MEDICLINIC INTERNATIONAL PLC MEDICLINIC INTERNATIONAL | ANNUAL REPORT FOR THE YEAR ENDED 31 MARCH 2019 ANNUAL 2019 ANNUAL REPORT CONTENTS 4 At a glance GOVERNANCE AND REMUNERATION 103 Chairman’s Introduction STRATEGIC REPORT 104 Board of Directors Business overview 110 Group Executive Committee 10 Performance summary 114 Corporate Governance Statement 12 Chairman’s Statement 136 Audit and Risk Committee Report 16 Business model 150 Clinical Performance and Sustainability 18 Our strategy, goals and progress Committee Report 22 Investment case 154 Nomination Committee Report 23 Five-year summary 159 Directors’ Remuneration Report Performance and future outlook 179 Statement of Directors’ Responsibilities 24 Chief Executive Officer’s Review 29 Financial Review FINANCIAL STATEMENTS 40 Value added statement 182 Group Financial Statements 41 Clinical services overview 280 Company Financial Statements Risk management ADDITIONAL INFORMATION 55 Risk management, principal risks and uncertainties 296 Shareholder information 60 Viability statement 300 Company information Divisional reviews 302 Forward-looking statements 62 Divisional Review – Switzerland 303 Glossary 67 Divisional Review – Southern Africa 71 Divisional Review – UAE Non-financial performance 76 Sustainable development overview 100 Non-financial information statement OVERVIEW ADAPTING LOSS OF MEDICLINIC TO THE CHANGING GLOBAL £151M* HEALTHCARE impacted by non-cash ENVIRONMENT Hirslanden and Spire impairment charges and is a priority with focus other exceptional items throughout the Group to invest across the continuum * Refer to loss attributable to equity holders. of care £232M 750 000 INPATIENT ADMISSIONS SIGNIFICANT across the Group as the demand ONGOING for quality healthcare services INVESTMENT remains strong across the Group supporting patient experience, clinical excellence, maintenance, upgrades and expansion REVENUE UP 2% to £2 932m; up 4% ADJUSTED EARNINGS in constant currency PER SHARE DOWN 10% ADJUSTED to 26.9 pence EBITDA DOWN 4% TOTAL DIVIDEND FOR to £493m; down 2% THE YEAR in constant currency reflecting the financial 7.9 PENCE impact of regulatory changes on Hirslanden MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 1 2 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT REPORT PROFILE REPORT STRATEGIC SCOPE, BOUNDARY AND REPORTING CYCLE This annual report and financial statements (“Annual Reporting] Regulations 2016 aimed at improving the Report”) of Mediclinic International plc (the “Company” transparency of companies regarding non-financial and or “Mediclinic”) presents the financial results and the diversity information), where relevant. The Company economic, social and environmental performance of complied with all the provisions of the UK Corporate Mediclinic for the financial year ended 31 March 2019 Governance Code, other than the exceptions explained GOVERNANCE AND REMUNERATION GOVERNANCE (the “reporting period”) and reports on the operations in the Corporate Governance Statement on page 114 of the Company’s subsidiaries in Switzerland, Southern of this Annual Report. The Company’s reporting on Africa and the United Arab Emirates (“UAE”) (collectively, sustainable development included in this report the “Group”). (supplemented by the Sustainable Development Report which is available on the Company’s website at REPORTING PRINCIPLES www.mediclinic.com) was done in accordance with This Annual Report contains information that is deemed the Global Reporting Initiative Sustainability Reporting useful and relevant to stakeholders, with due regard to Standards 2016 (“GRI Standards”) and the non-financial their expectations through continuous engagement or reporting regulations referred to above. information that the board of Directors of Mediclinic (the “Board” or the “Board of Directors”) believes may EXTERNAL AUDIT AND ASSURANCE influence stakeholders’ perception or decision-making. The Company’s annual financial statements and the The information aims to provide stakeholders with an Group’s consolidated annual financial statements were understanding of the Group’s financial, economic, social audited by the Group’s independent external auditor, and environmental impacts to enable them to evaluate PricewaterhouseCoopers LLP (the “external auditor”), in the ability of Mediclinic to create and sustain value. accordance with International Standards of Auditing (UK). This Annual Report was prepared in accordance with The Group follows various other voluntary external FINANCIAL STATEMENTS the International Financial Reporting Standards (“IFRS”), accreditation, certification and assurance initiatives, the listing rules of the London Stock Exchange (“LSE”), the complementing the Group’s combined assurance model, listings requirements of the JSE Ltd (“JSE”), the United as reported on in the Risk management section of this Kingdom (“UK”) Corporate Governance Code and the Annual Report. The Group believes that this adds to the UK Companies Act 2006 (including the Companies, transparency and reliability of information reported to Partnerships and Group [Accounts and Non-Financial its stakeholders. CONTRIBUTION TO CONTRIBUTION TO CONTRIBUTION TO REVENUE* ADJUSTED EBITDA* ADJUSTED EARNINGS* £677m £88m £46m £1m (£1m) ADDITIONAL INFORMATION ADDITIONAL £219m £1 368m £2 932m £493m £80m £198m £886m £187m £72m Hirslanden Mediclinic Southern Africa Mediclinic Middle East Corporate * The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance. Refer to the Financial Review on page 31 for an explanation and for a reconciliation to the equivalent IFRS measures. MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 3 AT A GLANCE TO ENHANCE THE QUALITY OF LIFE. Mediclinic is focused on providing specialist-orientated, multi-disciplinary services across the continuum of care in such a way that the Group will be regarded as the most respected and trusted provider of healthcare services by patients, medical practitioners, funders and regulators of healthcare in each of its markets. UNITED KINGDOM 29.9% investment in Spire Healthcare Group plc. For more information, please refer to page 38 and visit: www.spirehealthcare.co.uk SWITZERLAND With continuing regulatory changes during the year in Switzerland, Hirslanden is adapting to the evolving outpatient environment while delivering ongoing cost management and efficiency savings which, along with seasonal benefits, delivered an improved second-half financial performance. For more information, please refer to page 62 and visit: www.hirslanden.ch UNITED ARAB EMIRATES The new Mediclinic Parkview Hospital in Dubai was successfully opened in September 2018, six months ahead of the original schedule. Revenue and EBITDA growth achieved during the year are expected to continue over the medium term as the benefits from investments support the operational delivery of the division. For more information, please refer to page 71 and visit: www.mediclinic.ae SOUTHERN AFRICA Mediclinic’s continued strategic focus to invest across the continuum of care resulted in the expansion of the division’s sub-acute hospital, day case and outpatient clinics during the year. The investment in the Intercare group, completed in November 2018, supported revenue and patient growth with a strong operational focus delivering broadly stable EBITDA margins. For more information, please refer to page 67 or visit: www.mediclinic.co.za www.mhr.co.za www.er24.co.za 4 MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT About Mediclinic Mediclinic is an international private healthcare services group, established in South Africa in 1983, with divisions in REPORT STRATEGIC Switzerland, Southern Africa (South Africa and Namibia) and the UAE. The Group’s core purpose is to enhance the quality of life. The Company’s primary listing is on the LSE in the UK, with secondary listings on United Kingdom the JSE in South Africa and the Namibian AND REMUNERATION GOVERNANCE Stock Exchange (“NSX”) in Namibia. The Switzerland Group’s registered office is in London, UK. Mediclinic also holds a 29.9% interest in Spire Healthcare Group plc, a leading UK-based private healthcare group listed on the LSE. United Arab Emirates FINANCIAL STATEMENTS 77 5 Hospitals Sub-acute hospitals ADDITIONAL INFORMATION ADDITIONAL 12 21 Southern Africa Day case clinics Outpatient clinics 32 398 11 359 445 Employees Inpatient beds Theatres MEDICLINIC INTERNATIONAL PLC | 2019 ANNUAL REPORT 5 AT A GLANCE (CONTINUED) “WE ARE ADAPTING THE BUSINESS TO ADDRESS THE CHANGING LANDSCAPE AND TO CAPITALISE ON GROWING OPPORTUNITIES IN THE GLOBAL HEALTHCARE SERVICES SECTOR.” Dr Ronnie van der Merwe Chief Executive Officer 12 DAY 11 359 INPATIENT 77 HOSPITALS CASE CLINICS BEDS Switzerland 18 Switzerland 2 Switzerland 1 916 Southern Africa 52 Southern Africa 8 Southern Africa 8 517 South Africa 49 UAE 2 UAE 926 Namibia 3 UAE 7 5 SUB-ACUTE 21 OUTPATIENT 445 HOSPITALS CLINICS THEATRES Southern Africa 5 Switzerland 3 Switzerland 112 UAE 18 Southern Africa 296 UAE 37 32 398 EMPLOYEES Permanent Full-time equivalents Switzerland 10 442 8 303 Southern Africa 15 804 19 646 (including agency employees) UAE 6 152 6 152 EMPLOYEE ENGAGEMENT CONTROLLABLE EMPLOYEE PATIENT EXPERIENCE (MAXIMUM SCORE OF 5) TURNOVER Switzerland 4.01 Group 6.9% Switzerland 87.6% Southern Africa 3.94 Switzerland 7.6% Southern Africa 82.2% UAE 4.02 Southern Africa 6.7% UAE 85.6% Refer to page 85 for more information. Refer to page 80 for more information. Refer to page 43 for more information. Refer to the Investments in Subsidiaries,