overview About Medi-Clinic inside front cover Scopes of the report inside front cover Our Values

Transcription

1 Contents overview About Medi-Clinic inside front cover Scopes of the report inside front cover Our Values inside front cover Financial Highlights 1 Operational Profile 2 Our History 4 Value Added Statement 6 Investment Case 7 Seven-year Financial Review 8 Board of Directors 10 Group Objectives 12 Administration and Dates of Importance to Shareholders 13 Reports to shareholders Chairman s Report 14 Chief Executive Officer s Report 16 Chief Financial Officer s Report 20 Operational reviews Medi-Clinic Southern Africa 31 Hirslanden 33 Emirates Healthcare 36 Governance & sustainability Clinical Governance Report 38 Corporate Governance Report 54 Risk Management Report 60 Sustainable Development Report 64 Remuneration Report Financial statements Directors responsibility statement 116 Certificate by the company secretary 116 Audit and Risk Committee report 117 Independent auditor s report 119 Directors report 120 Statements of financial position 122 Income statements 123 Statements of comprehensive income 123 Statements of changes in equity 124 Statements of cash flows 126 Notes to the annual financial statements 127 Annexure investments in subsidiaries and associates 165 Analysis of shareholders 168 Glossary 170 Notice of Annual General Meeting and Proxy Form 172

2 About Medi-Clinic Our values Medi-Clinic is a South Africa-based international private hospital group with three operating platforms in Southern Africa (South Africa and Namibia), Switzerland and the United Arab Emirates. The group was founded in 1983 and has been listed on the JSE Limited, the South African stock exchange based in Johannesburg, since We are focused on providing providing acute care, specialist-orientated, multi-disciplinary hospitals. Our core purpose is to enhance the quality of life of patients by providing comprehensive, high-quality hospital services in such a way that the group will be regarded as the most respected and trusted provider of hospital services by patients, doctors and funders of healthcare. We provide patients with cost-effective healthcare by offering a wide range of specialised services, ensuring that medical practitioners are provided with the best possible infrastructure in the form of custom-designed facilities and state-of-the-art equipment, delivering excellent nursing care focusing on the needs and satisfaction levels of our patients and by employing motivated, dedicated and loyal staff. SCOPE OF REPORT The Medi-Clinic Group and its employees support the following core values: Client Orientation In our behaviour we: reflect the image of the company deliver the right service in the right place at the right time regard everyone who is dependent on our outputs as our client determine and meet the expectations of our clients measure our clients satisfaction regularly respect our clients right to confidentiality personally accept responsibility for client service Team Approach In our behaviour we: promote positive team behaviour ensure the participation of all role players in problem solving set common goals exhibit responsible, fair, honest and effective leadership and followership Mutual Trust and Respect In our behaviour we: share information to the benefit of the company listen with empathy communicate openly and honestly exhibit respect for the individual and his or her dignity respect personal and company property solve problems on a win-win basis greet and acknowledge one another maintain an ethical standard This annual report of Medi-Clinic Corporation Limited presents the operating and financial results of the Group for the financial year ended 31 March 2010 and covers all our operations in Southern Africa, Switzerland and the United Arab Emirates. The report has been prepared in accordance with International Financial Reporting Standards, the Companies Act No. 61 of 1973, as amended, the Listings Requirements of the JSE Limited and the guidelines of the King Report on Corporate Governance for South Africa 2002 ( King II ) and the King Report on Governance for South Africa 2009 ( King III ). Performance Driven In our behaviour we: set objectives and give regular performance feedback ensure that each individual knows what the standards are and what is expected give recognition to whom it is due offer each employee the opportunity to develop to his or her full potential eliminate activities that do not add value promote continuous improvement in productivity base all appointments and promotions on competence and performance accept mentorship as a management task

3 Financial Highlights Salient Features S t r o n g d e f e n s i v e p e r f o r m a n c e by t h e G r o u p A l l t h r e e o p e r at i n g p l at f o r m s p e r f o r m e d s o l i d ly C o r e E B I T DA i n c r e a s e d by 9 % C o r e b a s i c h e a d l i n e e a r n i n g s p e r s h a r e i n c r e a s e d by 3 6 % GROUP SUMMARY Change R m R m % Revenue % Core EBITDA % Cash generated from operations % Core headline earnings % Total assets (13%) Shareholders equity (6%) Return (core headline earnings) on shareholders equity 12.8% 8.8% 45% cents cents Core headline earnings per ordinary share basic % Core headline earnings per ordinary share diluted % Total distribution per ordinary share % Net asset value per ordinary share (7%) Adjusted net asset value per ordinary share* (6%) * The adjusted net asset value per ordinary share exclude the valuation of the derivative financial instruments and the Swiss pension liability. MEDI-CLINIC ANNUAL REPORT

4 Operational Profile Hirslanden emirates healthcare Medi-Clinic southern Africa Medi-Clinic is a S o u t h A f rica-based international privat e hospita l gro u p with t hree oper ating pl at f orms in S o u t hern A f rica (S o u t h A f rica a nd N a mibi a), Switzerl a nd a nd t he U nited A r a b Emir at e s. Medi-Clinic was founded 27 years ago in 1983 when the Group s chairman, Dr Edwin Hertzog, was commissioned by the then Rembrandt Group (now Remgro) to undertake a feasibility study on private hospitals. Three years later Medi-Clinic, boasting four hospitals with 691 beds in commission and three hospitals with 688 beds under construction, listed on the JSE Limited. The Group has steadily expanded throughout Southern Africa and internationally. Subsequent to the Group s international expansion during 2007, its management and operational structure were divided into three operating platforms, namely Medi-Clinic Southern Africa, Hirslanden and Emirates Healthcare. The current Group structure is set out below. MEDI-CLINIC CORPORATION ( Medi-Clinic ) Medi-Clinic Southern Africa Hirslanden Emirates Healthcare Medi-Clinic Southern Africa operates 49 private hospitals throughout South Africa and three in Namibia with more than beds in total. Hirslanden operates 13 private acute care facilities in Switzerland with beds. Emirates Healthcare operates two private hospitals with 336 beds and four clinics in Dubai. 2 MEDI-CLINIC ANNUAL REPORT 2010

5 Hirslanden KEY FIGURES 13 hospitals beds 71 theatres employees Hospitals AndreasKlinik, Clinique Bois-Cerf, Clinique Cecil, Hirslanden Klinik Aarau, Klinik Am Rosenberg, Klinik Beau-Site, Klinik Belair, Klinik Birshof, Klinik Hirslanden, Klinik Im Park, Klinik Permanence, Klinik St. Anna, Salem-Spital emirates healthcare KEY FIGURES 2 hospitals and 4 clinics 336 beds 10 theatres employees Hospitals The City Hospital Welcare Hospital CLINICS Emirates Diagnostic Clinic, Welcare Ambulatory Care Centre, Welcare Clinic Mirdif, Welcare Clinic Qusais Medi-Clinic southern Africa KEY FIGURES 52 hospitals beds 252 theatres employees Hospitals SOUTH AFRICA Free State: Bloemfontein Medi-Clinic, Hoogland Medi-Clinic, Welkom Medi-Clinic Gauteng: Emfuleni Medi-Clinic, Kloof Medi-Clinic, Medforum Medi-Clinic, Medi-Clinic Heart Hospital, Morningside Medi-Clinic, Muelmed Medi-Clinic, Sandton Medi-Clinic, Sunnyside Medi-Clinic, Vereeniging Medi-Clinic, Wits Donald Gordon Medical Centre KwaZulu-Natal: Howick Private Hospital, Newcastle Private Hospital, Pietermaritzburg Medi-Clinic, Victoria Hospital Limpopo: Limpopo Medi-Clinic, Marapong Private Hospital, Thabazimbi Medi-Clinic, Tzaneen Medi-Clinic Mpumalanga: Barberton Medi-Clinic, Ermelo Medi-Clinic, Highveld Medi-Clinic, Nelspruit Medi-Clinic, Secunda Medi-Clinic Northern Cape: Kathu Medi-Clinic, Kimberley Medi-Clinic, Upington Medi-Clinic North West: Brits Medi-Clinic, Legae Medi-Clinic, Potchefstroom Medi-Clinic Western Cape: Cape Gate Medi-Clinic, Cape Town Medi-Clinic, Constantiaberg Medi-Clinic, Durbanville Medi-Clinic, Geneva Clinic, George Medi-Clinic, Hermanus Medi-Clinic, Klein Karoo Medi-Clinic, Louis Leipoldt Medi-Clinic, Milnerton Medi-Clinic, Paarl Medi-Clinic, Panorama Medi-Clinic, Plettenberg Bay Medi-Clinic, Stellenbosch Medi-Clinic, Strand Private Hospital, Vergelegen Medi-Clinic, Worcester Medi-Clinic NAMIBIA Cottage Medi-Clinic, Otjiwarongo Medi-Clinic, Windhoek Medi-Clinic Medi-Clinic s core purpose is to enhance the quality of life of patients by providing comprehensive, highquality hospital services in such a way that the Group will be regarded as the most respected and trusted provider of hospital services by patients, doctors and funders of healthcare. We provide patients with cost-effective healthcare by offering a wide range of specialised services, ensuring that medical practitioners are provided with the best possible infrastructure in the form of custom-designed facilities and state-of-the-art equipment, delivering excellent nursing care focusing on the needs and satisfaction levels of our patients and by employing motivated, dedicated and loyal staff. Through a continuous process of expansion, upgrading and training, we are constantly improving our standards and equipping our personnel with the skills and facilities to support our doctors and to ensure the peace of mind of our patients. Medi-Clinic s management approach is to run our hospitals on a decentralised basis. The head office of each of the three operational platforms is responsible for co-ordination, planning and providing specialised services, such as information technology, data warehousing, marketing, purchasing, technical services and financial services to our hospitals. MEDI-CLINIC ANNUAL REPORT

6 Our History Development Phase Dr Edwin Hertzog, our current chairman, commissioned by the then Rembrandt Group (now Remgro Group) to undertake a feasibility study on private hospitals, leading to the foundation of Medi-Clinic. Medi-Clinic Group established through purchasing of several medical facilities in Cape Town and Johannesburg. These include Sandton Medi-Clinic, Morningside Medi-Clinic and Leeuwendal (which later became Cape Town Medi-Clinic). Medi-Clinic listed on the JSE in South Africa. Panorama Medi-Clinic in Parow commissioned, the first hospital built by Medi-Clinic. Mitchell s Plain Medi-Clinic commissioned (subsequently sold in 1998) Acquisition of Lamprecht and Geneva Clinics in George (currently named George Medi-Clinic and Geneva Clinic). Establishment and acquisition of a 50% interest in the emergency assistance services company, ER24. Acquisition of Auckland Health Limited (the holding company of the Hospiplan hospitals), adding 12 more hospitals to the Group. Growth Phase Acquisition of an interest in the Curamed group of private hospitals in Pretoria, adding six more hospitals. Acquisition of an interest in Plettenberg Bay Private Health Centre (now Plettenberg Bay Medi-Clinic). Remaining interest obtained in Commissioning of Kloof Medi-Clinic in Pretoria (as part of the Curamed group), Tzaneen Medi-Clinic and Howick Medi-Clinic. Acquisition of an interest in Victoria Hospital in Tongaat. Establishment of Practice Relief, which renders practice administration management services to supporting doctors in Southern Africa. Acquisition of Cottage Medi- Clinic in Otjiwarongo. Acquisition of an interest in the Wits Donald Gordon Medical Centre in Johannesburg. Acquisition of remaining interest in ER24, the emergency services company, now a wholly owned subsidiary. Acquisition of Legae Medi-Clinic in Mabopane. R1.1 billion black ownership initiative introducing Phodiso Holdings Limited ( Phodiso ) and Circle Capital Ventures (Proprietary) Limited ( Circle Capital ) as our strategic black partners and shareholders in Medi-Clinic. 4 MEDI-CLINIC ANNUAL REPORT 2010

7 Medical Innovations established to design and manufacture medical equipment locally. Louis Leipoldt Medi-Clinic in Bellville acquired. Stellenbosch Medi-Clinic commissioned. Hoogland Medi-Clinic in Bethlehem commissioned. Constantiaberg Medi-Clinic in Constantia, Cape Town commissioned. Acquisition Phase Nursing Training Programme formally started. Klein Karoo Medi-Clinic in Oudtshoorn commissioned. Hydromed group acquired, adding four more hospitals to the Group. Medical Human Resources established. MediCor Group acquired, adding an additional 11 hospitals to the Group. Global Integration Phase Acquisition of the Protector Group s four hospitals (then with BEE partner Phodiso, who has subsequently sold its interest to Medi-Clinic). Conclusion of agreement to acquire a controlling interest in Emirates Healthcare Holdings in Dubai, United Arab Emirates, which then owned one hospital, the rights to develop two further hospitals in the Dubai Healthcare City and five clinics. Acquisition of a controlling interest in Emirates Healthcare Holdings in Dubai became unconditional. Medi-Clinic extends its international operations with the acquisition of a 100% interest in Hirslanden, the leading private hospital group in Switzerland, operating 13 private acute care facilities. This coincided with the 75th anniversary of the group s Klinik Hirslanden. Medi-Clinic celebrates its 25th anniversary. Division of management and operating structure of the Group into three operating platforms in Southern Africa (Medi-Clinic Southern Africa), Switzerland (Hirslanden) and the United Arab Emirates (Emirates Healthcare). Opening by Emirates Healthcare of Welcare Clinic Mirdif in Dubai. Opening by Emirates Healthcare of The City Hospital in the Dubai Healthcare City. Opening by Medi-Clinic Southern Africa of Cape Gate Medi-Clinic in the northern suburbs of Cape Town. Disposal by Emirates Healthcare of interest in Welcare Diagnostic and Treatment Centre in Muscat, Oman. MEDI-CLINIC ANNUAL REPORT

8 Value added statement for the year ended 31 March R m % R m % VALUE CREATED Revenue Cost of materials and services (6 369) (6 100) Interest received DISTRIBUTION OF VALUE To employees as remuneration and other benefits Taxation and other state and local authority levies (excluding VAT) To suppliers of capital: Minority interest Finance cost on borrowed funds Distributions to shareholders VALUE RETAINED To maintain and replace assets Income retained for future growth Distribution of value % Future growth 14.1% Finance cost 3.5% Distribution to shareholders 1.2% Minority interest 4.8% Taxation 6.6% Maintenance and replacement of assets 63.5% Employees 6 MEDI-CLINIC ANNUAL REPORT 2010

9 Investment Case MEDI-CLINIC IS COMMIT T ED TO ME A S U R A BL E COST-EFFECTIVE Q UA LIT Y CA RE We believe our core competence of achieving measurable cost-effective quality care is our competitive advantage. We are long-term investors in as well as developers and managers of acute care, specialist-orientated, multi-disciplinary hospitals and have a long track record of integrating and extracting value for investors. The healthcare sector remains a strong defensive investment with good long-term growth opportunities. H A S T HE ORG A NISATIONAL CA PA BILIT Y TO M A N AGE COSTS A ND PERFORM IN CH A NGING REGUL ATORY ENVIRONMENTS The healthcare sector is defined by ongoing changing regulatory environments. Medi-Clinic has a proven record of retaining margins and growing revenue despite changes in healthcare policy. Focusing on increasingly centralising cost centres and generating economies of scale. Implementing best practice in terms of clinical governance, sustainability and technical and operational expertise in each of the regions across the group. S T RONG GLOBA L PRESENCE A S A F OCUSED INTERNATIONAL HOSPITA L GRO U P Medi-Clinic is well positioned as a trusted provider of hospital services in the developing and developed markets in which it operates (Southern Africa, Europe and the Middle East). We focus on acute care specialist-orientated hospitals in each of the regions in which we operate. Diverse geographies mitigate country-specific risk. Generators of high quality earnings with consistent and transparent financial disclosure. An extensive property portfolio in prime real estate areas provides a strong asset underpin to our statement of financial position. WORK ING TO E S TA BLISH WORLD-CL A S S INTEGR ATION, CA PITA L M A N AGEMENT A ND RISK PROCE S SES Creating corporate structures that focus on group procurement and the most efficient allocation of capital across the Group. Creating centres of excellence in clinical standards, integration and risk management. Demonstrable efficiency and diligence in planning capital expenditure and making sound investment decisions. H A S A LONG-T ERM T R ACK RECORD OF PERFORMANCE WITH A S TA BLE SHAREHOLDER BASE An experienced management team within the private healthcare sector, with over 100 years in the industry collectively. Management and staff hold themselves to the highest personal and professional ethical standards. MEDI-CLINIC ANNUAL REPORT

10 Seven-year review IFRS IFRS IFRS IFRS IFRS IFRS SA GAAP CAGR # R m R m R m R m R m R m R m INCOME STATEMENTS Revenue 29.4% Core EBITDA 31.5% Past service cost 97 BEE share-based payment (85) EBITDA Depreciation (705) (672) (336) (146) (124) (97) (101) Amortisation/impairment of goodwill (13) (12) (5) (3) (3) Operating profit 30.9% Gain on sale of interest in subsidiary 28 Income from associates Exceptional items Finance income Finance cost (1 524) (1 602) (685) (88) (45) (29) (32) Profit before taxation Taxation (481) (502) (364) (270) (428) (214) (174) Profit for the year Attributable to: Equity holders of the Company 15.8% Minority interest Headline earnings 15.1% Core headline earnings 11.6% STATEMENTS OF FINANCIAL POSITION ASSETS Property, equipment and vehicles Intangible assets Investments and loans Deferred income tax assets Derivative financial instruments 43 Current assets Total assets EQUITY Equity attributable to owners of parent Minority interest LIABILITIES Long-term interest-bearing borrowings Deferred income tax liability Retirement benefit obligations Derivative financial instruments Provisions Current liabilities Total equity and liabilities STATEMENTS OF CASH FLOWS Cash generated from operating activities 29.1% Net finance income/(cost) (1 396) (1 438) (419) (44) Abnormal item 50 Taxation paid (444) (522) (360) (306) (448) (243) (196) Cash flow from operating activities Cash flow from investment activities (1 271) (1 380) (16 898) (672) (388) (178) (325) Cash flow from financing activities (542) (830) (185) (106) Cash distributions to minorities (55) (54) (41) (40) (39) (34) (32) Distributions to shareholders (374) (339) (189) (178) (166) (142) (120) Special dividend to shareholders (1 327) Proceeds from issuance of ordinary shares Movement in borrowings (155) (21) 40 Other 42 (29) Net movement in cash and bank overdrafts (647) Opening balance of cash and bank overdrafts Exchange rate fluctuations on foreign cash (121) Closing balance of cash and bank overdrafts # Compounded Annual Growth Rate 8 MEDI-CLINIC ANNUAL REPORT 2010

11 Seven-year review CAGR # STATISTICS AND PERFORMANCE PER PLATFORM Medi-Clinic Southern Africa Number of hospitals Licensed beds Licensed theatres Revenue (R m) 13.2% Core EBITDA (R m) 14.8% Core EBIT (R m) 15.2% Core EBITDA margin (%) 21.5% 21.5% 21.5% 21.5% 20.9% 20.3% 19.8% Hirslanden Number of hospitals Licensed beds Licensed theatres Revenue (R m) 16.1% * Core EBITDA (R m) 19.3% * Core EBIT (R m) 20.4% * Core EBITDA (CHF m) 9.5% Core EBIT (CHF m) 10.4% Core EBITDA margin (%) 23.4% 22.5% 22.2%* Emirates Healthcare Number of hospitals Licensed beds Licensed theatres Revenue (R m) 52.8% Core EBITDA (R m) 62.5% 132 (7) 50 Core EBIT (R m) 61.0% 57 (60) 22 Core EBITDA (AED m) 54.4% 62 (3) 26 Core EBIT (AED m) 56.7% 27 (25) 11 Core EBITDA margin (%) 11.8% (0.9%) 10.3% Share ratios Headline earnings per ordinary share cents Basic 5.9% Diluted 5.3% Core headline earnings per ordinary share cents Basic 2.7% Diluted 2.0% Distribution per ordinary share cents 10.5% Net asset value per ordinary share cents 10.3% Adjusted net asset value per ordinary share cents** 16.5% JSE Market capitalisation Price (cents per share) 31 March Highest Lowest Number of shares traded ( 000) Price-earnings ratio Core price-earnings ratio Number of shares Ordinary shares issued ( 000) Weighted number of ordinary shares ( 000) Diluted number of ordinary shares ( 000) Exchange rates Average rate (Swiss franc) R/CHF * Closing rate (Swiss franc) R/CHF Average rate (UAE dirham) R/AED Closing rate (UAE dirham) R/AED * The Group consolidated Hirslanden s results from the effective date of its acquisition, 26 October The figures are provided for a full year for comparative purposes. ** The adjusted net asset value per ordinary share exclude the valuation of the derivative financial instruments and the Swiss pension liability. MEDI-CLINIC ANNUAL REPORT

12 Board of directors Executive directors E de la H (Edwin) Hertzog (60) LJ (Louis) Alberts (62) DP (Danie) Meintjes (54) JG (Gerhard) Swiegers (55) Chairman M.B.Ch.B., M.Med., F.F.A. (SA) Appointed in 1983 as Managing Director, in 1990 as executive Vicechairman and in 1992 as executive* Chairman of the Company. Other directorships include Distell, Remgro, Total (SA) and Trans Hex Group. * Please refer to the explanation in respect of the classification of Dr Hertzog as executive chairman on page 56 of the annual report. Chief Executive Officer (retired on 31 March 2010) B.Comm., CA(SA) Appointed in 1988 as director of the Company and in 1990 as Chief Executive Officer. Retired on 31 March Chief Executive Officer (from 1 April 2010) B.PI. (Hons) Joined the Group in 1985 and appointed in 1996 as a director of the Company. Seconded to Dubai in 2006 and appointed as the Chief Executive Officer of Emirates Healthcare in Appointed as Chief Executive Officer of the Group with effect from 1 April Chief Financial Officer B.Acc. (Hons), B.Comm. (Hons) (Taxation), CA(SA) Appointed in 1994 as non-executive director of the Company and in 1999 as Chief Financial Officer. Independent non-executive directors ZP (Zodwa) Manase (48) AR (Alwyn) Martin (71) AA (Anton) Raath (54) DK (Desmond) Smith (62) B.Compt. (Hons), H.Dip. (Tax), CA(SA) B.Comm., CA(SA) B.Comm., CA(SA) B.Sc., FASSA Chief Executive Officer of the audit firm, Manase & Associates. Appointed as a director of the Company in Other directorships include State Information Technology Agency and Total (SA). Appointed in 2002 as a director of the Company. Other directorships include Trans Hex Group, Barnard Jacobs Mellet Holdings and Datacentrix Holdings. Chief Executive Officer of Glacier, a subsidiary of Sanlam. Appointed in 1996 as a director of the Company. Chairman of the RGA Reinsurance Company of South Africa and Chairman of Sanlam from June Appointed in 2008 as a director of the Company. Also appointed as the Lead Independent Director of the Company in MEDI-CLINIC ANNUAL REPORT 2010

13 Private hospital group KHS (Koert) Pretorius (47) Chief Executive Officer: Medi-Clinic Southern Africa B.Compt., MBL Joined the Group in 1998 and appointed as a director of the Company in Appointed as the Chief Executive Officer of Medi-Clinic Southern Africa in TO (Ole) Wiesinger (47) Chief Executive Officer: Medi-Clinic Switzerland/ Hirslanden Ph.D., Postgraduate Studies in Health Economics Joined the Hirslanden group in Appointed as the Chief Executive Officer of Hirslanden and a director of the Company in Non-executive directors JC (Joseph) Cohen (44) B.Sc. in Economics A managing partner of Trilantic Capital Partners. Appointed as a director of the Company in MK (Kabs) Makaba (57) M.B.Ch.B., Intermediate Diploma in Personnel Management and Training, Certificate in Small Business Management Chief Executive Officer of Faranani Health Solutions and director of Phodiso Holdings. Appointed as a director of the Company in WL (Wynand) van der Merwe (58) M.B.Ch.B., M.Med., F.F.A. (SA), MD Dean of the Faculty Health Sciences of Stellenbosch University. Appointed in 2001 as a director of the Company. MA (Mamphela) Ramphele (62) M.B.Ch.B., Diploma in Tropical Health and Hygiene, B.Comm., Diploma in Public Health, Ph.D. Deputy chairperson of Gold Fields from July Appointed in March 2005 as a director of the Company. Other directorships include Remgro and Anglo American. CM (Chris) van den Heever (46) B.Eng. (Chem), MBA An investment manager at Remgro (and previously at VenFin). Appointed in February 2010 as a director of the Company. Other directorships include Tracker, Tsb Sugar, Wispeco and One Digital Media. MH (Thys) Visser (56) B.Comm. (Hons), CA(SA) Chief Executive Officer of Remgro. Appointed in 2005 as a director of the Company. Other directorships include Distell, FirstRand Bank, Nampak, RMB Holdings and Unilever South Africa. Chairman of Rainbow Chicken. MEDI-CLINIC ANNUAL REPORT

14 Group objectives M A N AGING TO CRE AT E VA L U E F OR SHAREHOLDERS We focus on creating shareholder value, not just advancing market share, by focusing on growing our share of economic profit and managing risk appropriately whilst building an international hospital group. We will continue to optimise operations in our existing regional platforms by improving operational efficiencies in key business processes whilst continuously evaluating incremental growth opportunities. BUILD A CULT U RE T H AT PROV IDE S GROW T H A ND DE V ELOPMENT OPPORTUNITIE S FOR S TA F F A ND ENCOUR AGES T E A M WORK A corporate culture that provides a good working environment, training and skills development will assist to attract and retain talented staff. We aim to be the employer of choice, recognising that market competition for talent is increasing. Continued focus on making Medi-Clinic a great place to work will help us retain and attract the best people. W E F OCUS RELENTLESSLY ON CONTINUOUSLY IMPROV ING Q UA LIT Y CA RE We believe that our sustainable competitive advantage lies in excellence in clinical governance and delivering measurable, cost-effective quality care. We strive to be trusted and respected by patients, doctors and nurses. We will embrace technology as an enabler to deliver better quality care. ACCELER AT E INTEGR ATION A ND E X T R AC T SY NERGIE S ACRO S S T HE GRO U P Continue to develop core competencies across the various platforms to ensure international healthcare best practice is followed. Develop in-house skills that drive cost savings and synergies across existing and future platforms. Position ourselves as a leading international hospital group. M A N AGE RISK A ND REGUL ATORY CH A NGE PROAC TIVELY We focus on proactive engagement with regulatory and legislative bodies and actively manage the company according to Group-wide best practice. L E A D A S A RESPONSIBLE CORPOR AT E CITIZEN Social and environmental issues are important to us, our clients and stakeholders. We will continue to hold ourselves to the highest possible ethical and professional standards. 12 MEDI-CLINIC ANNUAL REPORT 2010

15 Administration and dates of importance to shareholders Administration COMPANY SECRETARY Gert Hattingh (45) B.Acc. (Hons), CA(SA) Dates of importance to shareholders ANNUAL GENERAL MEETING 9 September 2010 BUSINESS ADDRESS AND REGISTERED OFFICE Medi-Clinic Offices, Strand Road, Stellenbosch, 7600 Postal address: PO Box 456, Stellenbosch, 7599 Tel: Fax: FINANCIAL REPORTS Announcement of interim results Interim report Announcement of annual results Provisional report Annual report November November May June July AND WEBSITE medimail@mediclinic.co.za COMPANY REGISTRATION NUMBER 1983/010725/06 TRANSFER SECRETARIES Computershare Investor Services (Proprietary) Limited 70 Marshall Street, Johannesburg, 2001 Postal address: PO Box 61051, Marshalltown, 2107 Tel: Fax: AUDITOR PricewaterhouseCoopers Inc. PAYMENTS TO SHAREHOLDERS Interim payment: dividend number 25 (23 cents per share): Declaration date 10 November 2009 Last date to trade cum dividend 4 December 2009 First date of trading ex dividend 7 December 2009 Record date 11 December 2009 Payment date 14 December 2009 Final payment: dividend number 26 (50 cents per share): Declaration date 26 May 2010 Last date to trade cum dividend 18 June 2010 First date of trading ex dividend 21 June 2010 Record date 25 June 2010 Payment date 28 June 2010 SPONSOR Rand Merchant Bank (a division of FirstRand Bank Limited) LISTING JSE Limited Sector: Non Cyclical Consumer Goods Health Share code: MDC ISIN code: ZAE MEDI-CLINIC ANNUAL REPORT

16 Chairman s report The tasks of medical science fall into three buckets. One is understanding disease biology. One is finding effective therapies. And one is ensuring those therapies are delivered effectively. That third bucket has been almost totally ignored by research, funders, government, and academia. It s viewed as the art of medicine. That is a mistake, a huge mistake we have failed to view the delivery of healthcare as a science. Peter Pronovost (MD and PhD in public health in the US) Medi-Clinic holds the principle that good hospital care is something that must not be left to chance but has to be ensured systematically and made transparent. Viewing the delivery of healthcare as a science has been the guiding principle of all those responsible for the management of the Group ever since the Company was founded 27 years ago. Orienting all activities on the wellbeing of patients is the core element of Medi-Clinic s corporate philosophy. This general principle is embodied in our focus on cost-effective, quality healthcare. Healthcare and the provision of healthcare services has once again been a contentious topic on a global scale this year. In the United States, President Obama has succeeded, unlike his predecessors, to pass some sweeping healthcare reforms and has found that healthcare reform remains an emotional, complex and divisive topic. Priorities have to be set in all healthcare systems, whatever their level of expenditure and regardless of the methods of financing and delivery that are adopted. The nature of the choices that have to be made vary between systems, but the inevitability of priority setting is universal. As governments grapple with these issues, private healthcare providers are continuing to provide their ever-important services to a globally ageing, wealthier and better informed population. The debate around health policy and health policy models has also swept over South Africa. The Government s proposed NHI (national health insurance) and its noble aims are supported by the Group. We remain committed to working with government to try and find real solutions for access to and affordability of healthcare, issues that still face many South Africans. Europe has not remained untouched by the recent debates; the Swiss government has also embarked on a health policy reform process aimed at better addressing the needs of its ageing population. The economies of the world are increasingly focusing on how to bring quality healthcare to more people in a cost-effective way and it is likely to remain a key policy concern for all governments in the years to come. Fortunately most countries are increasingly recognising the important contribution the private sector plays in removing some of the public burden of healthcare services, mostly doing so in a more efficient and effective way. Capital markets, in the long run, place a premium on well-run companies. In the shorter term markets aren t always as rational creating challenges for management, auditors and boards of directors. The perennial question arises: How does one reconcile short-term market expectations with sustainability over the longer term? Medi-Clinic is aware that achieving satisfactory returns for shareholders in the long term depends on the sanctioning of the Company by a range of stakeholders such as employees, consumers, suppliers, competitors, communities, local authorities and governments. To that end, I must thank not only the staff of Medi-Clinic, but also the doctors that help us fulfil our contract of trust with patients. To our shareholders we have yet again delivered a solid set of results, improving both margins and standards of care. This cannot be achieved without the continued dedication of our management team, to whom I extend my heartfelt thanks. 14 MEDI-CLINIC ANNUAL REPORT 2010

17 Underpinning Medi-Clinic s future growth is a rising demand for cost-effective, quality healthcare. Three main factors are driving this on a global scale: population growth, ageing of the population and better informed patients demanding new clinical treatments. In 2010 the first of the baby boomers born after the second world war will turn 65. Although increased utilisation of hospital services by this age group is already occurring, by 2030 they are expected to account for twice as many hospital admissions as they do today. In this context and given benign economic conditions, the outlook for private healthcare remains positive. In acquisitions it is of utmost importance for us to speak our minds beforehand, and then to do what we said we would do, afterwards. Our newly established synergies and convergence division will focus on delivering value to that end. The integration of all our business is ongoing with the synergies and integration division actively engaging across all three operating platforms to investigate the potential of unlocking value. With regard to growth, we continuously evaluate interesting new opportunities that come our way as well as expansion projects at existing hospitals. At the moment our priority remains to focus on optimising our core business across the Group s three operating platforms. DIRECTORATE MATTERS We welcome Chris van den Heever to the Board as a non-executive director of Medi-Clinic from 5 February Mr Van den Heever is an investment manager at Remgro Limited, the company which owns 43.4% of Medi-Clinic s issued share capital. He brings with him a wealth of knowledge and experience in investment management from which the Medi-Clinic Group stands to benefit. EDWIN Hertzog chairman of the Medi-Clinic Group throughout his more than 22 years of service to the Company. He is an exceptional leader and has set a significant benchmark with his deep understanding of the business and industry. His experience and business acumen were invaluable assets for Medi-Clinic, for which we thank him most sincerely. We wish him a well-deserved retirement. Mr Danie Meintjes, appointed as the Group s CEO from 1 April 2010, joined Medi-Clinic from the Human Resources Department of the then Rembrandt Group (now Remgro) in He was the manager of Sandton Medi-Clinic for some years before he was appointed as the head of the Medi-Clinic Human Resources Department, and has been a member of the Medi- Clinic Executive Committee since In January 2006 he was seconded to Dubai where he was CEO of Emirates Healthcare, the company housing Medi-Clinic s activities in the United Arab Emirates. We welcome him in his new role as the Group s Chief Executive Officer and look forward to his further contribution to the Medi-Clinic Group. Mr Desmond Smith, an independent non-executive director of Medi-Clinic since March 2008, was appointed as the Lead Independent Director with effect from 1 March 2010 in compliance with the JSE Listings Requirements and the recommendations of the King Report on Governance for South Africa 2009 (King III). Mr Smith is the chairman of Santam Limited, the RGA Reinsurance Company of South Africa Limited and the chairman-elect of Sanlam Limited. He has recently been nominated as the only candidate for President of the International Actuarial Association, the first person ever from Africa. He also holds various other directorships. c h a i r m a n s R E P O R T c E O s r e p o r t c f O s r e p o r t o p e r a t i o n a l R E V I E W M e d i - C l i n i c S o u t h e r n A f r i c a o p e r a t i o n a l R E V I E W H I R S L A N D E N Mr Louis Alberts, our outgoing Chief Executive Officer, retired on 31 March Louis was appointed as a director of the Company in 1988 and as the CEO in He made an immense impact on the success E DE LA H HERTZOG Chairman MEDI-CLINIC ANNUAL REPORT o p e r a t i o n a l R E V I E W E M I R A T E S H E A LT H C A R E

18 Back to MAIN contents Chief executive officer s report International outlook 17 Group objectives 17 Group performance 18 Group outlook MEDI-CLINIC ANNUAL REPORT 2010

19 Back to contents INTERNATIONAL OUTLOOK Global healthcare overview Healthcare organisations and governments around the world are seeking solutions to temper the increasing costs of delivering healthcare while balancing this with the need to provide access to safe, quality care. According to PwC Healthcast 2010, conventional approaches are failing, even in the most advanced nations of the world. Healthcare organisations have not exchanged ideas globally as much as other industries such as manufacturing and services, because they are often viewed as a local industry. While each country faces unique hurdles, regulatory, economic and cultural, the challenges they face are remarkably similar. In evolving from a national hospital group to an international hospital group, the Group continues to exchange ideas globally. Despite the complexity of the challenges this presents, it is believed that successful initiatives often involving technological innovation, management commitment and increasingly consumer-focused business models will allow the Group to improve its commitment to provide cost-effective quality care and to develop global best practice. In order to function as an international hospital group, the Group continually strives to establish structures, business processes and business applications capable of integrating cross-border acquisitions seamlessly and unlocking value in the shortest possible time. To continue to grow internationally as a hospital group, it is imperative to understand how to unlock and add value with every acquisition, efficiently. In Southern Africa the Group developed a business model to achieve this with great success. In Switzerland Hirslanden has also had success with the integration of its hospital acquisitions. Combining the strengths of the Southern African operations and Hirslanden goes a long way to achieve the goal of being an international hospital group. In the past year the Group continued to build on its model for cross-border acquisitions, working collaboratively with its partners to determine best practice. Projects to standardise terminology, integrated risk management, clinical governance, information and communication technology governance, procurement and working capital management continue to progress. The debate on healthcare reform remains high on the political agenda of Southern Africa, Switzerland and Dubai. An overview of the developments in each of the regulatory environments is discussed under the business environment section of each platform s operational review. The Group is actively involved in the reform process via the health policy unit at each operating platform. The units are comprised of an louis alberts chief executive officer (retired 31 March 2010) internal team, consisting of management and other members of staff with specific skills, and a panel of external experts. These individuals often participate in or in certain cases, chair the associations that represent the interests of private hospitals. A great deal of misinformation or lack of information (especially relating to public services) often confuses the debate around hospital services, and the aim is to engage with government in a proactive and constructive manner in the search for appropriate solutions. GROUP OBJECTIVES Group operating environment The past operating year has been characterised by the global financial crisis. The crisis has created new imperatives that demand a revitalised perspective on the fundamental responsibilities of companies to their investors. In a marketplace driven by technology, information and a more empowered investor base, a commitment to sustainability and strong corporate governance is more than just sensible business practice it s essential for ensuring a sustainable, long-term business. The Group has once again delivered a sound set of results. Corporate governance, Group vision and sustainability Medi-Clinic strives not only to be the most trusted and respected international provider of hospital services, but also a good corporate citizen in its dealings with all stakeholders. The main pillars of its corporate constitution are the overall guidelines according to which the Group is managed and controlled (corporate governance), and which become increasingly important when operating globally. Policies are implemented to ensure adherence to all measures and provisions aimed at securing honest and ethically sound corporate management. Together with measures dealing efficiently and proactively with risks and opportunities to ensure the best possible quality of care, these policies serve their purpose of not only firmly establishing investors trust in the Company, but also continuously enhancing the value of the Group. What has always been important to the Group is not only that it meets its corporate targets, but does so using ways and means that satisfy its ethical standards. A Code of Business Conduct and Ethics has been re-confirmed by the Board. The Group is committed to being a responsible corporate citizen in every country and community in which it does business. According to this principle, the Board observes all laws, regulations, accepted codes and standards and internal guidelines, and implements MEDI-CLINIC ANNUAL REPORT C l i n i c a l G o v e r n a n c e R e p o r t C o r p o r a t e G o v e r n a n c e R e p o r t R i s k M a n a g e m e n t R e p o r t S u s t a i n a b l e D e v e l o p m e n t R e p o r t R e m u n e r a t i o n R e p o r t c h a i r m a n s R E P O R T c E O s r e p o r t c f O s r e p o r t o p e r a t i o n a l R E V I E W M e d i - C l i n i c S o u t h e r n A f r i c a o p e r a t i o n a l R E V I E W H I R S L A N D E N o p e r a t i o n a l R E V I E W E M I R A T E S H E A LT H C A R E

20 Chief Executive Officer s Report (continued) and encourages these in its dealings with employees and business partners. The Group s compliance guideline to all operating platforms is currently being amended and updated in accordance with King III. In line with the principles of King III, a Group-wide risk management strategy and process has been implemented during the year. The aim is that these principles are embodied in the Group s dealing with all its stakeholders. Medi-Clinic aims at all times to build a sustainable business. The case for sustainability is compelling and its benefits are considerable. Among the most compelling are customer loyalty, enhanced brand and reputation, improved access to capital and increased ability to attract and retain staff. Medi-Clinic now employs approximately staff across three continents. Organisations that can help their people manage change will be at an advantage in the global health system. The Group invests heavily in the training and development of its existing staff as well as providing some support for the training and development needs of its future workforce. Much has been said about the worldwide shortage of nurses, particularly in South Africa. The Group has a focused strategy of recruiting (locally and internationally) and retaining of its existing staff. The Group monitors staff turnover ratios carefully which is consistently below the industry standard. Clinical governance and risk management The Group s hospitals make the results of their quality measurements transparent by publishing them once a year in the clinical governance report. With its quality management tools the Group not only identifies opportunities for quality improvements, but also potential operating risks. The Group-wide quality process established with Group-wide recommendations, guidelines and controls not only contributes to higher quality, but also helps reduce its operating risks. Managing risks and opportunities also forms a core part of the services the Group performs. It is part of the management culture and ultimately also serves the purpose of value enhancement. The Group s quality-orientated corporate strategy gives equal regard to opportunities and risks, protects the different interests of its shareholders and other capital market participants and also incorporates a system for early identification of risks that may jeopardise its corporate existence as well as its corporate opportunities. The Group s risk/opportunities management system is based on the following elements: Responsibilities of each employee Integration of risk identification into business and work procedures Uniform and systematic Group-wide risk assessment and risk management Communication and transparency. GROUP PERFORMANCE Southern Africa: Highlights and challenges The inadequate availability of suitably qualified nurses remains a huge challenge within the country. In addition to the existing training programmes, Medi-Clinic Southern Africa is maintaining its foreign recruitment strategy. A total of 267 candidates are currently in various stages of the recruitment process. The government announced in 2008 that the nursing colleges closed in the 1990s would be reopened to address the critical shortage. Unfortunately nothing has yet happened, though the group remains optimistic that the moratorium will be lifted within the next year or two. The group is continuously engaged with the Nursing Council to facilitate constructive interim solutions. Medi-Clinic Southern Africa s contribution towards Group revenue and core EBITDA was 45% and 44% respectively. Medi-Clinic Southern Africa is increasing its involvement and investment in the training of specialists and subspecialists. The group has a 49.9% interest in the Wits Donald Gordon Medical Centre (Pty) Ltd ( WDGMC ), a joint venture with the University of the Witwatersrand. WDGMC is a 200-bed private hospital in Parktown, Johannesburg. Through its investment of R65m in WDGMC, the group has enhanced the ability of the medical school of the university to support sub-specialist training without requiring any government subsidy. The Group regards clinical governance as a major component of total quality management for its entire business. Within Medi-Clinic Southern Africa s clinical model of autonomous and independent medical practitioners, it remains a challenge to get all the role players to participate actively and meaningfully. To orientate services around the patient, Medi-Clinic Southern Africa has continued to invest in a Hospital Information System. This far-reaching and complex ITC project has the ability to improve the patient experience significantly, but also the quality and efficacy of information used to make decisions. 18 MEDI-CLINIC ANNUAL REPORT 2010