and monitors the
implementation of major projects
• Regularly considers fraud and ethics
reports (including whistleblowing)
Mediclinic believes in
building long-term
relationships of mutual
trust and respect with
suitable suppliers. The
Group relies on its
suppliers to deliver
products and services
of the highest quality
at the right time and
price while complying
with regulations,
and providing the
necessary training and
support.
‘Employee engagement’ and ‘Ethics, anti-bribery and anti-corruption’ in the Sustainable development overview
For more information, refer to:
• the Section 172 statement on page 4;
• the Business model on page 14;
• the Stakeholders summary on page 46;
•
on page 73 and 77 respectively;
• the Emergency preparedness summary on page 116;
• the ‘Shareholder engagement’ section on page 156;
• the ‘Workforce engagement’ section on page 157;
•
• the 2020 Sustainable Development Report, available at annualreport.mediclinic.com.
‘Response to votes received at the 2019 AGM’ in the Remuneration Committee Report on page 194; and
155
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
SHAREHOLDER ENGAGEMENT
Responsibility for shareholder relations rests with
the Chair, Group CEO, Group CFO, SID and Head of
Investor Relations. Collectively – but mainly through
the Group CEO, Group CFO and Head of Investor
Relations (as referred to on page 138) – they ensure
that there is effective, regular and transparent
communication with shareholders on matters such
as operational and financial performance, regulatory
changes, governance and strategy. In addition, they are
responsible for ensuring that the Board understands the
views of shareholders on matters such as governance
and strategy. The Chairs of the Board committees are
available to engage with investors on significant matters
related to their areas of responsibility.
The Board is supported by the Company’s corporate
brokers with whom it is in constant dialogue. The
Management Disclosure Committee assists the Board
to ensure the timely and accurate disclosure of all
information that is required to be disclosed to meet
the legal and regulatory obligations, as well as the
requirements arising from its listing on the LSE.
During the year under review, the regular 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 125 institutions and participated in
some 20 roadshows, investor conferences and ad hoc
capital market events across the UK, Europe and South
Africa. A breakdown of the fund manager style and
geographic holdings at year-end are provided in
Figure 3 and 4 respectively.
In December 2019, the Group hosted a dinner and site
visit for investors and analysts in Cape Town, South
Africa. The event included presentations from the CEO
of Mediclinic Southern Africa and various Mediclinic
Hospital General Managers, in addition to an address
from the CEO of Discovery Health, South Africa’s largest
health insurance company. The presentations were made
available to view on the ‘Investor relations’ section of
Mediclinic’s website on the day of the site visit.
Investors are invited to provide feedback directly to
management during all these meetings and their views
are included in regular reports to the Board. The Board
also receives regular formal feedback from investors
through quarterly reports prepared by QuantiFire,
a third-party service provider that collects opinions
and confidence measures from investors. The reports
presented to the Board during FY20 covered
56 responses from a variety of investors, both holders
and non-holders of Mediclinic shares. During FY21,
the Group plans to launch a new investor perception
study to update the information received during the
previous study conducted during FY19.
Shareholders can access details of the Group’s results
and other news releases through the LSE’s Regulatory
News Service and the JSE Stock Exchange News Service.
In addition, the Group publishes the announcements
on the ‘Investor relations’ section of its website at
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.
FIGURE 3: STYLE OF FUND
MANAGER BREAKDOWN (%)
FIGURE 4: GEOGRAPHIC
HOLDINGS (%)
Corporate 45%
GARP 11%
Value & Growth 11%
Value 10%
Hybrid 6%
Growth 5%
Retail 4%
Index 3%
Other 3%
Quant 2%
Africa 69%
Remgro 45%
Rest of Africa 24%
UK 21%
North America 7%
Nordics and Asia 2%
Western Europe 1%
156
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The Company seeks to maintain regular dialogue with its
shareholders to establish an open forum for discussion on
key market and Company-specific issues and the Board
acknowledges the importance of all shareholders' views.
ENGAGEMENT WITH SHAREHOLDERS FOLLOWING
THE 2019 AGM
At the Company’s 2019 AGM, the resolutions to approve
Mediclinic’s Directors’ Remuneration Report (Resolution 2)
and to authorise the directors to allot ordinary shares
(Resolution 18) received 71.44% and 78.88% support
from shareholders respectively. The Company seeks to
maintain regular dialogue with its shareholders to
establish an open forum for discussion on key market
and Company-specific issues and the Board
acknowledges the importance of all shareholders' views.
Details of the steps taken by the Remuneration
Committee in response to the vote on the Directors’
Remuneration Report are set out in the Remuneration
Committee’s Report on page 194. In relation to
Resolution 18, to authorise the directors to allot ordinary
shares, the Board notes that the voting outcome reflects
the differing market practice between the UK and South
Africa, where shareholders in the latter jurisdiction
usually approve more restricted levels of authority to
issue shares and prefer to vote on the proposed
allotments of shares on a case-by-case basis.
In accordance with the 2018 Corporate Governance
Code, the Company sought to engage with key
shareholders to ensure it fully understood the reasons
behind the result. During November 2019, the Chair of
the Remuneration Committee wrote to the Company’s
largest institutional shareholders and major proxy
advisers: (a) explaining the Remuneration Committee’s
current understanding of their concerns regarding the
Group’s remuneration policy; (b) reflecting feedback
received prior to and after the AGM and the approach
it intended to take going forward; and (c) offering to
engage directly with investors to further discuss their
concerns. An update on the views received from
shareholders was published on 21 January 2020, in
accordance with the 2018 Corporate Governance Code
and the recommendations of the UK Investment
Association.
The Company has consulted regularly with its larger
international shareholders on this matter. Many operate
under policies that do not permit the UK standard level
of authority to be supported, although a number do
understand the Company's position. As Mediclinic is a
UK premium-listed company, the Board considers it
appropriate to seek authorities in line with the UK’s
Investment Association's Share Capital Management
Guidelines to: (a) allow the Company to respond to
market developments; and (b) enable allotments to take
place to finance business opportunities as they arise.
The Board will continue to engage with international
shareholders on this topic, however, as the voting
outcome reflects the difficulty in balancing the
expectations of different markets, it is likely that there
will continue to be significant votes against this
resolution.
WORKFORCE ENGAGEMENT
The trust and respect of the Group’s employees are vital
to Mediclinic’s success. Listening and responding to
their needs through effective communication and sound
relations are important components in being regarded as
the employer of choice among existing and prospective
employees, and vital to maintaining an engaged and loyal
workforce.
Workforce 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 workforce engagement are included in the
2020 Sustainable Development Report, available at
annualreport.mediclinic.com.
At the end of March 2019, the Company announced
the appointment of Mr Meintjes as the designated non-
executive director for engagement with the Group’s
workforce with effect from 1 April 2019. As the former
Group CEO and with his prior experience as divisional
Human Resources Executive, Mr Meintjes was closely
involved with the Company's approach to engaging
157
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
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 fulfil the
role of ensuring that the voice of the workforce is heard
within the boardroom.
Mr Meintjes’ responsibilities as the designated non-
executive director for engagement with the Group's
workforce include:
• reviewing and assessing the existing workforce
engagement programmes;
• understanding and interpreting the views of the
workforce;
• providing feedback to the Board on the impact
and effectiveness of the Group’s various workforce
engagement initiatives, including but not limited to
the Gallup® employee engagement survey results
and human resources-related matters reported on
the ethics line;
• conveying feedback from the Group’s workforce (as
consolidated via multiple channels) to the Board and
shareholders;
• providing feedback to the workforce through existing
(or, if appropriate, new) communication channels on
how their input was communicated to and considered
by the Board; and
• reporting to the Board on workforce engagement
twice annually.
Mr Meintjes works closely with the Group Chief Human
Resources Officer and his team in accordance with a work
plan designed to support Mr Meintjes in the fulfilment of
this role. The first report was presented in September 2019
and the second report in May 2020.
The Board reviewed the existing and planned channels of
engagement with the workforce, with due consideration
for recommendations by the designated non-executive
director, and were satisfied that these provide an effective
means of collecting feedback from and providing
feedback to the Group-wide workforce.
The Board took note and was satisfied with the additional
divisional measures that were implemented to ensure
employee safety during the COVID-19 pandemic, as
outlined in the most recent report. Besides employee
safety, continued team engagement was encouraged to
ensure team support and cohesion. Team engagement
results and themes stemming from the diversity
and inclusion results of the annual Gallup® employee
engagement survey were explored in these meetings
to ensure progress on engagement and diversity and
inclusion goals. Technology such as, inter alia, Microsoft
Teams, Skype Business and Zoom were utilised to ensure
frequent interaction. Line managers were also equipped
with tools and resources to manage teams remotely.
Details of how the Group engaged with key
stakeholders, including employees, can be found in the
‘Stakeholder interests and Board engagement’ section
on page 151. 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 74 and the
2020 Sustainable Development Report available at
annualreport.mediclinic.com.
The distribution of the Group’s employees per division
is included in the Sustainable development overview
on page 72, with only one employee (Head of Investor
Relations) being based in the UK.
A breakdown by gender, age and, in respect of Southern
Africa only, race in Board and senior management roles
at year-end is illustrated in Table 5 and 6.
The Group values diversity and provides equal
opportunities in its workplace and does not tolerate any
form of 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. During FY20, the Board approved a
diversity and inclusion policy setting out the Group’s
strategy and goals for establishing and maintaining a
diverse and inclusive workforce. This initiative, which is
fully aligned with the Group’s purpose, culture (including
its organisational values) and strategy, was launched
at the Mediclinic Group Conference for leadership held
in October 2019. Progress on its implementation and
outcomes is being monitored by the Board.
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.
158
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT TABLE 5: RACE, GENDER AND AGE REPRESENTATION ON GOVERNANCE BODIES
RACE
(ONLY IN RESPECT OF
SOUTHERN AFRICA)
GENDER
AGE (YEARS)
AT 31/03/2020
BLACK2
WHITE
MALE
FEMALE
30–50
> 50
NO
%
NO
%
NO
%
NO
%
NO
%
NO
%
2 Board members of
diverse ethnicity (17%)3
8
67%
4
33%
1
8%
11
92%
n/a
n/a
8
89%
1
11%
4
44%
5
55%
7
100%
–
–
4
57%
3
43%
TOTAL
MEMBERS1
12
9
7
10
3
30%2
7
70%
8
80%
2
20%
4
40%
6
60%
9
n/a
8
89%
1
11%
6
67%
3
33%
Mediclinic
Board
Group
Executive
Committee
Hirslanden
Executive
Committee
Mediclinic
Southern
Africa
Executive
Committee
Mediclinic
Middle East
Executive
Committee
TABLE 6: RACE, GENDER AND AGE REPRESENTATION OF DIRECT REPORTS TO GOVERNANCE BODIES
RACE
(ONLY IN RESPECT OF
SOUTHERN AFRICA)
GENDER
AGE (YEARS)
AT 31/03/2020
BLACK2
WHITE
MALE
FEMALE
30–50
> 50
NO
%
NO
%
NO
%
NO
%
NO
%
NO
%
n/a
n/a
20
69%
9
31%
17
59%
12
41%
38
61%
24
39%
39
63%
23
37%
TOTAL
NO OF
DIRECT
REPORTS1
29
62
58
16
28%2
42
72%
33
57%
25
43%
29
50%
29
50%
61
n/a
45
74%
16
26%
44
72%
17
28%
Group
Executive
Committee
Hirslanden
Executive
Committee
Mediclinic
Southern
Africa
Executive
Committee
Mediclinic
Middle East
Executive
Committee
Notes
1 Total membership is shown at 31 March 2020.
2 In the South African context, the term ‘black people’ is a generic term which means African, Coloureds and Indians who: (a) are citizens of the Republic of
South Africa by birth or descent; or (b) became citizens by naturalisation before 27 April 1994 or on or after 27 April 1994 and who would have been entitled to
acquire citizenship by naturalisation prior to that date.
3 Diverse ethnicity refers to individuals with evident heritage from African, Asian, Middle Eastern and South American regions, or from another diverse ethnic
group, as defined by the Parker Report.
159
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
FIGURE 5: GENDER REPRESENTATION – GROUP EMPLOYEES AND SENIOR MANAGERS1
Group employees (%)
Senior managers (%)
Female: 75%
Male: 25%
Female: 23%
Male: 77%
Note
1 Senior managers are employees who are responsible for planning, directing or controlling the activities of the Group or a strategically significant part of
the Group and direct undertakings included in the Group consolidation (excluding the executive directors of the Company).
160
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT EVALUATION OF THE BOARD,
COMMITTEES AND CHAIR
The Company is committed to evaluating the performance and effectiveness of the Board as a whole, its committees,
the Chair and the directors, and acting upon the feedback received. An externally facilitated evaluation was last
conducted in 2018. Accordingly, the Board proceeded with an internal self-evaluation in FY19 and FY20, conducted
by way of questionnaires. In FY20, the external auditor and other regular attendees were invited to participate in the
evaluation of the Audit and Risk Committee. The anonymity of the respondents was ensured throughout the process
in order to promote a frank exchange of views. The outcomes and detailed feedback were discussed within each
committee, as relevant, and by the Board, with key actions being identified for subsequent follow up during the year.
PROGRESS ON THE KEY ACTIONS IDENTIFIED FROM FY19 BOARD EVALUATION
KEY ACTIONS
STATUS
• To review the introduction of ROIC as a
performance measure for forthcoming
long-term incentives
Refer to the ‘Letter from the Chair’ and ‘Directors' Remuneration
Policy’ sections of the Remuneration Committee Report on
pages 194 and 201 respectively
• To continuously improve the implementation
of technology and associated change
management across the divisions
Refer to Strategy, goals and progress in the Strategic Report on
page 36 and the ‘Principal Board activities’ section of this
Corporate Governance Statement on page 146
• To implement and oversee the Company’s
corporate strategy
• To continuously oversee succession planning
within all divisions
• To establish a meaningful and practical
structure for updating the Board on issues
concerning the workforce and wider
stakeholders
Refer to the Group Chief Executive Officer’s Report on page 28,
Strategy, goals and progress in the Strategic Report on page 36
and the ‘Principal Board activities’ section of this Corporate
Governance Statement on page 146
Refer to the ‘Board Chair and other succession planning’ section
in the Nomination Committee Report on page 189 and the
‘Principal Board activities’ section of this Corporate Governance
Statement on page 146
Refer to the ‘Principal Board activities’ and ‘Workforce
engagement’ sections of this Corporate Governance Statement
on pages 146 and 157 respectively
KEY ACTIONS IDENTIFIED FROM THE FY20
BOARD EVALUATION
The results of the evaluation of the Board committees
were considered by the relevant committee prior to
their presentation to the Board for discussion at the
meeting held in March 2020, together with the results
for the evaluation of the Board itself. The impact of
the Board evaluation on the composition of the Board
is set out on page 190 of the Nomination Committee
Report. The actions agreed upon for FY21 have been
summarised below:
• to increase opportunities for non-executive directors’
involvement in the development of the strategy for
the Group, in particular the strategic sub-goals for
digital transformation and innovation;
• to increase opportunities for discussion of potential
and emerging risks by the Board;
• to identify and introduce new methods for the Board
to access external expertise and insights into digital
business transformation and other pertinent matters;
and
• to maintain focus on continuous improvement in the
quality of information provided to the Board.
The non-executive directors, led by the SID, discussed
the performance of the Chair, having previously
obtained the views of the executive directors. The
results were discussed privately between the Chair
and the SID after the March 2020 meeting.
161
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
ACCOUNTABILITY
RISK MANAGEMENT AND INTERNAL CONTROLS
The Group has a comprehensive risk management and
internal control system in place. The system is designed
to identify and appropriately mitigate the emerging and
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 goals.
The Board is responsible for reviewing and confirming
the 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, and monitoring
reporting integrity has been delegated to the Audit
and Risk Committee, the Board maintains a strong and
regular oversight of the outcome of the committee’s
work.
Key features of the Group’s internal control system
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; and
• review of the disclosures by the Group, the Board
and the Audit and Risk Committee within the annual,
half-year and other price-sensitive reports, as
relevant, to ensure compliance.
FIGURE 6: GROUP RISK MANAGEMENT GOVERNANCE STRUCTURE
R
E
S
P
O
N
S
I
B
I
L
I
T
Y
F
O
R
R
O
F
Y
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I
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I
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A
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A
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 Group CEO in managing business
activities
Divisions
Responsible for the identification, assessment,
implementation and management of divisional risks
A review of the Group’s risk management approach
and internal control system is further discussed in
Risk management, principal risks and uncertainties on
page 119. The Group’s Viability statement can be found
on page 114. Refer to page 171 for more information on
the role of the Audit and Risk Committee.
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 supported by the
Group’s values and is set out in the Company’s Ethics
Code which is available under the ‘Governance’ section
of the Company’s website at www.mediclinic.com. The
Ethics Code provides a framework of the standards
of business conduct and ethics that are required of
all directors and employees in order to promote and
enforce ethical business practices and standards across
the Group. The Ethics Code is available to all employees
and communicated to new employees as part of
onboarding.
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.
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 reflects the steps taken by the Group to
enhance its internal processes and due diligence of
suppliers to prevent slavery and human trafficking and
demonstrate its commitment to this objective.
The statement is available on the Company’s website at
www.mediclinic.com.
162
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
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 182 for more information.
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 completed
its market inquiry into the private healthcare sector
in South Africa in September 2019. The findings have
not been unduly onerous and implementation thereof
would largely require legislative intervention. Should
this happen Mediclinic will participate in all public
engagement opportunities in developing the legal and
governing framework.
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 Resources and Procurement
functions. An enterprise data warehouse enables
advanced analytics and supports decision-making by
providing, sourcing and enriching the required data
sets. An extensive office automation environment
enables both on-premise and remote working, as well
as collaboration and communication within and across
divisions, while an international network enables data
flows, interoperability and communication across
the entire Group. Notable ICT-related projects in
the pipeline include various SAP projects; projects
to roll out systems that enable clinical performance
and patient safety (also referred to as EHRs); digital
backbone projects; and further roll-out of the
international human resources management system.
ICT governance is done in the context of the Group’s
overall governance, in general, and in the context
of the Group’s risk management structures and
processes, specifically. Central to ICT governance is
the Group’s ICT Steering Committee (‘ICT Com’) and
its ICT architecture subcommittee. The ICT Com is a
subcommittee 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. This committee focuses
on collaboration, standardisation and synergies,
including:
• advancing the digitalisation of Mediclinic’s business
model and services;
• ensuring high performance and cost efficiency 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 ICT Com 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 NIST, ISACA, CoBIT 5, ITIL,
ISO 27001 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 technological capabilities to safeguard
its ICT installation, users and connections to external
ICT systems.
Information security and data protection policies and
controls are in place throughout the Group regulating,
inter alia, the processing, use and protection of own,
personal and third-party information. This is further
entrenched through continuous user training, security
awareness programmes and certification courses in
information security. The flow of personal data across
country borders is managed in accordance with
country-specific legislation.
There were no material information security or data
privacy incidents during the year under review.
163
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
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 2017 (the
‘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
expected of non-executive directors who, on
appointment, undertake that they will have sufficient
time to meet their responsibilities.
INDUCTION AND TRAINING
The Chair, with the support of the Company Secretary,
is responsible for the induction of new directors and
ongoing development of all directors.
Upon appointment, all directors are provided with
training in respect of their legal, regulatory and
governance responsibilities and obligations in
accordance with the UK regulatory regime. The
induction includes face-to-face meetings with the
Group Executive Committee and operational site visits
to orientate and familiarise the new directors with the
healthcare industry as well as Mediclinic’s business,
strategy and goals, and key risks.
Mr Singer and Dame Inga were appointed during the
year under review. Mr Singer has completed and Dame
Inga is undertaking a comprehensive Board induction
programme tailored to their individual needs and
requirements.
The training needs of the directors are periodically
discussed at Board meetings and briefings are
arranged on issues relating to corporate governance
and other areas of 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.
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 AGM subsequent to such appointment, and other
directors must retire by rotation and seek re-election
by shareholders every three years. However, the
2018 Corporate Governance Code requires that
all directors should stand for re-election annually.
Accordingly, Mr Singer (appointed on 24 July 2019) and
Dame Inga (appointed on 26 March 2020) will stand for
election at the Company’s 2020 AGM. All other directors
(with the exception of Dr Hertzog, who is retiring at the
conclusion of the Company’s 2020 AGM) will stand for
re-election.
Taking into account the result of the Board evaluation
carried out during the year under review and following
recommendations from the Nomination Committee, the
Board considers that all the current directors continue
to be effective; are committed to their roles; and have
sufficient time available to perform their duties. The
Board therefore recommends the re-election of all
directors (other than Dr Hertzog) and the election of
Mr Singer and Dame Inga. Biographies of the directors
can be found on page 130.
Remgro, through wholly owned subsidiaries, holds
44.56% of the issued ordinary shares of the Company
and is therefore regarded as a controlling shareholder of
the Company for the purposes of the Listing Rules issued
by the FCA. The Listing Rules require that independent
non-executive directors of a company with a controlling
shareholder must be elected by a majority of votes cast
by independent shareholders, in addition to a majority
of votes cast by all shareholders in such company. The
resolutions proposed at the AGM for the election of the
independent non-executive directors of the Company
will therefore be taken on a poll and the votes cast by
independent shareholders and all shareholders will be
calculated separately. Such resolutions will be passed only
if a majority of votes cast by independent shareholders
are in favour thereof, in addition to a majority of votes
cast by all shareholders being 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.
INDEMNIFICATION OF DIRECTORS
The Company has entered into a deed of indemnity
with each director who served during the reporting
164
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The independence of the 10 non-executive directors was
reviewed as part of the annual board evaluation process,
with Mr Grieve (the SID) reviewing the independence
of the other non-executive directors and Mr Grieve’s
independence being reviewed by the Chair of the Board.
This review was undertaken by reference to factors that
could affect a director’s independence as set out in the
2018 Corporate Governance Code and by considering
the conduct, independence of thought and judgement
exhibited by the independent directors during Board
and committee meetings. While the current Chair of the
Board and two non-executive directors, Messrs Jannie
Durand and Danie Meintjes, are considered to be non-
independent due to the nature of their prior or existing
relationship with the Company, the Board is satisfied that
the seven other non-executive directors are independent
and are free from any relationship that could affect
their judgement and continue to demonstrate their
independence by how they conduct themselves in Board
meetings, including how they exercise judgement and
independent thinking.
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
Remuneration Committee Report on page 215.
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 194.
DIRECTORS’ INTERESTS
The directors’ shareholding and share interests in the
issued shares of the Company are provided in the
Remuneration Committee Report on page 214.
period 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’ EXTERNAL APPOINTMENTS AND
CONFLICTS OF INTEREST
Directors are required to obtain approval from the
Board prior to accepting new appointments. The
Board has well-established procedures to identify and
manage conflicts of interest, including those that may
result from Remgro’s shareholding in the Company,
and thus ensure that the overall independence of
the Board is not compromised or overridden by the
influence of a third party. Prior to their appointment
and thereafter annually, directors are required to
complete a detailed questionnaire to identify any
direct or indirect interest that conflicts or may possibly
conflict with the Company’s interests (a ‘conflict
of interest’) and any direct or indirect interest in a
proposed or existing transaction or arrangement
entered into by the Company. In addition, directors
are reminded at each Board meeting of their duty
to declare any new conflicts of interest, interests
in proposed transactions, or changes to previous
declarations and any new actual or potential conflicts
of interest or interests in transactions that could arise
from new external roles that directors are proposing
to take up. Any conflicts of interest or interests in
proposed transactions identified by these processes
are considered by the directors who have no interest
in the relevant matter and, if appropriate, authorised
in accordance with the Act and the Articles and their
duties as directors, with conditions attached where
prudent to do so.
The Board is satisfied that the commitments of the
Chair of the Board and other non-executive directors, as
shown in their biographies on page 130, do not conflict
with their duties and time commitments as directors of
the Company.
ASSESSMENT OF THE INDEPENDENCE OF NON-
EXECUTIVE DIRECTORS
The Board annually reviews any potential conflicts of
interest and identified conflicts are, if appropriate,
authorised. The Committee and the Board are satisfied
that the commitments of the Chair and other non-
executive directors, as shown in their biographies on
page 130, do not conflict with their duties and
commitments as directors of the Company.
165
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
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 www.mediclinic.com.
SIGNIFICANT AGREEMENTS
The following agreements are considered significant in
terms of their potential impact on the business of the
Group as a whole, and 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 a
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 2025 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:
• 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
ZAR6.2bn, bearing interest at Johannesburg
Interbank Average Rate (‘JIBAR’) plus a margin of
1.49% to 1.59%, expiring in September 2022 and
2023 with uncommitted extension options.
- South African unsecured preference share funding
totalling ZAR1.8bn, 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 US dollar LIBOR plus
a margin of 1.85%, expiring in August 2023.
Principal shareholder and relationship agreement
In accordance with Listing Rule 9.8.4(14), the Company
has set out below a statement describing the
Relationship Agreement. Remgro held 44.56% of the
issued ordinary share capital of the Company, at the
Last Practicable Date.
Under the Relationship Agreement, Remgro undertakes
to comply with the following independence provisions,
as required under the Listing Rules:
• Transactions and arrangements between the
Company and Remgro (and/or its associates) are, and
will be, at 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 Listing 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 36 of the Group financial statements on page 314.
166
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT GOING CONCERN STATUS
The Group’s financial statements, as set out on
pages 224–315 and approved by the Board on
1 June 2020, were prepared on a going concern basis.
The directors considered the Company’s financial
position; availability of funding; the principal risks
and uncertainties; and 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 Group Chief Financial Officer's Report
on page 78, the Viability statement on page 114 and the
Audit and Risk Committee Report on page 170.
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.
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 under review, 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 FY20 totalled CHF63 225 (2019: CHF4 500).
Annual fluctuations in spend are mostly due to the
timing of national and cantonal renewal elections. 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.
167
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CORPORATE GOVERNANCE STATEMENT CONTINUED
REQUIREMENTS OF THE LISTING RULES
Information required to be disclosed in terms of Listing Rule 9.8.4R, as applicable, is referenced below:
DETAIL
LOCATION IN ANNUAL REPORT
Long-term incentive schemes
Page 213
Confirmations regarding entering into a relationship agreement with a
controlling shareholder and compliance with independence provisions
Refer to the ‘Principal shareholder and
relationship agreement’ section on page 166
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
None other than the relationship
agreement referred to on page 166
None other than the services provided by
Remgro described in note 36 of the Group
financial statements on page 314
See notes 6 and 26 to the Group financial
statements on pages 261 and 299 respectively
Not applicable
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 FY20, as contemplated in the Act, and
was duly approved by the Board on 1 June 2020:
• Strategic Report – refer to pages 2–125
• Section 172 statement – refer to page 4
• Statement of Directors’ Responsibilities – refer to
page 221
• Shareholder information – refer to page 348
The Strategic Report sets out those matters required
to be disclosed in the Directors’ Report which are
considered to be of strategic importance:
• Strategy and future developments – refer to page 36
• Financial risk management objectives and policies –
refer to page 225
• Research and development activities – refer to
various activities discussed in the Strategic Report
on page 36; the standardised employee engagement
initiatives on page 73; and clinical research activities
referred to on page 57, with further details available
in the 2020 Clinical Services Report available at
annualreport.mediclinic.com
• Greenhouse gas emissions – refer to page 67,
with further details available in the 2020 Sustainable
Development Report available at
annualreport.mediclinic.com
• Corporate social responsibility and CSI – refer to
page 75, with further details available in the
2020 Sustainable Development Report available
at annualreport.mediclinic.com
168
In accordance with Section 172 of the Act, the Board
collectively, and its directors individually, believe that
they have acted in a manner which they consider,
in good faith, would be most likely to promote the
success of the Company to the benefit of all its
stakeholders. Refer to below sections in this Annual
Report for more information:
• the Section 172 statement – refer to page 4
• the Business model – refer to page 14
• the Stakeholders summary – refer to page 46
• ‘Employee engagement’ and ‘Ethics, anti-
bribery and anti-corruption’ in the Sustainable
development overview – refer to page 73 and 77
respectively
• the Emergency preparedness summary – refer to
page 116
• other stakeholder engagement statements:
‘Stakeholder interests and Board engagement’,
‘Shareholder engagement’ and ‘Workforce
engagement’ – refer to Corporate Governance
Statement on pages 151–160
• ‘Response to votes received at the 2019 AGM’ –
refer to the Remuneration Committee Report on
page 194
For and on behalf of the Board.
Dr Edwin Hertzog
Non-executive Chair
1 June 2020
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 169169
AUDIT AND RISK
COMMITTEE
REPORT
Mr Alan Grieve
Chair of the Audit and Risk
Committee
COMMITTEE COMPOSITION AND MEETINGS
The Committee comprised solely independent non-
executive directors, whose names and attendance
records are set out below. Detailed information on each
member’s experience, skills and qualifications can be
found on page 130. The Board is satisfied that the
Committee has the appropriate composition, skills and
experience (including recent and relevant financial,
accounting and sector-specific experience) to
discharge its responsibilities in an informed and
effective manner.
I am pleased to present my first report as Chair of the
Audit and Risk Committee (the ‘Committee’), covering
our work during FY20 and from the start of FY21 to
the Last Practicable Date. The Board understands that
the Company’s shareholders and other stakeholders
look to its full-year and half-year reports to make
informed decisions and hold the Group’s management
and Board to account. This report provides an insight
into how the Committee discharged its responsibilities
during the reporting period and up to the Last
Practicable Date, including the significant matters it
considered when assessing the integrity of the Group’s
periodic financial reporting. I trust you will find this
report to be informative and that you take assurance
from the work undertaken by the Committee.
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
QUALIFICATIONS AND
RELEVANT EXPERIENCE
DATE OF APPOINTMENT
(as Committee member)
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Mr Alan Grieve
(Committee Chair)
BA Hons, CA
15/02/2016 (as member)
24/07/2019 (as Chair)
Mr Seamus Keating3
FCMA
Mr Trevor Petersen
BComm Hons, CA (SA)
Mr Tom Singer4
BSc Hons, CA, Advanced
Management Programme
(INSEAD)
05/06/2013
15/02/2016
24/07/2019
4/4
3/4
4/4
2/3
Notes
1 The composition is shown at 31 March 2020. Changes to the composition during the reporting period are noted alongside.
2 The attendance reflects the number of scheduled meetings held during the financial year. Details of additional meetings are set out alongside.
3 Mr Keating was unable to join the Committee meeting in March 2020 due to another urgent and unexpected commitment. Mr Keating stepped down from
the Board and its committees on 31 March 2020.
4 Mr Singer was appointed to the Committee after the first meeting of the financial year had taken place and was unable to join the second meeting due to
prior commitments that could not be re-arranged.
170
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The role of the Committee is to support the Board on matters relating to the
Group’s financial and narrative reporting, internal control system and risk
management processes, Internal Audit function and relationship with the external
auditor, as well as ethical conduct, governance and compliance.
A number of changes to the composition of the
Committee took place during the reporting period. At
the conclusion of the Company’s AGM on 24 July 2019,
Mr Desmond Smith retired as a director of the Company
and Mr Alan Grieve, a member of the Committee since
February 2016, succeeded Mr Smith as Chair of the
Committee (and as SID). In view of Mr Smith’s retirement,
the Committee was pleased to welcome Mr Tom Singer
as a director of the Company and a member of the
Committee effective from 24 July 2019. Lastly, Mr Seamus
Keating stepped down from the Board and its
committees on 31 March 2020.
The 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. The Committee held one additional ad hoc
meeting during FY20 to consider an insurance-related
proposal and one meeting was held between the
Company’s financial year-end and the Last Practicable
Date, principally to approve this Annual Report and
accounts. These meetings were attended by all members
of the Committee at the time or at least the minimum
quorum required under the Committee’s terms of
reference.
Dr Ronnie van der Merwe (Group CEO), Mr Jurgens
Myburgh (Group CFO) and Mr Gert Hattingh (Group
Chief Corporate Services Officer) attend all meetings.
Other attendees differ from time to time and may include
Dr Edwin Hertzog (Board Chair), Mr Pieter Uys (alternate
to Mr Jannie Durand), Dr Dirk le Roux (Group CIO),
Mr Glenn Ho (Group General Manager: Internal Audit),
Mr Martin Rossouw (Group General Manager: Risk
Services), Mr Pierre de Villiers (Group General Manager:
Financial) and other relevant management members,
as and when their specialist knowledge is required.
Representatives from the external auditor are invited to
attend all meetings.
Each scheduled meeting of the Committee is held in
advance of the Board meeting, allowing the Committee’s
Chair to provide a report to the Board on the key
matters discussed. This allows the Board to consider
any recommendations or other matters brought to its
attention. The Committee meets privately without
management present after each scheduled meeting. In
addition, private meetings are held with the external
auditor, the Internal Audit function and senior
management respectively to allow any issues of
concern to be raised by, or with, each party.
The Chair of the Committee meets separately with the
Group CFO, Group General Manager: Internal Audit and
the external auditor during the financial year to ensure
that the work of the Committee is focused on key and
emerging issues.
ROLE AND KEY AREAS OF ACTIVITY
The role of the Committee is to support the Board on
matters relating to the Group’s financial and narrative
reporting, internal control system and risk management
processes, Internal Audit function and relationship
with the external auditor, as well as ethical conduct,
governance and compliance. The following sections of
this report explain the oversight and challenge that the
Committee has provided under each of those headings
during the reporting period and the resultant outcomes.
The Committee’s terms of reference, which are
reviewed annually by the Committee itself and the
Board, are available on the ‘Governance’ section of the
Company’s website at www.mediclinic.com and are
summarised on page 142 of the Corporate Governance
Statement.
FINANCIAL REPORTING
The principal responsibilities of the Committee in this
area are to ensure the integrity of the Group’s financial
and narrative reporting, including full-year and half-year
reports and financial statements and announcements
regarding the Company’s financial performance. The
Committee does so by scrutinising and challenging the
views of both management and the external auditor on
key accounting and financial matters and testing the
effectiveness and independence of the external audit.
The key focus areas of the Committee in relation to
financial reporting during the reporting period are set
out overleaf.
171
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT May
2019
Sep
2019
Nov
2019
Mar
2020
May
2020
Financial reporting
Financial performance of the Group and each division, including debt
covenants
Full-year report and accounts, half-year results, related announcements
Significant accounting policies, key accounting items, areas of significant
judgement, material assumptions and estimates
Key tax considerations
Going concern
Long-term viability assessment and stress testing analysis
Dividend proposal
Dividend policy
Fair, balanced and understandable reporting and adjusted performance
measures
Annual review of Finance function
Notice of AGM
Relevant statutory, regulatory and good practice developments
External auditor
Auditor’s feedback and formal reports
Audit plan and fees
Independence, effectiveness and re-appointment
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
The Committee paid particular attention to the matters
listed below. The Committee scrutinised management
and the external auditor’s views in all these areas to
understand any areas where there had been or continued
to be a difference of opinion between management and
the external auditor to satisfy itself that the conclusions
drawn were reasonable and supportable based on
the information available at the time, and that the
corresponding disclosures in the Group’s reports were
appropriate.
• The financial performance of the Group’s divisions, Spire
and the Group as a whole, and the key drivers of that
performance, in the context of the budget agreed for
the year, guidance provided to investors and market
expectations.
• The significant accounting policies and practices
adopted by the Group, including the implementation of
IFRS 16 Leases, its impact on the Group’s financial
statements and the corresponding presentation and
disclosures included in the Group’s periodic financial
reports.
• Key accounting items and areas of significant
judgement (as detailed in the section on ‘Significant
financial reporting matters’ alongside), material
assumptions and estimates, and the sensitivity of
outcomes to reasonably possible adverse changes in
key assumptions.
• Outstanding tax matters, tax risks and 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 Committee also reviewed and
recommended the Group Tax Strategy to the Board
for approval. The strategy is published in the ‘Risk
management’ section of Mediclinic’s website at
www.mediclinic.com and a summary is available on
page 91.
• Areas of discussion and challenge with management
and the external auditor, in particular the assumptions
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AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT used in the assessment of impairment charges, going
concern and long-term viability, and the existence of any
adjusted or unadjusted errors resulting from the audit,
as set out in the external auditor’s report on pages
224-236.
• The clarity of disclosures and the processes followed to
ensure the integrity of the information provided in the
Group’s periodic financial reports and assurance that
they present a fair, balanced and understandable
assessment of the Group’s position and prospects.
• Compliance with relevant accounting standards and
financial and governance reporting requirements,
including the reporting recommendations published
by the FRC during the financial year.
• The decision to delay financial reporting in response
to COVID-19.
• Management's liquidity and covenant compliance
analysis as part of the assessment of going concern
status.
Significant financial reporting matters
The significant financial reporting matters and principal
areas of judgement considered by the Committee in
relation to the 2020 half-year and full-year financial
statements, including matters communicated by the
external auditor to the Committee, are set out below.
TABLE 2: SIGNIFICANT ISSUES CONSIDERED AND ACTIONS TAKEN
ISSUE
ACTIONS TAKEN BY THE COMMITTEE
Goodwill
and non-
financial
assets (CGU
level)
impairment
reviews
(see notes 6
and 7 to the
Group
financial
statements)
The key issues considered were:
• the impairment assessment and impairment test of the Mediclinic Middle East goodwill; and
• whether any indication existed that non-financial assets at an individual CGU-level might be
impaired and review of the subsequent impairment test of a Swiss CGU.
The Group’s annual financial planning process concludes with individual business plans per division
that are approved by the Board. The business plans take account of macroeconomic conditions,
industry-specific trends and operational details. During the year under review, the plans further
incorporated the anticipated short- and medium-term impact of COVID-19, both directly and also
indirectly through its effect on economies globally.
The Committee reviewed the key assumptions to the impairment tests performed, including free
cash flows (from the business plans described above), 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.
The Committee noted the current high levels of uncertainty and the range of possible outcomes as
a result of the COVID-19 crisis, but was satisfied that management had developed its forecasts
based on the best available evidence at this time. Based on its challenge of the key assumptions
and associated sensitivities, the Committee concurred with the impairment booked against the
carrying value of the Mediclinic Middle East goodwill as well as the impairment charges in one of
the CGUs within Hirslanden.
The Committee also considered the sensitivities to changes in assumptions and the related
disclosures required by IAS 36 Impairment of Assets and IAS 1 Presentation of Financial Statements.
The Committee discussed the external auditor’s feedback and considered its conclusion regarding
the impairment charges recorded.
Considering all of the above, management responses and the external auditor’s views, the
Committee was satisfied that the assumptions used were reasonable and that the impairment
charges, together with related disclosures, were appropriately presented.
173
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT
ISSUE
Going
concern
(see note 2.1
to the Group
financial
statements)
ACTIONS TAKEN BY THE COMMITTEE
The key issues considered were:
• the impact of the COVID-19 pandemic on the liquidity of the business; and
• the going concern status of the Group for a period of at least 12 months from the date of this report.
As part of the year-end process, management performed a monthly liquidity analysis per division
extending to September 2021 that included a base and downside case scenario. The Committee
evaluated the key assumptions used in preparing these scenarios, including projected infection
forecasts; the economic impact of lockdowns and other measures taken to curb the spread of the
pandemic; the expected impact on revenue; and the mitigating actions. The Committee considered a
range of downside case scenarios and evaluated whether management’s downside case constituted a
severe but plausible scenario. On mitigating actions, the Committee confirmed that only such actions
within the control of management were included and that further mitigating actions were considered
that might be available to the Group if downside risk factors prove worse than currently expected.
The Committee concluded that the Group, at a divisional level and supplemented with cash at the
centre, has sufficient liquidity in both the base case and the downside case scenarios and that liquidity
was sufficiently disclosed in the financial statements.
The Committee considered the compliance with covenant ratios related to borrowings in each of the
divisions and noted that, where potential breaches of covenant tests were indicated based on the
scenario analyses discussed above, covenant test waivers had been obtained. The Committee noted
that the three divisions were recently refinanced and that an unutilised bank facility is in place to repay
a Swiss bond which matures in February 2021.
After evaluating management’s presentations and the auditor’s report on the going concern
assumption, the Committee concluded and recommended to the Board to approve the going concern
assumption for the Group’s financial statements, together with related disclosures.
Viability
assessment
The key issue considered was:
• the Group’s long-term viability assessment.
(see page 114
in this Annual
Report)
The Committee reviewed the viability assessment and sought support from management for the
scenarios selected and the key underlying assumptions. The Committee also examined the stress
testing undertaken by management based on severe but plausible scenarios identified for each of the
divisions as capable of impairing the viability of the Group. It considered the external auditor’s views
on the methodology and assumptions adopted by management and the outcome of the external
auditor’s conclusions.
Impairment
review of
equity
investment
in Spire
(see note 8
to the Group
financial
statements)
Having considered the principal risks, the Committee 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 the
detailed assessment, ending on 31 March 2025.
The key issue considered was:
• the impairment assessment of the equity investment in Spire.
The Committee reviewed the impairment tests performed at half year and at year-end.
It reviewed the key assumptions, which included the forecast cash flows, long-term growth rates and
the discount rate. For the year-end impairment test, the Committee also considered the impact of
COVID-19 on the carrying value of the equity investment. The Committee considered the updated
full-year financial results 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 Committee concurred
with the impairment charge taken at 31 March 2020 and the disclosures made in the results
announcement and the financial statements.
174
AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT ISSUE
ACTIONS TAKEN BY THE COMMITTEE
Swiss
pension fund
The key issue considered was:
• the carrying value of the Swiss pension fund.
(see note 19
to the Group
financial
statements)
The Committee reviewed the main assumptions underlying the valuation of the pension fund plan
assets and obligations, as determined by the external actuaries. These assumptions, such as discount
rates, mortality and inflation rate, were discussed with management and the external auditor in the
light of prevailing economic indicators in Switzerland.
Classification
and presen-
tation of
exceptional
items
The Committee considered the effect that volatility in equity markets with the onset of the COVID-19
pandemic had on the plan assets and reviewed the disclosures in the Annual Report.
Following its review and the above discussion, the Committee was satisfied with the value of the
Swiss pension fund and the associated disclosures.
The key issue considered was:
• the Group’s use of non-IFRS measures and the judgement applied to determine whether the items
were exceptional.
The Committee reviewed the exceptional items for FY20, amounting to £497m after taking related
tax and deferred tax into account (£500m before tax) of which £519m (£522m before tax) related to
impairment charges. Details of the exceptional items are set out in the Group Chief Financial
Officer’s Report on page 83.
Particular consideration was given to the types of income and expenses adjusted by management
in arriving at the Group’s adjusted earnings measure. The Committee received confirmation from
management and the external auditor that the exceptional items and adjusted measures had been
evaluated, classified and presented in line with the Group’s policy and guidance from the FRC, and
that management’s application of the Group’s policy was consistent with previous accounting
periods. It also examined whether the disclosures within the Group Chief Financial Officer’s Report
and the half-year and preliminary results announcements provided sufficient detail to understand
the nature of these items.
Following its review and the discussion with management and the external auditor, the Committee
was satisfied that:
• the amounts classified as exceptional items were reasonable in all material respects and the related
disclosure of these items in the Group Chief Financial Officer’s Report and results announcements
was appropriate;
• all adjusted measures were appropriately labelled and reconciled to the equivalent statutory
measures and the related disclosures were clear and transparent; and
• there was consistent application in determining the exceptional items.
Fair, balanced and understandable reporting
Throughout the year under review, the Committee, on
behalf of 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 measures adopted to ensure that this Annual Report
meets that requirement are as follows:
• factual content was verified by management;
• members of senior management undertook a
comprehensive review of the document to consider
messaging and balance;
• the Committee reviewed a full draft of the document,
together with a summary of management’s approach
to the preparation of the narrative sections and the
annual financial statements;
• the Committee 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;
• it also considered whether all key events reported to
the Board and its committees during the year, both
good and bad, were adequately reflected, together
with reporting by the external auditor of any material
inconsistencies;
175
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT • as previously indicated in this report, the Committee
reviewed the use of adjusted measures by the Group
and confirmed 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);
• a comprehensive review by the directors of a near final
version of the document; and
• feedback from the Committee and other directors on
areas that would benefit from further clarity was
incorporated into this Annual Report ahead of final
approval.
The Committee also considered whether the Annual
Report included sufficient and appropriate disclosures of
the impact of COVID-19 on the Group during FY20 and
during the period from the financial year-end to the Last
Practicable Date.
Based on all the above, the Committee advised the Board
that, in its opinion, this Annual Report, taken as a whole,
was fair, balanced and understandable and representative
of the year under review, and that it provided the
information necessary for stakeholders to assess the
Group’s position, performance, business model and
strategy.
RISK MANAGEMENT PROCESSES AND INTERNAL
CONTROL SYSTEM
The Group upholds an effective control environment,
including a comprehensive system of internal control
which is designed to ensure the accuracy and reliability
of the Group’s financial reporting, so 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 Committee, is responsible for ensuring
the efficacy of these controls and that appropriate
actions are taken to correct deficiencies when they are
identified.
The Internal Audit function is a key element of the
Group’s internal control environment and works closely
with the Group Risk Management function (refer to
‘Internal audit’ section). Specialist services are contracted
in, as required, to ensure that resources are optimised.
The Group’s compliance process forms an integral
component of the Group’s risk management and internal
control 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 internal
control system
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 system are set
out on pages 119–125 and page 162 of this Annual Report
respectively. The Board has delegated responsibility for
monitoring and reviewing the effectiveness of the Group’s
risk management processes and internal controls to the
Committee. This section describes the assurance
processes in place and the Committee’s work in this area.
Internal assurance is provided through various peer
reviews and control self-assessment 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 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.
During the reporting period, and specifically in dealing
with the impact of COVID-19, management conducted an
internal review and evaluation of the key financial controls,
to provide comfort and assurance that an effective control
environment is maintained amidst the changes brought
about by the introduction of the work-from-home policy
during the pandemic. The Committee received the report
on the positive findings, concluding that an effective
control environment is maintained despite the present
limitations and challenges imposed by the pandemic.
The Committee receives reports from management on
a range of issues focused primarily on the 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 Committee provides
regular updates to the Board on these matters.
The key focus areas of the Committee in relation to the
Group’s risk management processes and internal control
system during the reporting period are set out alongside.
176
AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT May
2019
Sep
2019
Nov
2019
Feb
2020
Mar
2020
May
2020
Risk management
Emerging and principal risks and other topical risks (including
cybersecurity) and mitigants
Annual assessment of risk management processes’ effectiveness
Implementation of the ERM plan for FY20
ERM plan for FY21
Going concern
Long-term viability assessment and stress testing analysis
Fraud and ethics report (including whistleblowing)
Disaster recovery preparedness
Group key insurance arrangements and policies
Relevant statutory, regulatory and good practice developments
Internal controls
Internal audit reports, including annual report on internal controls’
effectiveness (May)
Annual assessment of internal controls’ effectiveness
Internal control matters noted in the external auditor’s reports
Regulatory compliance and litigation
Implementation of the regulatory compliance plan for FY20
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Regulatory compliance report
Regulatory compliance plan for FY21
Litigation report
Annual policies review
Committee terms of reference and all material internal controls,
risk management and compliance policies and procedures
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Key focus areas for the Committee during FY20 were as
follows:
• Internal Audit reports identifying any need to enhance
particular aspects of the Group’s internal control
system and any control findings raised by the external
auditor in their reports;
• the Group’s ERM Policy, framework and processes, and
the Group’s risk appetite statement;
• confirmation that an effective control environment was
being maintained despite the COVID-19 pandemic and
resulting changes to the working environment;
• progress against the ERM plan for FY20 which was
completed as planned;
• an in-depth review of the drivers, regulatory changes
and risks for each division from a revenue perspective;
• key ICT risks including cybersecurity, information
protection, architecture and quality of IT systems, and
application control and change risks, together with the
steps being taken by management to strengthen the
Group’s defences and respond to cyber incidents;
• the governance arrangements and progress on
implementation of major 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;
• the Group’s disaster recovery preparedness, covering
the standardised framework and policy implemented
across the Group, specific arrangements within each
division and at Group level, and the outcome of regular
scenario testing;
177
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT • feedback from management on fraud and ethics
matters;
• progress on the compliance plan for FY20, which was
completed as planned;
• the continued development of integrated reporting
received on financial, operational, clinical and
compliance risk management processes and internal
control systems, together with corresponding KPIs and
sources of internal and external assurances; and
• further streamlining and strengthening of the combined
assurance model by outlining the separate
responsibilities of the Committee and the Clinical
Performance and Sustainability Committee in relation
to clinical risks and internal controls, as described in the
‘Ethical conduct, governance and compliance’ section
of this Committee Report on page 182.
As requested by the Board, the Committee carried out an
assessment of the Group’s emerging and principal risks
and the effectiveness of the Group’s risk management
processes. This included a review of the Group’s ERM
Policy, framework and processes, the Group’s risk
appetite statement, the emerging and principal risks
facing the Company, and action plans designed to
mitigate these risks in line with the Group’s risk appetite.
The principal risks and uncertainties facing the Group, the
procedures in place to identify emerging risks and how
these risks are being managed or mitigated are described
on pages 119–125.
were no significant failings or weaknesses and that
processes were in place to ensure that the necessary
actions were taken, where areas for improvement were
identified, and that these outcomes were monitored.
The Board, via the Committee, is therefore satisfied that
the Group has a risk management and internal control
environment that is effective in ensuring the consistent
achievement of key control objectives.
INTERNAL AUDIT
During the year under review, the Group continued
to enhance its in-house Internal Audit function by
recruiting core Internal Audit team members. Specialist
services are contracted in, as required, to ensure that
resources are optimised.
The Internal Audit function, which reports functionally
to the Committee and administratively to the Group Chief
Corporate Services Officer, is responsible for undertaking
risk-based reviews across the Group and 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 providing an assessment of the risk management
processes and internal control system. The Internal Audit
function meets with the external auditor at least on a
quarterly basis, or more frequently if required, to improve the
levels of assurance delivered to the Board on key risk areas.
The Committee also reviewed the effectiveness of the
Group’s internal control system, including all material
financial, operational and regulatory compliance controls,
in accordance with the FRC Guidance on Risk
Management, Internal Control and related Financial and
Business Reporting. The review confirmed that there
The Committee receives regular reports on the activities
and key findings of the function and the progress on
management’s implementation of Internal Audit
recommendations. The key topics relating to internal audit
considered by the Committee during the reporting period
are set out alongside.
The Board, via the Committee, is
therefore satisfied that the Group has a
risk management and internal control
environment that is effective in ensuring
the consistent achievement of key
control objectives.
178
AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Implementation of the internal audit plan for FY19 or FY20 (as relevant)
Internal audit reports, including key findings, management action plans and
annual report on internal controls’ effectiveness (May)
Assessment of internal controls’ effectiveness
Internal audit plan for FY20 or FY21 (as relevant)
Internal audit mandate
Annual review of Internal Audit function
Private meeting with management, without the internal auditor
Private meeting with internal auditor, without management
Private meeting of Committee members
May
2019
Sep
2019
Nov
2019
Mar
2020
May
2020
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
During the year under review, the Internal Audit function
completed and reported to the Committee on financial
audits and reviews across the Group. These audits
included hospital-level audits focusing on human
resources, patient administration, cash management
and pharmacy; major projects assurance on key
transformational projects; IT projects focused on
cybersecurity, medical device management and physical
and environmental access controls; and other process-
based audits e.g. procurement, financial discipline and
data privacy. A cycle of clinical internal audits was also
introduced to provide assurance on the top clinical
risk areas. Appropriate resourcing arrangements were
made to suitably staff this specialist audit area. The
combined assurance model was further streamlined and
strengthened by outlining the separate responsibilities
of the Committee and the Clinical Performance and
Sustainability Committee in relation to these clinical
internal audits, as described in the ‘Ethical conduct,
governance and compliance’ section of this Committee
Report on page 182.
The Committee reviewed the feedback on the
findings and recommendations, the actions taken by
management in response and the outcomes from those
actions. It also considered the Internal Audit function’s
annual written assessment of the effectiveness of
the Group’s risk management processes and internal
controls. Following discussion with Internal Audit and
management, the Committee reported on its assessment
to the Board and confirmed that it was satisfied with the
effectiveness of the Group's risk management processes
and internal controls.
One of the principal duties of the Committee is to
consider 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 processes;
• significant changes in the business, operations,
ICT programmes, systems and controls;
• requests from management and the Committee;
• new developments in organisational governance; and
• emerging risks and trends.
The Internal Audit function will continue to adopt a
risk-based approach to audits for FY21 and intends to
focus on hospital-level audits of human resources,
revenue, pharmacy and cash management processes
and controls; process audits of capital projects and
maintenance reviews, procurement, stock and facilities
management, among others; assurance for major
business and IT projects; and audits of other IT-related
risks such as access controls and information security.
The execution of the plan has been adjusted to take
account of restrictions imposed by the COVID-19
pandemic with alternative procedures being implemented
to ensure the planned coverage is still achieved. Follow-
up audits will also be performed to ensure ongoing
engagement with management and encourage
continuous improvement.
The Committee continued to monitor the development of
the in-house Internal Audit function and its resourcing. An
assessment of the function was conducted in May 2020
based on reports received and discussions held with the
Group General Manager: Internal Audit, management and
the external auditor during the year under review and a
robust discussion of the assessment of the function
prepared by the Group General Manager: Internal Audit
during the Committee meeting and in separate meetings
with the Group General Manager: Internal Audit, the
179
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT external auditor, management and Committee members.
The Committee continues to be satisfied with the
effectiveness, independence, resourcing and standing
of the Internal Audit function within the Group and the
progress made in establishing and embedding the function.
PwC 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 was
Mr Giles Hannam, who was appointed in February 2016. The
external auditor is invited to all Committee meetings and
receives copies of all relevant papers and meeting minutes.
EXTERNAL AUDIT
The Committee, on behalf of the Board, is responsible for
overseeing the relationship with the external auditor,
including ensuring the quality and robustness of the audit.
The key topics considered by the Committee during the
reporting period in relation to the external audit are set
out below.
External auditor’s pre-year-end report on accounting, auditing and control
matters/year-end audit report and opinion/half-year report, as relevant
Evaluation of the quality and effectiveness of the external audit and the
external auditor’s independence and objectivity
External auditor’s re-appointment
External audit plan for FY20 and fees
Non-audit services authorised thresholds for FY19 or FY20 (as relevant)
Non-audit services expenditure incurred for the financial year to date
Policy on the external auditor’s independence and non-audit services
Relevant statutory, regulatory and good practice developments
Private meeting with the external auditor, without management
Private meeting with management, without the external auditor
Private meeting of Committee members
May
2019
Sep
2019
Nov
2019
Mar
2020
May
2020
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
Quality, effectiveness and independence of the
external audit
The Committee plays a key role in seeking to ensure that
the Group receives a high-quality and effective statutory
audit. It does so by overseeing the relationship with the
external auditor and through open discussions with
management and the external auditor during Committee
meetings and with each group privately, after meetings.
Through these discussions, members of the Committee
ensure they have a clear understanding of contentious
issues, challenge management on their judgements and
the quality of disclosures, and scrutinise the external
auditor’s analysis and work.
Prior to the start of the statutory audit work in respect
of FY20, the Committee in November 2019 discussed
the strategy and scope of the audit with PwC and
management. At the March 2020 meeting, PwC presented
the 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. The
findings and conclusions of the external audit and
the assumptions, judgements and methodologies
underpinning the work were discussed in depth at the
May 2020 meeting. Private meetings held after Committee
meetings with the external auditor without management
present, and with management without the external
auditor present, encouraged open and transparent
feedback from both parties.
As the FY20 external audit neared finalisation, all
members of the Committee, management and others
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 four key performance
areas: (1) the robustness of the audit process; (2) the
quality of delivery; (3) the quality of reporting; and
(4) the quality of people and service. The feedback from
180
AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT the questionnaire and from the separate meetings with
the external auditor and management held during the year
under review was discussed by the Committee at the
meeting held in May 2020. Matters discussed included: the
adaptations to the original audit plan, audit team and
timetable agreed as a result of the impact of COVID-19;
areas of discussion between management and the external
auditor and the robust but constructive challenge to
management’s assertions and judgement, where relevant;
and the overall thoroughness of the external auditor’s
work. The Committee also took note of the FRC’s Audit
Quality Practice Aid for Audit Committees published in
December 2019 and the Audit Quality Inspection report for
PwC published by the FRC’s Audit Quality Review team in
July 2019. Any opportunities for improvement in the
quality of the external audit and the effectiveness of the
process were discussed with the existing and future lead
partners and their team. The Committee was satisfied with
the overall feedback on PwC and concluded that the
external audit process was effective and that expectations
set when awarding the external audit to PwC in 2019 had
largely been met.
The Committee is also responsible for assessing the
independence and objectivity of the external auditor on
an annual basis. It adopts a two-fold approach to do so.
Firstly, it considers the information and assurances
provided by the external auditor under the FRC’s Revised
Ethical Standard for Auditors. Secondly, the Committee
developed and monitors the Non-audit Services Policy and
associated fees discussed alongside, which are designed
to safeguard the independence of the external auditor.
In their external audit report for FY20, PwC confirmed
that there were no significant facts and matters that may
reasonably be thought to bear on its independence or on
the objectivity of the lead partner and the audit team. The
quality review partner, who reviews the judgements of the
audit team, rotates every seven years and the lead partner
and key audit partners at each division rotate every five
years. The quality review partner was appointed for the
FY20 audit and is therefore not due for rotation until after
FY26. The lead partner for the external audit of FY20,
Mr Hannam, was appointed in February 2016 and
therefore retired upon completion of the audit. Following
consultation with the Committee, Mr Neil Grimes was
appointed as lead partner with effect from June 2020
and arrangements were made for Mr Grimes to shadow
Mr Hannam throughout the external audit for FY20. The
key audit partners for Hirslanden, Mediclinic Southern
Africa and Mediclinic Middle East were appointed in 2018,
2017 and 2019 respectively, with rotation due after 2023,
2022 and 2024. The Committee also took note of the
continuing reduction in the Group’s usage of PwC for
the provision of non-audit services and the updated
Non-Audit Services Policy referred to alongside. Based
on the above confirmations and arrangements, the
feedback from management and Committee members’
own observations of the external auditor’s conduct and
judgement, the Committee was satisfied that PwC
continues to be independent and free from any
conflicting interest with the Group.
Non-audit services and fees
The Committee believes that it may be appropriate in
certain, limited circumstances for the Company to engage
its external auditor to provide non-audit services. The
provision of such services is strictly governed by the
Group’s Non-Audit Services Policy which helps to ensure
that the external auditor’s independence and objectivity
are not impaired or perceived to be impaired. 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. The
policy incorporates the additional restrictions on non-audit
services introduced by the FRC’s Revised Ethical Standard
2019 and was last reviewed and approved by the
Committee in March 2020.
At the beginning of each financial year, the Committee
determines the pre-approved monetary thresholds for
each category of non-audit services that may be provided
by the external auditor. The nature of the non-audit
services, the individual fee levels for each category and the
aggregate fee relative to the external audit fee are taken
into account in determining these thresholds. Any
individual assignment with a fee exceeding £50 000
requires the Committee’s prior approval. At the March 2020
meeting, the Committee was pleased to note the
continuing decline in the Group’s use of the external
auditor for non-audit services which, based on the
thresholds approved for FY21, would continue to decline.
The fees paid to PwC in respect of non-audit services
amounted to approximately £0.5m or 23% of the statutory
audit fees. Approximately £0.3m 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 2019. Therefore, excluding the half-year
reviews, non-audit service fees as a percentage of
statutory audit fees amounted to 9%.
Refer to note 24 to the Group financial statements on
page 298 for more information on the fees paid for audit
and non-audit services during the year under review. In
addition, an amount of approximately £0.16m or 7% of
the statutory audit fees was paid for Swiss billing code
audits. These audits are required by Swiss law to ensure
that the codes used for the bills issued by Hirslanden on
invoices for inpatient hospital services are entered in
accordance with the Swiss DRG tariffs. The Committee
allowed this non-audit service since it is cost effective for
the Group and represents a relatively small part of the
statutory audit fee.
181
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT Re-appointment
As described above, the Committee concluded that the
services provided by the external auditor were of a high
quality; that the external audit process in respect of FY20
was effective; and that the auditor remains objective and
independent. Accordingly, the Committee recommended
to the Board that the re-appointment of PwC as the
Company’s external auditor be proposed to shareholders
at the Company’s 2020 AGM.
February 2016, as approved by the Company’s shareholders
in December 2015. It is intended that the external audit will
be put out to tender no later than for the financial year
commencing 1 April 2023, which is 10 years after the
Company’s initial listing. The Committee complied with the
provisions of The Statutory Audit Services for Large
Companies Market Investigation (Mandatory Use of
Competitive Tender Processes and Audit Committee
Responsibilities) Order 2014.
As a result of the UK’s implementation of the EU’s
mandatory audit firm rotation requirements, and in
accordance with the Committee’s terms of reference, the
Company is required to ensure that the external auditor’s
contract is put out to tender at least every 10 years, with
the proviso that no single firm may serve as the Company’s
external auditor for a period exceeding 20 years. PwC was
first appointed as the Company’s auditor with effect from
ETHICAL CONDUCT, GOVERNANCE AND COMPLIANCE
The Group is focused on conducting its business in an honest,
fair and ethical manner – a principle endorsed by the Board
and management. The Committee oversees the Group’s
processes for handling breaches of the Group’s Ethics Code
and Anti-bribery Policy. The key topics considered by the
Committee during the year under review in relation to ethical
conduct, governance and compliance are set out below.
Ethical conduct (including whistleblowing)
Management’s report on fraud and ethics matters (including any
instances of whistleblowing)
Management’s report on litigation cases (introduced in November 2019)
Non-audit services authorised thresholds for FY19 and FY20 (as relevant)
Non-audit services expenditure incurred for the financial year to date
Group Tax Strategy
Key tax considerations across the Group
Governance and compliance
Separation of the responsibilities of the Committee and Clinical
Performance and Sustainability Committee in relation to clinical risk
management and clinical audits
Annual review of Committee terms of reference and all material internal
controls, risk management and compliance policies and procedures
Relevant statutory, regulatory and good practice developments
Management’s reports on regulatory compliance across the Group
May
2019
Sep
2019
Nov
2019
Mar
2020
May
2020
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
•
During the year under review, at the Board’s request, the
Committee received regular feedback from the Group
General Manager: Risk Management on all material cases and
incidents reported on the ethics lines or by other means and
on how these were managed. The Committee members also
satisfied themselves that the arrangements in place were
appropriate, proportionate and effective, and provided
regular reports to the Board on any major issues and
developments. Further details on the ethics lines are provided
in the Sustainable development overview on pages 76–77.
The Committee is responsible for ensuring Group-wide
compliance with relevant legislation and regulations. The
Group operates a standardised risk-based compliance
monitoring programme that tracks the Group’s compliance
with key legislation across all the jurisdictions in which it
operates. The Committee received regular updates on
the status of regulatory compliance across the Group;
examined the implications of forthcoming legislation and
management’s plans to address the new requirements; and
monitored progress on their implementation.
During the year, the Committee also reviewed the
overlapping roles of the Audit and Risk and Clinical
Performance and Sustainability committees in relation to
clinical internal controls and risk management, clinical
internal audits, compliance and ethics. The two committees
agreed a separation of their responsibilities to avoid
182
AUDIT AND RISK COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT duplication of work while ensuring that each committee
retained an appropriate level of oversight over matters that
fell within its responsibility.
Further details on the Company’s policies in respect of
business conduct and ethics, anti-corruption and anti-
bribery matters are provided in the Sustainable
development overview on page 77. Details of the Clinical
Performance and Sustainability Committee are provided on
page 184.
COMMITTEE EVALUATION
The Committee’s performance was reviewed within the
framework of the annual internal Board evaluation, which
is discussed on page 161 of the Corporate Governance
Statement. The evaluation focused on the Committee’s
composition, knowledge and behaviours, processes and
support, the work undertaken during FY20 and any
priorities for improving its performance in FY21. The
Committee members reviewed and discussed 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 2020 meeting. The 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 FY20
PRIORITIES
STATUS
• Continued monitoring of the development of the
in-house Internal Audit function and progress against
the internal audit plan for FY20
• Further development of the Group’s clinical risk
management and reporting processes
• Advancement of the integration of reporting to the
Committee on financial, operational and compliance
internal controls and risk management processes
• Advancement of the monitoring and reporting of
projects aimed at adapting the Group to the evolving
global healthcare environment and cybersecurity risks
• Continued monitoring of progress against the
ERM plan for FY20
Refer to the ‘Internal audit’ section of this Committee
Report on page 178
Refer to the ‘Risk management processes and internal
control system’ section of this Committee Report on
page 176
• Continued monitoring of the implementation of new
IFRS standards
Refer to the ‘Financial reporting’ section of this
Committee Report on page 171
• Oversight of the selection and transition of the new
lead external audit partner who will lead the audit
from FY21
• Enhancement of the Group’s monitoring of potential,
long-term regulatory developments
• Continued monitoring of progress against the
regulatory compliance plan for FY20
Refer to the ‘External audit’ section of this Committee
Report on page 180
Refer to the ‘Ethical conduct, governance and
compliance’ section of this Committee Report alongside
KEY PRIORITIES FOR THE COMMITTEE IN FY21
For the coming financial year, the Committee will, among
other matters, focus on:
• continuing to build and strengthen the Group’s risk
management framework and reporting, and increase
the time allocated to the Committee’s discussion of
emerging risks;
• continuing to monitor the development of the in-house
Internal Audit function and the audit processes
introduced during the reporting period;
• increasing visibility over the divisional CFOs and
succession planning for those positions;
• managing the Group’s corporate reporting on ESG
matters; and
• monitoring the ongoing impact of COVID-19 on the
Group's liquidity, covenant compliance and financial
reporting.
Approved and signed on behalf of the Committee.
Mr Alan Grieve
Chair of the Audit and Risk Committee
1 June 2020
183
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CLINICAL
PERFORMANCE AND
SUSTAINABILITY
COMMITTEE REPORT
Dr Felicity Harvey
Chair of the Clinical Performance
and Sustainability Committee
As Chair of the Clinical Performance and Sustainability
Committee (the ‘Committee’), it is my pleasure to report
on its activities for FY20. The Committee plays a key role
in assisting the Board in ensuring that the Group delivers
its purpose of enhancing the quality of life and its vision
of being the partner of choice that people trust for all
their healthcare needs. This report provides an overview
of the key focus areas considered during the year under
review, together with the priorities for FY21.
COMMITTEE COMPOSITION AND MEETING
ATTENDANCE
Detailed information on each member’s experience,
skills and qualifications can be found on page 130.
The Board is satisfied that the Committee has the
appropriate composition, skills and experience to
discharge its responsibilities in an informed and
effective manner.
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT (as
Committee member)
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Dr Felicity Harvey
(Committee Chair)
Independent Non-executive Director
03/10/2017
Dr Muhadditha Al Hashimi3
Independent Non-executive Director
01/04/2018
Dr Edwin Hertzog
Non-executive Director
15/02/2016
Mr Seamus Keating4
Independent Non-executive Director
25/07/2018
Dr Ronnie van der Merwe
Group Chief Executive Officer
25/07/2018
5/5
4/5
5/5
4/5
5/5
Notes
1 The composition of the Committee is shown at 31 March 2020.
2 The attendance reflects the number of scheduled meetings held during the financial year. Details of additional meetings are set out alongside.
3 Dr Al Hashimi was unable to attend one scheduled Committee meeting due to urgent and unavoidable personal reasons.
4 Mr Keating was unable to join the March meeting owing to another urgent and unexpected commitment. Mr Keating stepped down from the Board and
its committees on 31 March 2020.
FIGURE 1: COMMITTEE MEMBERS’
SKILLS AND EXPERIENCE
FIGURE 2: COMMITTEE COMPOSITION
Healthcare sector
Medical/clinical/similarly
complex businesses
HR/talent management/
culture management
Other stakeholder
management1
Sustainability
2
2
4
4
4
Note
1 Refer to the Stakeholders summary on page 46 for more information on all the Group’s stakeholders.
184
Non-executive directors 25%
Executive directors 25%
Independent non-executive
directors 50%
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT The Committee held five meetings during the year under
review, with one of these meetings being dedicated to
discussing the clinical strategy for the Group and each of
the divisions. Each scheduled meeting of the Committee
is held in advance of Board meetings, allowing the
Committee’s Chair to provide a report to the Board on the
key matters discussed. In addition, one meeting was held
between the Company’s financial year-end and the Last
Practicable Date which was attended by all members of
the Committee at the time.
Under the Ward-to-Board accountability framework, the
Group and divisional Chief Clinical Officers and the Group
General Manager: Clinical Performance are invited to
attend all meetings. The Group Chief Corporate Services
Officer, responsible for the Group’s sustainable
development management, is also invited to attend
all meetings. The divisional CEOs and other relevant
members of management are invited to attend meetings
as required.
ROLE AND KEY AREAS OF ACTIVITY
The role of the Committee is to assist the Board in:
• the promotion of a culture of excellence in patient
safety, quality of care and patient experience by, among
other things, monitoring the clinical performance of the
Group; and
• ensuring that the Group is and remains a good and
responsible corporate citizen by monitoring the
sustainable development performance of the Group.
The responsibilities and functions of the Committee are
governed by formal terms of reference, which are reviewed
at least annually by the Committee and the Board. The
terms of reference are available in the ‘Governance’ section
of the Company’s website at www.mediclinic.com and
summarised on page 142 of the Corporate Governance
Statement.
The key focus areas of the Committee during the year
under review and resultant outcomes are set out below.
CLINICAL PERFORMANCE
taskforce, centrally coordinated by the Group Chief
Clinical Officer and with its global view of trends and
policy, helps ensure medical protocols and best practices
are shared across the Group and supports the divisions’
establishment of contingency plans with particular
consideration for any impact on supply chain, ICT, finance,
risk and human resource capacity.
Governance
The Committee continued to oversee and support the
roll-out of the Ward-to-Board accountability framework
across all three divisions. This accountability framework is
integral to the Group’s Patients First approach and the
corresponding patient safety and clinical quality goals
and objectives. It is designed to align the interests of
clients and care providers, and strengthen a culture of
performance reporting and accountability. It also ensures
effective information flows up and down the organisation
and facilitates Group-wide alignment and collaboration.
The framework has now been implemented across all three
divisions, including Clinical Performance Committees at
each division, and is being replicated appropriately
at hospital level. The divisional committees where possible
include local independent clinical experts to provide
a different perspective and avoid ‘group think’. The
Ward-to-Board accountability framework drives clinical
quality and efficiency, thereby creating satisfaction and
value for the Company and its stakeholders. Evidence of
this is emerging in Mediclinic Southern Africa where the
framework has been introduced and is being embedded.
Mediclinic Southern Africa has seen improved transparency
and reporting of adverse events and is ensuring that the
necessary controls are in place to effectively prevent
recurrence of serious adverse events. The Clinical
Performance Committees at hospital level are led by and
consist of experienced and reputable medical practitioners,
as well as hospital management. These committees identify
clinical performance areas where potential improvement is
indicated and then devise action plans to bring about the
necessary improvements. At Mediclinic Middle East, the
framework has been embedded for over a year and greatly
enhanced the awareness, understanding and management
of adverse events.
COVID-19
With the growing spread of the COVID-19 pandemic
during the last quarter of FY20, the Committee turned its
attention to the Group’s preparations to deal with the
pandemic in all its countries of operation, both in frontline
operations and in administrative and corporate functions,
coordination between divisions and oversight at Group
level. In each geography, Mediclinic works closely with
governments and local regulators to combat the COVID-19
pandemic and support the different initiatives being
implemented locally. The frontline staff and management
teams deal with the daily challenges of managing the
pandemic. An agile approach, proactively managing a
changing landscape, is required. With the assistance of
strong IPC teams, dedicated multidisciplinary taskforces
are constantly re-evaluating Mediclinic’s responses to
this dynamic and rapidly evolving situation. The Group
The Committee also reviewed the overlap between its
role and that of the Audit and Risk Committee in relation
to clinical internal controls and risk management,
clinical internal audits, compliance and ethics. The two
committees agreed a separation of their responsibilities
to avoid duplication of work while ensuring that each
committee retained an appropriate level of oversight over
matters that fell within its area of responsibility.
Clinical performance model
The Group’s clinical performance management model and
outcomes continued to be a key area of focus for the
Committee. The model is based on a clinical performance
framework consisting of four components: patient safety,
clinical effectiveness, clinical cost efficiency and value-
based care. The composite performance indicator
dashboard implemented in FY19 allowed the Committee to
185
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT scrutinise in greater detail the clinical performance of the
Group’s three divisions. Further areas for refinement were
identified, such as the adoption of more standardised
indices, definitions and interpretations across all three
divisions, while still meeting local reporting needs to
address regulatory requirements or particular focus areas.
recommended it for approval to the Board with minor
modifications. More information on the Group
Sustainable Development Strategy is available under
‘Sustainable development’ in the ‘Governance’ section of
the Company’s website at www.mediclinic.com;
• reviewing and approving the changes proposed to
The Committee kept track of progress in this area and the
outcomes reported. These changes are enhancing the
ability of management and the Committee to consider
the clinical performance of each division on a consistent
basis and identify opportunities for cross-learning and
collaboration.
Clinical risk management, controls and processes
During the period under review, the Committee deepened
its oversight of clinical risk management, controls and
procedures, through enhanced reporting from
management and the introduction of clinical audits
conducted by the Internal Audit function. At the date of
this report, five clinical audits had been concluded and
found compliance with most controls for the high-risk
clinical areas. For non-compliance, corrective actions were
formulated and implemented – some immediately and
others over a longer period.
Other focus areas
Other focus areas for the Committee included:
• evaluating compliance with the Group’s patient safety
and quality clinical care standards, policies and
procedures, and regulation and accreditation standards at
divisional level;
• the work of the Patient Safety Committee established in
FY19, to standardise and enhance collaboration across
the Group in this area, and assist in reinforcing the
Group’s strengths and identifying and prioritising focus
areas;
• reviewing progress on the implementation of an EHR at
Hirslanden and Mediclinic Middle East, and the potential
options for Mediclinic Southern Africa;
• implementing a clinical adverse event and clinical risk
management solution suitable for the Group to further
strengthen patient safety procedures;
• reviewing clinical effectiveness and cost efficiencies;
• the outcomes and follow-up actions arising from patient
and doctor satisfaction surveys; and
• reviewing and approving the annual Clinical services
overview in this Annual Report and the 2020 Clinical
Services Report available at annualreport.mediclinic.com.
SUSTAINABLE DEVELOPMENT
During the period under review, the Committee, among
other matters, focused on:
• reviewing the formal Group Sustainable Development
Strategy developed by management to consolidate
the Group’s various ESG initiatives and implement a
structured, consistent and systematic approach going
forward. The Committee tested management on the
proposed strategy, its goals and time scales, and
various policies to align them to the Group Sustainable
Development Strategy and/or further strengthen the
Group’s position on non-discrimination and respect
for client and human rights. These included the
Group Sustainable Development Policy, the Group
Environmental Policy and the Ethics Code available on
the Company’s website at www.mediclinic.com;
• monitoring the sustainable development performance of
the Group with specific regard to:
- identifying and monitoring the Group’s engagement
with its key stakeholders and key outcomes from
such engagement (including patient and employee
engagement surveys conducted during the year under
review);
- labour relations and working conditions;
- employee training and skills development;
- health and public safety;
- B-BBEE in South Africa;
- 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 www.mediclinic.com);
- environmental impact management;
- fraud and ethics;
- compliance, including the governance of advertising
and compliance with consumer protection legislation;
and
- CSI;
• monitoring the results of the Company’s participation in
various sustainability indices and assessments, notably
the Company’s inclusion in the FTSE4Good Index, which
recognises companies with strong ESG practices;
• confirming the key sustainability priorities, as
recommended by management and reported on
page 65 and in the 2020 Sustainable Development
Report available at annualreport.mediclinic.com; and
• reviewing and approving the annual Sustainable
development overview included in the Annual Report
and the 2020 Sustainable Development Report
available at annualreport.mediclinic.com.
As referred to alongside, 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 Committee
therefore performs the statutory functions required
of a social and ethics committee in terms of the SA
Companies Act.
186
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTCLINICAL PERFORMANCE AND SUSTAINABILITY COMMITTEE REPORT CONTINUED COMPLIANCE
The Committee discussed management’s report on the
compliance universe for the Group and progress on the
implementation of the compliance plan for FY20.
PROGRESS ON KEY PRIORITIES FOR THE COMMITTEE
FOR FY20
PRIORITIES
STATUS
ASSURANCE
The Committee considered the need for external
assurance of the Group’s non-financial reporting,
particularly in relation to its sustainable development
performance. The Committee is satisfied that the current
level of combined assurance provides the necessary
independent assurance over the quality and reliability of
the information presented in relation to the Group’s
clinical performance and sustainable development. The
Committee will continue to monitor whether additional
forms of assurance are required in future.
COMMITTEE EVALUATION
The Committee’s performance was reviewed by its
members by way of a self-evaluation questionnaire, the
results of which were considered by both the
Committee and the Board. Following discussion of the
results, the Committee provided management with
guidance on further improvements to reports prepared
for the Committee, and requested that management
coordinate appropriate training on patient safety to
senior management and the Board, to help fully
entrench behavioural standards within the Group.
The Committee and the Board concluded that the
Committee operated effectively during the year under
review and that its current members have the necessary
skills and experience.
It was noted that two of the Committee members
would retire when they step down from the Board,
Mr Keating on 31 March 2020 and Dr Hertzog upon the
conclusion of the Company’s 2020 AGM. However, the
composition of the Committee would be addressed by
the Nomination Committee in advance of Dr Hertzog’s
retirement and be taken into account in the process to
identify and appoint a new independent non-executive
director to fill the vacancy on the Board created by
Mr Keating’s departure.
ANNUAL GENERAL MEETING
In terms of the SA Companies Act, a social and ethics
committee must, through one of its members, report
to the shareholders at a company’s AGM on the matters
within its mandate. As the Committee performs the
role of such a committee in terms of the SA Companies
Act, it will fulfil this function by referring shareholders
at the Company’s 2020 AGM to this report,
which should be read in conjunction with the
2020 Sustainable Development Report available at
annualreport.mediclinic.com. Any specific questions for
the Committee may be sent to the Company Secretary
prior to the AGM.
Continued implementation
and improved functioning
of the Ward-to-Board
accountability framework
across the divisions
Review of the clinical
performance indicators and
identification of trends
Refer to the
‘Governance’ section of
this Committee Report
on page 185
Refer to the ‘Clinical
performance model’
section of this
Committee Report on
page 185
Implementation of
advanced technology
for improved clinical
information and performance
Refer to the ‘Other
focus areas’ section of
this Committee Report
alongside
Continued monitoring of
the Company’s sustainable
development
Refer to the ‘Sustainable
development’ section of
this Committee Report
alongside
PRIORITIES FOR THE COMMITTEE FOR FY21
For the coming financial year, the Committee will, among
other matters, focus on:
• continuing to improve the comparability of reporting
within and across the Group’s three divisions;
• providing appropriate patient safety training to senior
management and the Board, together with other
relevant training on health measures and global trends;
• monitoring progress on the implementation of the
Group’s clinical strategy and objectives;
• monitoring progress on the implementation of a
software solution for the management of clinical
adverse events;
• monitoring the further implementation of an EHR
at Hirslanden and at Mediclinic Middle East;
• monitoring the selection of potential EHR options for
Mediclinic Southern Africa;
• monitoring the Group’s response to the COVID-19
pandemic; and
• monitoring progress on the implementation of the
Group’s Sustainable Development Strategy.
Signed on behalf of the Committee.
Dr Felicity Harvey
Chair of the Clinical Performance and Sustainability
Committee
1 June 2020
187
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT NOMINATION
COMMITTEE
REPORT
Dr Edwin Hertzog
Chair of the Nomination Committee
As Chair of the Nomination Committee (the
‘Committee’), it is my pleasure to report on its
activities for FY20.
The report provides an overview of the key focus areas
considered during the year under review, together with
the priorities for FY21. The 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
www.mediclinic.com and summarised on page 142
of the Corporate Governance Statement.
COMMITTEE COMPOSITION AND MEETING
ATTENDANCE
The current Committee composition meets the
requirements of the 2018 Corporate Governance Code,
with the majority of members being independent non-
executive directors. The Chair of the Board is the Chair of
the Committee but did not chair the meeting when the
matter of Board Chair succession was discussed.
Biographies of members are included on page 130.
Attendees of the Committee meetings may, from time
to time and upon invitation, include the Group CEO,
the Group Chief Human Resources and Corporate
Development Officer and the Group General Manager:
Talent Management.
TABLE 1: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
NAME1
DESIGNATION
DATE OF
APPOINTMENT
(as Committee
member)
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Dr Edwin Hertzog
(Committee Chair)
Non-executive Director
15/02/2016
2/2
Mr Alan Grieve
Senior Independent Director
15/02/2016
Dame Inga Beale3
Independent Non-executive Director
26/03/2020
Mr Jannie Durand
Non-executive Director
15/02/2016
Dr Felicity Harvey
Independent Non-executive Director
25/07/2018
Dr Anja Oswald
Independent Non-executive Director
25/07/2018
2/2
0/0
2/2
2/2
2/2
Notes
1 The composition of the Committee is shown at 31 March 2020.
2 The attendance reflects the number of scheduled meetings held during the financial year. Details of additional meetings are set out alongside.
3 Dame Inga Beale was appointed as a member of the Committee on 26 March 2020, after the first meeting of the year was held.
188
MEDICLINIC INTERNATIONAL PLC
2020 ANNUAL REPORT
The Committee normally holds two meetings during
a financial year. During FY20, the Committee also held
one additional ad hoc meeting to consider the succession
process for Mr Desmond Smith in advance of his retirement
in July 2019. The Committee held two ad hoc meetings
between the Company’s financial year-end and the
Last Practicable Date to address the vacancy created
when Mr Keating stepped down from the Board on
31 March 2020. All these meetings were attended by all of
the members of the Committee at the time. The Committee
delegated its work on the Board Chair succession process
to a panel which met four times during the year under
review, as discussed below.
KEY AREAS OF ACTIVITY
Board Chair and other succession planning
A key activity for the Committee during the reporting
period was leading the search for individuals to succeed
the Chair of the Board, following Dr Herzog’s indication in
July 2019 that he intended to retire at the conclusion of
the Company’s 2020 AGM. The search was led by the
SID, Mr Alan Grieve, who chaired a panel established by
the Committee for this purpose (the ‘Panel’) which
comprised a majority of independent non-executive
directors and excluded the Chair of the Board.
The Panel drew up a list of objective criteria for the new
Chair, taking into account the existing skills, experience
and composition of the Board, the effect of Dr Hertzog’s
retirement, the future needs of the business and the
benefits of a diverse Board as set out in the Board
Diversity Policy. Existing Board members were invited to
express an interest in the role; those individuals were
excluded from sitting on the Panel and were considered
for the role alongside external candidates.
Following proposals from a number of search
consultancies, the Panel engaged Egon Zehnder Limited
to identify suitably qualified external candidates for the
role by way of an extensive and rigorous process. The
firm has no connection with the Company or any of the
individual directors other than the provision of search
services for the Chair succession. Egon Zehnder Limited
was requested to provide a long list of diverse individuals
meeting the role criteria. The candidates presented to
the Panel came from a broad range of backgrounds and
more than half were female. The Panel assessed these
candidates, and those identified internally, against the
agreed criteria. The Panel then held interviews with the
shortlisted individuals and the final shortlisted candidates
also met with the Group CEO.
her standing within the UK financial sector, which
would facilitate discussions with regulators and other
stakeholders. The Board approved Dame Inga’s
appointment as an independent non-executive director
and Chair Designate on 26 March 2020 with immediate
effect, in order to allow for a handover and induction
period prior to her succeeding Dr Herzog as Chair of the
Board at the conclusion of the 2020 AGM, subject to her
election by shareholders.
During the year under review, the Committee also
completed the succession process to fill the vacancy
created by Mr Desmond Smith’s retirement as a director of
the Company at the conclusion of the 2019 AGM. Mr Alan
Grieve, a member of the Audit and Risk Committee since
February 2016, succeeded Mr Smith as SID and Chair of
the Audit and Risk Committee, effective from the date of
Mr Smith’s retirement. Following an assessment of the
existing skills, experience and composition of the Board
and the Audit and Risk Committee; the effect of Mr Smith’s
retirement; the future needs of the business; and the
benefits of a diverse Board, the Committee compiled a
list of objective criteria for the role and appointed MWM
Consulting Limited (‘MWM’), an external search agency,
to conduct an extensive search for suitably qualified
individuals. The firm has no connection with the Company
or any of the individual directors other than the provision
of search services for this role. The Committee assessed
the candidates included on the long list prepared by MWM
against the agreed criteria and conducted initial interviews
with a number of these candidates. The resulting
shortlisted candidates were invited to participate in a
further round of interviews with a larger panel comprising
the Committee, the SID and the Group CEO. Following
these interviews and subsequent discussions, Mr Tom
Singer was selected as the preferred candidate in view of
his recent and relevant financial experience and expertise,
and his knowledge of UK-listed international branded
consumer businesses, among other attributes. The Board
approved Mr Singer’s appointment as an independent
non-executive director of the Company and member of the
Audit and Risk Committee on 24 July 2019, with immediate
effect; he was subsequently also appointed as a member
of the Committee on 13 November 2019.
The Committee continued to conduct its detailed annual
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 overleaf, the outcome of the
annual Board evaluation, non-executive directors’ length
of service and a detailed skills matrix for the Board.
Upon conclusion of the interview process, and following
feedback from the Group CEO, the Panel agreed to
recommend Dame Inga Beale as the preferred candidate
in view of, inter alia, her past international corporate
experience in the insurance industry, her experience of
change management and digital transformation, and
Mr Seamus Keating, an independent non-executive
director, resigned from the Board with effect from
31 March 2020. At the date of this report, the process
for identifying and selecting a new non-executive
director with the appropriate skills and experience was
in progress.
189
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT Board and Committee composition
During the reporting period, the 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, diversity, tenure, geographical knowledge,
and knowledge of the Company as a whole.
Dame Inga was appointed as an independent non-
executive director and member of this Committee with
effect from 26 March 2020 and will succeed Dr Hertzog as
chair of the Board and of this Committee at the conclusion
of the 2020 AGM, subject to her election by shareholders.
Dame Inga was also appointed as a member of the
Remuneration Committee with effect from 1 June 2020.
This appointment is compliant with the 2018 Corporate
Governance Code, as Dame Inga was independent upon
her appointment as non-executive director and Chair
Designate.
Diversity
During the year under review, the Committee reviewed
the Board Diversity Policy, which applies to the Board and
the Group Executive Committee. It also received feedback
from the divisions regarding progress against their
diversity and inclusion goals during FY20 and plans for
continued improvement going forward.
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
personal strengths; and other characteristics. These
factors are considered in determining the optimum
composition of the Board and, when possible,
balanced 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 Committee will continue
to consider relevant prescribed guidelines and the
performance of peer companies.
The Board supports the principle 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,
race, gender and other characteristics is imperative
for the effective operation of the Board, as well as the
successful delivery of the strategy and long-term success
of the Group.
The Board Diversity Policy has four objectives to support
the Board’s commitment to diversity.
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,
ethnicity, education and
professional background.
During the year under review, the Board agreed to the appointment of Dame Inga
as independent non-executive director and Chair Designate. Dame Inga further
complements the current Board composition, not just in terms of gender but also
in terms of her breadth of skills, knowledge and experience, as described on the
previous page.
The Group CEO and divisional CEOs annually share their diversity goals and
report on progress to the Committee. The divisions continue to focus on
increasing diversity below Board level by encouraging and strengthening the
talent pipeline within the divisions through short- and long-term succession
planning. Activities during the year under review included strategies and
interventions to encourage engagement of women in senior management,
improve Mediclinic Southern Africa’s B-BBEE standing and promote Emiratisation
at Mediclinic Middle East.
Where the Company has been unable to promote candidates to new positions
from within, it has identified the desired criteria for external candidates. Both of
these activities have been embedded to support the executive committees, 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.
190
NOMINATION COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT OBJECTIVE
PROGRESS
The Committee will
annually consider and
make recommendations, if
applicable, to the Board on
its diversity objectives.
The Committee reviewed the Board Diversity Policy and was satisfied that the
objectives remained relevant. The Committee remains committed to progressing
the objectives for FY21.
A framework for the Group Diversity and Inclusion Strategy was approved during
FY20 to help develop a diverse pipeline of talent to executive management
positions. Progress against these objectives is reviewed at least annually by the
Committee, which reports on it to the Board.
In reviewing the composition
of the Board and executive
management, the Committee
will consider diversity, in
addition to considering the
balance of skills, experience,
independence and knowledge.
The Committee reviewed the composition of the Board and its committees,
specifically the balance of skills, experience, independence, knowledge and
diversity. The Board appointed a Chair Designate with a diverse background and
experience. The 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
under review, and plans for continued improvement during FY21.
In line with the Parker Report’s recommendation to have at least one director of
colour by 2024, the Board had two directors of colour (as defined in the Parker
Report) throughout the year under review and at the date of this report.
The Committee is also pleased to report that since the report on improving the
gender balance in FTSE leadership issued by the Hampton-Alexander Review in
November 2016, four out of six appointments to the Board of the Company went to
female candidates. As a result, at the date of this Annual Report, the Board has 33%
female representation, in line with the 2020 target recommended by the Hampton-
Alexander Review. This proportion may change throughout the year, as a successor
to Mr Keating is appointed and Dr Hertzog retires from the Board. Following
Dr Hertzog’s retirement, Dame Inga will become one of approximately 24 female
chairs of FTSE 350 companies.
The Group’s workforce has 75% 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 Committee will
assess candidates on merit
against objective criteria and
with due regard to the
benefits of a diverse Board.
The Chair Designate was identified from a diverse list of candidates, each of
whom was assessed on merit, against an agreed set of criteria, reflecting the
role of Chair and the capabilities required for that particular appointment, while
taking into account the benefits of a diverse Board. The Committee reviewed
each of the candidates’ significant commitments, other directorships, skills,
experience, knowledge, gender, race, geographical location, and other diversity
considerations.
Details of race, gender and age representation on the Group’s governance bodies, including the Board, the Group
Executive Committee, the divisional executive committees and senior managers, can be found on page 159 of the
Corporate Governance Statement.
191
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT COMMITTEE EVALUATION
The performance of the Committee was internally
evaluated by its members by way of a self-evaluation
questionnaire, the results of which were considered by
the Committee and the Board. No significant issues
requiring improvement were identified and the
Committee and the Board concluded that it operated
effectively during the year under review.
of Mr Singer and more recently, Dame Inga. Following
Mr Keating stepping down from the Board, the Committee
has commenced the process to identify and appoint a new
independent non-executive director, as discussed earlier
in this report, in the section on ‘Board Chair and other
succession planning’. The criteria adopted for this
appointment take into account the feedback received
during the FY20 Board evaluation.
EVALUATION OF THE COMPOSITION, STRUCTURE
AND FUNCTIONING OF THE BOARD
The composition, structure and functioning of the Board
were considered as part of the FY20 annual evaluation of
the Board, conducted by way of an internally-facilitated
self-evaluation questionnaire. The questionnaire focused
on 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
way to monitor progress. Further details on the Board
effectiveness evaluation are included on page 161 of the
Corporate Governance Statement.
When considering the election or re-election of directors,
the 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 judgement they add to Board deliberations;
and other commitments. Responses regarding the
composition of the Board are also taken into account in
the selection criteria for new appointments to the Board
and its committees. The outcomes of the Board evaluation
conducted in FY19 were reflected in the appointments
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 2020 AGM.
PRIORITIES FOR THE COMMITTEE FOR FY21
For the coming financial year, the Committee will, among
other matters, focus on:
• continuing the development of succession plans and
the talent pipeline;
• continuing the review of the composition of the Board
and its committees in respect of skills, diversity, tenure
and commitments; and
• continuing the implementation of the Diversity and
Inclusion Strategy.
Signed on behalf of the Committee.
Dr Edwin Hertzog
Chair of the Nomination Committee
1 June 2020
192
NOMINATION COMMITTEE REPORT CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT MEDICLINIC CONSTANTIABERG
193
REMUNERATION
COMMITTEE
REPORT
LETTER FROM THE CHAIR
Mr Trevor D Petersen
Chair of the Remuneration Committee
As Chair of the Remuneration Committee (the ‘Committee’), it
is my pleasure to present the Directors’ Remuneration Policy
and Report for FY20.
FY20 PERFORMANCE CONTEXT (PRE-IFRS 16)
As set out earlier in this Annual Report, the Group delivered
financial results for FY20 broadly in line with expectations,
despite the impact of COVID-19 during March 2020.
Having delivered a solid first-half financial performance, the
Group was on track to replicate this in the second half of the
year under review. However, with the onset of COVID-19
from mid-March, normally a period of seasonally high
activity, most non-urgent work was postponed allowing
hospitals and clinical professionals to prepare for the
expected increase in COVID-19-related cases. An approach
Mediclinic fully supports.
At the Group level, in constant currency, FY20 revenue was
up 4% and EBITDA was down 3%. However, after the
translation effect of foreign currency movements, FY20
revenue was up 5% at £3 083m (FY19: £2 932m) and
adjusted EBITDA decreased 3% at £480m (FY19: £493m).
Adjusted EPS for the Group was down 8% to 24.7 pence
(FY19: 26.9 pence). The Group reported available cash and
banking facilities at year-end of £518m.
At year-end, the Group reported non-cash exceptional
items relating to impairment charges at Mediclinic
Middle East, Hirslanden and Spire. These impairments
incorporate the impact of changes in the market and
regulatory environments, exacerbated by the near-term
uncertainty created by the COVID-19 pandemic.
In this context, Mediclinic Middle East and Hirslanden
recorded impairment charges of £481m on intangible
assets and £33m on fixed assets respectively. On Spire,
an impairment charge of £10m was recorded against the
carrying value of the equity-accounted investment. As a
result of these impairment charges and other exceptional
items, the reported loss for the year under review was
£315m (FY19: loss of £151m).
RESPONSE TO VOTES RECEIVED AT THE 2019 AGM
At the Group’s 2019 AGM, the resolution to approve
Mediclinic’s Directors’ Remuneration Report (Resolution 2)
was passed with a 71.44% majority. The Company seeks to
maintain regular dialogue with its shareholders to establish
an open forum for discussion on key market and Company-
specific issues. The Committee acknowledges the
importance of all shareholders’ views.
In relation to the Directors’ Remuneration Report, the key
areas of focus highlighted by shareholders during and after
the 2019 AGM process included:
• the performance metrics used for the purpose of the LTIP,
particularly the use of a formal metric reflecting ROIC;
• the STI to be focused on Group earnings before interest
and taxes (‘EBIT’) rather than EBITDA;
• the 2019 LTIP awards to the executives in light of share
price performance in the prior reporting period;
• a desire for deferred share awards under the LTIP to be
settled in shares rather than cash; and
• the treatment of incentive awards for the previous
Group CEO upon stepping down from his executive
responsibilities.
Since the 2019 AGM, the Committee has reflected
carefully on the feedback received from shareholders
and proxy advisory bodies as well as recent corporate
governance developments. The Committee was grateful for
the time and constructive feedback that shareholders and
the proxy advisory bodies provided. Based thereon, the
Committee reviewed the current Remuneration Policy and
its implementation in light of the requirement for a revised
Remuneration Policy to be put to a shareholder vote at the
2020 AGM, in line with the normal three-year cycle (last
approved by 95.95% of shareholders in 2017).
As part of the review, the Committee explored a range of
alternative approaches and received independent specialist
advice to develop an approach that supports the execution
of the Company’s long-term strategy in a way that is
consistent with its culture and values; appropriately aligns
executives’ remuneration with the interests of shareholders;
and complies with the 2018 Corporate Governance Code. As
a result, the Committee is proposing the following changes
to the Remuneration Policy.
194
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT ELEMENT
Fixed pay
CURRENT APPROACH
CHANGES GOING FORWARD
Set an appropriate level to
reflect the roles, skills and calibre
of the individuals. Pension aligned
with the rate for the wider South
African workforce.
No change.
STI
Maximum
opportunity
150% (Group CEO) and 133%
(Group CFO) of base compensation.
No changes to award levels.
Performance
conditions
Delivery
Rationale
Outcome driven by Group EBITDA
performance. Awards reduced
based on subset indicators linked
to financial and strategic objectives
of the three divisions.
50% deferred into shares, with
awards cash settled.
Group EBIT to replace Group EBITDA as the primary
performance metric. No change in approach on subset
indicators.
Awards to be settled in shares.
Further aligns executives with the shareholder experience and ensures that executives’ reward reflects decision
on depreciation and amortisation.
LTIP Maximum
opportunity
Performance
conditions
200% (Group CEO) and 150%
(Group CFO) of base compensation.
Three-year performance period.
No changes to award levels.
Metric
Weight
Rationale
60% adjusted EPS (CAGR) and
40% relative Total Shareholder
Return1 (‘TSR’) (vs the FTSE 250,
excluding financial services and
extraction companies). Awards
subject to ROIC underpin.
40%
25%
25%
10%
Adjusted
EPS
(pence)
Relative
TSR1
ROIC
Strategic
measure
(patient
satisfaction)
Ensures focus on driving
growth.
Move to pence targets
simplifies approach and
increases transparency.
Ensures alignment with
shareholders.
Focuses management on
efficient use of capital
allocation over the long term.
Ensures alignment with the
Group’s vision.
Given the highly regulated
nature of the sector, patient
experience is vital to
long-term prospects.
Delivery
Two-year holding period. Awards
settled in cash.
Awards to be settled in shares.
No changes to holding period.
Post-cessation
shareholding
requirement
Not applied.
Executive directors required to hold Company shares for
two years post cessation, at a level equal to the lower of
the actual shareholding on departure or the shareholding
requirement immediately prior to departure.
Full post-cessation shareholding required to be held for
12 months following cessation, reducing to 50% of this
level for a further 12 months.
Rationale
To promote long-term alignment with shareholders in line with the 2018 Corporate Governance Code.
Note
1 Continues to be measured relative to the FTSE 250, excluding financial services and extraction companies.
Refer to pages 197–209 for the complete Remuneration Policy detailing the approach for the upcoming three-year
cycle. Its implementation for FY21 is set out from page 196 in more detail, which reflects recent developments
associated with the COVID-19 pandemic.
195
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT IMPACT OF COVID-19 ON REMUNERATION
As set out elsewhere in this report, COVID-19 is having
a dramatic impact globally and is causing significant
economic uncertainty.
In the context of such uncertainty, the Group has taken a
number of decisions to maintain its liquidity position
through the crisis and to maximise its support to tackling
COVID-19, including the suspension of the dividend,
announced in April 2020. In light of this, the Committee
and wider Board debated at length the impact on
executive pay, and made the following decisions:
• Incentive outturns: While performance has been
assessed for the purpose of FY20 incentives (as set out
in detail on page 211 of the report), the Committee has
suspended any final decisions on any payouts from the
STI for the executive directors until a later point during
FY21, with consideration to be given to a number of
factors, including any decision on dividend payments.
Details on the final decision on any STI award in
respect of FY20 will be provided in the FY21 Directors’
Remuneration Report.
Long-term incentive awards will lapse based on
performance over the performance period (see
page 213 for details).
• FY21 salary increases: Given the vital role of facility-
based frontline employees during the COVID-19
pandemic, the Committee determined that the
previously planned increases for these employees
proceed, which included an average increase of 5.5%
for the facility-based frontline South African workforce.
A decision on salary increases for executive directors
will, however, be postponed until a yet-to-be-
determined future date.
• FY21 STI: In line with the approach set out in the table
on page 195, the current intention is that the STI in
respect of FY21 will be based on the agreed structure,
i.e. awards will be based on Group EBIT performance,
and subject to adjustments based on performance
against the subset performance indicators, which
include both financial and non-financial measures.
• FY21 LTIP awards: In line with our normal approach, the
Committee had intended to disclose the performance
metrics for FY21 LTIP awards upfront. However, as with
most industries and companies, the full impact of the
COVID-19 pandemic on Mediclinic remains uncertain.
The Group has put in place the necessary structures
and processes to monitor and mitigate existing and
emerging risks to the business with the main focus
areas being people, supply chain and liquidity. The
Committee debated at length the best approach to
target setting and believe that it is too challenging to
set meaningful targets under the LTIP that will be both
stretching and achievable at this time. A decision on
the FY21 LTIP award levels and targets has therefore
been deferred until later this year. This will allow
the Committee to better understand the impact of
COVID-19 on the business and allow it the time
necessary to make an informed decision on appropriate
target ranges. The Committee will consult with
shareholders in advance of finalising the targets as
appropriate. Details on the approach to measurement
will be provided to investors within the regulatory
announcements accompanying the award.
In addition to the above, and as announced in the trading
update provided on 17 April 2020, the Board (including
both the executive and non-executive directors) and the
divisional CEOs voluntarily donated 30% of their salary or
fees for three months to charities in the countries in
which Mediclinic has a presence, which is aimed at
assisting the most vulnerable to deal with the impact of
COVID-19.
COMMITTEE COMPOSITION
As announced on 21 February 2020, Mr Seamus Keating
stepped down from the Board on 31 March 2020.
I would like to place on record the Committee’s thanks to
Mr Keating for his counsel as a member of the Committee.
Mr Tom Singer joined the Committee on 13 November 2019.
Dame Inga Beale joined the Committee on 1 June 2020.
I very much look forward to working with both Mr Singer
and Dame Inga over the course of the coming year.
I trust the information presented in this report enables
stakeholders to understand how the Directors’
Remuneration Policy was implemented over the reporting
period, how it will be implemented in the coming financial
year and the rationale behind the Committee’s decision-
making. We remain committed to open and transparent
dialogue with investors and welcome any feedback or
comments.
Mr Trevor D Petersen
Chair of the Remuneration Committee
1 June 2020
196
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED REMUNERATION AT A GLANCE
The following section provides an overview of the revised Directors’ Remuneration Policy for the next three
years, which will be submitted to shareholders for approval at the 2020 AGM, and how it will be implemented in
FY21, as well as an overview of remuneration outcomes for the current reporting period.
EXECUTIVE DIRECTORS’ REMUNERATION POLICY AND PROPOSED IMPLEMENTATION IN FY21
TABLE 1: REMUNERATION POLICY OVERVIEW AND FY21 IMPLEMENTATION
ELEMENT OF
PAY
PURPOSE AND
LINK TO STRATEGY
TERMS
GROUP CEO
GROUP CFO
Base
compensation
Annual STI
• 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 encourage
share ownership
and align with
shareholder
interests
LTIP
• To balance
performance
pay between
achieving
financial and
strategic
performance
objectives and
delivering
sustainable
outperformance
• To encourage
share ownership
and align with
shareholders’
interests
With effect
from 1 April
2020
£542 7911
No change
£400 7731
No change
Maximum
opportunity
(% of base
compensation)
Performance
conditions
150%
133%
Group EBIT performance and other financial and
strategic subset indicators of the three divisions.
Targets are not published in advance as they are
commercially sensitive, however, details will be provided
in the following year’s Remuneration Committee Report.
The Committee has the discretion to override formulaic
outturns (upward or downward) considering overall
Company, business line and individual performance.
Deferral
50% compulsory deferral for two years, settled in
Company shares.
Maximum
opportunity
(% of base
compensation)
Performance
conditions
200%
150%
MEASURE WEIGHTING Targets
Adjusted
EPS
growth
Relative
TSR2
ROIC3
Patient
satisfaction
40%
25%
25%
10%
As set out on alongside, final
decision deferred until later
this year given uncertainty
with COVID-19. The
Committee will consult with
shareholders in advance of
finalising the targets as
appropriate and will publish
details of the approach to
measurement within the
regulatory announcements
accompanying the award.
The Committee will retain the discretion to override
formulaic outturns (upward or downward) considering
overall Company, business line and individual
performance.
Performance/
deferral period
Performance is measured over three years, following
which awards are subject to a two-year deferral period
and settled in Company shares.
197
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT ELEMENT OF
PAY
PURPOSE AND
LINK TO STRATEGY
TERMS
GROUP CEO
GROUP CFO
Pension/
retirement
benefits
• To help recruit
and retain
high-performing
executive
directors
• To provide
employees with
long-term
savings via
pension
provisions
Benefits
• To provide a
market-
competitive level
of benefits to
ensure executive
directors’
wellbeing
Share
ownership
guidelines
Post-cessation
shareholding
requirement
• Alignment of
executive
directors’
interests with
those of
shareholders
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 between
5–7 times annual base salary, as personally selected.
Requirement as
a % of base
compensation
Executive
directors
required to
hold Company
shares for two
years post
cessation
225%
200%
Executive directors are required to hold Company
shares for two years post cessation at a level equal to the
lower of the actual shareholding on departure or the
shareholding requirement immediately prior to departure.
Full post-cessation shareholding requirement to be held
for 12 months following cessation, reducing to 50% of this
level for a further 12 months.
Notes
1 Annualised remuneration payable in South African rand translated into sterling at a rate of £1: ZAR18.76 at 31 March 2020. Note that the change to the
base compensation figures disclosed on page 197 from last year resulted from fluctuations in the sterling: rand exchange rate during the year.
2 Measured against the FTSE 250, excluding financial services and extraction companies.
3 ROIC is net operating profit less adjusted tax expressed as a percentage of average invested capital. Further details on the approach to measurement will
be included within the market announcement setting out award details.
Base compensation
As part of the Group’s broad response to maintaining
its liquidity position through the COVID-19 crisis, the
Committee carefully reviewed the approach to planned
salary increases for the workforce for FY21. Given the vital
role of facility-based frontline employees during the
COVID-19 pandemic, the Committee determined that,
except for Mediclinic Middle East, the previously planned
increases for these employees proceed, which included an
average increase of 5.5% for the facility-based frontline
South African workforce, reflecting inflation in that market,
and 1% for the facility-based frontline Hirslanden
workforce.
After extensive deliberation, the Committee determined
that the most appropriate approach was to postpone the
decision on salary increases of executive directors and
Corporate Office management roles across the Group until
later in the financial year.
Note that the change to the base compensation figures
disclosed alongside from last year resulted from
fluctuations in the sterling: rand exchange rate during
the year.
198
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED TABLE 2: EXECUTIVE DIRECTORS’ BASE COMPENSATION LEVELS
EXECUTIVE DIRECTOR
SALARY FY20
R’000
SALARY FY21
R’0002
BOARD FEE
FY20 £’000
BOARD FEE
FY21 £’000
BASE COMPENSATION
FY21 £’0001,3
Dr Ronnie van der Merwe
Mr Jurgens Myburgh
9 000
6 336
9 000
6 336
63
63
63
63
543
401
Notes
1 Remuneration payable in South African rand translated into sterling at a rate of £1: ZAR18.76 at 31 March 2020.
2 Decision on FY21 salary increases postponed until later in the financial year.
3 The executive directors voluntarily donated 30% of their salary or fees for three months to the Solidarity Fund in South Africa aimed at assisting the most
vulnerable South Africans to deal with the impact of COVID-19.
ILLUSTRATION OF EXECUTIVE DIRECTORS’ REMUNERATION OUTCOMES IN FY20
FIGURE 1: EXECUTIVE DIRECTORS’ MAXIMUM POLICY LEVELS OF REMUNERATION AND ACTUAL
REMUNERATION FOR FY20
Fixed pay
Annual bonus
LTIP
Share price growth
GROUP CEO
Actual
100%
£601k
GROUP CFO
100%
£442k
Maximum before
share price growth
Maximum + share
price growth (50%)
24%
33%
43%
£2 500k
28%
34%
38%
£1 576k
20%
27%
36% 18%
£3 043k
24%
28%
32% 16%
£1 877k
Note
The Committee has suspended any final decisions on any payouts from
the STI for the executive directors until a later point during the financial
year with consideration to be given to a number of factors, including
any decision on dividend payments. Details on the final decision on any
STI award in respect of FY20 will be provided in the FY21 Directors’
Remuneration Report.
NON-EXECUTIVE DIRECTORS’ REMUNERATION
POLICY AND PROPOSED IMPLEMENTATION IN FY21
No changes are proposed to the Remuneration Policy
for non-executive directors. In line with the approach
for executive directors, a decision on fee increases for
FY21 has been deferred until later in the financial year.
The non-executive directors have voluntarily donated
30% of their fees for three months to charities aimed
at assisting the most vulnerable to deal with the impact
of COVID-19 in the countries in which Mediclinic has
a presence.
TABLE 3: NON-EXECUTIVE DIRECTORS’ FEES IN FY21
BASE FEES
Chair of the Board
Base Board fee
COMMITTEE CHAIR/SENIOR INDEPENDENT DIRECTOR FEES
Audit and Risk Committee
Clinical Performance and Sustainability Committee
Investment Committee
Nomination Committee
Remuneration Committee
Senior Independent Director
FEE FROM
1 APRIL 2019
FEE FROM
1 APRIL 2020
INCREASE
£280 000
£280 000
£63 000
£63 000
£16 000
£10 000
£10 000
£10 000
£16 000
£16 000
£10 000
£10 000
£10 000
£16 000
£25 000
£25 000
0%
0%
0%
0%
0%
0%
0%
0%
199
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT BASE FEES
COMMITTEE MEMBER FEES
Audit and Risk Committee
Clinical Performance and Sustainability Committee
Investment Committee
Nomination Committee
Remuneration Committee
FEE FROM
1 APRIL 2019
FEE FROM
1 APRIL 2020
INCREASE
£10 000
£10 000
£7 000
£7 000
£7 000
£7 000
£7 000
£7 000
£10 000
£10 000
0%
0%
0%
0%
0%
ADHERENCE TO THE 2018 CORPORATE GOVERNANCE CODE PRINCIPLES
When developing the revised Remuneration Policy and determining its implementation for FY21, the Committee took
into consideration, and has appropriately addressed, the following design principles set out in the 2018 Corporate
Governance Code:
Clarity
• The Committee welcomes open and frequent dialogue with shareholders on the approach to
remuneration.
• The Committee looks to provide clear disclosure of how the Remuneration Policy has been
implemented in the year under review and how the Committee intends to implement it in the year
ahead.
• Incentive arrangements (which are cascaded throughout the Group as appropriate) are based on
clearly defined financial and non-financial metrics that are aligned with the Group strategic goals.
Simplicity
• A market-standard annual bonus and LTIP structure is followed. The structure is simple and well
understood by both shareholders and participants.
• The remuneration approach taken for executive directors is cascaded down the organisation as
appropriate.
Risk
• The Committee considers that the structure of incentive arrangements does not encourage
inappropriate risk-taking.
• Under the STI and LTIP, discretion may be applied where formulaic outturns are not considered
reflective of overall performance.
• The introduction of share settlement of incentive awards, bonus deferral, the LTIP holding period
and shareholding requirements, including post-cessation shareholding, provide a clear link to the
ongoing performance of the business and the experience of shareholders.
• Malus and clawback provisions apply to both the STI and LTIP.
Predictability
• The Remuneration Policy contains details of threshold and maximum opportunity levels
under the STI and LTIP, with actual outcomes dependent on performance achieved against
predetermined measures and target ranges.
• This is illustrated on pages 199, 206, 212 and 213 of this report.
Proportionality
• The Committee’s ability to apply discretion ensures appropriate outcomes in the context of
long-term performance.
• Incentive time horizons provide strong alignment between executive directors’ remuneration
outcomes and long-term Company performance.
• Performance measures and target ranges under the STI and LTIP are aligned to the Mediclinic
Group Strategy.
• Reward arrangements are designed to reward delivery of the Mediclinic Group Strategy which is
focused on enhancing the quality of life. This is achieved through having incentive awards (both
in the short- and long-term) based not only on financial metrics but also non-financial metrics
linked to areas such as clinical performance and patient satisfaction. Adherence to the Company
philosophy of always putting Patients First will ultimately lead to the delivery of strong financial
performance and long-term shareholder value creation.
• All employees are entitled to participate in the pension scheme. The pension level for the
executive directors is set at the rate provided to the South African workforce.
• Strong individual, business line and Company performance are incentivised and recognised in the
wider employee population through STI schemes and, for the most senior employees, the LTIP.
Alignment to
culture
200
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED DIRECTORS’ REMUNERATION POLICY
INTRODUCTION
This section of the report sets out the Company’s policy
on the remuneration of its executive and non-executive
directors, which is subject to shareholder approval at the
2020 AGM. If approved, the policy will be binding and take
effect from this date and will operate for up to three years.
In determining the new Policy, the Committee followed a
robust decision-making process. The revised policy has
been developed taking into account the principles of the
updated UK Corporate Governance Code published in
2018 and the views of major shareholders and proxy
agencies, as expressed during engagement on
remuneration matters during the reporting period.
Throughout this Policy review process, input was sought
from both the management team, while ensuring that
conflicts of interests were suitably mitigated, and the
Committee’s independent advisors.
POLICY OVERVIEW
The Committee is responsible, on behalf of the Board, for
establishing appropriate remuneration arrangements for
the executive directors and other senior management of
the Group, and for overseeing workforce remuneration and
related policies.
In setting the Remuneration Policy for the executive
directors, the Committee will ensure that the structures
are in the best interest of the Group and its shareholders,
by taking into account the following general principles:
• To develop an approach that appropriately aligns
executives’ remuneration with the interests of
shareholders and supports the execution of the
Company’s long-term strategy in a way that is consistent
with its culture and values;
• To ensure the Group’s market-leading positions are
maintained by attracting, retaining and motivating the
best person for each position;
• To ensure total remuneration packages are simple and
fair in design so that these are valued by participants;
• To ensure the fixed element of remuneration is
determined with reference to the region in which the
executive operates and the broader international market,
taking account of individual performance, responsibilities
and experience; and to ensure a significant proportion of
the total remuneration package is linked to performance;
• To balance performance pay between the achievement
of the Group’s financial performance objectives and
delivering sustainable outperformance, creating a clear
line of sight between performance and reward; and
• To provide performance-related pay linked to the share
price and with a requirement to hold shares to facilitate
senior management to build a shareholding in the
business and, therefore, align management and
shareholders’ interests and the Group’s performance,
without encouraging excessive risk-taking.
As a result, some important changes are proposed to the
current Remuneration Policy, which have been highlighted
in the table overleaf.
The revised policy has been
developed taking into account
the principles of the updated UK
Corporate Governance Code
published in 2018 and the views
of major shareholders and proxy
agencies, as expressed during
engagement on remuneration
matters during the reporting
period.
201
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT TABLE 4: DIRECTORS’ REMUNERATION POLICY
ELEMENT
OF PAY
PURPOSE AND
LINK TO STRATEGY
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
Base
compensation
• To attract, retain
and motivate
talented
individuals who
are critical to the
Group’s success
• Normally reviewed annually
by the Committee or in the
event of a change in an
individual’s position or
responsibilities
• Typically effective from
1 April
• Base compensation levels
(which include base salary
and a Board fee) are set to
reflect the experience and
capabilities of the individual
and the scope and scale of
their role
• Increases to base
compensation reflect
individual performance and
the pay and conditions of
the workforce
• There is no prescribed
n/a
maximum annual
increase
• The Committee takes
into account
remuneration levels
in comparable
organisations in
geographies in which
the Company operates
and in which it
competes for talent
• Ordinarily, annual
salary increases would
be no more than the
average annual
increase of the
workforce in the same
geographic location in
which the director is
domiciled
• In exceptional
circumstances, a
higher increase may
be awarded (e.g.
assumed additional
responsibility; or, an
increase in the scale or
scope of the role; or, in
the case of a new
executive, a move
towards the desired
rate over a period of
time where salary was
initially set below the
intended positioning)
Annual
STI
• To encourage and
reward delivery of
the Group’s
annual financial
and operational
objectives
• To encourage
share ownership
and align with
shareholder risk
and reward
• Performance targets are
• Maximum opportunity
• The STI outcome is
of 150% of base
compensation in
respect of any
financial year
normally set annually by the
Committee; are linked to
strategic objectives; and are
appropriately demanding,
taking into account
economic conditions and
risk factors
• A proportion of the bonus,
normally no less than half, is
deferred into shares for two
years, subject to continued
employment
• Deferred awards ordinarily
settled in shares
• Dividends that accrue on the
shares under the deferred
bonus paid in cash at the
time of vesting
• Awards subject to malus and
clawback provisions (see
below)
• The Committee retains the
discretion to adjust award
outcomes at the end of the
performance period, to
ensure that the outcome is
fair in the context of overall
performance
determined based on
Group financial
performance against
predetermined targets,
with the weighting at the
outset of determination
of bonuses therefore up
to 100%
• Reductions are made to
this outcome, based on
the non-achievement of
financial, strategic and/or
operational subset
indicators of the Group or
component divisions;
reductions are on a
weighted basis
• Performance below
threshold against the
financial metrics results in
zero payment
• Payments increase from
0% to 100% of the
maximum opportunity for
levels of performance
between threshold and
maximum performance
targets
202
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED Key changes to policy – STI
• Deferred awards will ordinarily be settled in shares, in line with shareholder and proxy agency feedback
• Enhanced scope of Committee discretion, in line with the 2018 Corporate Governance Code
ELEMENT
OF PAY
LTIP
PURPOSE AND
LINK TO STRATEGY
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• To balance
• Annual awards denominated
• Maximum opportunity
• Performance
of 200% of base
compensation in
respect of any
financial year
performance pay
between achieving
financial and
strategic
performance
objectives and
delivering
sustainable
outperformance
• To encourage
share ownership
and align with
shareholders’
interests
in shares with vesting
dependent on the
achievement of performance
conditions normally
measured over a three-year
period
• Executive directors normally
required to hold vested
awards for two years
following the end of the
performance period
• Awards ordinarily settled in
shares
• Performance targets
normally set annually by the
Committee and are set
according to economic
outlook and risk factors
prevailing at the time,
ensuring that such targets
remain challenging in the
circumstances, and realistic
enough to motivate and
incentivise management
• Dividends that accrue during
the vesting and holding
periods paid in cash, to the
extent that awards have
vested
• Awards subject to malus and
clawback provisions (see
below)
• The Committee retains the
discretion to adjust award
outcomes at the end of the
performance period, to
ensure that the outcome is
fair in the context of overall
performance
measures set by the
Committee and
linked to the
achievement of the
Group’s long-term
strategic goals
and the creation
of long-term
shareholder value
• Awards based on an
appropriate balance
of earnings,
shareholder return,
capital efficiency
and strategic
measures
• It is expected that
FY21 LTIP awards
will be based on the
following measures:
adjusted EPS growth
(40%), relative TSR
(25%), ROIC (25%)
and patient
satisfaction (10%)
• No more than 25%
of an award will vest
for achieving
threshold
performance,
increasing pro rata
to full vesting for
achieving maximum
performance targets
Key changes to policy – LTIP
• Awards will ordinarily be settled in shares, in line with shareholder and proxy agency feedback
• Approach to performance metrics aligned with Group’s strategic priorities
• Formulaic outcomes are subject to Committee discretion, in line with the 2018 Corporate Governance Code
203
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT PURPOSE AND
LINK TO STRATEGY
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
• To help recruit
• Participation in a defined contribution
• Directors can
n/a
ELEMENT
OF PAY
Pension/
retirement
benefits
Benefits
and retain
high-performing
executive
directors
• To provide
employees with
long-term savings
via pension
provisions
• To provide
market-
competitive
benefits to ensure
executive
directors’
wellbeing
Non-
executive
directors’
fees
• Set to attract,
retain and
motivate talented
individuals
through the
provision of
market-
competitive fees
204
pension scheme
receive a
Company
contribution in
line with
contribution
levels provided
across Mediclinic
Southern Africa
and Mediclinic
Group Services
at 9% of salary
• Benefits may include but are not
• Actual value of
n/a
benefits
provided
limited to:
– private medical insurance
– death and disability insurance
– leave and long-service awards
• Other ancillary benefits, including
relocation and an allowance towards
reasonable fees for professional
services such as legal, tax and financial
advice
• Reasonable business expenses
(e.g. travel, accommodation and
subsistence) will be reimbursed and,
in some instances, the associated tax
will be borne by the Company
• The Chair of the Board receives an
• Aggregate
n/a
all-inclusive fee
• For other non-executive director roles,
a Board fee is payable with additional
fees paid for: (i) chairing a committee;
(ii) the SID role; and (iii) committee
membership, to take into account the
additional responsibilities and time
commitments of these roles
• Additional fees may be introduced
where deemed appropriate to reflect
additional responsibilities and time
commitments
• In consultation with executive
directors, the Chair of the Board will
review fees periodically, or in the event
of a change in an individual’s position
or responsibilities (as appropriate)
• Fee levels are set at market rates,
taking into consideration responsibility
and time commitments, and pay and
conditions in the workplace
• Reasonable business expenses
(e.g. travel, accommodation and
subsistence) will be reimbursed and, in
some instances, the associated tax will
be borne by the Company
• Additional benefits may be provided as
appropriate to the role
Board fees are
subject to a
maximum cap as
stated in the
Group’s Articles
• No prescribed
maximum
annual increase
for non-
executive
directors – the
Chair of the
Board and the
executive
directors are
guided by the
general increase
for the broader
workforce
• In certain
circumstances,
the Chair of the
Board may
recognise an
increase, such
as additional
responsibility, or
an increase in
the scale or
scope of the role
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED ELEMENT
OF PAY
PURPOSE AND LINK
TO STRATEGY
OPERATION
MAXIMUM
OPPORTUNITY
PERFORMANCE
CRITERIA
n/a
n/a
• Alignment of
executive
directors’ interests
with those of
shareholders
Share
ownership
guidelines
and post-
cessation
shareholding
requirement
• Executive directors are
expected to build and
maintain a shareholding in
the Company. The level of
shareholding guidelines will
be detailed in the Annual
Remuneration Report each
year
• Until the share ownership
guideline is achieved,
executive directors are
normally required to retain
no less than 50% of the net
of tax value from vested
LTIP, deferred bonus or
other awards
• Executive directors are also
required to hold Company
shares for a period of time
post cessation, as detailed in
the Annual Remuneration
Report each year
Key change to policy – share ownership guidelines
• Introduction of a post-cessation shareholding requirement, in line with the 2018 Corporate Governance Code and
shareholder/proxy agency expectations
COMMITTEE DISCRETION IN RELATION TO
EXISTING COMMITMENTS
The Committee reserves the right to make any
remuneration payment and payment for loss of office,
notwithstanding that they are not in line with the policy
set out in this report, where the terms were agreed:
i. Before the policy set out from page 201 comes into
effect;
ii. At a time when a previous policy approved by
shareholders was in place provided that the payment
is in line with the terms of that policy; or
iii. At a time when the individual was not a director of the
Company and the payment was not in consideration of
them becoming a director of the Company.
INCENTIVE DISCRETIONS
The Committee operates the annual STI and the LTIP in
accordance with their respective rules, the Listing Rules
and the rules of relevant tax authorities, where relevant.
The Committee, consistent with market practice, retains
discretion over a number of areas relating to the
operation and administration of the plans. These include
(but are not limited to) the following:
• participants in the plans;
• timing of the grant and/or payment of award;
• the size of an award (up to plan limits) and/or payment;
• choice of performance measures, weightings and
targets;
• the ability, in exceptional circumstances, to settle share-
based awards in cash (e.g. where share settlement is
not feasible due to regulatory restrictions);
• discretion to review the level of payout/vesting in the
context of overall performance;
• discretion relating to the measurement of
performance in the event of a change of control or
reconstruction;
• determination of a good leaver (in addition to any
specified categories) for incentive plan purposes;
• adjustments required in certain circumstances
(e.g. rights issues, corporate restructuring and
special dividends);
• the ability to adjust existing performance conditions for
exceptional events to fulfil their original purpose; and
• whether (and to what extent) malus/clawback
provisions shall apply to an award (see below).
At the discretion of the Committee, awards may be
adjusted before delivery (malus) or reclaimed after
delivery (clawback) if an adjustment event occurs. Such
events may include: a material misstatement of the
Group’s audited financial results; a material miscalculation
of any relevant performance measure; a material failure of
risk management or regulatory compliance by a relevant
entity; material reputational damage to the Group;
corporate failure; or the participant’s material
misconduct.
205
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT CHOICE OF PERFORMANCE MEASURES AND
APPROACH TO SETTING TARGETS
The annual STI is focused predominantly on the Group’s
key financial performance indicators, to reflect the
Group’s success in managing its operations. The balance
is determined based on performance against annual
Group operational targets, including measures of clinical
excellence.
The LTIP measures are selected to reward long-term
returns to shareholders, long-term financial growth,
managing capital allocation efficiency and progress
against the Group’s strategic objectives.
Stretching targets are set on sliding scales annually, taking
into account multiple internal and external reference
points including internal forecasts/budgets, market
expectations and the Group’s risk appetite. Modest
rewards are available for achieving threshold performance
with maximum rewards requiring substantial
outperformance of challenging strategic plans.
CONSIDERATION OF SHAREHOLDER VIEWS
The Company is committed to maintaining open and
transparent dialogue with its shareholders and the
Committee engages regularly in a process of investor
consultation.
Following the voting outcome of last year’s Remuneration
Report resolution, the Committee sought feedback from
major shareholders and proxy agencies. The Committee
reviewed in detail the feedback received along with
changes to the Company’s strategy and recent
developments in the UK executive remuneration
environment, when determining the ongoing
appropriateness of the current remuneration approach. In
light of this review, changes have been proposed by the
Committee with a detailed overview of the changes set
out on pages 202–205. The Committee is grateful for the
time and constructive feedback that shareholders and the
proxy advisory bodies have provided.
The Committee considers the AGM to be an opportunity
to engage with shareholders, giving investors the
opportunity to provide feedback on the way in which the
remuneration policy operates and the way in which it has
been implemented. In addition, the Committee will seek
to engage directly with major shareholders and their
representative bodies should any material changes be
made to the Remuneration Policy or its implementation.
REMUNERATION SCENARIOS FOR THE EXECUTIVE DIRECTORS
The total remuneration for each executive director that could result from the Remuneration Policy in FY21 is shown
below under four different performance scenarios.
FIGURE 2: EXECUTIVE DIRECTORS’ REMUNERATION SCENARIOS FOR FY21
Fixed pay
Annual bonus
LTIP
Share price growth
GROUP CEO
Minimum
100%
£601k
GROUP CFO
100%
£442k
Target
47% 32% 21%
£1 279k
51% 31% 17%
£859k
Maximum before
share price growth
Maximum + share
price growth (50%)
24%
33%
43%
£2 500k
28%
34%
38%
£1 576k
20%
27%
36%
18%
£3 043k
24%
28%
32% 16%
£1 877k
The basis of calculation for these scenarios is as follows:
Fixed pay
• Salary from 1 April 2020
• 9% of salary pension contribution
• Value of benefits as shown in the total single figure table for FY20
• Remuneration is earned in sterling (GBP) and South African rand (ZAR). The ZAR portion of
the remuneration package is translated into GBP at a rate of £1: ZAR18.76
MINIMUM
TARGET
MAXIMUM
MAXIMUM WITH 50%
SHARE PRICE GROWTH
Annual STI
(payout as % of
maximum)
LTIP
(vesting as % of
maximum)
0%
0%
Up to 60%
100%
100%
62.5%
100%
100% plus 50% share
price growth
The chart highlights how the performance-related elements of the package comprise a significant portion of total
remuneration at on-target and maximum performance.
206
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED DIRECTORS’ RECRUITMENT AND PROMOTIONS
The policy on the recruitment or promotion of an
executive director takes into account the need to attract,
retain and motivate the best person for each position,
while ensuring close alignment between the interests of
shareholders and management.
• If a new executive director is appointed, the Committee
will align the remuneration package with the
Remuneration Policy approved by shareholders.
• New executive directors will participate in the STI and
LTIP subject to the limits as set out in the policy –
resulting in the maximum level of variable pay for a
new executive director of 350% of salary.
• Depending on the timing of the appointment, the
Committee may deem it appropriate to set different
annual bonus 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.
• To facilitate recruitment, the Committee may make an
award to buy out remuneration terms forfeited on
leaving a previous employer. The 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
remuneration being forfeited, any performance
conditions and the time over which they would
have vested or been paid. Where appropriate, the
Committee retains the discretion to utilise the Listing
Rules exemption (Listing Rule 9.4.2) to facilitate the
recruitment of an executive director.
• For an internal appointment, any incentive amount
awarded in respect of a prior role may be allowed to
vest on its original terms or be adjusted as relevant to
take into account the appointment. Any other ongoing
remuneration obligations existing prior to appointment
may continue.
• The Committee may agree that the Company will
meet certain relocation and incidental expenses as
appropriate.
• For an overseas appointment, the Committee will have
discretion to offer cost-effective benefits and
pension provisions which reflect local market practice
and relevant legislation, within the scope of the
Remuneration Policy.
For the appointment of a new Chair or non-executive
director, the fee arrangement will be set in accordance
with the approved Remuneration Policy at that time.
DIRECTORS’ SERVICE AGREEMENTS AND PAYMENT
FOR LOSS OF OFFICE
The Committee seeks to ensure that 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.
In circumstances of termination on notice, the Committee
will determine an equitable compensation package,
having regard for the particular circumstances of the
case. The Committee may require notice to be worked, or
to make payment in lieu of notice, or to place the director
on garden leave for the notice period. Such a decision is
made to protect the Company’s and shareholders’
interests.
In case of payment in lieu of notice or garden leave, the
salary, benefits and pension will be paid for the period of
notice served on garden leave or paid in lieu of notice. If
the Committee feels it would be in shareholders’ interests,
payments will be made in phased instalments. In the case
of payment in lieu of notice, payments will be subject to
mitigation.
Subject to the circumstances on cessation of employment,
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 any STI to be payable
for any part of the notice period not worked. Such
payment would, unless the Committee determines
otherwise, be scaled back pro rata for the period of the
incentive year worked by the director, and remain payable
at the normal payment date and would be subject to
performance.
207
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT Awards held under the deferred STI and LTIP arrangements are subject to the rules containing discretionary provisions
setting out the treatment of awards where a participant leaves. The table below sets out the relevant provisions under
each plan:
PLAN
GOOD LEAVER DEFINITION
GOOD LEAVER TREATMENT
BAD LEAVER
TREATMENT
Deferred STI
LTIP
• Death
• Retirement with the agreement
of the Company
• Injury or disability
• The employing entity ceasing
to be a member of the Group
• Any other reason as decided by
the Committee
• Award vests on date of cessation
• The Committee retains the discretion
to allow awards to vest on the normal
vesting date
• On death, the award will normally
vest on the date of cessation subject
to the achievement of performance
conditions at that date
• For other good leavers, the award will
vest on the normal vesting date,
subject to performance achieved over
the performance period and time
pro-ration as a proportion of the
vesting period served
• The Committee retains the discretion
to allow awards to vest on the date of
cessation and/or disapply time
pro-rating
Award lapses on
date of cessation
The Committee may make any other payments
determined by a court of law in respect of the termination
of a director’s contract or may pay any statutory
entitlements or any sums to settle or compromise claims
in connection with a termination (including, at the
discretion of the Committee, reimbursement for legal
advice and provision of outplacement services) as
necessary.
In the event of a change of control, annual STI awards
will be payable to participants subject to the extent to
which the performance conditions have been achieved at
that time (taking into account any factors considered
appropriate by the Committee). All unvested awards under
the deferred STI and LTIP arrangements will vest, taking
into account the extent that any performance conditions
attached to the relevant awards have been achieved.
Awards may, at the discretion of the Committee, be scaled
back pro rata for the period of the performance period
worked by the director.
Executive directors may, on nomination from the
Company, take on outside appointments, however, all fees
will be retained by Mediclinic.
Non-executive directors do not have service contracts but
instead have letters of appointment setting out the terms
under which they provide their services to the Company.
Non-executive directors are normally appointed for an
initial period of three years that, subject to review, may be
subsequently extended for further such terms. Any third
term of three years would be subject to rigorous review.
Non-executive directors’ appointment is terminable by
three months’ notice on either side.
In accordance with the 2018 Corporate Governance Code,
all directors are subject to annual election or re-election by
shareholders at the Company’s annual general meetings.
Refer to pages 215–216 for the dates of the executive
directors’ service contracts and the non-executive
directors’ letters of appointment, which are also available
for inspection during normal business hours at the
Company’s registered office, and at the AGM.
208
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED CONSIDERATION OF EMPLOYEE PAY AND CONDITIONS
Pay and employment conditions are considered when
setting remuneration for executive directors.
Given the size and scale of the Group’s operations, which
includes multiple jurisdictions, the Committee currently
does not formally consult with employees in respect of the
design of the executive directors’ Remuneration Policy and
its implementation. However, the Committee receives
information on workforce pay and employment conditions
as part of the annual Committee calendar and oversees
the operation of share plans across the Group.
During FY20, the Board designated an existing non-
executive director, Mr Danie Meintjes, as the designated
director for workforce engagement. His responsibilities
and activities are described in the ‘Workforce
engagement’ section of the Corporate Governance
Statement on page 157.
When determining executive director remuneration
arrangements, including base compensation increase,
the Committee is provided with appropriate information
on the approach to such issues within the wider workforce,
to permit informed comparison of relevant metrics.
The structure of the executive directors’ pay policy on
annual STIs is generally in line with the policy for
remuneration of management within the Group. The
performance measures that apply to management are
based on the respective division’s financial performance
and division-specific operational targets, including
measures of clinical excellence. A proportion of the
award for all senior management roles is based on
Group-wide performance indicators.
Similarly, the structure of the executive directors’ pay
policy on LTIPs is in line with the current policy for
remuneration of key senior management within the
Group, with awards for all participants subject to the
achievement of the same performance conditions over
a three-year period.
209
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT ANNUAL REMUNERATION REPORT
DIRECTORS’ REMUNERATION
This section sets out the single figure tables showing the remuneration for the executive and non-executive
directors for FY20. Further information on these figures is set out in the subsequent sections.
TABLE 5: SINGLE TOTAL FIGURES OF DIRECTORS’ REMUNERATION (AUDITED)
SALARY
AND FEES
£’000
BENEFITS
£’000
ANNUAL
BONUS/
STI £’0004
LTIP
£’000
PENSION
£’000
TOTAL
REMUNERATION
£’000
EXECUTIVE DIRECTORS1
Dr Ronnie van der
Merwe2
Mr Jurgens
Myburgh
FY20
FY19
FY20
FY19
Mr Danie Meintjes3
FY19
543
447
401
396
212
15
7
11
14
3
0
110
0
87
46
0
0
0
0
0
43
36
30
30
15
601
600
442
527
276
FEES
£’000
BENEFITS9
£’000
TOTAL
REMUNERATION
£’000
NON-EXECUTIVE CHAIR
Dr Edwin Hertzog
FY20
FY19
281
280
NON-EXECUTIVE DIRECTORS
Notes
1 South African rand remuneration was
translated into sterling at a rate of
£1: ZAR18.76 at 31 March 2020 and
£1: ZAR18.01 at 31 March 2019.
2 Dr Van der Merwe was appointed as
executive director on 1 June 2018 and his
remuneration for FY19 covers the period
from appointment date to the end of the
reporting period.
3 Mr Meintjes retired as executive director
of the Company on 31 July 2018, therefore
his remuneration for FY19 in the executive
director section of the table covers the
period from 1 April 2018 to his date of
retirement. Subsequently, Mr Meintjes
was appointed as non-executive director on
1 August 2018, therefore his remuneration
for FY19 in the non-executive director
section of the table covers the period from
1 August 2018 to 31 March 2019.
4The Committee has suspended any final
decisions on any payouts from the STI
for the executive directors until a later
point during the financial year, with
consideration to be given to a number of
factors, including any decision on dividend
payments. Details on the final decision
on any STI award in respect of FY20
will be provided in the FY21 Directors’
Remuneration Report.
5Dame Inga Beale was appointed as non-
executive director and Chair Designate of
the Company on 26 March 2020.
6Mr Durand’s fees are paid to Remgro and
include services rendered by Mr Durand or
his alternate, Mr Pieter Uys.
7Dr Oswald joined the Board on 25 July 2018
and her remuneration for FY19 covers the
period from appointment date to the end
of the reporting period.
8 Mr Singer was appointed as non-executive
director of the Company on 24 July 2019
and his remuneration for FY20 covers the
period from appointment date to the end
of the reporting period.
9 Benefits to non-executive directors
comprise reimbursement of reasonable
travel, accommodation and subsistence
expenses plus the associated tax.
6
8
0
1
6
3
3
6
4
1
1
0
0
0
0
6
1
4
1
7
7
0
287
288
1
36
117
73
73
83
81
107
81
80
78
90
90
76
48
84
56
103
98
54
979
1 040
31
34
1 010
1 074
1
35
111
70
70
77
77
106
80
80
78
90
90
70
47
80
55
96
91
54
FY20
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY19
FY20
FY193
FY20
FY19
FY20
FY19
FY20
FY19
FY20
Dame Inga Beale5
Mr Desmond Smith
Dr Muhadditha Al
Hashimi
Mr Jannie Durand6
Mr Alan Grieve
Dr Felicity Harvey
Mr Seamus Keating
Mr Danie Meintjes
Dr Anja Oswald7
Mr Trevor Petersen
Mr Tom Singer8
Total
Total
210
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED BASE COMPENSATION (AUDITED)
Base salaries and Board fees are reviewed annually in March, with any changes ordinarily 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 sterling. The following base compensation was paid during the reporting
period:
TABLE 6: BASE COMPENSATION FOR FY20
EXECUTIVE DIRECTOR
BOARD FEE (£)
BASE SALARY (ZAR)
TOTAL BASE COMPENSATION (£)1
Dr Ronnie van der Merwe
Mr Jurgens Myburgh
63 000
63 000
9 000 000
6 336 000
542 791
400 773
Note
1 Figures converted to sterling at a rate of £1: ZAR18.76 at 31 March 2020.
BENEFITS AND PENSION (AUDITED)
The benefits of Dr Van der Merwe and Mr Myburgh
include private medical insurance, life insurance and
reimbursements for reasonable business-related expenses
(e.g. travel, accommodation and subsistence). In some
instances, the associated tax was borne by the Company.
SHORT-TERM INCENTIVE (AUDITED)
In line with previous years, the STI for FY20 was based
on Group-achieved IFRS 16 EBITDA performance and
subset performance indicators for each of the three
divisions, which comprise financial and operational
objectives, including measures of clinical performance.
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 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.
None of the executive directors have rights to a defined
benefit pension.
Non-executive directors were reimbursed for reasonable
business-related expenses (e.g. travel, accommodation
and subsistence) and, in some instances, the associated
tax was borne by the Company. They receive no pension
contribution or other benefits and are not granted awards
under the short-term or long-term reward schemes.
Group-achieved IFRS 16 EBITDA for the purposes of the
executive directors’ STI comprises Group adjusted IFRS 16
EBITDA calculated based on budgeted foreign exchange
rates (£19m) excluding the impact of STI bonus accruals
for the Group’s key management and employees (£19m).
The Group IFRS 16 EBITDA target is based on the sum of
each division’s approved budgeted adjusted IFRS 16
EBITDA and that of Corporate. The Group’s actual
adjusted IFRS 16 EBITDA performance sets the initial
bonus outcome percentage. The non-achievement of
subset performance indicators, which include both
financial and non-financial measures, 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-
adjusted IFRS 16 EBITDA.
211
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT FIGURE 3: SUMMARY OF THE PERFORMANCE CONDITIONS AND ACHIEVEMENT AGAINST TARGETS
MAIN PERFORMANCE INDICATOR
GROUP-ACHIEVED IFRS 16 EBITDA
Group-achieved IFRS 16 EBITDA
£541m
Stretch IFRS 16 EBITDA
£578m
Threshold IFRS 16 EBITDA
£509m
46% of a maximum EBITDA bonus achieved
SUBSET PERFORMANCE INDICATORS
HIRSLANDEN
MEDICLINIC
SOUTHERN AFRICA
MEDICLINIC
MIDDLE EAST
FINANCIAL PERFORMANCE INDICATORS
Debtors’ days
n/a
n/a
OPERATIONAL, CLINICAL AND PATIENT QUALITY PERFORMANCE INDICATORS
Clinical care quality
indicator
Full achievement: clinical safe
surgery, National Society for
Quality Assurance
Readmission Index and quality
initiative benchmark indicators
Null achievement: never
events and antibiotic
utilisation
Full achievement: hand
hygiene
(10% Penalty)
Employee
engagement
n/a
Partial achievement based
on Gallup® employee
engagement survey
responses to ‘My team has
effectively followed through
on actions we agreed on
during our action planning
session’
(1% Penalty)
Threshold: 105 days
Maximum: 95 days
Achievement: 107 days
(5% Penalty)
Null achievement: hospital-
acquired or worsening
pressure ulcers, unplanned
return to theatre
Partial achievement: hospital
never events
Full achievement: SSI, clinic
administration errors, clinic
never events
(6% Penalty)
Null achievement based
on Gallup® employee
engagement survey response
(5% Penalty)
Personal
performance
Full achievement: personal
objective scoreboard
indicators
Patient satisfaction
n/a
Employment Equity
n/a
Penalty
Weighting of
division
Weighted penalty
0%
43%
0%
n/a
n/a
Full achievement based on
overall mean Press Ganey®
patient experience indicator
score
Null achievement based on
overall mean Press Ganey®
patient experience indicator
score
(5% Penalty)
Full achievement based on
appointment to open
positions
n/a
11%
34%
(3.8%)
21%
23%
(4.8%)
Total subset penalty
(8.6%) of a 46% achieved EBITDA bonus equates to a (4%) total bonus deduction
GROUP ACHIEVEMENT (ACHIEVED EBITDA BONUS LESS SUBSET OUTCOME): 42%
Note
The foreign exchange rate used for budget purposes was £1: ZAR19.00, £1: AED4.85 and £1: CHF1.32 at 31 March 2020.
212
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED The formulaic STI outcome was 42% of the maximum
bonus, which reflects that Group financial performance
was in line with expectations for the significant majority
of the year under review until mid-March 2020, when the
impact materialised from COVID-19 national lockdowns
and associated actions suspending non-urgent elective
procedures.
As set out in the Committee Chair’s letter, while
performance has been assessed for the purpose of FY20
incentives, the Committee has suspended any final
decisions on any payouts from the STI for the executive
directors until a later point during the financial year, with
consideration to be given to a number of factors, including
any decision on dividend payments. Details on the final
decision on any STI award in respect of FY20 will be
provided in the FY21 Directors’ Remuneration Report.
LTIP AWARDS VESTED TO EXECUTIVE DIRECTORS
(AUDITED)
In June 2017, an LTIP award equal to 200% of base
compensation was granted to Mr Meintjes (in respect
of his prior role as Group CEO) and 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 2020. An LTIP award was granted to Dr Van
der Merwe in respect of his role as Group Chief Clinical
Officer, based on the same performance conditions.
In view of the actual performance compared to the
threshold targets, set out in Table 7 below, no LTIP
awards are due to vest any of the participants.
TABLE 7: LTIP PERFORMANCE TARGETS AND ACTUAL PERFORMANCE
PERFORMANCE
CONDITION
THRESHOLD
WEIGHTING
TARGET
(25% VESTING)
MAXIMUM TARGET
ACTUAL
(100% VESTING)
PERFORMANCE
VESTING
(% OF
MAXIMUM)
Adjusted EPS growth
60%
5% per annum
compounded
12% per annum
compounded
(6)% 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)
(57)%
0%
LTIP AWARDS GRANTED TO EXECUTIVE DIRECTORS (AUDITED)
2019 LTIP
As set out on page 161 of the 2019 Annual Report, the
Committee reviewed the 2019 LTIP award levels in light of
share price performance during the year under review. The
Company’s view was that the share price level reflected an
industry-wide re-rating, given the increased external focus
on the affordability of healthcare delivery which resulted in
changing care delivery models and greater regulatory
intervention.
At the time the 2019 LTIP awards were granted, the
Committee nonetheless retained the discretion to review
the outcome of the awards on vesting to demonstrate
commitment to shareholders. On 18 July 2019, a cap was
placed on the value of awards that may vest such that if
the share price exceeds £8 on the date of vesting, the
maximum amount that will be delivered to the executive
directors will be capped at £8 per share vesting.
TABLE 8: FY19 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
COMPENSATION
END OF
PERFOR-
MANCE
PERIOD
PERFORMANCE
CONDITIONS
Dr Ronnie
van der Merwe
Mr Jurgens
Myburgh
19/06/2019
Conditional
Share
Awards
373 437
1 125
200%
206 456
622
150%
31/03/2022
See Table 9
overleaf
Note
1 Number of shares granted based on the five-day average middle market quotation prior to grant of an LSE share (£3.01).
213
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT TABLE 9: FY19 LTIP PERFORMANCE CONDITIONS
PERFORMANCE CONDITION
Adjusted EPS growth
TSR ranked relative to constituents of the
FTSE 250 excluding financial services and
extraction companies
WEIGHTING
THRESHOLD TARGET
(25% VESTING)
MAXIMUM TARGET
(100% VESTING)
60%
40%
4% per annum
compounded
Median of peers
(50th percentile)
11% per annum
compounded
Upper quartile
of peers
(75th percentile)
The LTIP awards will also be subject to a discretionary
override if an ROIC underpin is not met. This allows the
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 reporting period.
The awards are subject to clawback and malus provisions.
Awards are denominated in shares with vesting dependent
on the achievement of performance conditions over a
three-year period. Awards are subject to a two-year
deferral period after vesting, meaning they are settled only
at the end of a five-year period from the date of grant.
PAYMENTS TO PAST DIRECTORS AND PAYMENTS FOR
LOSS OF OFFICE (AUDITED)
No payments that have not been reported previously were
made to past directors, and no loss of office payments
were made in the year under review.
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. The Company’s Register of Directors’
Interests, which is open for inspection at the Company’s
registered office during business hours, contains full details
of the directors’ shareholdings and share allocations.
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 £2.69 per share at 31 March 2020.
TABLE 10: DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS
EXECUTIVE
DIRECTOR
Dr Ronnie
van der Merwe
Mr Jurgens
Myburgh
SHARE-
HOLDING
GUIDELINES
AS A % OF
ANNUAL BASE
COMPENSA-
TION
SHARES
HELD AT
31 MARCH
2019
SHARES
HELD AT
31 MARCH
2020
% OF
ANNUAL
BASE
COMPEN-
SATION
OUTSTANDING
UNVESTED LTIP
AWARDS WITH
PERFORMANCE
CONDITIONS1
DEFERRED
STI
SHARES1
SHARE-
HOLDING
REQUIREMENT
MET
225%
40 630
51 630
26%
600 463
21 962
200%
80 000
83 000
56%
382 365
41 653
Progress being
made
Progress being
made
Note
1 Awards granted prior to the introduction of the revised policy will be settled in cash and therefore are not taken into consideration as part of determining
whether shareholding requirements have been met.
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.
214
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED TABLE 11: NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS
NON-EXECUTIVE DIRECTOR
AT 31 MARCH 2019
AT 31 MARCH 2020
Dr Edwin Hertzog
Mr Desmond Smith
Dr Muhadditha Al Hashimi
Dame Inga Beale
Mr Jannie Durand
Mr Alan Grieve
Dr Felicity Harvey
Mr Seamus Keating
Mr Danie Meintjes
Dr Anja Oswald
Mr Trevor Petersen
Mr Tom Singer
Mr Pieter Uys1
Note
1 Mr Uys is the alternate to Mr Durand.
394 276
394 276
–
–
-
–
7 500
–
–
142 063
–
–
–
417
–
–
-
–
7 500
–
–
142 063
–
–
–
417
SHARE DILUTION LIMITS
The Company is committed to protecting
shareholders’ interests and ensuring that the dilution
of shares remains within a reasonable limit. In line
with guidelines by the Investment Association, 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
COMMENCEMENT DATE OF SERVICE AGREEMENT
Mr Jurgens Myburgh
1 August 2016
Dr Ronnie van der Merwe
1 June 2018 (joined Mediclinic on 1 July 1999)
Executive directors have rolling service agreements under which, other than by termination in accordance with the terms
of these agreements, employment continues until retirement.
Further detail of the executive directors’ service agreements is provided on page 207.
215
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT 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 below.
TABLE 13: NON-EXECUTIVE DIRECTORS’ APPOINTMENT DATE AND EXPIRY OF CURRENT TERM
NON-EXECUTIVE DIRECTOR
DATE OF APPOINTMENT
EXPIRY OF CURRENT TERM
Dr Edwin Hertzog1
Dr Muhadditha Al Hashimi
Dame Inga Beale
Mr Jannie Durand
Mr Alan Grieve
Dr Felicity Harvey
Mr Seamus Keating2
Mr Danie Meintjes
Dr Anja Oswald
Mr Trevor Petersen
Mr Tom Singer
15 February 2016
1 November 2017
26 March 2020
15 February 2016
15 February 2016
3 October 2017
5 June 2013
15 February 2016
25 July 2018
15 February 2016
24 July 2019
14 February 2022
30 October 2020
25 March 2023
14 February 2022
14 February 2022
2 October 2020
4 June 2022
31 July 2021
24 July 2021
14 February 2022
23 July 2022
Notes
1 Dr Edwin Hertzog is retiring as Non-executive Chair of the Board at the conclusion of the Company’s 2020 AGM; he will be succeeded by the Chair
Designate, Dame Inga Beale.
2 Mr Seamus Keating stepped down from the Board and its committees on 31 March 2020.
CHANGE IN REMUNERATION LEVELS
Table 14 shows how the percentage change in the Group 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 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: GROUP CEO AND EMPLOYEES
Group CEO
All employees
Note
1 Decrease excludes once-off events.
SALARY
0%
5.5%
BENEFITS
(8.9)% 1
8.26%
ANNUAL BONUS/STI
To be confirmed
(50)%
Notwithstanding an average increase of 5.5% for the
South African workforce, the Committee decided to
postpone any FY21 increases to the executive directors
until a later point during the financial year.
While performance has been assessed for the purpose of
FY20 incentives, the Committee has suspended any final
decisions on any payouts from the STI for the executive
directors until a later point during the financial year,
with consideration to be given to a number of factors,
including any decision on dividend payments. Details on
the final decision on any STI award in respect of FY20
will be provided in the FY21 Directors’ Remuneration
Report.
CEO PAY RATIO
The requirement to disclose the Group CEO to workforce
pay ratio does not apply as the Company did not meet
the employee threshold (currently there is only one
UK-based employee). The Committee has chosen not to
report on this ratio as it believes such a ratio is irrelevant
due to currency differences as well as the geographical
spread of the workforce. The Committee does, however,
consider pay ratios across the divisions in considering
remuneration.
PERFORMANCE AND PAY PERFORMANCE
Figure 4 shows the value at 31 March 2020 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 during the relevant period.
216
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED FIGURE 4: MEDICLINIC TOTAL SHAREHOLDER RETURN COMPARED TO FTSE 100 AND FTSE 250
250
200
150
100
50
0
1
J
u
n
e
-
2
0
1
3
1
D
e
c
-
2
0
1
3
1
J
u
n
e
-
2
0
1
4
1
D
e
c
-
2
0
1
4
1
J
u
n
e
-
2
0
1
5
1
D
e
c
-
2
0
1
5
1
J
u
n
e
-
2
0
1
6
1
D
e
c
-
2
0
1
6
1
J
u
n
e
-
2
0
1
7
1
D
e
c
-
2
0
1
7
1
J
u
n
e
-
2
0
1
8
1
D
e
c
-
2
0
1
8
1
J
u
n
e
-
2
0
1
9
1
D
e
c
-
2
0
1
9
Mediclinic
FTSE 100
FTSE 250
Table 15 shows the total Group 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 GROUP CEO REMUNERATION
YEAR ENDED 31 DECEMBER
YEAR ENDED 31 MARCH
2012
2013
2014
2014
2015
1
Jan–
2015
Feb
2016
15
Feb–
31 Mar
2016
2017
2018
GROUP CEO
GROUP CEO
Dr Kassem Alom
Dr Kassem Alom
Mr Ronald Lavater
Mr Ronald Lavater
Mr Danie Meintjes11
Mr Danie Meintjes
1
Apr–
31
May
20181
1 Jun
2018–
31
Mar
20192
2020
Dr Ronnie van
Dr Ronnie van
der Merwe22
der Merwe
Total
remuneration
£’000
STI outturn
(% of
maximum)
Deferred STI
portion
LTIP vesting
(% of
maximum)
326
361
290
170
702
2 165
79
1 029
1 126
138
600
601
n/a
n/a
n/a
11.8%
20.0%
n/a
79.7%
55.9%
61.4%
16.5%
16.5%
03
n/a
n/a
n/a
100.0%
n/a
n/a
n/a
50.0% 50.0%
n/a
n/a
0
n/a
n/a
n/a
65.4%
69.9%
n/a
0.0%
0.0%
0.0%
0.0%
0.0%
0.0%
Notes
1 Mr Meintjes retired as Group CEO on 31 May 2018, therefore his remuneration for FY19 covers the period from the start of the reporting period to his date
of retirement as Group CEO.
2 Dr Van der Merwe was appointed as Group CEO on 1 June 2018 and his remuneration for FY19 covers the period from appointment date to the end of the
reporting period.
3 The Committee has suspended any final decisions on any payouts from the STI for the executive directors until a later point during the financial year, with
consideration to be given to a number of factors, including any decision on dividend payments. Details on the final decision on any STI award in respect of
FY20 will be provided in the FY21 Directors’ Remuneration Report.
217
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT
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 175 of the 2019 Annual Report, and returns
to shareholders over the same period:
TABLE 16: COMPARISONS SPEND ON EMPLOYEE COSTS
Employee costs1
Dividends paid
FY20
£’000
1 388 000
59 000
FY19
£’000
1 284 000
59 000
CHANGE %
8%
0%
Note
1 Figures converted to sterling at a rate of £1: ZAR18.76, £1: AED4.67 and £1: CHF1.25 at 31 March 2020.
SHAREHOLDER VOTING ON REMUNERATION MATTERS
The Directors’ Remuneration Report for FY19 was approved by shareholders at the Company’s 2019 AGM with 71.4% of
votes cast in its favour. The previous Directors’ Remuneration Policy was approved at the Company’s 2017 AGM 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
456 707 341
71.4
182 599 172
28.6
13 445 771
652 752 284
97.9
614 711 926
95.9
25 915 697
4.1
2 718 474
643 346 097
87.3
Directors’
Remuneration
Report (FY19)
Remuneration
Policy (FY17)
As set out in the Committee Chair’s letter, the Committee
acknowledges the importance of shareholder views. The
key areas of focus highlighted by shareholders during
and after the 2019 AGM process in relation to directors’
remuneration were:
• The performance metrics used for the purpose of the
LTIP, with particular feedback in relation to the use of a
formal metric reflecting ROIC;
• The STI to be focused on Group EBIT rather than
EBITDA;
• The 2019 LTIP awards to the executives in light of share
price performance in the prior reporting period;
• Cash versus share-based settlement for deferred
awards under the STI and the LTIP; and
• The treatment of incentive awards for the previous
Group CEO on stepping down from his executive
responsibilities.
The Committee reflected carefully on the feedback
received from shareholders as well as recent
developments in the UK remuneration environment,
and took this into consideration during the Committee’s
review of the Remuneration Policy and its
implementation. As detailed in the Committee Chair’s
letter, the Committee has sought to address the
concerns raised by investors through:
• Changing the performance metrics for LTIP awards
going forward to ensure that they are aligned with the
Group’s strategic priorities, by including ROIC and a
specific metric linked to patient satisfaction;
• Moving the core financial metric used for the purpose
of the STI further down the P&L (EBIT rather than
EBITDA);
• Moving to share settlement of share-based incentive
awards; and
• Placing a cap on the value of 2019 LTIP awards at
£8 per share as detailed on page 213.
218
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED COMMITTEE RESPONSIBILITIES, COMPOSITION
AND MEETINGS
The Committee is principally responsible to the Board for
establishing the Group’s remuneration strategy and policy
and determining the remuneration and benefits package
for the Chair, individual executive directors, other members
of the Group Executive Committee and certain other
executives. The Committee ensures that incentives and
rewards are aligned with the Group culture; linked to the
Company strategy; and promote Mediclinic’s long-term
success. Its decision-making takes account of remuneration
and related policies for the workforce across the Group.
The Committee is governed by formal terms of reference
available in the governance section of the Company’s
website at www.mediclinic.com and summarised on
page 142 of the Corporate Governance Statement.
The current composition of the Committee meets the
requirements of the 2018 Corporate Governance Code,
with all members being independent non-executive
directors. Refer to page 130 for the Committee members’
biographies. The Committee composition and meeting
attendance during the period under review are set out in
Table 18.
Mr Petersen (Committee Chair), Mr Keating, Dr Oswald
and Mr Singer held office during the year under review,
although Mr Keating stepped down from the Board and its
committees at the financial year-end. Dame Inga Beale was
appointed as a member of the Committee on 1 June 2020.
She currently serves as an independent non-executive
director and will continue to serve as a member of the
Committee (but not chair it) after she succeeds Dr Hertzog
as Chair of the Board. Mr Meintjes, Mr Durand and/or his
alternate Mr Uys attend meetings by invitation but are not
voting members. Other attendees, also by invitation only,
include the Group CEO, the Group Chief Human Resources
and Corporate Development Officer, the Group Executive:
Reward and representatives from Deloitte LLP, all of whom
provide material assistance to the Committee. None of the
aforementioned attend as a right, nor do they attend when
their own remuneration is under discussion.
None of the 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 Committee recommends the compensation
of the Chair of the Board, but the Chair of the Board, in
consultation with the executive directors, determines the
non-executive directors’ fees.
TABLE 18: COMMITTEE COMPOSITION AND MEETING ATTENDANCE
COMMITTEE MEMBER1
DESIGNATION
APPOINTMENT DATE
NUMBER OF SCHEDULED
MEETINGS ATTENDED2
Mr Trevor Petersen
(Committee Chair)
Mr Seamus Keating3
Dr Anja Oswald
Mr Tom Singer4
Independent
Non-executive Director
Independent
Non-executive Director
Independent
Non-executive Director
Independent
Non-executive Director
15/02/2016
17/03/2017
25/07/2018
13/11/2019
5/5
3/5
5/5
2/2
Notes
1 The composition of the Committee is shown at 31 March 2020. Dame Inga Beale was subsequently appointed to the Committee on 1 June 2020.
2 The attendance reflects the number of scheduled meetings held during the financial year. Three additional ad hoc meetings were held during the financial
year to deal with urgent matters. One scheduled meeting and one ad hoc meeting were held between the Company’s financial year-end and the Last
Practicable Date. All these meetings were attended by all members of the Committee at the time or at least the minimum quorum required under the
Committee’s terms of reference.
3 Mr Keating was unable to attend two meetings due to other urgent and unexpected commitments. Mr Keating provided input on the Committee papers to
the Committee Chair where he was not able to attend the meeting. Mr Keating stepped down from the Board and its committees on 31 March 2020.
4 Mr Singer was appointed as a member of the Committee on 13 November 2019 and attended both of the Committee meetings that took place after the
date of his appointment.
219
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT Including routine monitoring and approval activities, the material issues discussed by the Committee during the year under
review and between the financial year-end and the Last Practicable Date are summarised below.
TABLE 19: MATERIAL ISSUES DISCUSSED BY THE COMMITTEE
AREA
Awards
DISCUSSIONS
• Reviewed the STI payment for FY20 and having given consideration to the uncertainty
caused by the COVID-19 pandemic and measures taken by the Board to strengthen the
liquidity of the Group, including the suspension of dividend payments, suspended any
decisions on payouts for the executive directors until a later point during the financial year1
• Agreed to defer a decision on allocations and the performance criteria for the FY21 LTIP
awards for the time being, for the same reasons1
• Reviewed and approved division-specific junior management bonus scheme payments
Remuneration
Policy
Remuneration
levels
• Reviewed approach to remuneration going forward and considered feedback received as part
of the consultation process
• Reviewed and agreed to defer a decision on salary increases for executive directors and the
Group Executive Committee for the time being in view of the uncertainty created by the
COVID-19 pandemic1
• Reviewed and approved overall salary increases of all employee groups of each division
• Reviewed and approved the fee of the Chair of the Board
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
Note
1 Further details on the Committee’s decisions in relation to these matters can be found in the Committee Chair’s letter on page 194.
The Committee Chair presents a summary of material
matters to the Board and meeting minutes are circulated to
all directors. The Committee reports to shareholders
annually by way of this report and the Chair attends the
AGM to address any questions that arise.
ADVISOR TO THE COMMITTEE
During the year under review, the 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: ADVISOR TO THE COMMITTEE
ADVISOR
APPOINTED/
SELECTED BY
SERVICES PROVIDED
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
Appointed by the
Committee following
a robust selection
process and
reviewed annually by
the Committee
• General advice on
remuneration
matters
• Advice on UK
market practice
and UK
shareholder
perspectives
FEES PAID BY THE
COMPANY FOR
THESE SERVICES
PROVIDED IN THE
REPORTING PERIOD
£104 500 based on
time charges for
work completed
OTHER SERVICES
PROVIDED TO THE
COMPANY IN THE
REPORTING PERIOD
Tax advisory
services
This Committee Report has been prepared on behalf of
the Board by the Committee, in accordance with the
2018 Corporate Governance Code, the Listing Rules, the Act,
and the Large- and Medium-sized Companies and Groups
(Accounts and Reports) (Amendments) Regulations 2013.
Signed on behalf of the Committee.
Mr Trevor D Petersen
Chair of the Remuneration Committee
1 June 2020
220
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTREMUNERATION COMMITTEE REPORT CONTINUED STATEMENT OF
DIRECTORS’
RESPONSIBILITIES
IN RESPECT OF THE FINANCIAL STATEMENTS
The directors are responsible for preparing the annual
report and the financial statements in accordance with
applicable legislation and regulations.
Legislation in the UK governing the preparation and
dissemination of financial statements may differ from
legislation in other jurisdictions.
The Act requires the directors to prepare financial
statements for each financial year. Under the Act, the
directors have prepared the Group financial statements
and the Company financial statements in accordance with
IFRS as adopted by the EU. Under the Act, the directors
must not approve the financial statements unless they are
satisfied that these give a true and fair view of the state
of affairs of the Group and Company and of the profit or
loss of the Group and Company for the reporting period.
In preparing the financial statements, the directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• state whether applicable IFRS as adopted by the EU
have been followed for the Group financial statements
and for the Company financial statements, subject to
any material departures disclosed and explained in the
financial statements;
• make judgements and accounting estimates that are
reasonable and prudent; and
• prepare the financial statements on the going concern
basis unless it is inappropriate to presume that the
Group and Company will continue in business.
The directors are also responsible for safeguarding the
assets of the Group and Company and hence for taking
reasonable steps for the prevention and detection of fraud
and other irregularities.
The directors are responsible for keeping adequate
accounting records that are sufficient to show and explain
the Group and Company’s transactions and disclose
with reasonable accuracy at any time the financial position
of the Group and Company and enable them to ensure
that the financial statements and the Remuneration
Committee Report comply with the Act and the Group
financial statements with Article 4 of the IAS Regulation.
The directors are responsible for the maintenance and
integrity of the Company’s website.
DIRECTORS’ CONFIRMATIONS
The directors consider that this Annual Report, and
accounts, taken as a whole, is fair, balanced and
understandable and provides the information necessary
for shareholders to assess the Group and Company’s
position and performance, business model and strategy.
Each of the directors, whose names and functions are
listed from page 130 of this Annual Report, confirm that, to
the best of their knowledge:
• the Company financial statements, which have been
prepared in accordance with IFRS as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and loss of the Company;
• the Group financial statements, which have been
prepared in accordance with IFRS as adopted by the EU,
give a true and fair view of the assets, liabilities, financial
position and loss of the Group; and
• the Directors’ Report includes a fair review of the
development and performance of the business and the
position of the Group and Company, together with a
description of the principal risks and uncertainties that
these entities face.
In the case of each director in office at the date the
Directors’ Report is approved:
• so far as the director is aware, there is no relevant audit
information of which the Group and Company’s auditors
are unaware; and
• they have taken all the steps that they ought to have
taken as a director in order to make themselves aware of
any relevant audit information and to establish that the
Group and Company’s auditors are aware of that
information.
CA van der Merwe
Group Chief Executive Officer Group Chief Financial Officer
1 June 2020
1 June 2020
PJ Myburgh
221
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTGOVERNANCE AND REMUNERATION REPORT
FINANCIAL
STATEMENTS
222
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CONTENTS
GROUP FINANCIAL STATEMENTS
224
Independent auditors’ report
237 Consolidated statement of financial position
238 Consolidated income statement
239 Consolidated statement of comprehensive income
240 Consolidated statement of changes in equity
242 Consolidated statement of cash flows
243 Notes to the consolidated financial statements
316 Annexure – Investments in subsidiaries, associates and joint ventures
COMPANY FINANCIAL STATEMENTS
330
Independent auditors’ report
337 Company statement of financial position
338 Company statement of changes in equity
339 Company statement of cash flows
340 Notes to the Company financial statements
GENERAL INFORMATION
These financial statements are consolidated financial statements for Mediclinic International plc (the ‘Company’
or ‘Mediclinic’) and its subsidiaries, associates and joint ventures (collectively, the ‘Group’). A list of subsidiaries,
associates and joint ventures is included from page 316.
Mediclinic is a public limited company, listed on the London Stock Exchange (‘LSE’) and incorporated and domiciled
in England and Wales. The Company has secondary listings on the JSE Ltd (‘JSE’) and the Namibian Stock Exchange
(‘NSX’). A wholly owned subsidiary, Hirslanden AG, issued bonds listed on the SIX Swiss Exchange.
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 1 June 2020. No authority was given to anyone
to amend the financial statements after the issue date.
Press releases, financial reports and other information are available on the Company’s website at www.mediclinic.com.
223
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
GROUP FINANCIAL
STATEMENTS
INDEPENDENT AUDITORS’ REPORT TO THE
MEMBERS OF MEDICLINIC INTERNATIONAL PLC
REPORT ON THE AUDIT OF THE GROUP FINANCIAL STATEMENTS
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 2020 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 2020; the consolidated income statement and consolidated statement
of comprehensive income, the consolidated statement of changes in equity and the consolidated statement of
cash flows 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 includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Group.
Other than those disclosed in note 24 to the consolidated financial statements, we have provided no non-audit
services to the Group in the period from 1 April 2019 to 31 March 2020.
224
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT OUR AUDIT APPROACH
OVERVIEW
Materiality
Audit scope
Key Audit
matters
• Overall Group materiality: £12.4 million (2019: £14.0 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 2019.
We have also audited selected financial statement line items
of the 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,
94% of consolidated loss before tax and 89% of consolidated
adjusted profit before tax.
• Going concern assessment in response to economic
uncertainties related to COVID-19
• Impairment of intangible assets, goodwill and non-financial
assets
• Impairment of the Group’s associate investment in Spire
• Adoption of IFRS 16
• Impact of COVID-19
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 in which it operates, we identified that the principal risks of
non-compliance with laws and regulations related to healthcare reforms (and the introduction of new regulations in the
Group’s markets) and to UK and international tax regulations 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, UK Listing Rules,
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 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 engagement
team shared this risk assessment and planned audit procedures with the component auditors so that they could
include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the Group
engagement team and/or by component auditors 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 whistle-blower 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 responses to risks related to management
override of controls and to fraud in revenue recognition.
225
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
INDEPENDENT AUDITORS’ REPORT CONTINUED
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. Also, 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 engagement team.
These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of
our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate
opinion on these matters. This is not a complete list of all risks identified by our audit.
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
1. GOING CONCERN ASSESSMENT IN
RESPONSE TO ECONOMIC UNCERTAINTIES
RELATED TO COVID-19 (refer to Group
Chief Financial Officer’s Report on page 78,
Audit and Risk Committee Report on
page 170 and note 2.1 in the consolidated
financial statements)
Since the start of the 2020 calendar year, the
scale and impact of the COVID-19 pandemic
on the global economy and on the markets
in which the Group operates have increased
significantly. The severity and duration of
the impact of the COVID-19 pandemic and
its economic aftermath on all businesses,
including Mediclinic, remain uncertain.
National lockdowns were implemented
during March 2020 in each country in which
the Group operates, imposing restrictions
on the Group’s ability to perform elective
surgery and outpatient activities. These
restrictions have negatively impacted the
results of the Group for the financial year
ended 31 March 2020 and are expected
to continue to directly impact the Group
for at least the next financial year with the
potential for longer-term indirect impacts
from global recessionary factors and higher
unemployment.
In order to conclude whether it is appropriate
for the financial statements to be prepared
on a going concern basis, management has
performed a detailed analysis of the expected
impact of COVID-19 on the Group’s revenue,
profit and cash flows including an assessment
of the extent of possible cost mitigation.
Management prepared a base case budget
and strategic plan covering the next five
226
We evaluated management’s going concern assessment and we
performed testing procedures at each division and for the Group
as a whole, deploying internal experts as appropriate to support
our assessment.
We assessed both the base case budget and strategic plan
prepared by management and the severe but plausible downside
case which has been used to sensitise the base case model.
In relation to the budget and strategic plan, we have agreed the
key inputs including revenue, EBITDA and net debt to budgets
and strategic plans approved by the directors. We evaluated the
historical accuracy of the budgeting and forecasting process to
assess the reliability of the Group’s budgets and strategic plans.
In addition, we tested the integrity of management’s monthly
liquidity analysis at each division.
Given the significant impact of the COVID-19 pandemic on the
Group’s operations and forecast financial performance, we obtained
management’s COVID-19 impact analysis and we discussed the
underlying assumptions with the Group’s executive directors,
management at each division and the Group’s Chief Clinical Officer.
We evaluated the range of possible scenarios and the extent and
duration of the expected impact on the Group’s operations assumed
in the base case and downside case by comparison to external
market economic forecasts and our internal industry analysis.
We understood and evaluated the COVID-19 overlay adjustments
applied by management compared to the initial version of the
budget and strategic plan presented to the directors in March 2020.
The updated version was approved by the directors in June 2020
and took account of actual business performance during the period
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
financial years which encompass a best
estimate of this impact, including a forecast
of monthly liquidity for the next 18 months.
Management separately considered a number
of potential downside scenarios, preparing
a severe but plausible downside case which
models a longer and deeper impact from the
pandemic. In doing so, management made
estimates and applied assumptions that
are critical to the outcome of the Group’s
going concern assessment. These forecasts
have been prepared in conjunction with
an assessment of the Group’s liquidity and
covenant compliance for the period through
30 September 2021.
All of the Group’s borrowings are held
separately within each of the operating
divisions, with no cross guarantees or cross
default clauses, and the related covenant
tests are determined by reference to financial
performance measures at each division.
Where management’s projections indicated
a potential covenant breach, management
agreed waivers at each division for those
specific covenants at risk of breach for
the next financial year. In the Middle East,
an interim covenant was agreed as part
of the waiver agreement to replace the
financial covenants that may otherwise have
been breached and the Group separately
committed to reset covenant targets in the
second half of the 2021 financial year based
on a revised business plan to be agreed at
that time. Management prepared covenant
compliance calculations based on its
approved forecasts (covering both its base
case and downside case scenarios) for those
covenants that remain in place for the period
extending to 30 September 2021.
We focused on this area given the importance
of the going concern judgement in the
context of the basis of preparation of the
Group financial statements and recognising
the high degree of judgement inherent in
management’s forecasts, which is heightened
by the current uncertainty that exists about
trading prospects as a result of the COVID-19
pandemic.
of national lockdowns in March and April 2020 and the trading
experience subsequent to operational restrictions being removed
or relaxed later in April 2020 and during May 2020. We evaluated
the key assumptions in the forecasts and considered whether these
assumptions appeared reasonable, for example by comparing
forecast sales to actual sales recorded in April 2020 and to historical
trends. We assessed whether management’s downside case was
severe but plausible.
With regard to mitigation of anticipated revenue declines, we
evaluated the extent to which cost or cash flow savings included in
the forecasts were based on controllable activities, confirming that
only measures directly controllable by the Group had been modelled.
We separately evaluated the existence of further cost or cash flow
measures which had not been modelled but which management
could action to the extent that downside risk factors prove more
negative than currently anticipated.
With regard to the covenant waivers and facility amendments
agreed in May 2020 at all divisions, we obtained and read the terms
of the covenant waiver agreements and facility amendments. We
evaluated the interim covenant requirements at Mediclinic Middle
East. As part of our evaluation, we obtained and evaluated the
legal advice from external legal counsel related to the terms of the
expected resetting of covenant targets in the 2021 financial year in
order to confirm that the Group will not be obligated to accept more
onerous terms than are currently contracted.
We recalculated management’s covenant compliance calculations
through 30 September 2021 and confirmed that the calculation
methodologies are consistent with the terms of the underlying
covenant waiver agreements or facility agreements to the extent
that covenants were not waived. In relation to covenant compliance,
we undertook independent sensitivity analysis to consider the extent
to which headroom exists to absorb any further downside risk
related to the severity and duration of the COVID-19 pandemic.
We evaluated management’s analysis of liquidity headroom to
satisfy ourselves that no breaches are anticipated over the period
of assessment and we again undertook independent sensitivity
analysis to consider the extent to which headroom exists to absorb
any further downside risk. We evaluated the existence of funds
held centrally which could be used to fund liquidity breaches at the
divisional level to the extent that downside risk factors prove to be
worse than anticipated.
We assessed the COVID-19 and related going concern disclosures
provided in the Annual Report to determine whether these
disclosures are consistent with the analysis which we have evaluated
and with the testing which we have performed.
Our findings relating to our work on the going concern status of
the Group are set out in the going concern section of this report.
Our findings relating to our work on the going concern status of the
Company are set out in the going concern section of our report on
the Company financial statements.
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KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
2. IMPAIRMENT OF INTANGIBLE ASSETS,
GOODWILL AND NON-FINANCIAL ASSETS
(refer to Audit and Risk Committee Report
on page 170 and notes 2, 4, 6 and 7 in the
consolidated financial statements)
The Group has £1 171 million
(2019: £1 586 million) of intangible assets.
This balance consists mainly of goodwill
relating to the Mediclinic Middle East
operations amounting to £928 million
(2019: £1 340 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
separate impairment assessments of
individual CGUs which form part of these
operating divisions.
Goodwill is generally assessed for impairment
at the operating division level on the basis
that the commercial 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 acquisition
of Les Grangettes completed in 2018 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
£33 million (2019: £186 million) was recorded
to partially impair property and equipment
within one Swiss CGU (2019: five) and an
impairment loss of £481 million was recorded
to partially impair goodwill relating to the
Middle East.
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. If these cash flows
do not meet the Group’s expectations or if
significant estimates related to discount rates
or growth rates change, there is a risk that
further impairment losses will be required.
There is greater risk and uncertainty in the
forecast cash flows at 31 March 2020 as a
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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 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 validated the carrying amounts of the net assets subject
to impairment testing to the underlying accounting records,
making sure that there was appropriate consistency between
the assets and liabilities that were included in management’s
assessment and the related cash flows.
Our procedures focused on the Swiss and Middle East operations
where headroom has been lower or more sensitive to changes
in key assumptions. We evaluated the impact of the COVID-19
pandemic on management’s future cash flow projections by
comparison to external market economic forecasts and our
internal industry analysis. We performed independent sensitivity
analysis to evaluate the impact of a range of different COVID-19
scenarios on the Group’s impairment judgements. We assessed
the Group’s assumptions about the longer-term impact of global
recessionary factors and higher unemployment that are expected
to follow the pandemic by analysing each division’s historical
ability to recover from periods of significant global economic
uncertainty.
In addition, 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. We assessed
whether return on asset measures encompassing goodwill are
monitored or measured at a level lower than the operating
divisions. We separately 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
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
consequence of the COVID-19 pandemic
and its expected impact on the Group’s
operations.
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.
other facilities are allocated to stand-alone CGUs.
We compared management’s impairment models to externally
available data including analyst valuations where available. We
prepared independent valuations based on alternative valuation
assumptions as part of assessing the reasonableness of the
approach and outputs determined by management.
Where impairments were identified by management relating to the
Swiss and Middle East operations based on fair value less costs
of disposal, we tested the calculation of the impairment charge
and we ensured that the value-in-use would not give rise to a
higher recoverable amount. We tested management’s estimate of
disposal costs for each division and we evaluated management’s
assessment whether market participant adjustments were required
to be made to the valuations.
We assessed the appropriateness of management’s decision to
provide additional disclosures about sensitivities in note 6 and 7 of
the consolidated financial statements in relation to the Swiss and
Middle East operations. More broadly, we considered whether the
disclosures complied with IAS 36 and with IAS 1.
Based on the procedures performed, we noted no material issues
arising from our work.
3. IMPAIRMENT OF THE GROUP’S ASSOCIATE
INVESTMENT IN SPIRE (refer to Audit and
Risk Committee Report on page 170 and
notes 2, 4 and 8 in the consolidated financial
statements)
At 31 March 2020, 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 a further impairment charge of £10 million
(2019: £164 million) was required.
We focused on this area because of 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. There is greater risk and
uncertainty in the forecast cash flows at
31 March 2020 as a consequence of the
COVID-19 pandemic and its expected impact
on Spire’s forecast performance.
We evaluated 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
Spire’s recent performance trends. We reviewed the latest
available financial reports published by Spire and its subsequent
announcements related to the impact of the COVID-19 pandemic,
specifically the arrangement that Spire has agreed with the NHS in
England, Wales and Scotland to provide support during the crisis.
We obtained and read analyst reports to understand third
party expectations of Spire’s future performance. We also read
healthcare industry market research to understand the future
expected performance of the healthcare sector in the UK.
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 market economic
forecasts. We compared management’s forecasts to Spire’s
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KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
own expectations about future performance. We performed
independent sensitivity analysis to evaluate the impact of a
range of different COVID-19 scenarios on the Group’s impairment
judgement. We assessed the Group’s assumptions about the
longer-term impact of global recessionary factors and higher
unemployment that are expected to follow the pandemic by
analysing Spire’s historical ability to recover from periods of
significant global economic uncertainty. In addition to discussing
the forecasts and key assumptions reflected in the impairment
model with Mediclinic management, we engaged separately with
Spire management in order to understand business trends and
future prospects.
We performed independent sensitivity analyses to ascertain the
impact of reasonably possible changes to key assumptions on the
level of impairment required. We considered the appropriateness
of the related disclosures in the Group financial statements.
Based on the procedures performed, we noted no material issues
arising from our work.
We obtained management’s impact assessment in respect of
IFRS 16 and the Group’s proposed accounting policies under
the new standard. We assessed the appropriateness of these
initial assessments to ensure that the proposed treatments were
in line with the requirements of the standard. This included a
consideration of any exemptions or practical expedients to be
applied.
Following the completion of management’s initial impact
assessment, we obtained management’s calculations to quantify
the impact of the adoption of IFRS 16. We tested the mathematical
accuracy of the calculations and we tested the accuracy of a
sample of the input data to source documents. We recalculated
the right of-use-asset and lease liability recognised at 1 April 2019.
We performed procedures to assess the completeness of
management’s identification of the Group’s lease contracts,
including reading new contracts and management meeting minutes
and assessing expense accounts.
For new lease contracts incepted during the year, we agreed the key
inputs in management’s calculations to the source documents. We
recalculated the depreciation of the right-of-use asset and interest
expense on the lease liability recognised in the financial year.
4. ADOPTION OF IFRS 16 (refer to Audit and
Risk Committee Report on page 170 and
note 34 in the consolidated financial
statements)
The Group has implemented IFRS 16 with
effect from 1 April 2019. This new accounting
standard requires a lessee to recognise a
right-of-use asset representing its right to
use the underlying leased asset and a lease
liability representing its obligation to make
lease payments on the balance sheet. In
adopting this new standard, management has
applied judgement in assessing whether new
arrangements contain a lease, in determining
the lease terms, in estimating the discount
rate to apply and in concluding whether
any service or lease components of lease
arrangements need to be separated.
The effect of adoption of IFRS 16 on the
Group’s consolidated statement of financial
position is the recognition of a right-of-use
asset of £640 million, a lease liability of
£665 million and an opening retained earnings
adjustment of £37 million at 1 April 2019. The
Group applied transition provisions and did
not restate comparative periods.
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HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
We focused on the adoption of IFRS 16 due to
the financial significance of the adjustments
required on adoption and because of the
high degree of judgement and estimation
involved in the assessment undertaken by
management.
In addition, we tested the appropriateness of the significant
assumptions used in determining the adoption impact. This
included the discount rates and assessment of lease renewal,
termination and extension options to be used in calculating the
value of the lease liabilities. We assessed the appropriateness and
adequacy of the disclosures in respect of the adoption of IFRS 16
in the Group financial statements.
Based on the procedures performed, we noted no material issues
arising from our work.
5. IMPACT OF COVID-19 (refer to Audit and
Risk Committee Report on page 170)
The COVID-19 pandemic is having a
significant impact on the Group’s operations.
Management has undertaken an assessment
of the impact of COVID-19 on the Group
financial statements at 31 March 2020,
focusing on the potential impact on the
Group’s significant accounting estimates.
The areas where the impact has been most
significant are as follows:
• The Group’s going concern assessment;
• Impairment of goodwill, intangible assets
and non-financial assets;
• Impairment of the Group’s associate
investment in Spire; and
• The related disclosures in the Annual
Report.
We focused on the impact of COVID-19 on the
preparation of the Group financial statements
as its impact is significant and widespread,
both in terms of the impact on a range of
the Group’s accounting judgements and
estimates, including but not limited to going
concern and impairment, and in terms of
related disclosures in the Annual Report.
We revisited our audit risk assessment originally presented to the
Group in November 2019 to add going concern as a significant
risk and we updated our planned audit responses more broadly
in March 2020 to address the financial reporting and audit
implications of the COVID-19 pandemic.
We issued additional audit instructions to component auditors,
requesting further procedures to be performed to ensure the
completeness of our audit risk assessment and planned audit
response at each division.
We assessed our ability to execute the audit when operating
under the restrictions of national lockdowns and related
international travel restrictions. We implemented alternative
communication and review protocols with management and with
component auditors. We agreed with the Company an extension
to the planned timetable for the sign-off of the Annual Report
and audit completion in order to provide adequate time for
management to make its assessment of the business and financial
reporting impacts of COVID-19 and for our Group and component
audit teams to complete the required audit procedures.
We reviewed management’s disclosures in relation to the impact
of COVID-19 in the Annual Report, considering whether the
disclosures were consistent with the Company’s scenario planning
and with trading experience in April and May 2020.
We evaluated management’s accounting estimates in light of
COVID-19 and we have reported separate key audit matters in the
following areas:
• The assessment of going concern of the Group;
• The impairment assessment of goodwill, intangible assets and
non-financial assets; and
• The impairment assessment of the Group’s associate investment
in Spire.
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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 Group
financial statements as a whole, taking into account the structure of the Group, the accounting processes and controls
and the industry in which it operates.
The Group financial statements are a consolidation of 13 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 Group financial statements as a whole. An overview of the impact of COVID-19 on our
planned audit approach and our response in terms of our involvement in the work of component auditors is included in
our report as a key audit matter.
Recognising that not every business in each of the 13 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 reviewed the audit work of our component teams in South Africa, Switzerland and the UAE, which included file
reviews, participation in key audit discussions 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
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, 94% of consolidated loss before tax and 89% 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.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 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
£12.4 million (2019: £14.0 million).
How we determined it
Based on approximately 5% of adjusted profit before tax, calculated as
consolidated statutory loss before tax adjusted for impairment losses,
impairment reversals and remeasurement of the redemption liability.
Rationale for benchmark applied
We believe that adjusted profit before tax is a primary measure
used by 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.
For each component in the scope of our Group audit, we allocated a materiality that is less than our overall Group
materiality. The range of materiality allocated across components was between £5.6 million and £11.1 million.
Certain components were audited to a local statutory audit materiality that was less than the materiality allocated.
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our
audit above £1 million (2019: £0.7 million) as well as misstatements below those amounts 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.
We have nothing to report.
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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).
234
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 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 2020 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 221 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 114 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 221, 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 170 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.
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RESPONSIBILITIES FOR THE FINANCIAL
STATEMENTS AND THE AUDIT
RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS
As explained more fully in the Statement of Directors’ Responsibilities set out on page 221, 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 five years, covering the years ended 31 March 2016 to 31 March 2020.
OTHER MATTER
We have reported separately on the Company financial statements of Mediclinic International plc for the year ended
31 March 2020 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
1 June 2020
236
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2020
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
Derivative financial instruments
Cash and cash equivalents
Assets classified as held-for-sale
Total assets
EQUITY
Capital and reserves
Share capital
Share premium reserve
Retained earnings
Other reserves
Attributable to equity holders of the Company
Non-controlling interests
Total equity
LIABILITIES
Non-current liabilities
Borrowings
Lease liabilities
Deferred income tax liabilities
Retirement benefit obligations
Provisions
Derivative financial instruments
Cash-settled share-based payment liabilities
Current liabilities
Trade and other payables
Borrowings
Lease liabilities
Provisions
Retirement benefit obligations
Derivative financial instruments
Current income tax liabilities
Liabilities classified as held-for-sale
Total liabilities
Total equity and liabilities
Notes
6
7
8
9
10
11
12
9
21
30.8
33
13
13
14
16
17
18
10
19
20
21
22
17
18
20
19
21
33
2020
£’m
5 741
4 358
1 171
181
9
22
1 213
104
766
2
2
2
329
8
6 954
74
690
4 327
(2 201)
2 890
113
3 003
3 182
1 787
654
427
168
36
109
1
769
515
164
49
17
14
2
4
4
3 951
6 954
2019
£’m
5 335
3 524
1 586
193
10
22
1 091
88
732
1
1
-
265
4
6 426
74
690
4 769
(2 382)
3 151
115
3 266
2 576
1 895
-
423
138
29
91
-
584
462
87
-
15
11
-
8
1
3 160
6 426
These financial statements and the accompanying notes as set out on pages 237–329 were approved for issue
by the Board of Directors on 1 June 2020 and were signed on its behalf by:
CA van der Merwe
Group Chief Executive Officer
Mediclinic International plc (Company no 08338604)
PJ Myburgh
Group Chief Financial Officer
237
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
Notes
23
24
24
6 & 24
7 & 24
24
25
26
8
8
27
16
28
28
2020
£’m
3 083
(1 960)
(1 311)
(30)
(482)
(799)
4
(184)
9
(92)
2
(10)
(275)
(24)
(299)
(320)
21
(299)
(43.4)
(43.4)
(Re-presented)1
2019
£’m
2 932
(1 890)
(958)
(186)
(55)
(717)
(3)
81
9
(66)
3
(164)
(137)
7
(130)
(151)
21
(130)
(20.5)
(20.5)
CONSOLIDATED INCOME STATEMENT
FOR THE YEAR ENDED 31 MARCH 2020
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 (loss)/profit
Finance income
Finance cost
Share of net profit of equity-accounted investments
Impairment of equity-accounted investment
Loss before tax
Income tax (expense)/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
Note
1 Refer to note 2.1
238
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 31 MARCH 2020
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
Effect of changes in income tax rates on retirement benefit obligations
Other comprehensive income, net of tax
Total comprehensive loss for the year
Attributable to:
Equity holders of the Company
Non-controlling interests
Notes
2020
£’m
(299)
2019
£’m
(130)
29
29
29
29
29
169
175
(6)
(21)
(17)
(4)
148
(151)
(161)
10
(151)
142
142
-
(34)
(34)
-
108
(22)
(29)
7
(22)
239
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Balance at 31 March 2019
IFRS 16 transition adjustment
Restated at 1 April 2019
(Loss)/profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2020
Share
capital
(note 13)
£’m
74
-
74
-
-
-
-
-
Capital
redemption
reserve
(note 14)
£’m
6
-
6
-
-
-
-
-
Share
premium
reserve
(note 13)
£’m
690
-
690
Reverse
acquisition
reserve
(note 14)
£’m
(3 014)
-
(3 014)
-
-
-
-
-
-
-
-
-
-
Treasury
shares
(note 13)
£’m
Share-based
payment
reserve
(note 14)
£’m
Attributable
Non-
to equity
controlling
holders of the
Company
£’m
interests
(note 16)
Total equity
£’m
628
(2)
4 732
Foreign
currency
translation
reserve
(note 14)
£’m
628
-
-
-
-
187
187
Hedging
reserve
(note 14)
£’m
(2)
-
-
-
-
(6)
(6)
Retained
earnings
£’m
4 769
(37)
(320)
(22)
(342)
(4)
(59)
74
6
690
(3 014)
815
(8)
4 327
2 890
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2019
Balance 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
74
Capital
redemption
reserve
(note 14)
£’m
6
Share
premium
reserve
(note 13)
£’m
690
Reverse
acquisition
reserve
(note 14)
£’m
(3 014)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Treasury
shares
(note 13)
£’m
(1)
Share-
based
payment
reserve
(note 14)
£’m
1
Attributable
Non-
to equity
controlling
holders of the
Company
£’m
3 284
interests
(note 16)
Total equity
£’m
Foreign
currency
translation
reserve
(note 14)
£’m
468
-
153
153
7
-
-
-
-
-
Hedging
reserve
(note 14)
£’m
5
(7)
-
-
-
-
-
-
-
-
Retained
earnings
£’m
5 055
(151)
(31)
(182)
-
-
-
41
(59)
(86)
(86)
74
6
690
(3 014)
628
(2)
4 769
3 151
(37)
3 114
(320)
159
(161)
(4)
(59)
(151)
122
(29)
-
-
-
41
(59)
3 151
£’m
115
-
115
21
(11)
10
3
(15)
113
£’m
87
21
(14)
7
12
-
-
-
17
(8)
115
3 266
(37)
3 229
(299)
148
(151)
(1)
(74)
3 003
3 371
(130)
108
(22)
12
(86)
-
-
58
(67)
3 266
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
1
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
(1)
240
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Balance at 31 March 2019
IFRS 16 transition adjustment
Restated at 1 April 2019
(Loss)/profit for the year
Other comprehensive income/(loss) for the year
Total comprehensive income/(loss) for the year
Transactions with non-controlling shareholders
Dividends paid
Balance at 31 March 2020
Share
capital
(note 13)
£’m
74
74
Capital
redemption
reserve
(note 14)
£’m
Share
premium
reserve
(note 13)
£’m
690
Reverse
acquisition
reserve
(note 14)
£’m
(3 014)
690
(3 014)
74
6
690
(3 014)
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
6
-
6
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
Share
capital
(note 13)
£’m
74
Capital
redemption
reserve
(note 14)
£’m
6
Share
premium
reserve
(note 13)
£’m
690
Reverse
acquisition
reserve
(note 14)
£’m
(3 014)
74
6
690
(3 014)
Balance 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
Retained
earnings
£’m
4 769
(37)
4 732
(320)
(22)
(342)
(4)
(59)
Retained
earnings
£’m
5 055
(151)
(31)
(182)
-
-
(86)
-
41
(59)
Treasury
shares
(note 13)
£’m
Share-based
payment
reserve
(note 14)
£’m
Foreign
currency
translation
reserve
(note 14)
£’m
Hedging
reserve
(note 14)
£’m
Attributable
to equity
holders of the
Company
£’m
Non-
controlling
interests
(note 16)
£’m
Total equity
£’m
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
-
628
-
628
-
187
187
-
-
(2)
-
(2)
-
(6)
(6)
-
-
3 151
(37)
3 114
(320)
159
(161)
(4)
(59)
115
-
115
21
(11)
10
3
(15)
113
3 266
(37)
3 229
(299)
148
(151)
(1)
(74)
3 003
815
(8)
4 327
2 890
Treasury
shares
(note 13)
£’m
(1)
-
-
-
-
-
-
1
-
-
-
Share-
based
payment
reserve
(note 14)
£’m
Foreign
currency
translation
reserve
(note 14)
£’m
Hedging
reserve
(note 14)
£’m
1
-
-
-
-
-
-
(1)
-
-
-
468
-
153
153
7
-
-
-
-
-
5
-
-
-
(7)
-
-
-
-
-
628
(2)
4 769
Attributable
to equity
holders of the
Company
£’m
Non-
controlling
interests
(note 16)
£’m
Total equity
£’m
3 284
(151)
122
(29)
-
-
(86)
-
41
(59)
3 151
87
21
(14)
7
-
12
-
-
17
(8)
115
3 371
(130)
108
(22)
-
12
(86)
-
58
(67)
3 266
241
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
Notes
30.1
30.2
30.3
30.4
30.5
31
32
8
16
30.6
16
30.7
30.7
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 other investments and loans
Proceeds on disposal of property, equipment and vehicles
Net cash generated before financing activities
CASH FLOW FROM FINANCING ACTIVITIES
Distributions to non-controlling interests
Distributions to shareholders
Transaction with non-controlling interest
Proceeds from borrowings
Repayment of borrowings
Refinancing transaction costs
Repayment of lease liabilities
Net increase in cash and cash equivalents
Opening balance of cash and cash equivalents
Exchange rate fluctuations on foreign cash
Closing balance of cash and cash equivalents
30.8
2020
2019
£’m
Inflow/(outflow)
£’m
Inflow/(outflow)
589
9
(83)
(59)
456
(182)
(81)
(102)
(12)
9
(1)
5
(2)
2
274
(207)
(15)
(59)
(1)
15
(101)
(1)
(45)
67
265
(3)
329
451
9
(61)
(55)
344
(298)
(86)
(154)
(63)
-
(4)
4
5
-
46
(34)
(8)
(59)
-
385
(347)
(5)
-
12
261
(8)
265
242
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT NOTES TO THE CONSOLIDATED
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
1
2
2.1
DESCRIPTION OF BUSINESS
Mediclinic International plc is an international healthcare services group with divisions in Switzerland, Southern
Africa (South Africa and Namibia) and the United Arab Emirates (‘UAE’), and with an equity investment in the
United Kingdom (‘UK’). Its core purpose is to enhance the quality of life.
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 16 for the first time in the 2020 financial year and comparative information has not
been restated. Refer to note 34 for descriptions on the changes in accounting policies.
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 (‘EU’), including IFRS Interpretations
Committee (‘IFRS IC’) guidance and with the UK 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 EU. 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 fair value through profit or loss
(‘FVPL’) and equity instruments measured at fair value through other comprehensive income (‘FVOCI’) 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 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, are the Swiss franc, South African rand
and UAE dirham. The UAE dirham is pegged against the United States (‘US’) dollar at a rate of 3.6725 per
US dollar.
Exchange rates
The Group uses the average of exchange rates prevailing during the year to translate the results and cash flows
of foreign subsidiaries, the joint venture and associated undertakings into sterling and year-end rates to translate
the net assets of those undertakings. The following exchange rates were applicable for the year:
Average rates
Swiss franc
South African rand
UAE dirham
Year-end rates
Swiss franc
South African rand
UAE dirham
2020
2019
1.25
18.76
4.67
1.20
22.08
4.56
1.30
18.01
4.82
1.30
18.90
4.79
243
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
Going concern
For the purposes of assessing liquidity and going concern, the Group has modelled scenarios reflecting suitable
assumptions over the next 12–18-month period that serve to inform the decisions the Group takes regarding
future cost savings, cash generation, debt covenants and levels of investment. The Group’s financial performance
to date in FY21 across all three divisions has been ahead of the modelled scenarios. In addition, due to the
proactive response taken by the Group to maintain its liquidity position, over the two-month period since the
end of FY20, the cash and available facilities of the Group has remained/broadly stable at £518m, demonstrating
the financial discipline across the Group and the conservative approach taken when modelling scenarios.
As part of the Group’s proactive response to maintaining its liquidity position and optimising its response to the
crisis, a broad range of consequent actions was taken including:
• All non-urgent and non-committed capital programmes have been postponed or reduced during the initial
months of the pandemic;
• Non-essential administrative costs generally and relating to projects specifically have been postponed or reduced;
• Measures have been taken to further optimise working capital management;
• Loan amortisation payments have been deferred, where possible;
• The Board has taken the decision to suspend the dividend (it recognises the importance of the dividend to
shareholders and will keep this position under review);
• Executive directors’ annual salary increases and STI have been suspended; and
• Salary increases have been postponed for all managerial positions (at Mediclinic Middle East for all employees)
while such increases for facility-based frontline employees were implemented to honour their engagement in
combatting the COVID-19 challenges.
Additional mitigating steps are available to the Company if required, including further reductions in operating
costs, rent waivers and government intervention packages. These steps, if introduced, would provide additional
support to the liquidity analysis and modelled scenarios. In addition, a level of discretionary capital expenditure has
been retained, largely during the second half of FY21, which could be further curtailed in the short-term, if required.
At 31 March 2020, the Group had material headroom to covenants in its existing borrowings and a strong
liquidity position heading into the global pandemic. The cash and available facilities of the Group at year-end
were £518m and the Group leverage ratio was 3.4x (excluding IFRS 16 lease liabilities). A further unutilised bank
facility in Switzerland of CHF250m was re-activated after year-end as part of the proactive measures taken
with lenders. Across the Group, prompt payment by insurers in addition to the proactive measures taken by the
Group to preserve liquidity have supported efforts to improve working capital.
Based on the assumptions applied and the effect of mitigating actions set out above, all within the control of
the Group, the analyses demonstrate that the divisions will continue to be able to meet their obligations for the
periods modelled.
Debt is ring-fenced to each division, with no cross guarantees or cross defaults. Borrowings are denominated
in the same currency as the divisions’ underlying revenue and therefore not exposed to foreign exchange rate
risk. All three divisions have recently refinanced their debt and, therefore, maturities are relatively long dated.
The nearest term material maturity is a Swiss bond for CHF145 million due in February 2021. The unutilised bank
facility of CHF250m is available to fully repay the bond.
As a matter of prudence, the divisions proactively engaged with lenders to obtain certain covenant test waivers
where the financial impact from the disruption caused by COVID-19 may have resulted in covenants being
exceeded before coming back into compliance as operations normalise. For Mediclinic Middle East, the first of
such waived covenant compliance tests are to be performed at the end of June 2021, whereas for Mediclinic
Southern Africa and Hirslanden this will be performed at the end of September 2021. All remaining covenant
tests have sufficient headroom based on the range of modelled scenarios.
While there are no alternative covenants at Hirslanden and Mediclinic Southern Africa, at Mediclinic Middle East
there is an interim covenant based on agreed targets which provides appropriate headroom on the modelled
scenarios. If required, the Group has the opportunity to mitigate any potential covenant breach. The Mediclinic
Middle East waived financial covenants may be reintroduced from the second half of FY21 dependent on
improved operational performance and at mutually agreed new levels based on revised forecasts. Pending this
agreement, the interim covenant will remain in place until and including 31 March 2021.
Based on the Group’s current financial position and the modelled scenarios, the directors have concluded that
the Group has sufficient liquidity to meet all its obligations and be able to meet all covenant requirements for
at least the twelve months from the date of this report and the directors considered it appropriate to adopt the
going concern basis of accounting in preparing the financial statements.
244
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.1
Basis of preparation (continued)
Income statement reclassification
The income statement for the year ended 31 March 2019 has been re-presented to reclassify certain costs of the
Switzerland segment that were previously shown in error as administration and other expenses. The impact of
the reclassification was an increase in cost of sales and decrease in administration and other expenses of £63m.
The reclassification had no impact on reported cash, profits or net assets.
Finalisation of purchase price allocation (‘PPA’)
In accordance with IFRS 3, the statement of financial position at 31 March 2019 has been adjusted as a result of
the finalisation of Intercare Hospital Group’s PPA.
Trade and other payables
Intangible assets
Deferred income tax assets
Previously
Restated
31 Mar 2019 Adjustment
31 Mar 2019
£’m
£’m
£’m
464
1 587
23
(2)
(1)
(1)
462
1 586
22
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.
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MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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 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.
2.3 Segment reporting
Consistent with internal reporting, the Group’s segments are identified as the three geographical operating
segments in Switzerland, Southern Africa and the Middle East. The UK 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 page 131 and pages 136–137.
Intersegment transactions are eliminated and shown separately in the Segmental report. Refer to note 5.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 and capital expenditure in progress 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.
When commissioned, capital expenditure in progress is transferred to the relevant category of property and
equipment and depreciated in accordance with the Group’s policies.
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 fair value of 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.
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 2–25 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.
Computer software
Acquired computer software licences, configuration and implementation costs 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 (2–10 years) using the straight-line method.
b)
c)
Costs associated with maintaining computer software 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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.6 Impairment of non-financial assets (continued)
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
The Group classifies its financial assets in the following measurement categories:
• Financial assets measured subsequently at fair value (either through FVOCI or 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 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 FVPL 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 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.
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 and loans receivable are classified
as debt instruments measured at amortised cost.
• 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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.7 Financial assets (continued)
Impairment (continued)
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 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.
2.8 Offsetting of financial assets and liabilities
Financial assets and liabilities are offset and the net amount reported in the statement of financial position
when there is a legally enforceable right to offset the recognised amounts; the legal enforceable right is not
contingent on a future event and is enforceable in the normal course of business even in the event of default,
bankruptcy or insolvency; and there is an intention to settle on a net basis or realise the asset and settle the
liability simultaneously.
2.9
Inventories
Inventories are measured at the lower of cost, determined on the weighted average method or net realisable
value. Net realisable value is the estimated selling price in the ordinary course of business, less applicable
variable selling expenses.
2.10 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. 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.
2.11 Derivative financial instruments and hedging activities
Derivative financial instruments comprise interest rate swaps, put/call agreements and forward contracts.
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 are designated as
cash flow hedges. 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.
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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.11 Derivative financial instruments and hedging activities (continued)
• 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 21. 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.
Non-hedging derivatives
Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative
instrument that does not qualify for hedge accounting are recognised at fair value through profit or loss.
Written put option (redemption liability)
The amount that may become payable under a written put option on exercise is initially recognised at the
present value of the redemption amount with a corresponding charge directly to equity.
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.
2.12 Non-current assets held-for-sale
Non-current assets and disposal groups are classified as held-for-sale if their carrying amount will be recovered
through a sale transaction rather than through continuing use. This condition is regarded as met only when the
sale is highly probable and the asset (or disposal group) is available for immediate sale in its present condition.
Management must be committed to the sale which should be expected to qualify for recognition as a completed
sale within one year from the date of classification.
Non-current assets (and disposal groups) classified as held-for-sale are measured at the lower of carrying
amount and fair value less costs to sell.
A non-current asset is not depreciated (or amortised) while it is classified as held-for-sale, or while it is part of a
disposal group classified as such.
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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
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 legislation 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 legislation) that have been enacted or substantially enacted by the
reporting date, and are expected to apply when the related deferred income tax asset is realised or the deferred
income tax liability is settled.
Deferred income tax assets are recognised only to the extent that it is probable that future taxable profit will be
available against which the temporary differences can be utilised.
Deferred income tax is provided on temporary differences arising on investments in subsidiaries and associates,
except for deferred income tax liabilities where the timing of the reversal of the temporary difference is
controlled by the Group and it is probable that the temporary difference will not reverse in the foreseeable
future.
Deferred income tax assets and liabilities are offset when there is a legally enforceable right to offset current
tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income
taxes levied by the same taxation authority on either the same taxable entity or different taxable entities where
there is an intention to settle the balances on a net basis.
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.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.19 Employee benefits (continued)
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
period/(s). 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.
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.
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.
b)
c)
d)
Profit sharing and bonus plans
The Group recognises a liability and an expense where a contractual obligation exists for short-term incentives.
The amounts payable to employees in respect of the short-term incentive schemes are determined based on
annual business performance targets.
2.20 Revenue recognition
Revenues are measured at the 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 distinct goods and services 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 constitute variable consideration under IFRS 15.
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SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.20 Revenue recognition (continued)
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 23
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.
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. Consequently, the Group does not
adjust any of the transaction prices for time value of money.
Refer to note 23 for specific revenue recognition accounting policies relating to different geographical locations.
Other income
Other income is recognised on the following basis:
• 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 is recognised on a straight-line basis over the term of the lease.
With the exception of interest income, all the items above are presented as revenue.
2.21 Cost of sales
Cost of sales consists of the cost of inventories, including obsolete stock, which have been expensed during
the year, together with employee costs and related overheads which are directly attributable to the provision of
services.
In the Middle East, rebates received from suppliers are recognised when all the conditions agreed with the
suppliers are met, the amount of cost of sales can be measured reliably and it is probable that the economic
benefits associated with the transaction will flow to the entity.
2.22 Leases (accounting policies applied from 1 April 2019)
The Group leases various buildings, equipment, vehicles and other assets. Lease terms are negotiated on an
individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose
any covenants other than the security interests in the leased assets that are held by the lessor.
Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset
is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present
value basis. Lease liabilities include the net present value of the following lease payments:
• Fixed payments (including in-substance fixed payments), less any lease incentives receivable;
• The exercise price of a purchase option if the Group is reasonably certain to exercise that option;
• Payments of penalties for terminating the lease, if the lease term reflects the Group exercising that option; and
• Lease payments to be made under reasonably certain extension options.
The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily
determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used,
being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset
of similar value to the right-of-use asset in a similar economic environment with similar terms, security and
conditions.
The Group is exposed to potential future increases in variable lease payments based on an index or rate, which
are not included in the lease liability until they take effect. When adjustments to lease payments based on an
index or rate take effect, the lease liability is reassessed and adjusted against the right-of-use asset.
Lease payments are allocated between principal and finance cost. The finance cost is charged to profit or loss
over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for
each period.
253
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.22 Leases (accounting policies applied from 1 April 2019) (continued)
Right-of-use assets are measured at cost comprising the following:
• The amount of the initial measurement of lease liability;
• Any lease payments made at or before the commencement date less any lease incentives;
• Any initial direct costs; and
• Restoration costs.
Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on
a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is
depreciated over the underlying asset’s useful life.
Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line
basis as an expense in profit or loss. Short-term leases are leases with a lease term of 12 months or less.
To determine the incremental borrowing rate, the Group uses recent third-party financing received by the lessee
as a starting point and adjusts the rate to reflect changes in financing conditions since the third-party financing
was received. The Group also makes adjustments to the rate relating to the specific lease based on the term,
country, currency and security.
Some property leases contain variable payment terms that are linked to revenue generated from a hospital.
Variable lease payments that depend on revenue are recognised in profit or loss in the period in which the
condition that triggers those payments occur.
Extension and termination options are included in a number of leases across the Group. The majority of the
extension and termination options held are exercisable only by the Group and not by the respective lessor.
In determining the lease term, all facts and circumstances that create an economic incentive to exercise an
extension option, or not to exercise a termination option, are considered.
2.23 Leases (accounting policies applied until 31 March 2019)
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 in order to achieve a constant rate on the finance
balance outstanding. The corresponding rental obligations, net of finance charges, are included in borrowings.
The interest element of the finance charges is charged to the income statement over the lease period. The
property, equipment and vehicles acquired under finance leasing contracts are depreciated over the useful lives
of the assets or the term of the lease agreement, if shorter, and transfer of ownership at the end of the lease
period is uncertain.
Leases where the lessor retains substantially all the risks and rewards of ownership are classified as operating
leases.
Payments made under operating leases (net of any incentives received from the lessor) are charged to the
income statement on a straight-line basis over the period of the lease.
2.24 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.
254
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
2.25 Foreign currency transactions (continued)
Group entities
The results and financial position of all foreign operations that have a functional currency different from the
Group’s presentation currency are translated into the presentation currency as follows:
• Assets and liabilities are translated at the closing rate at the reporting date;
• Income and expenses for each income statement are translated at average exchange rates for the year; and
• 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 2020 financial period:
The following published standards, amendments and interpretations are mandatory for the accounting period
beginning on or after 1 April 2019 and have been adopted (refer to the changes in accounting policy note 34 for
a description of the impact of the implementation of these standards):
• IFRS 16 – Leases (1 January 2019)
Other standards adopted
The following new accounting standards, interpretations and amendments, have been adopted on 1 April 2019:
• 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)
The implementation of these standards and amendments had no material financial impact on the reported
results or financial position of the Group.
Published standards, amendments and interpretations not yet effective and not early adopted:
The following new accounting standards, interpretations and amendments will have no material impact on the
financial statements:
• IFRS 3 Definition of a Business amendments (1 January 2020)
• IFRS 17, IFRS 9 and IAS 39 Interest Rate Benchmark Reform (1 January 2020)
• IAS 1 and IAS 8 Definition of Material amendments (1 January 2020)
• Revised Conceptual Framework for Financial Reporting (1 January 2020)
• IFRS 17 Insurance Contracts (1 January 2021)
• IAS 1 Classification of Liabilities (1 January 2022)
3
FINANCIAL RISK MANAGEMENT
3.1
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 sterling/Swiss franc, sterling/South African rand and 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 are 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.
255
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
3.1
a) Market risk (continued)
i) Currency risk (continued)
The impact of a 10% change in the sterling/Swiss franc, sterling/South African rand and sterling/UAE dirham
exchange rates for a sustained period of one year is:
• profit for the period would increase/decrease by £7m (2019: increase/decrease by £8m) due to exposure to
the sterling/Swiss franc exchange rate;
• profit for the period would increase/decrease by £9m (2019: increase/decrease by £7m) due to exposure to
the sterling/South African rand exchange rate;
• profit for the period would increase/decrease by £4m (2019: increase/decrease by £5m) due to exposure to
the sterling/UAE dirham exchange rate;
• foreign currency translation reserve would increase/decrease by £143m (2019: increase/decrease by £132m)
due to exposure to the sterling/Swiss franc exchange rate;
• foreign currency translation reserve would increase/decrease by £14m (2019: increase/decrease by £12m) due
to exposure to the sterling/South African rand exchange rate; and
• foreign currency translation reserve would increase/decrease by £113m (2019: increase/decrease by £157m)
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 were unhedged (refer to note 17). The unhedged borrowings
are evaluated on a regular basis.
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.
iii) Interest rate sensitivity
The sensitivity analyses below were determined based on the exposure to interest rates of 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 2020, the 3M Swiss LIBOR was -0.62% (2019: -0.71%). Interest rates would have to
increase by 62 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 (2019: no impact).
• Southern Africa: Profit for the period would increase/decrease by £0.9m (2019: increase/decrease by £0.6m)
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 (2019: 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.
iiii) 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 reputable 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 customers in
relation to their credit standing is evaluated on an ongoing basis. Medical schemes and insurance companies are
required to maintain minimum reserve levels.
256
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
3
FINANCIAL RISK MANAGEMENT (continued)
Financial risk factors (continued)
3.1
b) Credit risk (continued)
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. Expected credit losses were assessed at 31 March 2020 taking account of
COVID-19 measures encouraging prompt payment by medical schemes and insurance companies, which had the
effect of much improved cash collections in April 2020 compared to April 2019.
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
2019 and 31 March 2020, the Group did not consider there to be a significant concentration of credit risk.
c)
Liquidity risk
The liquidity risk related to the impact of COVID-19 pandemic has been considered in the directors’ evaluation of
the going concern assumption. See section 2.1.
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
2020
£’m
189
2019
£’m
295
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 2020
Borrowings
Lease liabilities
Derivative financial instruments
Trade payables
Other payables and accrued expenses
31 March 2019
Borrowings
Lease liabilities
Derivative financial instruments
Trade payables
Other payables and accrued expenses
Carrying
value
£’m
Contractual
cash flows
£’m
1-12
months
£’m
1-5 years
£’m
1 951
703
111
260
204
2 822
954
107
260
204
219
61
3
260
204
1 982
2 875
160
-
91
230
181
-
94
230
181
-
-
230
181
1 596
231
104
-
-
1 712
-
94
-
-
Beyond
5 years
£’m
1 007
662
-
-
-
1 002
-
-
-
-
257
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
3
FINANCIAL RISK MANAGEMENT (continued)
3.2 Capital management
The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern
while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital
structure of the Group consists of debt, which includes the borrowings disclosed in note 17; cash and cash
equivalents and equity attributable to equity holders of the parent, comprising issued capital, retained earnings
and other reserves; and non-controlling interest as disclosed in notes 13, 14 and 16 respectively. The Group’s
Audit and Risk Committee reviews the going concern status and capital structure of the Group twice 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 payout
ratio of 25-35% of adjusted earnings. The Board may revise the policy at its discretion. The debt-to-capital ratios
as at 31 March 2020 and 31 March 2019 were as follows:
Borrowings
Lease liabilities
Less: cash and cash equivalents
Net debt
Total equity
Debt-to-equity capital ratio
2020
£’m
1 951
703
(329)
2 325
3 003
77.4%
2019
£’m
1 982
-
(265)
1 717
3 266
52.6%
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 listed 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)
• Determination of CGUs for impairment testing (refer to note 6)
• Determination of lease term (refer to note 18)
Key estimates
• Impairment of non-current assets excluding goodwill (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 19)
258
MEDICLINIC INTERNATIONAL PLC 2020 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
Switzerland
£’m
Southern
Africa
£’m
Middle East
£’m
United
Kingdom
£’m
Corporate
£’m
Year ended 31 March 2020
Revenue
EBITDA
EBITDA before
management fee
Group Services fees
included in EBITDA
Other gains and losses
Depreciation and
amortisation
Reversal of impairment of
property
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 2020
Investments in associates
Investments in joint ventures
Capital expenditure for
the year
Total segment assets
Total segment liabilities
(excluding intersegment loan)
Total liabilities from
reportable segment
Elimination of intersegment
loan
Total
£’m
3 083
541
541
-
4
1 438
907
245
188
737
110
251
194
113
(6)
-
(6)
-
(3)
1
(217)
(126)
(37)
(53)
4
4
-
(34)
(33)
(1)
-
-
(1)
149
(481)
(423)
(482)
(184)
2
(10)
9
(92)
(92)
-
(24)
(299)
177
4
192
6 954
-
90
-
-
-
(35)
(52)
17
13
68
2
-
75
4 192
-
-
8
(37)
(37)
-
(36)
84
2
4
69
680
-
-
1
(20)
(20)
-
-
5
-
47
1 838
3 951
2 701
564
683
4 942
3 692
564
683
(991)
(991)
-
-
-
-
-
-
-
-
-
-
-
-
2
(10)
-
-
-
-
-
168
-
-
169
-
-
-
(442)
(8)
1
(2)
(17)
15
3
(1)
-
-
-
-
-
-
-
-
17
(17)
(1)
(1)
-
-
1
75
3
3
-
259
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
5
SEGMENTAL REPORT (continued)
Year ended 31 March 2019
Revenue
EBITDA
EBITDA before management
fee
Group Services fees
included in EBITDA
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
Reportable operating segments
Other
Switzerland
£’m
Southern
Africa
£’m
Middle East
£’m
United
Kingdom
£’m
Corporate
£’m
Total
£’m
2 932
493
1 368
886
219
187
677
88
-
-
-
-
-
-
-
-
-
493
224
192
91
-
(3)
(5)
-
(5)
1
(3)
(3)
(168)
(101)
(31)
(36)
(186)
(186)
(55)
81
3
(164)
9
(66)
(66)
-
7
(55)
(123)
-
-
-
(23)
(39)
16
47
(130)
(99)
-
-
-
-
157
49
-
-
8
(36)
(36)
-
(39)
90
3
4
65
-
-
1
(7)
(7)
-
-
3
(164)
-
-
-
-
-
43
(161)
4
-
94
180
-
-
1
(1)
(14)
13
(1)
-
-
-
(2)
-
-
-
-
16
(16)
(1)
(3)
-
-
1
Investments in associates
Investments in joint ventures
Capital expenditure for
the year
189
4
232
2
-
72
Total segment assets
6 426
3 532
707
1 965
182
40
Total segment liabilities
(excluding intersegment loan)
Total liabilities from
reportable segment
Elimination of intersegment
loan
3 160
2 182
591
385
4 058
3 080
591
385
(898)
(898)
-
-
-
-
-
2
2
-
260
MEDICLINIC INTERNATIONAL PLC 2020 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
6
PROPERTY, EQUIPMENT AND VEHICLES
Land - cost
Buildings
Cost
Accumulated depreciation and impairment
Land and buildings
Capital expenditure in progress
Right-of-use assets
Cost
Accumulated depreciation
Equipment
Cost
Accumulated depreciation
Furniture and vehicles
Cost
Accumulated depreciation and impairment
2020
£’m
2019
£’m
3 499
484
1 559
168
2 909
482
1 733
180
-
3 083
-
2 932
168
5 542
180
5 124
2020
£’m
959
2 336
2 997
(661)
3 295
81
675
739
(64)
264
961
(697)
43
216
(173)
2019
£’m
889
2 199
2 763
(564)
3 088
90
-
-
-
299
895
(596)
47
208
(161)
4 358
3 524
261
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
6
PROPERTY, EQUIPMENT AND VEHICLES (continued)
Capital
expenditure
in progress
£’m
Right-of-use
assets
£’m
Equipment
£’m
Furniture
and
vehicles
£’m
192
(212)
Net book value at 1 April 2018
Additions
Depreciation
Business combinations
Transfer between asset classes
Prior year capital expenditure
completed1
Impairment2
Transfer to assets held-for-sale
Exchange differences
Net book value at
31 March 2019
IFRS 16 transition adjustment
Additions
Disposals
Depreciation
Business combinations
Transfer between asset classes
Prior year capital expenditure
completed
Disposal of subsidiaries
Impairment
Reversal of impairment
Transfer to assets held-for-sale
Borrowing cost capitalised
Exchange differences
Land and
buildings
£’m
3 048
17
(50)
8
-
(182)
-
55
3 088
-
34
(1)
(51)
8
17
41
(9)
(13)
4
(4)
-
181
181
123
-
-
1
-
-
(3)
90
-
62
-
-
-
(25)
(44)
-
-
-
-
3
(5)
81
306
49
(78)
7
8
17
(3)
(1)
(6)
299
(1)
57
-
(82)
-
7
3
-
55
15
(20)
5
(9)
3
(1)
-
(1)
47
-
16
-
(18)
-
1
-
-
(19)
(2)
Total
£’m
3 590
204
(148)
20
-
-
(186)
(1)
45
3 524
640
221
(6)
(197)
8
-
-
(10)
(34)
4
(7)
3
-
-
-
-
-
-
-
(1)
212
-
-
-
-
-
-
-
-
-
-
641
52
(5)
(46)
-
-
-
(1)
-
-
(3)
-
37
Net book value at 31 March
2020
3 295
675
264
43
4 358
Notes
1 Capital expenditure in progress of £9m previously presented under the asset category Equipment was reclassified to Capital expenditure in
progress. The reclassification had no impact on the carrying value of property, equipment and vehicles, reported cash or profits.
2 An impairment charge of £4m previously presented under the asset category Furniture and vehicles was reclassified to Land and buildings (£1m)
and Equipment (£3m). The reclassification had no impact on the carrying value of property, equipment and vehicles, reported cash or profits.
262
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 6
PROPERTY, EQUIPMENT AND VEHICLES (continued)
Total additions
To maintain operations
To expand operations
2020
£’m
169
76
93
2019
£’m
204
82
122
The right-of-use assets were recognised during the year with the adoption of IFRS 16 Leases. Refer to note 18
and note 34 for further information on the impact of the adoption of IFRS 16.
Property, equipment and vehicles with a book value of £2 869m (2019: £2 678m) are encumbered as security for
borrowings (see note 17).
Included in equipment in the prior year is capitalised finance lease equipment with a book value of £1m. Finance
lease equipment has been reclassified to right-of-use assets with the adoption of IFRS 16.
Critical accounting estimates and judgements
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 assessment
The Swiss CGUs were assessed for impairment at 31 March 2020. The recoverable amounts of the CGUs tested
for impairment were based on fair-value-less-cost-to-sell calculations. In determining the fair-value-less-cost-
to-sell for the CGUs, the cash flows were discounted at rates between 4.8% and 5.1% (2019: 4.9% and 5.1%).
Beyond five years a growth rate of 1.6% (2019: 1.6%) was used. The carrying value of one CGU (2019: five) was
determined to be higher than its recoverable amount and as a result an impairment charge of £33m (2019:
£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 £9m to £67m 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. The carrying amounts of the Swiss property, equipment and vehicle are sensitive to reasonably possible
changes in the discount rate and the terminal growth rate. An increase in the discount rate of 0.5% would lead to
an impairment charge of approximately £83m and a decrease of the terminal growth rate by 0.3% would result
in an impairment charge of approximately £8m.
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 this valuation could materially change in future periods.
Reversal of impairment
During the period, Klinik Belair was sold and a reversal of previously recognised impairment charges in respect
of properties of £4m was recognised.
263
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
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
Leases1
Cost
Accumulated amortisation
2020
£’m
1 047
1 862
(815)
54
420
(366)
70
150
(80)
-
-
-
2019
£’m
1 450
1 758
(308)
53
425
(372)
60
119
(59)
23
26
(3)
1 171
1 586
Net book value at 1 April 2018
Additions
Amortisation
Business combinations
Impairment
Exchange differences
Goodwill
£’m
1 253
-
-
106
-
91
Net book value at 31 March 2019
1 450
IFRS 16 transition adjustment
Additions
Amortisation
Business combinations
Impairment
Exchange differences
Net book value at 31 March 2020
-
-
-
4
(482)
75
1 047
Trade
names
£’m
Computer
software
£’m
Leases1
£’m
83
-
(4)
25
(55)
4
53
-
-
48
28
(15)
-
-
(1)
60
-
23
(4)
(16)
-
-
5
54
-
-
3
70
22
-
(1)
-
-
2
23
(23)
-
-
-
-
-
-
Total
£’m
1 406
28
(20)
131
(55)
96
1 586
(23)
23
(20)
4
(482)
83
1 171
Note
1 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. This was reclassified on 1 April 2019 on adoption of IFRS 16 to right-of-use assets within property, equipment and vehicles.
264
MEDICLINIC INTERNATIONAL PLC 2020 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 divisional level or segmental level, except for 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. 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 Mediclinic Middle East
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.
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 divisional level in terms of IFRS 8 except for goodwill arising from the 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 divisions are required to submit budgets for the
next financial year and forecasts for the following four years, which are approved by the Board. Future earnings
in the fair-value-less-cost-to-sell calculation are based on these budgets and forecasts that are calculated on
a per hospital basis and consider both internal and external market information. These budgets and forecasts
represent management’s best view of future revenues and cash flows. During the period under review, the
original business plans were revisited because of the outbreak of the COVID-19 pandemic and they encompass a
best estimate of the short- and long-term impact of the pandemic considering potential recessionary factors.
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 considering long-term medical inflation. The
regulatory environment and impact on tariffs are considered. Growth rates have been benchmarked against
external data for the relevant markets.
Discount rates
The weighted average cost of capital (‘WACC’) was determined by considering the respective debt and equity
costs and ratios. The discount rate is based on the risk-free rate for government bonds adjusted for a risk
premium to reflect the increased risk of investing in equities. Discount rates are lower for the 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 segmental or divisional cash
flows. The assumptions used in the calculation of the discount rate are benchmarked to externally available data.
265
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
7
INTANGIBLE ASSETS (continued)
Impairment testing of Mediclinic Middle East goodwill
The Mediclinic Middle East goodwill with a carrying amount of £928m (2019: £1 340m) originated mainly from
the 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 8.8% (2019: 9.0%).
- Growth rates – The terminal growth rate beyond five years is 3.0% (2019: 3.0%).
- Forecasts – As a result of the changes in the market environment exacerbated by COVID-19, the significantly
lower oil price and an increasingly competitive situation, forecasted cash flows have been reduced from
expectations in the prior period.
The discreet period used for the fair-value-less-cost-to-sell calculation was reduced from seven to five years due
to changes in capital projects, the response to the COVID-19 pandemic and changes in the market environment.
It also reflects the period the Group typically uses for the annual planning cycle.
The combination of these changes in key assumptions resulted in a significant impact on the Mediclinic
Middle East fair-value-less-cost-to-sell calculation value. As a result, the carrying amount of the goodwill was
determined to be higher than its recoverable amount and an impairment of £481m was recognised against
goodwill.
Sensitivity analysis
Any adverse change to key assumptions would result in an increase to the impairment charge recorded as
goodwill is carried at its recoverable amount at 31 March 2020.
Reasonably possible changes in key assumptions that could give rise to a material adjustment to the carrying
value are set out below:
- A fall in the terminal growth rate to 2.5% would result in an additional impairment of £34m;
- A rise in discount rate to 9.1% would result in an additional impairment of £52m; or
- A fall in the forecast cash flows of 5% each year would result in an additional impairment of £74m.
Impairment testing of Hirslanden goodwill and trade names
Hirslanden goodwill with a carrying amount of £105m that originated from the business combination of Clinique
des Grangettes has been tested for impairment. In the prior year, an impairment charge of £55m was recognised
after the Hirslanden trade name and Linde trade name were fully impaired.
The recoverable amount has been determined based on fair-value-less-cost-to-sell discounted cash flow
calculations.
- Discount rates – The discount rate applied to cash flow projections was 5.0% (2019: 5.0%).
- Growth rates – The terminal growth rate beyond five years was 1.6% (2019: 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)
exacerbated by COVID-19 and to reflect actions taken by management to adapt to the new operating
environment, the forecasted cash flows have been reduced from expectations in the prior period.
Sensitivity analysis
An increase in the discount rate by 1.2% combined with a decrease in the terminal growth rate by 1.2% would
reduce the headroom to £nil. In the prior year an increase in the discount rate by 0.2% or a decline in the
terminal growth rate by 0.8% would have reduced the headroom to £nil.
266
MEDICLINIC INTERNATIONAL PLC 2020 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 year
Opening balance
IFRS 9 transition adjustment
IFRS 16 transition adjustment1
Additional investment in unlisted associate
Share of net profit of associated companies
Impairment of listed associate
Dividends received from associated companies
2020
£’m
177
4
181
2020
£’m
168
9
177
189
-
-
1
2
(10)
(5)
177
2019
£’m
189
4
193
2019
£’m
180
9
189
352
(2)
-
4
3
(164)
(4)
189
Note
1 As a result of prior period impairment charges, no adjustment was required to the carrying value of the investment in Spire on adoption of
IFRS 16. The transition adjustment resulted in a decrease of the Group’s share of Spire’s net assets on adoption of IFRS 16 by £22m together with
a consequential transitional adjustment to reduce the Group’s impairment provision in Spire by the same amount. Accordingly, the Group’s
carrying amount of its investment in associates was not impacted on the transition to IFRS 16.
Set out below are details of the associate which is material to the Group:
Spire Healthcare Group plc (Spire)
Country of
incorporation and
place of business
United
Kingdom
% ownership
29.9%
Spire is listed on the LSE. 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 2019 (2019: 31 December 2018). Except for COVID-19, which was appropriately considered in the
impairment assessment, no significant events occurred between 1 January 2020 and 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 prior year, an impairment loss was recognised on the Spire investment. The impairment charge
decreased the notional NCRC recognised to £nil. The amortisation charge for the prior period was £1m.
267
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
8
EQUITY-ACCOUNTED INVESTMENTS (continued)
8.1 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
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
At 31 Dec
2019
£’m
At 31 Dec
2018
£’m
2 233
205
2 438
(1 301)
(198)
939
1 537
175
1 712
(563)
(122)
1 027
29.9%
29.9%
168
168
94
180
180
155
981
931
7
(2)
5
11
-
11
Refer to the Annexure on page 316 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 assume a stable
regulatory environment.
At year-end, an impairment test was performed. The carrying amount of the investment was determined to
be higher than its recoverable amount and an impairment of £10m was recognised against equity-accounted
investments. The following key assumptions were used in the calculation:
Discount rates – a discount rate of 6.9% was applied to cash flow projections (2019: discount rates ranging
between 5.3% and 6.8% were 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% (2019: 2.0%) was applied in the calculation.
Forecasts – as a result of the changes in the market environment exacerbated by COVID-19, forecasted cash
flows have been reduced from expectations in the prior period.
Sensitivity analysis – reasonably possible changes in key assumptions that could give rise to a material
adjustment to the carrying value are set out below:
- A fall in the terminal growth rate to 1.5% would result in an additional impairment of £4m; or
- A rise in discount rate to 7.25% would result in an additional impairment of £16m; or
- A fall in the forecast cash flows of 5% each year would result in an additional impairment of £15m.
Any adverse change to key assumptions would result in an increase to the impairment charge recorded as the
investment is carried at its recoverable amount at 31 March 2020.
268
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
8
EQUITY-ACCOUNTED INVESTMENTS (continued)
8.1
Investment in associates (continued)
Critical accounting estimates and judgements (continued)
Between the period from 1 January 2020 until the announcement in March 2020 of Spire’s arrangement with the
NHS to support the UK’s response to COVID-19, the market price of the Company’s investment reached a high of
£170m. At 31 March 2020, the market price was £94m (2019: £155m).
During the prior year an impairment test was performed and the investment in Spire was impaired by £164m
after key assumptions were updated in the value-in-use calculations.
8.2
Investment in joint venture
Reconciliation of carrying value at the beginning and end of the year
Opening balance
Exchange differences
2020
£’m
4
-
4
2019
£’m
5
(1)
4
The Group has a 49.9% interest in Wits University Donald Gordon Medical Centre (Pty) Ltd. The unlisted joint
venture is accounted for by using its financial information for the 12 months ended 31 December 2019 (2019:
31 December 2018) since it has a different year-end.
Details of the joint venture appear in the Annexure on page 329.
9
OTHER INVESTMENTS AND LOANS
Debt instruments at amortised cost
Equity instruments at FVPL (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
2020
£’m
9
2
11
9
2
11
3
6
2
11
2019
£’m
8
3
11
10
1
11
3
6
2
11
269
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS 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
Change in accounting policy
Disposal of subsidiaries
Business combinations
(Credited)/charged to other comprehensive income
Balance at year-end
Deferred income tax assets
Deferred income tax liabilities
2020
£’m
401
(30)
35
(2)
(1)
1
1
405
(22)
427
405
2019
£’m
445
(60)
17
-
-
7
(8)
401
(22)
423
401
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:
Deferred tax liabilities
At 1 April 2018
(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 year-end
At 1 April 2019
(Credited)/charged to the income statement
Business combinations
Disposal of subsidiaries
Exchange differences
At 31 March 2020
Set-off of deferred tax liabilities pursuant
to set-off provisions
Net deferred tax liabilities at year-end
Tangible
assets
£’m
Intangible
assets
£’m
Current
assets
£’m
Provisions
and other
£’m
432
(47)
2
10
397
397
(18)
1
(1)
28
407
23
(12)
6
-
17
17
(5)
-
-
1
13
7
(2)
-
-
5
5
2
-
-
-
7
14
5
1
1
21
21
(4)
-
-
2
19
Total
£’m
476
(56)
9
11
440
(17)
423
440
(25)
1
(1)
31
446
(19)
427
270
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 10
DEFERRED TAX (continued)
Current
liabilities
£’m
Provisions
and other
£’m
Long-term
liabilities
£’m
Derivatives
£’m
Leases
£’m
Tax losses
carried
forward
£’m
Deferred tax assets
At 1 April 2018
Charged/(credited) to the
income statement
Credited to other
comprehensive income
Business combinations
Exchange differences
(2)
(9)
-
-
-
-
1
-
1
1
(12)
(2)
(8)
(3)
3
At 31 March 2019
(2)
(6)
(22)
Set-off of deferred tax
assets pursuant to set-off
provisions
Net deferred tax assets at
year-end
At 1 April 2019
(2)
Charged/(credited) to the
income statement
Credited to other
comprehensive income
Change in accounting
policy
Exchange differences
-
-
-
-
(6)
(3)
-
-
2
(22)
(2)
3
-
1
-
(1)
-
-
1
-
-
(1)
(2)
-
-
At 31 March 2020
(2)
(7)
(20)
(3)
-
-
-
-
-
-
-
-
-
(2)
-
(2)
Set-off of deferred tax
assets pursuant to set-off
provisions
Net deferred tax assets at
year-end
Total
£’m
(31)
(4)
(8)
(2)
6
(8)
(2)
-
-
1
(9)
(39)
(9)
1
-
-
1
(7)
17
(22)
(39)
(5)
1
(2)
4
(41)
19
(22)
271
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
10
DEFERRED TAX (continued)
At 31 March 2020, the Group had unutilised tax losses of approximately £121m (2019: £113m) potentially available
for offset against future profits. A deferred tax asset of £7m (2019: £9m) 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 affect 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 3-7 years
No expiry
2020
£’m
1
2
35
51
89
2019
£’m
19
1
9
47
76
Critical accounting estimates and judgements
Deferred tax on unremitted earnings
The Group recognised a deferred tax liability of £1m (2019: £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. 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 294m (2019: £1 270m). 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.
272
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
11
INVENTORIES
Inventories consist of:
Pharmaceutical products
Consumables
2020
£’m
94
10
104
The cost of inventories recognised as an expense and included in cost of sales amounted to £721m
(2019: £656m).
12
TRADE AND OTHER RECEIVABLES
Trade receivables
Loss allowance
Prepayments
Other receivables1
2020
£’m
581
(19)
562
38
166
766
2019
£’m
78
10
88
2019
£’m
534
(18)
516
23
193
732
Note
1 Included in other receivables are Swiss unbilled services of £106m (2019: £119m).
Trade and other receivables are categorised as debt instruments at amortised cost. The carrying amounts of the
Group’s trade and other receivables are denominated in the following currencies:
Swiss franc
South African rand
UAE dirham
2020
£’m
472
77
217
766
2019
£’m
458
87
187
732
Trade receivables to the value of £51m (2019: £59m) have been ceded as security for banking facilities.
273
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS 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 is determined as
follows:
2020
Gross carrying amount
Loss allowance
Net carrying amount
Current
£’m
1-30 days
past due1
£’m
31-60 days
past due1
£’m
61-90 days
past due
£’m
311
(1)
310
55
-
55
35
-
35
23
(1)
22
More than
90 days
past due
£’m
157
(17)
140
Total
£’m
581
(19)
562
Expected loss rate
0.32%
0.00%
0.00%
4.35%
10.83%
2019
Gross carrying amount
Loss allowance
Net carrying amount
280
(2)
278
74
-
74
45
-
45
33
(1)
32
102
(15)
87
534
(18)
516
Expected loss rate
0.45%
0.65%
0.93%
2.93%
14.17%
Note
1 Impact is less than £0.5m.
Movement in the loss allowance
Opening balance (2019: calculated under IAS 39)
Loss allowance
Disallowances recognised as bad debt reclassified to gross debtors
(IFRS 15 adjustment)
Exchange differences
Unused amounts reversed
Amounts written off as uncollectable
Balance at year-end
2020
£’m
18
9
-
-
(1)
(7)
19
2019
£’m
45
11
(32)
1
-
(7)
18
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 that have been written off are not subject to enforcement activities.
The expected credit losses for non-credit-impaired receivables, which include Swiss unbilled services, are not
material.
The majority of Swiss unbilled services 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).
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).
274
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 13
SHARE CAPITAL
Issued share capital
Share capital
Share premium
Ordinary shares
Number of shares in issue
Nominal value
Value: Indicating nominal and share premium amount
2020
£’m
74
690
764
2019
£’m
74
690
764
2020
£’m
2019
£’m
737 243 810
737 243 810
10p
10p
Rights of 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.
Treasury shares
At 1 April 2018
Vesting of Forfeitable Share Plan
At 31 March 2019
Disposal of shares held by Mpilo Trust
At 31 March 2020
The balance of the treasury shares at 31 March 2020 comprise:
Forfeitable Share Plan
Mpilo Trusts
Total
£’m
(1)
1
-
-
-
Number of
shares
133 672
(101 342)
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 this was 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.
275
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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 reserve1
Capital redemption reserve2
MOVEMENTS IN OTHER RESERVES
Equity-settled share-based payment reserves (refer to note 15)
Opening balance
Settlement of Forfeitable Share Plan
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
2020
£’m
-
815
(8)
2019
£’m
-
628
(2)
(3 014)
(3 014)
6
6
(2 201)
(2 382)
-
-
-
815
628
187
-
(8)
(2)
(6)
-
-
1
(1)
628
468
153
7
(2)
5
-
(7)
Reverse acquisition
During February 2016, Mediclinic completed the combination between Al Noor and Mediclinic International Ltd.
The combination was classified as a reverse acquisition.
Notes
1 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 Ltd shareholders; and
• the share value component of the total consideration.
2 The UK Companies Act 2006 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.
276
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
15
SHARE-BASED PAYMENTS
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 is 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 EPS (60% weighting).
Opening balance
Share-based payment expense
Benefits paid
Closing balance
2020
£’m
-
1
-
1
2019
£’m
1
(1)
-
-
A reconciliation of the movement in the LTIP award units is detailed below:
Opening balance
Granted
Vested
Lapsed
Closing balance
Average price (pence)
2020
Number of units
2019
Number of units
306.5
300
2 047 733
2 109 925
(8 259)
(271 579)
3 877 820
875 846
1 216 177
(2 516)
(41 774)
2 047 733
Valuation assumptions relating to the outstanding units:
Grant date
Vesting date
Outstanding units
Closing share price
Risk-free interest rate
Expected dividend yield
Volatility
2019 LTIP
allocation
2018 LTIP
allocation
2017 LTIP
allocation1
19 June 2019
15 June 2018
1 June 2017
1 June 2022/2024
15 June 2021/2023
1 June 2020/2022
2 109 925
1 183 768
584 127
269
0.19%
0.00%
41.80%
269
0.18%
0.00%
42.30%
n/a
n/a
n/a
n/a
Note
1 The performance period for the 2017 Awards has elapsed with the Company being below the TSR targets. None of these awards will vest.
Certain awards were also granted to management that were subject only to service conditions. These awards
were granted on 1 September 2016 and vested on different dates between 1 September 2016 and 14 June 2019.
The total number of these awards granted was 16 115. Of these awards, 8 259 vested in 2020, 2 516 vested
in 2019 and 5 340 units of these awards vested in 2018 and 2017.
277
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
15
SHARE-BASED PAYMENTS (continued)
Equity-settled share-based payment arrangements
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 was 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 the FSP have been finalised to the extent that the performance conditions were met as at
30 September 2015. The performance conditions constituted a combination of: absolute total shareholder
return (40% weighting) and adjusted diluted headline earnings per share (60% weighting). The vesting of the
shares granted in 2015 is 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
R87.41
2020
Number of
shares
-
-
-
2019
Number of
shares
101 342
(101 342)
-
278
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
16
NON-CONTROLLING INTERESTS
Opening balance
Transactions with non-controlling shareholders
Dividends to non-controlling shareholders
Business combinations
Share of total comprehensive income
Share of profit
Currency translation differences
Share of other comprehensive income
Non-controlling interests
2020
£’m
115
3
(15)
-
10
21
(12)
1
113
Details of non-wholly owned subsidiaries that have material non-controlling interests (‘NCI’):
Mediclinic (Pty) Ltd1
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)1
Ownership interest held by NCI
Accumulated non-controlling interests in statement of financial position
Profit allocated to non-controlling interests
Grangettes Group2
Ownership interest held by NCI
Accumulated non-controlling interests in statement of financial position
Profit allocated to non-controlling interests
Notes
1 Country of business: South Africa
2 Country of business: Switzerland
2019
£’m
87
17
(8)
12
7
21
(14)
-
115
2019
£’m
3.3%
7
2
2020
£’m
2.9%
5
1
30.2%
30.4%
19
3
21
4
40.0%
40.0%
34
8
29
3
279
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
16
NON-CONTROLLING INTERESTS (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.
2020
£’m
423
237
(342)
(215)
384
17
6
23
31
(2)
(33)
(4)
43
33
(3)
(10)
69
13
-
13
18
(5)
(8)
5
2019
£’m
137
148
(33)
(133)
384
38
2
40
44
(10)
(34)
-
48
36
(3)
(13)
68
13
-
13
15
(7)
(8)
-
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
280
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 16
NON-CONTROLLING INTERESTS (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.
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
2020
£’m
354
72
(208)
(38)
142
19
1
20
25
(3)
(27)
(5)
2019
£’m
163
73
33
31
74
8
(7)
1
23
4
(9)
18
281
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
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
Secured bank
loan three2
Swiss operations
(denominated in Swiss franc)
This loan bears interest at variable rates
linked to the 3M LIBOR plus 1.25%. CHF50m
is redeemable annually on 30 September
with the final outstanding balance
redeemable on 30 September 2025. The
repayment in September 2020 has been
suspended. The non-current portion
includes capitalised financing costs of £13m
(2019: £13m).
These loans were acquired as part of the
Linde acquisition and bear interest at a
fixed rate of 1.12%. CHF0.5m are repayable
on 30 June and 31 December every year.
The remaining balances are repayable
during May 2023.
This fixed interest mortgage loan was
acquired as part of the Linde acquisition
and bears interest at 0.90% compounded
quarterly. The loan is repayable by
December 2023.
Secured bank
loan four2
These loans were acquired as part of the
Les Grangettes acquisition and bear interest
linked to the 3M LIBOR plus 1.40%. The loan
was redeemed on 27 July 2019.
Listed bonds
Secured
long-term
finance3
The listed bonds consist of CHF145m 1.63%
and CHF90m 2.00% 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 1.00% and 12.00%
and are repayable in equal monthly
payments in periods ranging from one to
seven years.
Balance carried forward
282
2020
£’m
1 673
82
196
-
1 951
1 787
164
1 951
2019
£’m
1 703
96
181
2
1 982
1 895
87
1 982
2020
£’m
Non-current
2020
£’m
Current
2019
£’m
Non-current
2019
£’m
Current
1 156
-
1 066
77
15
1
14
1
8
-
-
-
8
12
75
121
181
-
-
-
-
-
1 254
122
1
1 282
1
79
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 17
BORROWINGS (continued)
Balance carried forward
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.
These loans bear interest at variable rates
linked to the prime overdraft rate and are
repayable in periods ranging between one
and 12 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.
Secured bank
loan one4
Secured bank
loan two4
Secured bank
loan five5
Preference
shares4
Bank
overdraft
Middle East operations
(denominated in UAE dirham)
Secured bank
loan one6
The loan bears interest at variable rates
linked to the 3M LIBOR and a margin of
1.85% with five-year amortising terms,
expiring in August 2023.
2020
£’m
Non-current
2020
£’m
Current
2019
£’m
Non-current
1 254
122
1 282
2019
£’m
Current
79
116
162
3
82
-
1
1
1
-
13
136
189
6
95
-
1
1
1
1
-
170
26
1 787
164
187
1 895
4
87
Notes
1 The loan is secured by mortgage notes on Swiss properties and buildings to the value of £2 580m (2019: £2 395m) and Swiss bank accounts with
a book value of £149m (2019: £112m).
2 These loans are secured by mortgage notes on the properties and buildings of the Linde Group.
3 Equipment with a book value of £nil (2019: £1m) is encumbered as security for these loans. These loans were reclassified to lease liabilities on
adoption of IFRS 16. Refer to note 18 and note 34 for further information on the impact of the adoption of IFRS 16.
4 Property and equipment with a book value of £271m (2019: £262m) are encumbered as security for these loans. Cash and cash equivalents of
£1m (2019: £12m) and trade receivables of £51m (2019: £58m) have also been ceded as security for these borrowings.
5 Property, equipment and vehicles with a book value of £18m (2019: £20m) are encumbered as security for these loans. Net trade receivables of
£1m (2019: £1m) have also been ceded as security for these loans.
6 Shares of investments in Emirates Healthcare Holdings Ltd and Emirates Healthcare Ltd are encumbered as security for these loans as well as an
account pledge on receivable collection accounts.
283
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
18
LEASES
This note provides information for leases where the Group is the lessee. Refer to note 34 for a detailed
explanation of the impact of the adoption of IFRS 16 Leases on the Group’s financial statements.
Amounts recognised in the statement of financial position
The statement of financial position shows the following amounts relating to leases:
Right-of-use assets
Buildings
Equipment
Right-of-use assets per geographic market
Switzerland
Southern Africa
United Arab Emirates
Lease liabilities
Switzerland
Southern Africa
United Arab Emirates
Of which are:
- Non-current lease liabilities
- Current lease liabilities
Amounts recognised in the income statement
The income statement shows the following amounts relating to leases:
Depreciation charge of right-of-use assets
Buildings
Equipment
Classified as:
Cost of sales
Administration and other operating expenses
Interest expense (included in finance cost)
Expense relating to short-term leases and leases of low-value assets
2020
£’m
672
3
675
414
29
232
675
2020
£’m
416
38
249
703
654
49
703
2020
£’m
45
1
46
44
2
46
21
12
The total cash outflow for leases, excluding short-term leases and leases of low-value assets, was £63m.
284
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
18
LEASES (continued)
Critical accounting estimates and judgements
In determining the lease term, management considers all facts and circumstances that create an economic
incentive to exercise an extension option. Extension options are only included in the lease term if the lease is
reasonably certain to be extended.
For leases of hospitals, the Group considers their past practice in exercising renewal options and the cost of
business disruption required to replace the leased asset. Most extension options in respect of hospitals have not
been included in the lease liability due to the long duration of existing lease contracts and the low probability of
exercising renewal options based on the contractual renewal terms.
The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged
to exercise (or not exercise) it. The assessment of reasonable certainty is only revised if a significant event or a
significant change in circumstances occurs, which affects this assessment, and that is within the control of the
lessee.
19
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
2020
£’m
71
28
83
182
182
(14)
168
40
6
10
56
12
(8)
13
17
2019
£’m
52
37
60
149
149
(11)
138
36
6
9
51
44
(3)
1
42
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.
285
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit obligation
The Group’s Swiss operations have five defined benefit pension plans, namely:
• Pensionskasse Hirslanden1
• Vorsorgestiftung VSAO (Association for Swiss Assistant and Senior Doctors)
• Hirslanden Clinique La Colline SA
• Hirslanden Klinik Linde AG
• Clinique des Grangettes
Note
1 Employees of Radiotherapie Hirslanden AG have been integrated in the pension plan Pensionskasse Hirslanden from 1 January 2020.
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 year is
as follows:
Opening balance
Current service cost
Interest cost
Employee contributions
Benefits paid
Business combinations
Actuarial (gain)/loss
Exchange differences
Balance at year-end
The movement of the fair value of plan assets over the year 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 year-end
2020
£’m
2019
£’m
1 321
(1 250)
71
1 216
(1 164)
52
1 216
1 045
39
6
37
(58)
-
(22)
103
1 321
1 164
40
37
(58)
-
6
(35)
(1)
97
35
8
35
(32)
49
45
31
1 216
1 041
38
35
(32)
42
8
1
(1)
32
1 250
1 164
286
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit (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 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
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
The assumed rates of mortality are as follows:
• During employment: SA 85/90 tables of mortality
• Post-employment: PA(90) tables
NUMBER OF PLAN MEMBERS
Active members
Pensioners
2020
£’m
2019
£’m
52
40
(40)
-
7
12
71
(6)
28
(34)
(12)
39
6
(6)
1
40
(28)
4
36
(38)
7
(1)
44
52
(5)
(40)
1
(44)
35
8
(8)
1
36
9
0.45%
1.50%
0.00%
1.00%
0.45%
1.75%
0.00%
1.25%
9 710
1 063
9 804
995
287
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit (continued)
Quoted investments
Fixed income investments
Equity investments
Real estate
Other
Non-quoted investments
Fixed income investments
Equity investments
Real estate
Other
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Discount rate
Salary growth rate
Pension growth rate
Impact on defined benefit obligation
Life expectancy (mortality)
2020
£’m
2020
%
2019
£’m
2019
%
430
34.4%
315
21
118
25.2%
1.7%
9.4%
367
280
42
147
31.5%
24.1%
3.6%
12.6%
884
70.7%
836
71.8%
30
-
2.4%
0.0%
32
12
2.8%
1.0%
249
19.9%
223
19.2%
87
7.0%
61
5.2%
366
29.3%
328
28.2%
1 250
100.0%
1 164 100.0%
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
0.45%
1.50%
0.00%
0.25%
0.50%
0.25%
(2.7)%
2.7%
0.9%
2.2%
(0.8)%
0.0%
Base
assumption
Change in
assumption
65-year-old male:
22 years
65-year-od female:
24 years
1 year in
expected
lifetime
of plan
participants
Increase
by 1 year in
assumption
Decrease by
1 year in
assumption
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 year.
288
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit (continued)
Expected employer contributions to be paid to the pension plans for the year ended 31 March 2021 are £36m
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 13.5 years (2019: 13.9 years). The maturity
profile of the defined benefit obligation is as follows:
At 31 March 2020
Defined benefit obligation
At 31 March 2019
Defined benefit obligation
5 years
£’m
Total
£'m
93
277
1 040
1 410
80
242
980
1 302
Additional information on 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). The PH Fund is a foundation and an entity legally
separate from Hirslanden. 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 governing body has mandated the investment activity to
Complementa Investment Controlling AG, as the global custodian.
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 employees’ 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 employees’ and the employer’s contributions are
determined based on the insured salary and range from 1.25–15.5% of the insured salary depending on the age of
the beneficiary.
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.
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). The VSAO Fund is a foundation and an entity
legally separate from Hirslanden. 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 employees’ 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).
The employee’s and the employer’s contributions are 14% of the insured salary.
289
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(a) Swiss pension benefit (continued)
Other pension plans
Other pension plans exist for the latest acquired subsidiaries (Hirslanden Clinique La Colline SA, Hirslanden
Klinik Linde AG and Clinique des Grangettes) which are not yet integrated into PH, the main pension plan of the
Group. These pension funds are legally separate from Hirslanden Group. The investment of the plan assets is in
accordance with the legal investment guidelines (BVV2).
The employee’s and the employer’s contributions are determined based on the insured salary and range from
1.78–15% of the insured salary depending on the age of the beneficiary.
General information on all pension plans
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 and the money originally brought into the pension
plan by the beneficiary. Upon 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 5-7 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.
(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 2020, a 10.40% (2019: 9.30%) medical inflation rate and a 13.40% (2019: 10.50%)
discount rate were assumed. The average retirement age was set at 63 years (2019: 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
2020
£’m
2019
£’m
37
6
2
4
(1)
(6)
(8)
28
40
6
2
4
(1)
(5)
(3)
37
290
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(b) South African post-retirement medical benefit obligation (continued)
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Discount rate
Medical inflation rate
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
13.40%
10.40%
0.50%
1.00%
(6.0)%
7.0%
14.0%
(12.0)%
The expected post-employment medical benefits payable for the year ended 31 March 2021 is £1m.
(c) UAE end-of-service benefit obligation
In terms of UAE labour law, employees are entitled to severance pay at the end of employment. Severance pay is
calculated as follows:
First five years of service: between seven 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
Benefits paid
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
2020
2019
1.0%
2.1%
2.9%
1.9%
60 years
60 years
10.3%
10.0%
2020
£’m
2019
£’m
60
10
8
2
(4)
1
3
13
83
14
69
83
52
9
7
2
(6)
(1)
5
1
60
11
49
60
291
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
19
RETIREMENT BENEFIT OBLIGATIONS (continued)
(c) UAE end-of-service benefit obligation (continued)
Assumptions and sensitivity analysis
Impact on defined benefit obligation
Discount rate
Future salary increases
Base
assumption
Change in
assumption
Increase in
obligation
Decrease in
obligation
1.03%
2.10%
1.00%
1.00%
(6.5)%
7.4%
7.1%
(6.4)%
The expected employer contributions to be paid to the UAE end-of-service benefit obligation for the year ended
31 March 2021 are £14m.
None of the directors of Mediclinic participate in Swiss pension benefits or the UAE end-of-service benefit. One
executive director and one non-executive director of Mediclinic participate in the South African post-retirement
medical benefit obligation.
2020
£’m
36
16
2
18
17
3
4
10
53
2019
£’m
29
16
1
12
15
2
6
7
44
Employee
benefits
£’m
Legal cases
and other
£’m
Tariff risks
£’m
16
3
(2)
-
-
1
18
2
(2)
-
1
19
5
2
(1)
-
1
-
7
2
(3)
(1)
1
6
17
6
-
(5)
-
1
19
14
(2)
(5)
2
28
Total
£’m
38
11
(3)
(5)
1
2
44
18
(7)
(6)
4
53
20
PROVISIONS
Non-current
Employee benefits
Legal cases and other
Tariff risks
Current
Employee benefits
Legal cases and other
Tariff risks
Opening balance at 1 April 2018
Charged to the income statement
Utilised during the year
Unused amounts reversed
Business combinations
Exchange differences
Closing balance at 31 March 2019
Charged to the income statement
Utilised during the year
Unused amounts reversed
Exchange differences
Closing balance at 31 March 2020
292
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
20
PROVISIONS (continued)
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 Group as well as the estimated expected utilisation of the employee benefits.
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.
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 23 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
21
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 hedges1
Forward exchange contracts
Written put option (redemption liability)
Note
1 Amount is less than £0.5m in prior year.
2020
£’m
17
29
7
53
2019
£’m
15
22
7
44
2020
£’m
Assets
2020
£’m
Liabilities
2019
£’m
Assets
2019
£’m
Liabilities
-
-
-
-
-
2
-
2
2
8
-
101
109
2
-
-
2
111
-
-
-
-
-
-
-
-
-
2
1
88
91
-
-
-
-
91
293
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
21
DERIVATIVE FINANCIAL INSTRUMENTS (continued)
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 2020, the Group had 16 effective
interest rate swap contracts (2019: 14) 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:
Borrowings
hedged
£’m
Fixed
interest
payable
Interest
receivable
Fair value
gain/(loss)
for the year
£’m
As at 31 March 2020
1–3 years1
180
6.90–7.30%
As at 31 March 2019
1–3 years1
245
6.90–7.70%
3 month JIBAR/
69% of prime
interest rate
3 month JIBAR/
69% of prime
interest rate
(6)
-
Note
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 1 June 2021 for
£43m; 1 September 2021 for £32m; 1 March 2022 for £23m and 1 June 2022 for £82m. There is no ineffective portion recognised in the profit and
loss that arises from the cash flow hedges.
At Mediclinic Middle East, an interest rate swap was entered into for a third of the borrowing facility (£65m)
(2019: £64m) to hedge for rising interest rates. The swap was entered into at a fixed rate of 4.99% (1.85% margin
plus 3.10% for the five-year USD swap curve rate). The interest rate swap resulted in fair value loss of £2m 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 option
is exercisable after four 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.
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 £10m (2019: £9m).
Movement in the redemption liability
Opening balance at 1 April
Business combinations
Charged to the income statement
Remeasurement of redemption liability
Unwinding of discount
Exchange differences
Closing balance at 31 March
294
2020
£’m
88
-
5
1
7
101
2019
£’m
-
88
-
-
-
88
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
22
TRADE AND OTHER PAYABLES
Trade payables
Other payables and accrued expenses
Social insurance and accrued leave pay
Value added tax
2020
£’m
260
204
43
8
515
2019
£’m
230
179
43
10
462
23
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
2020
£’m
2019
£’m
2 979
2 838
34
1
69
31
1
62
3 083
2 932
1 438
907
737
1
3 083
1 368
886
677
1
2 932
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 Swiss diagnostic-related groups (‘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 they 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.
295
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
23
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 medical practitioner fees are
agreed directly between the insurer and the relevant medical practitioner. The revenue is recognised as the
services are rendered over the period of the stay of the patient.
For inpatient cases open over year-end, revenue is accrued for by taking into account the average case mix
index (‘CMI’) of the respective medical field, the base rate according to the respective category (accident, illness,
inner-cantonal, external, self-payer etc.) as well as the pro rata length of stay.
For outpatient cases, the pricing model is based on TARMED rates. The applicable TARMED rate varies
depending on the canton, procedure and patient and is calculated based on tax points for the different
outpatient treatments which are multiplied with an individual tax point value. Specific medicaments and other
material are added to determine the hospital fee. Invoicing occurs when the patient is discharged directly after
treatment and revenue is recognised at the same time.
The Group’s hospitals have affiliated doctors which are partners cooperating with Hirslanden on a contractual
agreement. The contracts with these affiliated doctors allow them to use the Hirslanden infrastructure, nurses,
theatre etc. The doctors are responsible for the treatment of the patient and Hirslanden is responsible for the
technical services such as the medical equipment, nursing care etc. Swiss regulatory requirements compel
Hirslanden to provide statistics to the government based on all the costs incurred for patient procedures,
including doctors’ fees. Hirslanden therefore invoices its own technical services together with the doctors’ fees
to the insurer and subsequently refunds the amount of the doctors’ services to the affiliated doctors.
Hirslanden acts as an agent for those affiliated doctors based on the following considerations:
• The affiliated doctors are responsible for fulfilling the contract of treating the patient. Every affiliated
doctor needs its own liability insurance for any claim against any human error of the doctor. The hospital is
responsible for any process failures at the hospital.
• The Group does not have discretion in establishing prices, this is determined by contracts in place between the
doctor and the insurer or the relevant percentage of the total revenue for DRG procedures.
• An administrative cost contribution (a form of commission) is deducted from the doctors’ fees before the
transfer of these fees to the doctors.
• Credit risk is considered to be insignificant, but if the insurer does not accept an invoice after the amount has
been refunded to the doctor, the doctor is contractually obliged to repay the amount to the hospital.
As a result, the refund paid to the doctor is deducted from revenue and thus revenue is shown on a net basis.
For DRG procedures the refund is calculated using a contractually agreed-upon percentage for doctors’ services
and deducted from revenue.
Revenue from other sources is based on a fixed-fee arrangement and recognised when the control of goods and
services is transferred.
Inpatient revenue
Outpatient revenue
2020
£’m
1 061
296
1 357
2019
£’m
1 029
265
1 294
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.
Southern Africa healthcare services revenue
In Southern Africa, a fee-for-service model is predominantly used with funders. Mediclinic invoices 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.
296
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
23
REVENUE (continued)
Southern Africa healthcare services revenue (continued)
Services rendered by affiliated doctors are excluded from revenue.
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 it will not reverse. Discounts are accrued over the course of the year based on
the estimates of the level of business expected. This is adjusted at the end of the year 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 case clinic patient income
Emergency medical transport
2020
£’m
858
33
891
2019
£’m
836
35
871
Middle East healthcare services revenue
In Dubai, a fee-for-service model is used with funders. Mediclinic invoices 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 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.
Mediclinic Middle East acts as a principal in respect of tariff negotiations and takes the risk for disallowances
and bad debts related to doctors’ services. As a result, services rendered by employed doctors and independent
doctors are included in revenue.
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 it will not reverse. Discounts are accrued over the course of the year based on
the estimates of the level of business expected. This is adjusted at the end of the year 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. Under IFRS 15, these rejected claims are recognised as part of revenue (decreasing the revenue
recognised).
Set out below is a breakdown of the Middle East healthcare services revenue:
Inpatient revenue
Outpatient revenue
2020
£’m
263
468
731
2019
£’m
239
434
673
Rental income
The rental income received from external parties during the year from the letting of consulting rooms, parking,
etc. was £34m (2019: £31m). Rental income is based on a high number of individual lease agreements with
outstanding committed terms of between 1 and 3 years and standard pricing linked to inflation.
297
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
24
EXPENSES BY NATURE
Fees paid to the Group's auditors for the following services:
Audit of the parent Company and consolidated financial statements
Audit of Company subsidiaries
Audit services
Audit-related services
Other assurance services
All other services
Cost of inventories
Depreciation (refer to note 6)
Buildings
Right-of-use assets
Equipment
Furniture and vehicles
Employee benefit expenses
Wages and salaries
Swiss social security costs
Retirement benefit costs – defined contribution plans
Retirement benefit costs – defined benefit obligations (refer to note 19)
Share-based payment expense (refer to note 15)
Increase in provision for impairment of receivables (refer to note 12)
Maintenance costs
Short-term leases and leases of low-value assets (2019: IAS 17
Operating leases)
Buildings
Equipment
Amortisation of intangible assets (refer to note 7)
Impairments (refer to notes 6 and 7)
Impairment of property, equipment and vehicles
Reversal of impairment of property
Impairment of goodwill
Impairment of trade names
Other expenses
2020
£’m
0.7
1.8
2.5
0.3
0.2
-
3.0
721
197
51
46
82
18
1 388
1 257
60
14
56
1
9
68
12
9
3
20
512
34
(4)
482
-
341
2019
(Re-presented)1
£’m
0.5
1.9
2.4
0.4
0.2
-
3.0
656
148
50
-
78
20
1 284
1 167
51
16
51
(1)
11
53
63
60
3
20
241
186
-
-
55
369
3 271
2 848
Note
1 Refer to note 2.1.
298
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 24
EXPENSES BY NATURE (continued)
Classified as:
Cost of sales
Administration and other operating expenses
Depreciation classified as:
Cost of sales
Administration and other operating expenses
Amortisation classified as:
Cost of sales
Administration and other operating expenses
2020
£’m
1 960
1 311
3 271
143
54
197
13
7
20
2019
(Re-presented)1
£’m
1 890
958
2 848
112
36
148
12
8
20
Number of employees
33 140
32 398
25 OTHER GAINS AND LOSSES
Loss on disposal of subsidiaries
Foreign exchange rate gains on corporate transactions
Fair value adjustments on derivative contracts
26
FINANCE COST
Interest expense
Interest on lease liabilities
Interest rate swaps2
Amortisation of capitalised financing costs
Derecognition of unamortised financing costs
Remeasurement of redemption liability (written put option)
Preference share dividend
Less: amounts included in cost of qualifying assets
Notes
1 Refer to note 2.1.
2 Amount is less than £0.5m in the prior year.
2020
£’m
-
3
1
4
2020
£’m
58
21
1
3
-
5
7
(3)
92
2019
£’m
(1)
-
(2)
(3)
2019
£’m
55
-
-
5
2
-
10
(6)
66
299
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
27
INCOME TAX EXPENSE
Current tax
Current year
Deferred tax credit (refer to 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
2020
£’m
54
(30)
24
-
24
24
2020
%
2019
£’m
53
(60)
(7)
-
(7)
(7)
2019
%
19.0%
19.0%
(0.0)%
0.2%
0.2%
0.1%
0.4%
0.4%
Non-deductible expenses1
(35.9)%
(26.5)%
Non-controlling interests' share of profit before tax
Effect of different tax rates2
Income tax rate changes3
Effect of differences between deferred and current tax rates4
Non-recognition of tax losses in current year
Derecognition of tax losses relating to prior years
Utilisation of previously unrecognised tax losses
Withholding taxes
Prior year adjustment5
Effective tax rate6
0.4%
(0.1)%
10.2%
-
(1.1)%
(0.7)%
(0.1)%
(0.1)%
(0.6)%
(8.6)%
0.7%
1.5%
-
0.1%
(1.7)%
(0.3)%
-
-
11.7%
5.4%
Notes
1 The impairment of the listed associate of £10m (2019: £164m) and the impairment of goodwill of £482m were not deductible for tax purposes
and are included in non-deductible expenses. The tax effect amounted to £93m (impact of 34% in effective tax rate).
2 Since the tax reconciliation is based on a UK statutory tax rate of 19.0%, a reconciling item results due to profit from Southern Africa which is
subject to an income tax rate of 28.0% reduced by profit from the UAE which is not subject to income tax.
3 Corporate tax reforms in Switzerland led to the reduction in deferred tax liabilities amounting to £29m and a corresponding reduction to the tax
rate charge.
4 In the prior year, 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.
5 Included in the prior year adjustment in 2019 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%.
6 If the impairment charges (and related deferred tax effect) discussed in point 1 and 4 above together with the items listed in point 3 were
excluded from the effective tax rate calculation, the adjusted effective tax rate would be 22.3% (2019: 20.4%). Comparing the adjusted effective
tax rate with the prior year, the increase is mainly due to the derecognition of previously recognised deferred tax assets on carry forward tax
losses, in addition to not recognising deferred tax assets on current year tax losses in the Switzerland segment.
300
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 28
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 EPS
2020
£’m
(43.4)
(43.4)
(320)
-
(320)
2019
£’m
(20.5)
(20.5)
(151)
-
(151)
2020
£’m
2019
£’m
NUMBER OF SHARES RECONCILIATION
Weighted average number of ordinary shares in issue for basic
earnings per share
Ordinary shares in issue at the beginning of the year
737 243 810
737 243 810
Weighted average number of treasury shares
Mpilo Trusts1
Forfeitable Share Plan
(31 800)
(31 800)
-
(49 544)
(32 330)
(17 214)
737 212 010
737 194 266
Weighted average number of ordinary shares in issue for diluted EPS
Weighted average number of ordinary shares in issue
737 212 010
737 194 266
Weighted average number of treasury shares held, not yet released
from treasury stock
Mpilo Trusts1
Forfeitable Share Plan
31 800
31 800
-
49 544
32 330
17 214
737 243 810
737 243 810
Note
1 Mpilo Trusts are employees share trusts that were created as part of the South African division’s black economic empowerment initiative in 2005.
301
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
28
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 Listings
Requirements, determined by reference to the South African Institute of Chartered Accountants’ circular 01/2019
(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 EPS
Adjustments
Impairment of equity-accounted investment
Impairment of properties and intangible assets
Loss on disposal of subsidiaries
Associate's (reversal of impairment)/impairment of property,
plant and equipment
Headline earnings
HEPS (pence)
Diluted HEPS (pence)
2020
£’m
2019
£’m
(320)
(151)
10
509
-
(1)
198
26.9
26.9
164
192
1
5
211
28.6
28.6
302
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
29 OTHER COMPREHENSIVE INCOME
COMPONENTS OF OTHER COMPREHENSIVE INCOME
Currency translation differences
Fair value adjustments – cash flow hedges
Remeasurement of retirement benefit obligations
Effect of changes in income tax rates on retirement benefit obligations
Other comprehensive income, net of tax
2020
£’m
175
(6)
(17)
(4)
148
2019
£’m
142
-
(34)
-
108
Attributable to
equity holders
of the Company
(before tax)
£’m
Tax charge
attributable to
equity holders
of the Company
£’m
Attributable to
non-controlling
interest (after tax)
£’m
Total
£’m
Year ended 31 March 2020
Currency translation differences
Fair value adjustments – cash flow
hedges
Remeasurement of retirement benefit
obligations
Effect of changes in income tax rates
on retirement benefit obligations
Other comprehensive income
Year ended 31 March 2019
Currency translation differences
Remeasurement of retirement benefit
obligations
Other comprehensive income
187
(8)
(19)
-
160
153
(39)
114
-
2
1
(4)
(1)
-
8
8
(12)
175
-
1
-
(11)
(6)
(17)
(4)
148
(11)
142
(3)
(14)
(34)
108
303
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30 CASH FLOW INFORMATION
30.1 Reconciliation of profit before taxation to cash
generated from operations
Profit/(loss) before taxation
Adjustments for:
Finance cost – net
Share of net profit of equity-accounted investments
Share-based payments
Depreciation and amortisation
Loss allowance 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
Fair value adjustments on derivative contracts
Operating income before changes in working capital
Working capital changes
(Increase)/decrease in inventories
Increase in trade and other receivables
Increase in trade and other payables
30.2 Interest paid
Finance cost per income statement
Non-cash items
Amortisation of capitalised financing fees
Borrowing costs capitalised
Remeasurement redemption liability
Unwinding of discount of redemption liability
Accrued interest on lease liability
2020
£’m
2019
£’m
(275)
(137)
83
(2)
1
217
9
5
10
512
10
-
(1)
569
20
(15)
(11)
46
589
92
(3)
3
(5)
(1)
(3)
83
57
(3)
(1)
168
11
5
7
241
164
1
2
515
(64)
4
(104)
36
451
66
(5)
-
-
-
-
61
304
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 30 CASH FLOW INFORMATION (continued)
30.3 Tax paid
Liability at the beginning of the year
Provision for the year
Business combinations
Liability at year-end
30.4 Investment to maintain operations
Property, equipment and vehicles purchased
Intangible assets purchased
Movement in capital expenditure payables
30.5 Investment to expand operations
Property, equipment and vehicles p urchased
Intangible assets purchased
Movement in capital expenditure payables
2020
£’m
7
54
-
61
(2)
59
76
8
(3)
81
93
15
(6)
102
2019
£’m
4
53
5
62
(7)
55
82
1
3
86
122
26
6
154
30.6 Dividends
Date paid/payable
Dividend per share
(pence)
2020
£’m
2019
£’m
Dividends declared
Year ended 31 March 2020
Interim dividend
Final dividend
Year ended 31 March 2019
Interim dividend
Final dividend
Dividends paid
Dividends paid during the year
17 December 2019
n/a
18 December 2018
29 July 2019
3.20
-
3.20
3.20
4.70
7.90
24
24
59
24
35
59
59
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). As part of the Group’s
response to maintaining its liquidity position through the crisis and to maximise its support in tackling COVID-19,
the Board has taken the prudent and appropriate decision to suspend the final dividend.
305
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
30 CASH FLOW INFORMATION (continued)
30.7 Changes in liabilities arising
from financing activities
Net derivative
financial instruments
held to hedge
borrowings
£’m
Total lease
liabilities
£’m
Total borrowings
£’m
Total
£’m
1 984
15
(101)
(45)
(1)
-
-
-
(45)
-
665
662
-
-
(4)
52
(5)
3
37
3
8
(4)
52
(5)
3
93
2
-
-
-
-
-
-
8
-
-
-
-
-
10
703
2 664
2
-
-
-
-
-
-
2
-
-
-
-
-
-
-
-
1 939
385
(347)
(5)
5
19
(12)
1 984
Year ended 31 March 2020
Opening balance
Cash flow movements
Proceeds from borrowings
Repayment of borrowings
Repayment of lease liabilities
Refinancing transaction cost
Non-cash items
Change in accounting policy
Amortisation of capitalised
financing fees
Fair value changes
Transfer to liabilities held for sale
New lease commitments entered into
during the year
Lease commitments terminated
during the year
Accrued interest on lease liabilities
Exchange rate differences
Closing balance
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
1 982
15
(101)
-
(1)
(3)
3
-
-
-
-
-
56
1 951
1 937
385
(347)
(5)
5
19
(12)
1 982
306
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 30 CASH FLOW INFORMATION (continued)
30.8 Cash and cash equivalents
For the purposes of the statement of cash flows, cash,
cash equivalents and bank overdrafts include:
2020
£’m
2019
£’m
Cash and cash equivalents
329
265
Cash, cash equivalents and bank overdrafts are denominated in
the following currencies:
Swiss franc1
South African rand2
UAE dirham3
Sterling4
US dollar5
158
93
33
37
8
329
119
97
19
30
-
265
Notes
1 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.
2 The counterparties have a minimum Baa3 credit rating by Moody’s.
3 The counterparties have a minimum BBB+ by Standard & Poor’s.
4 The counterparty has an Aa3 credit rating by Moody’s.
5 The counterparty has an Aa3 credit rating by Moody’s.
Cash and cash equivalents denominated in Swiss franc amounting to £149m (2019: £112m) and South African
bank accounts denominated in South African rand amounting to £1m (2019: £12m) have been ceded as security
for borrowings (refer to note 17).
31
BUSINESS COMBINATIONS
The following business combinations occurred during the current and prior years:
Cash flow on acquisition:
Denmar Specialist Psychiatric Hospital
Clinique des Grangettes
City Centre Clinics Deira and Me'aisem
Welkom Medical Centre
2020
£’m
(12)
-
-
-
(12)
2019
£’m
-
(50)
(7)
(6)
(63)
Denmar Specialist Psychiatric Hospital
Effective on 1 December 2019, Mediclinic Southern Africa acquired 100% of the share capital of Denmar
Specialist Psychiatric Hospital for £12m (R217m). Denmar is a mental health treatment provider operating
170 beds located in Garsfontein, Pretoria East and specialising in the treatment of psychiatric illnesses. The
goodwill of £4m (R78m) arising from the acquisition is attributable to the acquired workforce. None of the
goodwill recognised is expected to be deductible for income tax purposes.
307
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
31
BUSINESS COMBINATIONS (continued)
The following table summarises the provisional fair value of assets acquired and liabilities assumed at the
acquisition date.
Recognised amounts of identifiable assets acquired and
liabilities assumed
Assets
Property, equipment and vehicles
Trade and other receivables
Total assets
Liabilities
Deferred tax liabilities
Total liabilities
Total identifiable net assets at fair value
Goodwill
Cash flow on acquisition
Cash flow on acquisition
Net cash acquired with subsidiary
Cash paid
Net cash flow upon acquisition
2020
£’m
8
1
9
1
1
8
4
12
-
(12)
(12)
Revenue and profit contribution
The acquired business contributed revenues of £1m and net profit of £0.4m to the Group for the period from
2 December 2019 to 31 March 2020. If the acquisition had occurred on 1 April 2019, consolidated pro-forma
revenue and net profit for the year ended 31 March 2020 would have been £5m and £0.5m respectively.
308
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
32 DISPOSAL OF SUBSIDIARIES
During the current year, the Group disposed of Klinik Belair AG, Schaffhausen that was part of the Switzerland
division with effect from 1 October 2019, as well as Mediclinic Ghayathi Clinic, branch of Mediclinic Hospitals LLC
in Abu Dhabi that was part of the Middle East segment with effect from 3 March 2020.
In the prior 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.
Analysis of assets and liabilities over which control was lost
2020
£’m
2019
£’m
Property, equipment and vehicles
Inventories
Trade and other receivables
Cash and cash equivalents
Deferred income tax liabilities
Trade and other payables
Net assets disposed of
Consideration received
Cash and cash equivalents
Total consideration
Loss on disposal of subsidiary
Consideration received1
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
Note
1 Amount was less than £0.5m in the prior year.
10
-
2
2
(1)
(2)
11
11
11
11
(11)
-
11
(2)
9
1
-
-
-
-
-
1
-
-
-
(1)
(1)
-
-
-
309
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
33 DISPOSAL GROUPS HELD-FOR-SALE
During the year, management decided to sell three outpatient medical centres within the Switzerland segment
with effect from 1 June 2020.
During the prior year, management decided to sell the following clinics within the Mediclinic Middle East
segment: Mediclinic Hospitals – Al Mussafah Speciality Clinics.
ANALYSIS OF ASSETS AND LIABILITIES HELD-FOR-SALE
Assets
Property, equipment and vehicles
Trade and other receivables
Total assets
Liabilities
Lease liabilities
Retirement benefit obligations
Total liabilities
2020
£’m
2019
£’m
7
1
8
4
-
4
1
3
4
-
1
1
34 CHANGES IN ACCOUNTING POLICIES
This note explains the impact of the adoption of IFRS 16 Leases on the Group’s financial statements.
The Group adopted IFRS 16 retrospectively from 1 April 2019, but has not restated comparatives for the 2019
reporting period as permitted under the specific transition provisions in the standard. The reclassifications and
adjustments arising from the new leasing rules are therefore recognised in the opening statement of financial
position on 1 April 2019. The new accounting policies are disclosed in note 2.
On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been
classified as operating leases under the principles of IAS 17 Leases. These liabilities were measured at the present
value of the remaining lease payments, discounted using the lessee’s incremental borrowing rate at 1 April 2019.
The weighted average lessee’s incremental borrowing rate applied to the lease liabilities on 1 April 2019 were as
follows for each division:
• Switzerland: 0.8–2.0%
• Southern Africa: 8.7–9.8%
• Middle East: 4.2–4.5%
A number of transition options are available to lessees under IFRS 16. The Group applied the simplified approach
where two options are available on a lease-by-lease basis:
• The lease liability is measured at the present value of the remaining lease payments over the period of
the lease at the incremental borrowing rate measured at 1 April 2019. The right-of-use asset is measured
retrospectively as if IFRS 16 had always been applied with an adjustment to retained earnings.
• The lease liability is measured at the present value of the remaining lease payments over the period of the
lease at the incremental borrowing rate measured at 1 April 2019. The right-of-use asset is measured at an
amount equal to the lease liability with no adjustment to retained earnings.
As allowed under IFRS 16, the two options above were applied on a lease-by-lease basis. For the larger leases of
the Group, the right-of-use assets were measured retrospectively with an adjustment to retained earnings. For
other leases a more simplistic approach was taken where the right-of-use assets were determined to be equal to
their respective lease liabilities.
310
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
34 CHANGES IN ACCOUNTING POLICIES (continued)
Practical expedients applied
In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the
standard:
• Applying a single discount rate to a portfolio of leases with reasonably similar characteristics;
• Accounting for operating leases with a remaining lease term of less than 12 months at 1 April 2019 as short-
term leases;
• Excluding initial direct costs for the measurement of the right-of-use asset at the date of initial application;
and
• Using hindsight in determining the lease term where the contract contains options to extend or terminate the
lease.
The Group has also elected not to reassess whether a contract is or contains a lease at the date of initial
application. Instead, for contracts entered into before the transition date, the Group relied on its assessment
made by applying IAS 17 and Interpretation 4 Determining whether an Arrangement contains a Lease.
Measurement of lease liabilities
Operating lease commitments disclosed at 31 March 2019
Operating lease commitment for contracts commencing after date of initial application
Discounted using the lessee’s incremental borrowing rate on 1 April 2019
Short-term and low value leases not recognised as a liability
Adjustments as a result of different treatment of extension and termination options
Lease liability for contracts commencing on 1 April 2019
Lease liability recognised at 1 April 2019
Of which are:
Non-current lease liabilities
Current lease liabilities
Lease liability by segment:
Switzerland
Southern Africa
Middle East
1 Apr 2019
£’m
754
(45)
709
515
(7)
154
3
665
618
47
665
394
26
245
665
311
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
34 CHANGES IN ACCOUNTING POLICIES (continued)
Measurement of right-of-use assets
For certain identified leases, the associated right-of-use assets were measured on a retrospective basis as if the
new rules had always been applied. Other right-of-use assets were measured at an amount equal to the lease
liability.
Adjustments recognised in the statement of financial position on 1 April 2019
Right-of-use assets (under property, equipment and vehicles)
Less: Favourable lease contract reclassification
Right-of-use assets (under property, equipment and vehicles)
Deferred tax assets
Prepayments (under trade and other receivables)
Other payables (under trade and other payables)
Borrowings
Lease liabilities
Impact on retained earnings
35
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
1 Apr 2019
£’m
640
(23)
617
2
(2)
8
3
(665)
(37)
2019
£’m
99
15
69
15
166
16
130
20
265
2020
£’m
114
30
70
14
123
2
96
25
237
312
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
35
COMMITMENTS (continued)
In terms of a forward contract in the Middle East, the Group has an obligation to pay £4m 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 £85m.
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. On 1 April 2019, the
Group has recognised right-of-use assets for these leases, except for short-term and low value leases (refer to
note 18 and note 34). The future non-cancellable minimum lease rentals that were payable during the previous
financial year:
Within 1 year
1 – 5 years
Beyond 5 years
2020
£’m
1
-
-
1
2019
£’m
63
199
492
754
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 3–5 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 aforementioned income guarantees in the reporting period as
the net income individually generated met or exceeded the amounts guaranteed.
Total of net income guaranteed:
April 2019 – March 2020
April 2020 – March 2021
April 2021 – March 2022
April 2022 – March 20231
Note
1 Amount is less than £0.5m.
2020
£’m
2019
£’m
-
4
2
-
6
3
1
1
-
5
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 year-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
20, the Group considers that no material loss to the Group is expected to result from legal proceedings, claims,
complaints and investigations.
313
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS CONTINUED
36
RELATED PARTY TRANSACTIONS
Remgro Ltd owns, through various subsidiaries (Remgro Healthcare [Pty] Ltd, Remgro Health Ltd and Remgro
Jersey GBP Ltd) 44.56% (2019: 44.56%) of the Company’s issued share capital.
The following transactions were carried out with related parties:
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 fees1
ii)
KEY MANAGEMENT COMPENSATION
Key management includes the directors (executive and non-executive)
and members of the Group Executive Committee.
Salaries and other short-term benefits
Short-term benefits
iii)
TRANSACTIONS WITH ASSOCIATES AND JOINT VENTURES
Zentrallabor Zürich
Fees earned
Purchases
Spire Healthcare Group plc
Non-executive director fee2
Wits University Donald Gordon Medical Centre (Pty) Ltd
Fees paid
Notes
1 In the prior year the amount was less than £0.1m. No administration fees were paid in the current year.
2 Amount is less than £0.1m.
2020
£’m
0.4
-
-
2019
£’m
0.3
0.2
-
5
6
(1)
8
-
2.3
(2)
9
-
2
Terms and conditions
Managerial and administration fees were bought on a cost-plus basis. All other transactions were made on
normal commercial terms and conditions and at market rates.
314
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT
37
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
Derivative financial instruments
Financial liabilities
Derivative financial instruments
2020
£’m
2
2
2019
£’m
3
-
(10)
(3)
• Equity 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. Forward contracts 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
Derivative financial instruments
Trade and other payables
2020
£’m
9
562
329
(1 951)
(101)
(464)
2019
£’m
8
516
265
(1 982)
(88)
(409)
• 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
approximates 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.
• Derivative financial instruments: The value of the redemption liability (written put option) is determined based
on the profitability of Clinique des Grangettes and Clinique La Colline. The exercise price is formula based and
the financial liability is recognised at amortised cost at the present value of the estimated future contractual
cash flows of the redemption amount.
38 EVENTS AFTER THE REPORTING DATE
No material events occurred between year-end and the date the financial statements were authorised for issue.
315
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS ANNEXURE – INVESTMENTS IN SUBSIDIARIES,
ASSOCIATES AND JOINT VENTURES
SUBSIDIARIES
Company
Al Noor Holdings
Cayman Limited
(‘ANH Cayman’)3
ANMC Management
Limited (‘ANMC
Management’)3
Address of the
registered office
Maples Corporate Services
Limited, P.O.BOX 309, Ugland
House, Grand Cayman,
KYI-1104 Cayman Islands
Maples Corporate Services
Limited, P.O.BOX 309, Ugland
House, Grand Cayman,
KYI-1104 Cayman Islands
Mediclinic CHF Finco
Limited
IFC 5, St Helier, Jersey,
JE1 1ST, Channel Islands
Mediclinic Holdings
Netherlands B.V.
Schiekade 830, 3032 AL
Rotterdam, Netherlands
Mediclinic
International (RF)
(Pty) Ltd
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch 7600
Country of
incorporation
and place of
business
Principal
activities
Cayman Islands
Liquidated
Cayman Islands
Liquidated
Interest in capital1
31 March
2020
%
-
-
31 March
2019
%
100.0
100.0
Jersey
Treasury
100.0
100.0
Netherlands
South Africa
Intermediary
holding company
Intermediary
holding company
100.0
100.0
100.0
100.0
Mediclinic Middle East
Holdings Limited
IFC 5, St Helier, Jersey,
JE1 1ST, Channel Islands
Jersey
Intermediary
holding company
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC CHF FINCO LIMITED
Mediclinic Jersey
Limited
IFC 5, St Helier, Jersey,
JE1 1ST, Channel Islands
Jersey
Intermediary
holding company
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC INTERNATIONAL (RF) (PTY) LTD
Mediclinic
Investments (Pty) Ltd
Mediclinic Group
Services (Pty) Ltd
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch 7600
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch 7600
South Africa
Intermediary
holding company
100.0
100.0
South Africa
Provision of group
services within the
Mediclinic Group
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC INVESTMENTS (PTY) LTD
Mediclinic Southern
Africa (Pty) Ltd
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch 7600
South Africa
Intermediary
holding company
100.0
100.0
316
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Address of the
registered office
Country of
incorporation
and place of
business
Principal
activities
INDIRECTLY HELD THROUGH MEDICLINIC GROUP SERVICES (PTY) LTD
Medical Innovations
(Pty) Ltd
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch, 7600
South Africa
Hospital
equipment and
procurement
INDIRECTLY HELD THROUGH MEDICLINIC SOUTHERN AFRICA (PTY) LTD
Interest in capital1
31 March
2020
%
31 March
2019
%
100.0
100.0
Curamed Holdings
(Pty) Ltd
ER24 Holdings (Pty)
Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Howick Private
Hospital Holdings
(Pty) Ltd9 (50% plus 1
share)
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Medical Human
Resources (Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Intermediary
holding company
69.8
69.6
South Africa
Intermediary
holding company
100.0
100.0
South Africa
Intermediary
holding company
50.0
50.0
South Africa
Management of
healthcare staff
100.0
100.0
Mediclinic (Pty) Ltd
(ordinary shares and
Mediclinic Head Office
Hospital shares)
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
100.0
100.0
Intermediary
holding company
and operating
company of
Mediclinic
Southern Africa
Mediclinic Brits (Pty)
Ltd9
Mediclinic Finance
Corporation (Pty) Ltd
Mediclinic Holdings
(Namibia) (Pty) Ltd
Mediclinic Lephalale
(Pty) Ltd9
Mediclinic Midstream
(Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
66.7
66.7
South Africa
Treasury
100.0
100.0
Namibia
Intermediary
holding company
100.0
100.0
South Africa
Healthcare
services
93.2
91.2
South Africa
Healthcare
services
81.8
79.8
317
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Company
Mediclinic Paarl (Pty)
Ltd9
Mediclinic Properties
(Pty) Ltd
Mediclinic Tzaneen
(Pty) Ltd9 (50% plus
one share)
Mediclinic
Stellenbosch (Pty)
Ltd9
Denmar Specialist
Psychiatric Hospital
(Pty) Ltd
Intelimed (Pty) Ltd
Intercare Group
Hospital Holdings
(Pty) Ltd (Hospitals)
Newcastle Private
Hospital (Pty) Ltd9
(50% plus one share,
including B class
shares)
Practice Relief (Pty)
Ltd
Country of
incorporation
and place of
business
South Africa
Principal
activities
Healthcare
services
Interest in capital1
31 March
2020
%
31 March
2019
%
75.5
75.5
South Africa
Property
ownership and
management
100.0
100.0
South Africa
Healthcare
services
50.0
50.0
South Africa
Healthcare
services
87.3
72.5
South Africa
Mental healthcare
services
100.0
South Africa
Managed Care
Organisation
(Dormant)
100.0
0
0
South Africa
Healthcare
services
50.1
50.1
South Africa
Healthcare
services
51.3
50.0
Address of the
registered office
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Glenfair Office Block
Lynnwood & Daventry Roads
Lynnwood
0081
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Provision of debt
collection and
related services
100.0
100.0
Victoria Hospital (Pty)
Ltd9 (50% plus five
shares, including B
class shares)
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
50.0
50.0
INDIRECTLY HELD THROUGH MEDICLINIC HOLDINGS (NAMIBIA) (PTY) LTD
Mediclinic Capital
(Namibia) (Pty) Ltd
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Namibia
Investment holding
company
100.0
100.0
318
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Mediclinic
Otjiwarongo (Pty) Ltd
Mediclinic Properties
(Swakopmund) (Pty)
Ltd
Mediclinic Properties
(Windhoek) (Pty) Ltd
Mediclinic
Swakopmund (Pty)
Ltd
Mediclinic Windhoek
(Pty) Ltd
Address of the
registered office
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
Grant Thornton Neuhaus
12th floor
Sanlam Centre
157 Independence Avenue
Windhoek, Namibia
HOSPITAL INVESTMENT COMPANIES
Mediclinic
Bloemfontein
Investments (Pty) Ltd
Mediclinic Cape Gate
Investments (Pty) Ltd
Mediclinic Cape Town
Investments (Pty) Ltd
Mediclinic
Constantiaberg
Investments (Pty) Ltd
Mediclinic Durbanville
Investments (Pty) Ltd
Mediclinic Emfuleni
Investments (Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Country of
incorporation
and place of
business
Namibia
Principal
activities
Healthcare
services
Interest in capital1
31 March
2020
%
31 March
2019
%
100.0
100.0
Namibia
Namibia
Property
ownership and
management
Property
ownership and
management
100.0
100.0
100.0
100.0
Namibia
Healthcare
services
98.9
99.0
Namibia
Healthcare
services
97.1
97.1
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
98.2
98.2
90.5
89.9
99.0
99.0
75.0
75.0
99.4
99.4
81.0
80.1
319
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Address of the
registered office
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Company
Mediclinic George
Investments (Pty) Ltd
Mediclinic Highveld
Investments (Pty) Ltd
Mediclinic Hoogland
Investments (Pty) Ltd
Mediclinic Kathu
Investments (Pty) Ltd
Mediclinic Klein Karoo
Investments (Pty) Ltd
Mediclinic Legae
Investments (Pty) Ltd
Mediclinic Louis
Leipoldt Investments
(Pty) Ltd
Mediclinic Milnerton
Investments (Pty) Ltd
Mediclinic
Morningside
Investments (Pty) Ltd
Mediclinic Nelspruit
Investments (Pty) Ltd
Mediclinic Panorama
Investments (Pty) Ltd
Mediclinic
Pietermaritzburg
Investments (Pty) Ltd
Mediclinic Plettenberg
Bay Investments (Pty)
Ltd
320
Country of
incorporation
and place of
business
South Africa
South Africa
South Africa
Principal
activities
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Interest in capital1
31 March
2020
%
31 March
2019
%
99.3
99.3
97.1
98.5
98.9
99.1
South Africa
Dormant
100.0
100.0
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
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
100.0
100.0
88.0
89.3
99.9
99.8
99.4
99.4
81.3
79.7
98.2
98.2
99.2
99.2
77.6
76.4
93.0
93.0
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Mediclinic Sandton
Investments (Pty) Ltd
Mediclinic Secunda
Investments (Pty) Ltd
Mediclinic Vereeniging
Investments (Pty) Ltd
Mediclinic Vergelegen
Investments (Pty) Ltd
Mediclinic Welkom
Investments (Pty) Ltd
Mediclinic Worcester
Investments (Pty) Ltd
Address of the
registered office
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
INDIRECTLY HELD THROUGH MEDICLINIC (PTY) LTD
Mediclinic Ermelo
(Pty) Ltd9
Mediclinic Hermanus
(Pty) Ltd9
Mediclinic Kimberley
(Pty) Ltd9
Mediclinic Limpopo
(Pty) Ltd9&11
Mediclinic
Potchefstroom (Pty)
Ltd9
Mediclinic Upington
(Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Country of
incorporation
and place of
business
South Africa
South Africa
South Africa
South Africa
South Africa
South Africa
Principal
activities
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Hospital
investment
company
Interest in capital1
31 March
2020
%
31 March
2019
%
93.8
93.8
82.2
81.8
98.5
98.5
94.8
94.4
91.5
91.9
97.3
97.3
South Africa
Healthcare
services
58.1
58.1
South Africa
Healthcare
services
53.2
53.2
South Africa
Healthcare
services
89.6
89.5
South Africa
Healthcare
services
50.0
50.0
South Africa
Healthcare
services
85.6
85.6
South Africa
Healthcare
services
50.0
50.0
321
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Company
Address of the
registered office
Country of
incorporation
and place of
business
Principal
activities
Interest in capital1
31 March
2020
%
31 March
2019
%
INDIRECTLY HELD THROUGH HOWICK PRIVATE HOSPITAL HOLDINGS (PTY) LTD
Howick Private
Hospital (Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC LIMPOPO (PTY) LTD
Mediclinic Limpopo
Day Clinic (Pty) Ltd9
Mediclinic Limpopo
Investments (Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
57.9
57.9
South Africa
Investment holding
company
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC TZANEEN (PTY) LTD
Mediclinic Tzaneen
Investments (Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Investment holding
company
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC DURBANVILLE INVESTMENTS (PTY) LTD
Mediclinic Durbanville
Day Clinic (Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Day clinic
investment
company
INDIRECTLY HELD THROUGH MEDICLINIC NELSPRUIT INVESTMENTS (PTY) LTD
Mediclinic Nelspruit
Day Clinic
Investments (Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Day clinic
investment
company
INDIRECTLY HELD THROUGH MEDICLINIC CAPE GATE INVESTMENTS (PTY) LTD
Mediclinic Cape Gate
Day Clinic
Investments (Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Day clinic
investment
company
INDIRECTLY HELD THROUGH MEDICLINIC WELKOM INVESTMENTS (PTY) LTD
85.2
85.2
100.0
100.0
-
-
Welkom Medical
Centre (Free State)
(Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
79.5
78.8
INDIRECTLY HELD THROUGH MEDICLINIC MORNINGSIDE INVESTMENTS (PTY) LTD
Sandton Day Hospital
(Pty) Ltd10
Glenfair Office Block
Lynnwood & Daventry Roads
Lynnwood
0081
South Africa
Healthcare
services
70.0
70.0
322
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Sandton Sub-Acute
Hospital (Pty) Ltd10
Address of the
registered office
Glenfair Office Block
Lynnwood & Daventry Roads
Lynnwood
0081
Country of
incorporation
and place of
business
South Africa
Principal
activities
Healthcare
services
Interest in capital1
31 March
2020
%
31 March
2019
%
70.0
70.0
INDIRECTLY HELD THROUGH MEDICLINIC VICTORIA HOSPITAL (PTY) LTD
Victoria Hospital
Investments (Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Investment holding
company
100.0
100.0
INDIRECTLY HELD THROUGH CURAMED HOLDINGS (PTY) LTD
Curamed Hospitals
(Pty) Ltd9
Curamed Properties
(Pty) Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
100.0
100.0
South Africa
Property
ownership and
management
100.0
100.0
INDIRECTLY HELD THROUGH CURAMED HOSPITALS (PTY) LTD
Mediclinic Thabazimbi
(Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
76.0
76.0
INDIRECTLY HELD THROUGH ER24 HOLDINGS (PTY) LTD
ER24 EMS (Pty) Ltd
ER24 Trademarks
(Pty) Ltd
ER24 Zambia Ltd
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Building 3
Acacia Park
Stand No. 22768
Thabo Mbeki Road
Lusaka, Zambia
South Africa
Emergency
medical services
100.0
100.0
South Africa
Intellectual
property holding
company
100.0
100.0
Zambia
Emergency
medical services10
99.0
99.0
INDIRECTLY HELD THROUGH MEDICLINIC STELLENBOSCH (PTY) LTD
Mediclinic Winelands
(Pty) Ltd9
Stellenbosch Day
Clinic (Pty) Ltd9
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
Mediclinic Corporate Office
25 Du Toit Street
Stellenbosch
7600
South Africa
Healthcare
services
50.1
100.0
South Africa
Dormant
76.1
100.0
323
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Company
Address of the
registered office
Country of
incorporation
and place of
business
Principal
activities
Interest in capital1
31 March
2020
%
31 March
2019
%
INDIRECTLY HELD THROUGH MEDICLINIC HOLDINGS NETHERLANDS B.V.
Mediclinic
Luxembourg S.à.r.l
14, rue Edward Steichen,
L-2540 Luxembourg
Luxembourg
Intermediary
holding company
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC LUXEMBOURG S.À.R.L.
Hirslanden AG
Boulevard Lilienthal 2
8152 Glattpark (Opfikon)
Switzerland
INDIRECTLY HELD THROUGH HIRSLANDEN AG
AndreasKlinik AG
Cham
Rigistrasse 1
6330 Cham
Hirslanden Bern AG
Schänzlihalde 11
3013 Bern
Hirslanden Freiburg
AG, Düdingen
Bahnhofplatz 2a
3186 Düdigen
Hirslanden Klinik
Aarau AG
Schänisweg
5000 Aarau
Hirslanden Klinik Am
Rosenberg AG
Hasenbühlstrasse 11
9410 Heiden
Hirslanden Lausanne
SA
Avenue d’Ouchy 31
1006 Lausanne
IMRAD SA
Avenue d’Ouchy 31, Clinique
Bois-Cerf c/o Hirslanden
Lausanne SA
1006 Lausanne
Klinik Belair AG9
Rietstrasse 30
8200 Schaffhausen
Klinik Birshof AG
Alte Reinacherstrasse 28
4142 Münchenstein
Hirslanden
Praxiszentrum am
Bahnhof,
Schaffhausen AG9
Klinik St. Anna AG
Bleichestrasse 3
8200 Schaffhausen
St.- Anna-Strasse 32
6006 Luzern
Klinik Stephanshorn
AG
Brauerstrasse 95
9016 St. Gallen
Radiotherapie
Hirslanden AG
Rain 34
5000 Aarau
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
Switzerland
100.0
100.0
Intermediary
holding company
and operating
company of the
Hirslanden group
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
100.0
80.0
-
100.0
99.97
99.70
100.0
-
100.0
100.0
100.0
100.0
100.0
100.0
324
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Address of the
registered office
Hirslanden Klinik
Linde AG
Bluemrain 105
2503 Biel/Bienne
Hirslanden La Colline
Grangettes
Chemin des Grangettes 7, c/o
Clinique des Grangettes SA
1224 Chene-Bougeries
Country of
incorporation
and place of
business
Switzerland
Switzerland
Principal
activities
Healthcare
services
Healthcare
services
Interest in capital1
31 March
2020
%
31 March
2019
%
100.0
100.0
60.0
60.0
INDIRECTLY HELD THROUGH HIRSLANDEN KLINIK AM ROSENBERG AG
Klinik am Rosenberg
Heiden AG
Hasenbühlstrasse 11
9410 Heiden
Switzerland
Healthcare
services
99.2
99.2
INDIRECTLY HELD THROUGH HIRSLANDEN LA COLLINE GRANGETTES SA
Hirslanden Clinique
La Colline SA
Avenue de Beau-Séjour 6
1206 Genève
Switzerland
Healthcare
Services
60.0
60.0
Grangettes Healthcare
SA
Chemin des Grangettes 7, c/o
Clinique des Grangettes SA
1224 Chene-Bougeries
Switzerland
Healthcare
Services
60.0
60.0
INDIRECTLY HELD THOUGH GRANGETTES HEALTHCARE SA
Clinique des
Grangettes
Dianecho SA
Chemin des Grangettes 7
1224 Chene-Bougeries
Switzerland
Rue de Carouge 116
1205 Genève
Switzerland
Switzerland
Healthcare
Services
Healthcare
Services
Healthcare
Services
60.0
60.0
43.9
43.9
100.0
100.0
Hirslanden ambulante
Operationszentren
AG9
Boulevard Lilienthal 2
8152 Glattpark (Opfikon)
INDIRECTLY HELD THROUGH MEDICLINIC MIDDLE EAST HOLDINGS LIMITED
Mediclinic
International Co
Limited
6th Floor, 65 Gresham Street,
London, EC2V 7NQ, United
Kingdom
Emirates Healthcare
Holdings Limited
C/O Tricor Group, Office: 2nd
Floor Palm Grove House,
Wickhams Cay P.O. Box 3340,
Road Town Tortola, British
Virgin Islands
United Kingdom Dormant
100.0
100.0
British Virgin
Islands
Intermediary
holding company
100.0
100.0
INDIRECTLY HELD THROUGH EMIRATES HEALTHCARE HOLDINGS LIMITED
Welcare World
Holdings Limited
Emirates Healthcare
Limited2
C/O Tricor Group, Office: 2nd
Floor Palm Grove House,
Wickhams Cay P.O. Box 3340,
Road Town Tortola, British
Virgin Islands
C/O Tricor Group, Office: 2nd
Floor Palm Grove House,
Wickhams Cay P.O. Box 3340,
Road Town Tortola, British
Virgin Islands
British Virgin
Islands
Healthcare
services
100.0
100.0
British Virgin
Islands
Healthcare
services
100.0
100.0
325
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Company
Address of the
registered office
Country of
incorporation
and place of
business
Principal
activities
Interest in capital1
31 March
2020
%
31 March
2019
%
DIRECTLY HELD THROUGH EMIRATES HEALTHCARE HOLDINGS LIMITED
Delah Cafe FZ LLC
(incorporated in
October 2016)
Mediclinic City Hospital
-Building no 37-G-round
Floor -Dubai
Mediclinic Al Quasis
Clinic LLC
Mediclinic Beach
Road LLC (dormant)
Mediclinic City
Hospital FZ LLC
Mediclinic Clinics
Investment LLC
Mediclinic Ibn
Battuta Clinic LLC
Mediclinic Medical
Stores Co LLC
Mediclinic Mirdif
Clinic LLC
Mediclinic Parkview
Hospital LLC
Al Qusais-Shop 3,4,5 -Legend
Middle East Building -plot no
284/243
Second December Street -Al
Hudaibah Building Complex
– Block C -First floor -Dubai
UAE
Dubai Healthcare City – Al
Razi Street – Building no
37- Dubai -UAE
Bur Saeed -Deira City Center
– Majid Al Futtaim Building –
3A-3B-5A-GF-B Offices-
Dubai
Ibn Battua Mall -Retail
Corp-China Cluster -shop
142-Dubai
Deira -Al Khubeissi-
Mohamed Abdul Rahmen
-store no 19- Dubai
Mirdif – Uptown Mirdif
Building- Office 13, Ground
Floor-Dubai
Al Barsha South 3 -Mediclinic
Middle East Management
services FZ.LLC Building-
Dubai
Welcare Hospitals
Limited
Welcare World Health
Systems Limited
C/O Tricor Group, Office: 2nd
Floor Palm Grove House,
Wickhams Cay P.O. Box 3340,
Road Town Tortola, British
Virgin Islands
C/O Tricor Group, Office: 2nd
Floor Palm Grove House,
Wickhams Cay P.O. Box 3340,
Road Town Tortola, British
Virgin Islands
UAE
Food and catering
100.0
100.0
UAE
UAE
UAE
UAE
UAE
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
Healthcare
services
49.0
49.0
49.0
49.0
100.0
100.0
49.0
49.0
49.0
49.0
UAE
Procurement
49.0
49.0
UAE
UAE
Healthcare
services
Healthcare
services
British Virgin
Islands
Healthcare
services
49.0
49.0
49.0
49.0
49.0
49.0
100.0
100.0
British Virgin
Islands
Healthcare
services
100.0
100.0
Mediclinic Al Bahr
Clinic LLC (dormant)
Bur Dubai -Jumeirah-Fardan
Bin Ali Fardan Villa Dubai
UAE
Healthcare
services
Mediclinic Hospitals
LLC (Al Noor
Hospital)4
Sheikh Khalifa Street -Sheikh
Mohamed Bin Butti Building
-Abu Dhabi
UAE
Healthcare
services
49.0
49.0
Pharma Light Medical
Store LLC
Musaffah -shop 27 – plot no
49-store- Abu Dhabi
UAE
Medical store /
procurement
49.0
49.0
326
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT Company
Address of the
registered office
Country of
incorporation
and place of
business
INDIRECTLY HELD THROUGH WELCARE HOSPITALS LIMITED (BVI)
Mediclinic Welcare
Hospital LLC
Al Garhood-Deira Nasser
Abdullah Hussein Lootah
Building - Dubai
UAE
INDIRECTLY HELD THROUGH WELCARE WORLD HOLDINGS LIMITED
Mediclinic Corniche
Medical Centre LLC
(liquidated)
Khalifa Bin Zayed street
Central Market – Al Dar
Properties
Ground floor -Abu Dhabi
Mediclinic Pharmacy
LLC (liquidated)
Khalifa Bin Zayed street
-World Trade Center shop no
16LG - Al Dar Properties- Abu
Dhabi
UAE
UAE
Principal
activities
Healthcare
services
Healthcare
services
Healthcare
services
(pharmacy)
Interest in capital1
31 March
2020
%
31 March
2019
%
49.0
49.0
-
-
49.0
49.0
INDIRECTLY HELD THROUGH WELCARE WORLD HEALTH SYSTEMS LIMITED
Mediclinic Middle East
Management Services
FZ LLC
Dubai Production City –
Publishing Pavilion -Floor
5,6,7 -Dubai
UAE
Healthcare
management
services
100.0
100.0
INDIRECTLY HELD THROUGH MEDICLINIC HOSPITALS LLC (AL NOOR HOSPITAL)
Al Noor Hospital
Clinics – Al Ain7
Al Ain Town Center -Sheikh
Mohammed Bin Butti Al
Hamed Building – Al Ain -Abu
Dhabi
UAE
Al Madar Medical
Center Pharmacy
LLC8
Al Jimi – Al Jimi Ali Jumaa Ali
Darmaki Building.
Abu Dhabi
UAE
Mediclinic Al Mamora
LLC (previously
named Al Noor
Hospital Family Care
Centre – Al Mamoora
LLC)5
Mediclinic Khalifa City
Clinic LLC (previously
named Al Noor
Hospital Medical
Centre Khalifa City
LLC)6
Mediclinic Hospitals -
Al Musafah Specialty
Clinics LLC
Mediclinic Pharmacy
- Al Musaffah 2 LLC
Island-Al Mouror Street-Jabr
Mohamed Ghanem Sultan Al
Suwaidi -Al Ain -Abu Dhabi
UAE
Khalifa City-Eastern South
42-plot no 14-Mabkhoot
Saleh Al Mansouri Building-
Abu Dhabi
Musafah Sh 10 parcel Id
401Floor no M,1&2 Huashel
Saeed Khaseeb Al Yakooubi
Building- Abu Dhabi
Madinat Mohamed Bin Zayed
-Sh10 Parcel ID 401 Huashel
Saeed Khaseeb Al Yakooubi
Building-Abu Dhabi
UAE
UAE
UAE
Intermediary
holding company
49.0
49.0
Healthcare
Services
Healthcare
Services
49.0
49.0
99.0
100.0
Healthcare
Services
49.0
49.0
Healthcare
Services
Healthcare
Services
49.0
49.0
49.0
49.0
327
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS Notes
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 Sole
proprietorship LLC and Mediclinic Hospitals
LLC (Al Noor Hospital 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 holds the
remaining 49%. By virtue of this shareholders
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
between ANCI, ANMC Management on
20 May 2013 (‘Management Agreement’);
and
d) A shareholder’s 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 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 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 99% and ANCI holds 1% in the issued
share capital of Mediclinic Al Mamora LLC,
collectively 100%.
6 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%.
7 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 (Al Noor Hospital).
8 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%.
9 Controlled through long-term management
agreements.
10 Managed by Intercare.
11 Operating through trusts or partnerships.
328
ANNEXURE CONTINUEDMEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT JOINT VENTURES
Company
Wits University Donald Gordon
Medical Centre (Pty) Ltd
ASSOCIATES
Country of incorporation
and place of business
Mediclinic Corporate Office,
25 Du Toit Street,
Stellenbosch,
7600 South Africa
Principal
activities
Healthcare
services
Interest in capital
31 March 2020 % 31 March 2019 %
49.9
49.9
Interest in capital
Book value of
investment
31 March
2020
%
31 March
2019
%
31 March
2020
£’m
31 March
2019
£’m
29.9
29.9
168
180
Company
Address of the registered office
Listed
Spire Healthcare Group plc
(held through Mediclinic
Jersey Limited)
3 Dorset Rise
London
EC4Y 8EN
Unlisted
Intercare Holdings Proprietary
Limited
Bourn Hall International
MENA Limited
Glenfair Office Block
Lynnwood & Daventry Roads
Lynnwood
0081
Dubai World Trade Centre, 9th
Floor, P.O. Box 9275, Dubai, United
Arab Emirates
Zentrallabor Zürich, Zürich1
Forchstrasse 452 8702 Zollikon
Baukonsortium, Cham2
Rigistrasse 1, 6330 Cham
EFG Parkierung Rigistrasse,
Cham2
Rigistrasse 1, 6330 Cham
Centre de Reeducation et de
Physiotherapie SA2
Avenue de la Roseraie 76 A, 1205
Genève
Centre de Physiotherapie du
Sport S.à.r.l.2
Chemin Thury 7A
1206 Genève
CORTS AG, Maur2
c/o ETU Treuhand und
Unternehmensberatung, Ch. Lutz
Zürichstrasse 268
8122 Binz
34.0
34.0
30.0
30.0
46.0
24.0
25.0
49.2
24.0
24.9
20.0
20.0
23.0
23.0
30.0
30.0
GRGB Santé SA, Genève Chemin de Beau-Soleil 20
30.0
30.0
1206 Genève
Notes
The nature of the activities of the associates is similar to the major activities of the Group.
1 The Hirslanden group does not control Zentrallabor Zürich as it has no power of the company.
2 Book value is less than £0.5m.
2
5
2
-
-
-
-
-
-
3
4
2
-
-
-
-
-
-
177
189
329
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS 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 (the ‘financial statements’):
• give a true and fair view of the state of the Company’s affairs at 31 March 2020 and 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 as applied in accordance with the provisions of the Companies Act 2006; and
• have been prepared in accordance with the requirements of the Companies Act 2006.
We have audited the financial statements, included within the Annual Report, which comprise: the Company statement of
financial position at 31 March 2020; the Company statement of changes in equity and the Company statement of cash
flows for the year then ended; and the notes to the financial statements, which include a description of the significant
accounting policies.
Our opinion is consistent with our reporting to the Audit and Risk Committee.
BASIS FOR OPINION
We conducted our audit in accordance with International Standards on Auditing (UK) (‘ISAs [UK]’) and applicable law.
Our responsibilities under ISAs (UK) are further described in the auditors’ responsibilities for the audit of the financial
statements section of our report. We believe that the audit evidence we have obtained is sufficient and appropriate to
provide a basis for our opinion.
INDEPENDENCE
We remained independent of the Company in accordance with the ethical requirements that are relevant to our audit of
the financial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest
entities, and we have fulfilled our other ethical responsibilities in accordance with these requirements.
To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard
were not provided to the Company.
Other than those disclosed in note 7 to the financial statements, we have provided no non-audit services to the Company
in the period from 1 April 2019 to 31 March 2020.
OUR AUDIT APPROACH
OVERVIEW
Materiality
• Overall materiality: £33.5 million (2019: £38 million)
based on approximately 1% of total assets.
Audit scope
material balances and transactions.
• Our audit included substantive procedures of all
• Impairment assessment of the Company’s
investments in subsidiaries
Key Audit
matters
• Impact of COVID-19
330
MEDICLINIC INTERNATIONAL PLC 2020 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 in which it operates, we identified that the principal risks of
non-compliance with laws and regulations related to UK tax regulations 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
and UK Listing Rules. We evaluated management’s incentives and opportunities for fraudulent manipulation of the
financial statements (including the risk of override of controls) and determined that the principal risks were related to
posting inappropriate journal entries and management bias in key 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 whistle-blower claims including 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 accounting estimates;
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. Also, 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 engagement
team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the
context of our audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide
a separate opinion on these matters. This is not a complete list of all risks identified by our audit.
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
1. IMPAIRMENT ASSESSMENT OF THE COMPANY’S
INVESTMENTS IN SUBSIDIARIES (refer to notes 2 and 3
in the Company financial statements)
Investments in subsidiaries are accounted for at cost
less impairment in the Company balance sheet. At
31 March 2020, 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.
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 2020 and to the valuations implied by other
models, including valuation models prepared for
impairment review purposes at each division and for
the Group’s associate investment in Spire, which were
subject to audit procedures as part of our Group audit.
331
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT CONTINUED
KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
At the start of the financial year, accumulated impairment
charges previously recorded totalled £2 113 million. In the
current financial year, impairment triggers were identified
in connection with all of the Company’s investments
due to the impact of the COVID-19 pandemic and
an impairment test was therefore performed by
management for all investments held. Management’s
analysis resulted in impairment charges for the
investment in Mediclinic Middle East Holdings Limited
(which holds the Group’s Middle East operations) due to
the combined impact of COVID-19 and changes to the
longer-term regional economic outlook and lower oil
prices. Management also identified an impairment in the
Company’s investment in Mediclinic International (RF)
Pty Limited (which holds the Group’s South African
operations) principally due to changes in the discount
rate assumptions and decline in the foreign exchange
rate of the South African rand compared to the
Company’s functional currency.
Deploying our valuation experts, we tested the
reasonableness of key assumptions underpinning
management’s valuation of the Company’s investments,
focusing in particular on the Middle East and Southern
Africa operations, 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.
We performed independent sensitivity analysis to
evaluate the impact of a range of different COVID-19
scenarios on the Company’s impairment judgements.
We separately evaluated the difference between the
investment carrying values and the Group’s market
capitalisation.
We tested the correction of the prior period errors
related to the adjustment for non-controlling interests
and for post-retirement benefit provisions and we
assessed the adequacy of the related disclosure. We
assessed the risk of any further undetected errors in the
calculation of recoverable amount for the Company’s
other investments.
We considered the appropriateness of the related
disclosures in the Company financial statements.
Based on the procedures performed, we noted no
material issues arising from our work.
Management identified prior period errors in the
determination of the recoverable amount for Mediclinic
International (RF) Pty Limited as the effect of non-
controlling interests and post-retirement benefit
provisions had not been correctly accounted for
previously. The impact of the errors was to reduce the
carrying value of the investments at 1 April 2018 and
31 March 2019 by £235 million and £259 million
respectively, with the cumulative impairment charges
at 31 March 2019 restated to £2 372 million.
As a result of management’s analysis, an impairment
loss of £233 million was recognised in the current
year, reflecting a write-down of the investments in
Mediclinic Middle East Holdings Limited and Mediclinic
International (RF) (Pty) Limited to their recoverable value
at 31 March 2020. The total accumulated impairment
charges at 31 March 2020 amount to £2 605 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 and the fact that prior period financial
information has required restatement. 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.
332
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT KEY AUDIT MATTER
HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER
2. IMPACT OF COVID-19 (refer to Audit and Risk
Committee Report on page 170)
Management has undertaken an assessment of the
impact of COVID-19 on the Company financial
statements at 31 March 2020, focusing on the potential
impact on the Company’s significant accounting
estimates. The areas where the impact has been most
significant are as follows:
• The Company’s going concern assessment;
• Impairment of the Company’s investments in
subsidiaries; and
• The related disclosures in the Annual Report.
We focused on the impact of COVID-19 on the
preparation of the Company financial statements as its
impact is significant, both in terms of the impact on a
range of the Company’s accounting judgements and
estimates, including but not limited to going concern
and impairment, and in terms of related disclosures in
the Company financial statements.
We assessed our ability to execute the audit when
operating under the restrictions of national lockdowns and
related international travel restrictions. We implemented
alternative communication and review protocols with
management and with our overseas supporting team
based in South Africa. We agreed with the Company an
extension to the planned timetable for the sign-off of the
Company financial statements and audit completion in
order to provide adequate time for management to make
its assessment of the business and financial reporting
impacts of COVID-19 and for our team to complete the
required audit procedures.
We evaluated management’s disclosures in relation to the
impact of COVID-19 in the Company financial statements
and we have reported a separate key audit matter relating
to going concern in our report on the Group financial
statements. Our findings relating to our work on the going
concern status of the Company are set out in the going
concern section of this report.
We evaluated management’s accounting estimates in light
of COVID-19 and we have reported a separate key audit
matter relating to impairment of the Company’s
investments in subsidiaries.
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 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
£33.5 million (2019: £38 million).
How we determined it
Based on approximately 1% of total assets.
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 Company is the payment of dividends. Using a
benchmark of total assets is therefore most appropriate.
For 2020 and 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
£11.1 million (2019: £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.
333
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS INDEPENDENT AUDITORS’ REPORT CONTINUED
We agreed with the Audit and Risk Committee that we would report to them misstatements identified during our
audit above £1 million (2019: £0.7 million) as well as misstatements below those amounts 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.
We have nothing to report.
REPORTING ON OTHER INFORMATION
The other information comprises all of the information in the Annual Report other than the financial statements and our
auditors’ report thereon. The Directors are responsible for the other information. Our opinion on the financial
statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the
extent otherwise explicitly stated in this report, any form of assurance thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information and, in doing
so, consider whether the other information is materially inconsistent with the financial statements or our knowledge
obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency
or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement
of the financial statements or a material misstatement of the other information. If, based on the work we have
performed, we conclude that there is a material misstatement of this other information, we are required to report that
fact. We have nothing to report based on these responsibilities.
With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by
the UK Companies Act 2006 have been included.
Based on the responsibilities described above and our work undertaken in the course of the audit, the Companies Act
2006 (CA06), ISAs (UK) and the Listing Rules of the Financial Conduct Authority (FCA) require us also to report
certain opinions and matters as described below (required by ISAs [UK] unless otherwise stated).
334
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 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 2020 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 221 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 114 of the Annual Report as to how they have assessed the prospects of
the Company, over what period they have done so and why they consider that period to be appropriate and
their statement as to whether they have a reasonable expectation that the Company will be able to continue
in operation and meet its liabilities as they fall due over the period of their assessment, including any related
disclosures drawing attention to any necessary qualifications or assumptions.
We have nothing to report having performed a review of the Directors’ statement that they have carried out
a robust assessment of the principal risks facing the Company and statement in relation to the longer-term
viability of the Company. Our review was substantially less in scope than an audit and only consisted of making
inquiries and considering the directors’ process supporting their statements; checking that the statements are
in alignment with the relevant provisions of the UK Corporate Governance Code (the ‘Code’); and considering
whether the statements are consistent with the knowledge and understanding of the Company and its
environment obtained in the course of the audit. (Listing Rules)
OTHER CODE PROVISIONS
We have nothing to report in respect of our responsibility to report when:
• The statement given by the directors, on page 221, 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 170 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)
335
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS 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 Statement of Directors’ Responsibilities set out on page 221, 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 Company financial statements and the part of the Directors’ Remuneration Report to be audited are not in
agreement with the accounting records and returns.
We have no exceptions to report arising from this responsibility.
APPOINTMENT
Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 18 March 2016 to
audit the financial statements for the year ended 31 March 2016 and subsequent financial periods. The period of total
uninterrupted engagement is five years, covering the years ended 31 March 2016 to 31 March 2020.
OTHER MATTER
We have reported separately on the Group financial statements of Mediclinic International plc for the year ended
31 March 2020.
Giles Hannam (Senior Statutory Auditor)
for and on behalf of PricewaterhouseCoopers LLP
Chartered Accountants and Statutory Auditors
London
1 June 2020
336
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT COMPANY STATEMENT OF FINANCIAL POSITION
AT 31 MARCH 2020
Non-current assets
Investment in subsidiaries
Current assets
Cash and cash equivalents
Derivatives
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
Note
1 Refer to note 2.3.
Notes
2020
£’m
2019
£’m Restated1
1 April 2018
£’m Restated1
3
3 311
3 544
4 512
35
2
28
-
26
-
3 348
3 572
4 538
74
6
690
2 547
2 773
(167)
(59)
-
-
74
6
690
2 773
3 741
(909)
(59)
-
-
74
6
690
3 741
5 154
(1 355)
(58)
1
(1)
3 317
3 543
4 511
2
29
31
1
28
29
1
26
27
3 348
3 572
4 538
5
5
5
5
5
5
6
5
5
4
These financial statements as set out on pages 337-344 were approved and authorised for issue by the Board of
Directors and signed on their behalf by:
CA van der Merwe
Group Chief Executive Officer
1 June 2020
PJ Myburgh
Group Chief Financial Officer
1 June 2020
Mediclinic International plc (Company no 08338604)
The notes on pages 340–344 form an integral part of these financial statements.
337
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
COMPANY STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 31 MARCH 2020
Share capital
£’m
Capital
redemption
reserve
£’m
At 1 April 2018
Correction of error1
Restated total equity
at beginning of
financial year
Loss for the year1
Dividends paid in the year
Settlement of share-
based payment reserve
Restated total equity at
31 March 2019
Balance at 31 March 2019
as originally presented
Correction of error1
Loss for the year
Dividends paid in
the year
Settlement of share-
based payment reserve
74
-
74
-
-
-
74
74
-
-
-
-
6
-
6
-
-
-
6
6
-
-
-
-
Share
premium
reserve
£’m
690
-
690
-
-
-
Retained
earnings
£’m
3 976
(235)
3 741
(909)
(59)
Share-based
payment
reserve
£’m
1
-
1
-
-
-
(1)
690
2 773
690
3 032
-
-
-
-
(259)
(167)
(59)
-
Treasury
shares
£’m
(1)
-
Total
4 746
(235)
(1)
4 511
-
-
1
-
-
-
-
-
-
-
(909)
(59)
-
3 543
3 802
(259)
(167)
(59)
-
3 317
-
-
-
-
-
-
-
At 31 March 2020
74
6
690
2 547
Note
1 Refer to note 2.3.
The notes on pages 340–344 form an integral part of these financial statements.
338
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT COMPANY STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 31 MARCH 2020
Operating activities
Profit/(loss) before tax
Adjustments for:
Other income
Impairment of investments
Fair value adjustment on derivative contracts
Dividend income
Net cash used in operating activities before movements
in working capital
Change in balances with related parties
Change in other payables
Net cash used in operating activities
Investing activities
Dividend received
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
Note
1 Refer to note 2.3.
Notes
2020
£’m
2019
£’m Restated1
(167)
(909)
6
3
4
6
(35)
233
(2)
(35)
(6)
1
1
(4)
35
35
(24)
(24)
7
28
35
(39)
967
-
(28)
(9)
2
1
(6)
28
28
(20)
(20)
2
26
28
The notes on pages 340–344 form an integral part of these financial statements.
339
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS NOTES TO THE COMPANY
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2020
1
STATUS AND ACTIVITY
Mediclinic 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 UK. The Company is a public liability company with divisions in Switzerland, Southern Africa
(South Africa and Namibia) and the UAE.
The activities of the subsidiaries are the operation of hospitals and clinics, and the sale of pharmaceuticals,
medical supplies and related equipment.
These financial statements are the 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 financial statements, except as noted below. These policies have
been consistently applied to all the years presented.
• Investments in subsidiaries are carried at cost less any accumulated impairment.
• Dividend income is recognised when the right to receive payment is established.
• The Company is taking advantage of the exemption in Section 408 of the UK Companies Act 2006 not to
present its individual income statement as part of these financial statements.
2.1. Basis of measurement
The financial statements of the Company are prepared in accordance with IFRS, as adopted by the EU, including
the 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.
2.2. Functional and presentation currency
The financial statements and financial information are presented in sterling, rounded to the nearest million.
2.3. Prior period error
During the year-end impairment assessment of Mediclinic International (RF) (Pty) Ltd it was discovered that
the non-controlling interest in Southern Africa and a retirement benefit obligation were not appropriately
deducted from the recoverable amount of the investment, resulting in the overstatement of the carrying value
and an understatement of the impairment charge in prior periods. As a result, the prior period carrying value of
the investment in subsidiary was restated. Mediclinic International (RF) (Pty) Ltd was impaired due to revised
expectations of business performance triggered by a deterioration in the macroeconomic environment and
prospects in South Africa as well as the weakening of the South African rand.
2019
£’m
Adjustment
£’m
2019
(Restated)
£’m
2018
£’m
Adjustment
£’m
1 April 2018
(Restated)
£’m
Statement of financial position (extract)
Investment in subsidiaries
Retained earnings
Statement of cash flows (extract)
Impairment of investments
Loss before tax
3 803
3 032
943
(885)
(259)
(259)
3 544
2 773
4 747
3 976
(235)
4 512
(235)
3 741
24
(24)
967
1 169
235
1 404
(909)
(1 120)
(235)
(1 355)
340
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 2
BASIS OF PREPARATION (continued)
2.4. Going concern
The Company 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. Refer to note 2.1 in the Group financial
statements for more detail relating to the going concern basis of accounting used in preparing the financial
statements.
2.5. 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).
3
INVESTMENT IN SUBSIDIARIES
This investment is stated at cost less impairment.
Shares at cost
Less: accumulated impairment charge
Closing balance
Note
1 Refer to note 2.3.
2020
£’m
5 916
(2 605)
3 311
2019
£’m Restated1
5 916
(2 372)
3 544
The investments held by the Company are Mediclinic CHF Finco Ltd, Mediclinic Holdings Netherlands B.V.,
Mediclinic Middle East Holdings Ltd and Mediclinic International (RF) (Pty) Ltd, each being wholly owned
subsidiaries. The activities of the subsidiaries are the operation of hospitals and clinics, and the sale of
pharmaceuticals, medical supplies and related equipment.
At the financial year-end, an impairment charge of £233m was recognised in respect of the carrying values of
the investments in Mediclinic Middle East Holdings Ltd and Mediclinic International (RF) (Pty) Ltd.
Mediclinic Middle East Holdings Ltd
The investment in subsidiary was impaired due to the changes in the macroeconomic environment. Refer to note
7 in the Group financial statements for key assumptions used for the fair-value-less-cost-to-sell calculations of
Mediclinic Middle East. 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. Additional sensitivity disclosure in respect
of the carrying value of the investment in Mediclinic Middle East Holdings Ltd: A fall in the forecast cash flows of
5% each year would result in an additional impairment of £73m.
Mediclinic International (RF) (Pty) Ltd
The investment in subsidiary was impaired due to revised expectations of business performance triggered by a
deterioration in the macroeconomic environment and prospects in South Africa as well as the weakening of the
South African rand.
Key assumptions used for the fair-value-less-cost-to-sell calculations for the annual impairment test for the
investment in Mediclinic International (RF) (Pty) Ltd are set out below:
Discount rates – The discount rate applied to cash flow projections 12.7% (2019: 12.0%)
Growth rates – The terminal growth rate beyond five years is 5.5% (2019: 5.6%)
Forecasts – As a result of the changes in the market environment exacerbated by COVID-19, forecasted cash
flows have been reduced from expectations in the prior period.
Reasonably possible changes in key assumptions that could give rise to a material adjustment to the carrying
value are set out below:
- A fall in the terminal growth rate to 4.5% would result in an additional impairment of £33m;
- A rise in discount rate to 13% would result in an additional impairment of £26m; or
- A fall in the forecast cash flow of 5% each year would result in an additional impairment of £42m.
341
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
3
INVESTMENT IN SUBSIDIARIES (continued)
The carrying value of the investment in Mediclinic International (RF) (Pty) Ltd is based on the fair value which
was determined in 2016 at the time of the Al Noor reverse acquisition, whereas the underlying assets of the
Southern African business in the consolidated financial statements are carried at historical cost with limited
fair value adjustments from historical acquisitions. Significant headroom remains in the consolidated financial
statements with no material impairments that were required
Mediclinic CHF Finco Ltd and Mediclinic Holdings Netherlands B.V.
Refer to notes 6, 7 and 8 in the Group financial statements for more detail relating to the impairment
calculations.
During the prior year, an impairment charge of £967m was recognised in respect of the carrying values of the
investments in Mediclinic CHF Finco Ltd, Mediclinic Holdings Netherlands B.V. and Mediclinic International (RF)
(Pty) Ltd. Mediclinic CHF Finco Ltd was impaired due to the impairment of the listed associate (Spire). Refer
to note 8 in the Group 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. Refer to notes 6 and 7 in the Group financial statements for more key assumptions used
for the fair-value-less-cost-to-sell calculations. Mediclinic International (RF) (Pty) Ltd was impaired due to the
weakening of the South African rand.
Refer to the Annexure to the notes to the Group financial statements on page 316 for a complete list
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) Transactions with key management personnel
Key management includes the directors (executive and non-executive)
and members of the Group Executive Committee
Directors’ fees
b) Amount due to a related party1
Mediclinic Hospitals LLC
Information regarding the Group’s subsidiaries and associates can be
found in the Annexure to the Group financial statements on page 316.
c) Dividends received from related parties:
Mediclinic CHF Finco Ltd
Mediclinic Holdings Netherlands B.V.
Mediclinic Middle East Holdings Ltd
Mediclinic International (RF) (Pty) Ltd
2020
£’m
2019
£’m
1
29
5
20
8
2
35
1
28
5
7
16
-
28
Note
1 This amount included the transaction and operational expenses paid by Mediclinic Hospitals LLC on behalf of the Company. This amount
is payable on demand.
342
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 5
SHARE CAPITAL AND RESERVES
Issued and fully paid 737 243 810 (2019: 737 243 810) shares of 10 pence each
Other Reserves
At 1 April 2018
Settlement of share-based payment reserve
At 31 March 2019
Settlement of share-based payment reserve
At 31 March 2020
Share-based
payment
reserve
£’m
1
(1)
-
-
-
2020
£’m
74
Treasury
shares
£’m
(1)
1
-
-
-
2019
£’m
74
Total
-
-
-
-
-
6
DIVIDENDS
The Company declared interim dividends for FY20 and final dividends for FY19 amounting to £59m. The
Company paid £24m (2019: £20m) of these dividends and the remainder of £35m (2019: £39m) 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 this was 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 30.6 to the Group financial statements.
7
AUDITOR’S REMUNERATION
The Company incurred an amount of £654 505 (2019: £448 758) to its auditor in respect of the audit of the
Company and Group’s financial statements for the year ended 31 March 2020. The fee includes an amount of
£107 610 (2019: £nil) in respect of prior years.
Fees to the Company’s auditors for other services:
Audit-related services
2020
£’m
0.15
0.15
2019
£’m
0.11
0.11
8
TAXATION
At 31 March 2020, the Company had unutilised tax losses of approximately £51m (2019: £47m). No deferred tax
asset has been recognised in respect of these losses.
343
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTFINANCIAL STATEMENTSFINANCIAL STATEMENTS
NOTES TO THE COMPANY FINANCIAL STATEMENTS CONTINUED
9
FINANCIAL INSTRUMENTS
9.1 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.
9.2 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.
9.3 Credit risk
The carrying amount of financial assets represents the maximum credit exposure. There is no material credit
risk involved on the Company financial statements. The Company’s cash equivalents are placed with reputable
financial institutions with a high-credit rating.
9.4 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.
Refer to note 2.1 in the Group financial statements for more detail relating to the necessary structures and
processes in place to monitor and mitigate against existing and emerging risks to the business, including
liquidity management risks, associated with the COVID-19 pandemic.
The maturity profile of the liabilities at the end of reporting period based on existing contractual repayment
arrangements was as follows:
a) Transactions with key management personnel
Key management includes the directors (executive and non-executive)
and members of the Group Executive Committee
Directors’ fees
b) Amount due to a related party1
Mediclinic Hospitals LLC
Information regarding the Group’s subsidiaries and associates can be
found in the Annexure to the Group financial statements on page 316.
c) Dividends received from related parties:
Mediclinic CHF Finco Ltd
Mediclinic Holdings Netherlands B.V.
Mediclinic Middle East Holdings Ltd
Mediclinic International (RF) Proprietary Limited
2020
£’m
2019
£’m
1
29
5
20
8
2
35
1
28
5
7
16
-
28
9.5 Foreign currency risk
The Company has an insignificant exposure regarding foreign currency, but a prudent approach toward foreign
cover is followed where applicable.
Note
1 This amount included the transaction and operational expenses paid by Mediclinic Hospitals LLC on behalf of the Company. This amount is payable
on demand.
344
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 345
ADDITIONAL
INFORMATION
To live our values, all processes must
start with the client in the middle
and enough time must be spent on
understanding their needs.
Dr Ronnie van der Merwe
Group Chief Executive Officer
Through the use of virtual reality, Hirslanden’s Clinique
Cecil in Lausanne has found an innovative way to help
patients manage the pain and anxiety associated with
medical treatment and procedures.
Refer to the 2020 Clinical Services Report at
annualreport.mediclinic.com for more information.
ADDITIONAL INFORMATION
348 Shareholder information
351 Company information
352 Forward-looking statements
353 Glossary of terms
346
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT 347
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTADDITIONAL INFORMATION SHAREHOLDER
INFORMATION
SHARE CAPITAL AND SHAREHOLDERS
STRUCTURE
The Company’s ordinary issued share capital at 31 March 2020 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 Group financial statements on page 275.
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 Remuneration Committee’s
Report on page 213.
TABLE 1: DISTRIBUTION OF ORDINARY SHAREHOLDERS AT 31 MARCH 2020
NUMBER OF SHAREHOLDERS NUMBER OF SHARES
% OF ISSUED SHARE CAPITAL
LSE register (registered)
436
245 308 909
JSE register (beneficial)
comprising:
- certificated
- dematerialised
18 796
1 042
17 754
491 934 901
499 653
491 435 248
33.27
66.73
0.07
66.66
Total
19 232
737 243 810
100.00
The Company has no intention to complete a market purchase of its ordinary shares and will not seek this authority at
the Company’s 2020 AGM.
RESTRICTIONS ON THE TRANSFER OF COMPANY SHARES
The South African B-BBEE Act, No. 53 of 2003, as amended, was enacted to establish a legislative framework for
the promotion of B-BBEE 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 socio-economic development. In 2005, Mediclinic International (RF) (Pty) Ltd (previously Mediclinic
International Ltd) (‘Mediclinic SA’) implemented a series of black ownership initiatives.
MP1 Investment Holdings (Pty) Ltd, through its subsidiary, Mpilo 1 Newco (RF) (Pty) Ltd (‘Mpilo 1’), holds
10 958 206 shares, representing approximately 1.49% of the Company’s issued share capital.
The agreement with Mpilo 1 was extended in 2019 and disposal of its shares is restricted until 30 April 2021.
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.
348
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT SUBSTANTIAL SHAREHOLDERS
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: FY20 SUBSTANTIAL SHAREHOLDERS
Remgro Ltd
(through wholly owned subsidiaries)
Public Investment Corporation SOC Ltd
Genesis Investment Management LLP
ORDINARY SHARES
% VOTING RIGHTS
DATE NOTIFIED
328 497 888
44.56
17/02/2016
58 392 076
36 733 699
7.92
10/12/2018
4.98
4/03/2020
Between the year-end and the Last Practicable Date, the Company received the following notifications from
shareholders in their interest of 3% or more in the Company’s issued share capital, in accordance with the Disclosure
Guidance and Transparency Rules:
Public Investment Corporation SOC Ltd
Genesis Investment Management LLP
71 180 057
36 866 812
9.66
3/04/2020
5.01
7/05/2020
ORDINARY SHARES
% VOTING RIGHTS
DATE NOTIFIED
2020 ANNUAL GENERAL MEETING
The Company’s AGM will take place at 16:30 (BST) on Wednesday, 22 July 2020 at 14 Curzon Street, London W1J 5HN,
UK. The 2020 Notice of AGM is available at annualreport.mediclinic.com, and has been posted as a separate booklet at
the same time as this Annual Report.
349
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTADDITIONAL INFORMATION SHAREHOLDER INFORMATION CONTINUED
DIVIDENDS
As part of the Group’s broad response to maintaining
its liquidity position through the COVID-19 pandemic and
to maximise its support in the handling of the crisis, the
Board has taken the prudent and appropriate decision
to suspend the dividend. The Board recognises the
importance of its dividend to shareholders and will keep
this position under review. Refer to the Chair’s Review on
page 20 for more information.
Refer to the Group Chief Financial Officer’s Report on
page 91 for more information on the Company’s Dividend
Policy.
The tax treatment of the dividend for shareholders on the
South African register is 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 Group financial statements on page 275.
The dividends declared by the Company to its ordinary shareholders during the reporting period are summarised below:
TABLE 3: FY20 DIVIDENDS DECLARED
Interim dividend
Final dividend
Total dividend
SHARE PRICE
FY19
3.20
4.70
7.90
FY20
3.20
n/a
3.20
The latest share price information can be found on the Company’s website at www.mediclinic.com or through a broker.
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 UK register
Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ, UK
Tel: +44 370 703 6022
E-mail: WebCorres@computershare.co.uk
Website: www.investorcentre.co.uk
Lines are open during normal business hours from 08:30
to 17:30 GMT, Monday to Friday, and charged at the
standard rate. Shareholders can use Computershare’s
website to check and maintain their records.
Share dealing service
Computershare offers a share dealing service that 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, whose 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 tel. +44 20 7930 3737 or
visit their website at www.sharegift.org.
Shareholders on the South African
and Namibian registers
South African transfer secretary
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue,
Rosebank 2196, South Africa
Postal address: Private Bag X9000,
Saxonwold 2132, South Africa
Tel: +27 11 370 5000
Fax: +27 11 688 5200
Email: Groupadmin1@computershare.co.za
Namibian transfer secretary
Transfer Secretaries (Pty) Ltd
4 Robert Mugabe Avenue, Windhoek, Namibia
Postal address: PO Box 2401, Windhoek, Namibia
Tel: +264 61 227 647
Fax: +264 61 248 531
Email: ts@nsx.com.na
350
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT COMPANY
INFORMATION
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 9548
Email: info@mediclinic.com
Website: www.mediclinic.com
TOLL-FREE ETHICS LINES
Switzerland and South Africa
Tel: 0800 005 316
UAE
Tel: 800 1 55000
LISTING
FTSE sector: Healthcare Providers
ISIN code: GB00B8HX8Z88
SEDOL number: B8HX8Z8
EPIC number: MDC
LEI: 2138002S5BSBIZTD5I60
Primary listing: LSE (share code: MDC)
Secondary listing: JSE (share code: MEI)
Secondary listing: NSX (share code: MEP)
DIRECTORS
Dr Edwin Hertzog (ne) (Chair) (South African),
Inga Beale DBE (ind ne) (Chair Designate) (British),
Dr Ronnie van der Merwe (Group Chief Executive
Officer) (South African), Jurgens Myburgh (Group
Chief Financial Officer) (South African), Alan Grieve
(Senior Independent Director) (British and Swiss),
Dr Muhadditha Al Hashimi (ind ne) (Emirati), Jannie
Durand (ne) (South African), Dr Felicity Harvey CBE
(ind ne) (British), Danie Meintjes (ne) (South African),
Dr Anja Oswald (ind ne) (Swiss), Trevor Petersen
(ind ne) (South African), Tom Singer (ind ne) (British),
Pieter Uys (alternate to Jannie Durand) (South African)
COMPANY SECRETARY
Link Company Matters Limited (previously named
Capita Company Secretarial Services Limited)
Caroline Emmet
6th Floor, 65 Gresham Street
London, EC2V 7NQ, United Kingdom
Tel: +44 20 7954 9548
Email: MediclinicInternational@linkgroup.co.uk
INVESTOR RELATIONS
James Arnold
Head of Investor Relations
14 Curzon Street, London
W1J 5HN, United Kingdom
Tel: +44 20 3786 8180/1
Email: ir@mediclinic.com
REGISTRAR/TRANSFER SECRETARIES
UK
United Kingdom Computershare Investor Services PLC
The Pavilions, Bridgwater Road, Bristol, BS99 6ZZ
Tel: +44 370 703 6022
Email: WebCorres@computershare.co.uk
SOUTH AFRICA
Computershare Investor Services (Pty) Ltd
Rosebank Towers, 15 Biermann Avenue, Rosebank 2196
Private Bag X9000, Saxonwold, 2132
Tel: +27 11 370 5000
NAMIBIA
Transfer Secretaries (Pty) Ltd
4 Robert Mugabe Avenue, Windhoek
PO Box 2401, Windhoek
Tel: +264 61 227 647
CORPORATE ADVISORS
Auditor
PricewaterhouseCoopers LLP, London
Corporate broker and sponsors
UK
Joint corporate brokers: Morgan Stanley & Co
International plc and UBS Investment Bank
SOUTH AFRICA
JSE sponsor: Rand Merchant Bank (a division of
FirstRand Bank Limited)
NAMIBIA
NSX sponsor: Simonis Storm Securities (Pty) Ltd
Legal advisors
UK
Slaughter and May
SOUTH AFRICA
Cliffe Dekker Hofmeyr Inc.
Remuneration consultant
Deloitte LLP
Communication agency
FTI Consulting
Tel: +44 20 3727 1000
Email: businessinquiries@fticonsulting.com
351
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTADDITIONAL 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 developments 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 UAE; 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.
352
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT GLOSSARY
OF TERMS
TERM
MEANING
2018 Corporate Governance
Code
the UK Corporate Governance Code published by the FRC in July 2018
Act
AED
AGM
Al Murjan
Annual Report
Articles
B-BBEE
the United Kingdom Companies Act 2006
United Arab Emirates dirham
annual general meeting
Saudi Arabian investment company Al Murjan Group
this annual report with financial statements for the reporting period ended
31 March 2020
the Company’s Articles of Association as adopted on 20 July 2017
broad-based black economic empowerment
Board or Board of Directors
the board of directors of Mediclinic
Bourn Hall
Bourn Hall International MENA
BST
BUPA
CAGR
CCRG
CEO
CFO
CGU
CHF
CIO
CO₂e
CoE
British Summer Time
British United Provident Association
compound annual growth rate
clinical and cost-related grouping
Chief Executive Officer
Chief Financial Officer
cash-generating unit
Swiss franc
Chief Information Officer
carbon dioxide equivalent
Centre of Excellence
Committee
Company
conflict of interest
pertaining to the committee previously defined, e.g. Audit and Risk Committee
Mediclinic International plc
any direct or indirect interest that conflicts or may possibly conflict with the
Company’s interests
CPE
CSI
DAS
DHA
cost per event
corporate social investment
Dividend Access Scheme
Dubai Health Authority
353
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTADDITIONAL INFORMATION GLOSSARY OF TERMS CONTINUED
TERM
DoH
DRG
EBIT
EBITDA
EHR
EMEA
EPS
ERM
ESG
MEANING
Abu Dhabi Department of Health
diagnostic-related grouping
earnings before interest and taxes
earnings before interest, tax, depreciation and amortisation
electronic health record
Europe, Middle East and Africa region
earnings per share
Enterprise Risk Management
environmental, social and governance
Ethics Code
the Company’s Code of Business Conduct and Ethics
EU
the European Union
External auditor
the Group’s independent external auditor, PricewaterhouseCoopers LLP
FCA
FRC
FSP
FVOCI
FVPL
Financial Conduct Authority
Financial Reporting Council
Forfeitable Share Plan
fair value through other comprehensive income
fair value through profit or loss
FY19/prior financial year
the financial year ended on 31 March 2019
FY20/period under review/
reporting period/year under
review
the financial year ended on 31 March 20200
FY21/next financial year
the financial year ending 31 March 20211
GDP
GMT
gross domestic product
Greenwich Mean Time
GRI Standards
Global Reporting Initiative Sustainability Reporting Standards 2016
Group
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
headline earnings per share
health information exchange in Abu Dhabi
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
Health Market Inquiry in South Africa
University Hospitals of Geneva
International Accounting Standard
information communication technology
HEPS
HIE
Hirslanden
HMI
HUG
IAS
ICT
354
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT TERM
ICT Com
ICU
IFRS
IFRS IC
IPC
IQM
MEANING
the Group’s ICT Steering Committee
intensive care unit
International Financial Reporting Standards
IFRS Interpretations Committee
infection prevention and control
Initiative on Quality Medicine
ISA or ISAs (UK)
International Standards of Auditing (UK)
IT
IVF
JACIE
JCI
JIBAR
JSE
KPI
information technology
in vitro fertilisation
Joint Accreditation Committee ISCT-Europe & EBMT
Joint Commission International
Johannesburg Interbank Average Rate
JSE Ltd
key performance indicator
Last Practicable Date
the date of the approval of the Annual Report, being 1 June 20200
LIBOR
London Interbank Offered Rate
Listing Rules
the listing rules issued by the Financial Conduct Authority
Listings Requirements
the listings requirements of the JSE
LSE
LTIP
the stock exchange operated by London Stock Exchange plc, based in London
long-term incentive plan for executives
Mediclinic
Mediclinic International plc
Mediclinic Middle East
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
Mediclinic SA
Mediclinic International (RF) (Pty) Ltd (previously Mediclinic International Ltd)
Mediclinic Southern Africa
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
Mpilo 1
MWM
NCI
NCRC
NHI
NHS
NSX
Mpilo 1 Newco (RF) (Pty) Ltd, a subsidiary of MP1 Investment Holdings (Pty) Ltd and
shareholder through a B-BBEE scheme
MWM Consulting Limited, the external search agency contracted to find an
independent non-executive director
non-controlling interests
non-contractual relationships with consultants
National Health Insurance
the UK’s National Health Service
Namibian Stock Exchange
355
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORTADDITIONAL INFORMATION GLOSSARY OF TERMS CONTINUED
TERM
Panel
Parker Report
PDMS
PH
PPA
PPE
PPPs
PwC
MEANING
the panel established to search for the Chair’s successor
the report based on the independent review by Sir John Parker into the ethnic
diversity of UK boards
patient data management system
Pensionskasse Hirslanden, the fund which provides post-employment, death-in-
service and disability benefits
purchase price allocation
personal protective equipment
public-private partnerships
the Group’s independent external auditor, PricewaterhouseCoopers LLP
Relationship Agreement
the Company’s relationship agreement with its principal shareholder, Remgro
Remgro
ROIC
Remgro Ltd, a controlling shareholder of Mediclinic which through wholly owned
subsidiaries held a 44.56% stake in the Company as at 31 March 2020
return on invested capital
SA Companies Act
the South African Companies Act, No. 71 of 2008
SAEs
SCADA
serious adverse events
supervisory control and data acquisition
Section 172
Section 172 of the United Kingdom Companies Act 2006
SID
SIR
Spire
SSI
STI
Senior Independent Director
standardised infection ratio
Spire Healthcare Group plc, a leading UK-based private healthcare group listed on
the LSE
surgical site infections
short-term incentive
TARMED
national outpatient tariff in Switzerland
total shareholder return
the United Arab Emirates
the United Kingdom of Great Britain and Northern Ireland
the United States
Vermont Oxford Network
weighted average cost of capital
World Health Organization
South African rand
TSR
UAE
UK
US
VON
WACC
WHO
ZAR
356
MEDICLINIC INTERNATIONAL PLC 2020 ANNUAL REPORT D E S I G N P O R T F O L I O / T I P A F R I C A P U B L I S H I N G