Mediclinic International plc Final Results (0335G)

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Mediclinic (LSE:MDC)
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RNS Number : 0335G

Mediclinic International plc

24 May 2017

Mediclinic International plc

(Incorporated in England and Wales)

Company Number: 08338604

LSE Share Code: MDC

JSE Share Code: MEI

NSX Share Code: MEP

ISIN: GB00B8HX8Z88

LEI: 2138002S5BSBIZTD5I60

South African income tax number: 9950122714

("Mediclinic", the "Company" or the "Group")

THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.

MEDICLINIC INTERNATIONAL PLC - 2017 FULL YEAR RESULTS AND PROPOSED FINAL CASH DIVID

Good performance in Switzerland, Southern Africa and Dubai

Middle East platform impacted by Abu Dhabi business

Strong operating cash flow generation

Robust balance sheet

Proposed final dividend of 4.70 pence; total dividend for the year 7.90 pence

Mediclinic, an international private healthcare group, announces its results for the year ended 31 March 2017 (the "reporting period" or "FY17").

Group financial results

 
 --   Revenue up 30% to GBP2 749m; up 15% compared 
       to pro forma FY16 revenue including Al 
       Noor (GBP2 391m) 
 --   Underlying EBITDA up 17% to GBP501m; underlying 
       EBITDA margin decreased to 18.2% from 20.4% 
 --   Operating profit up 26% to GBP362m 
 --   Underlying earnings per share down 19% 
       to 29.8 pence 
 --   In constant currency, revenue and underlying 
       EBITDA increased by 15% and 3% respectively 
 --   Cash flow conversion at 101% of underlying 
       EBITDA 
 --   Proposed final dividend of 4.70 pence per 
       share; in line with dividend policy

OPERATING PERFORMANCE

 
 --   Hirslanden revenue up 3% to CHF1 704m; 
       underlying EBITDA up 5% to CHF340m; underlying 
       EBITDA margin of 20.0% 
 --   Southern Africa revenue up 7% to ZAR14 
       367m; underlying EBITDA up 6% to ZAR3 049m; 
       underlying EBITDA margin of 21.2% 
 --   Middle East revenue up 72% to AED3 109m; 
       revenue down 8% versus pro forma for the 
       Al Noor combination; underlying EBITDA 
       down 5% to AED364m; underlying EBITDA margin 
       of 11.7%

Danie Meintjes, CEO of Mediclinic, today commented:

"During the financial year, our two largest operating platforms, Switzerland and Southern Africa, and the Dubai business, performed well growing revenues and patient volumes. Our focus has been on steering the business in Abu Dhabi towards a more sustainable long-term growth path. We expect a gradual improvement in the Middle East platform as we progress through the 2018 financial year and beyond.

"This year, regulatory matters weighed on the Group more so than in the past and I'm pleased that in recent weeks we've made progress with some key issues in Switzerland and Abu Dhabi. We will continue to monitor the regulatory landscape and engage with authorities to offer quality and cost-efficient services towards the long-term sustainability of healthcare provision.

"We continue to see growing demand for quality healthcare services which is underpinned by an ageing population, growing disease burden and technological innovation. This is why we place such an emphasis on our Patients First strategy and continue to invest in our facilities and people. With this focus and our leading positions in core markets, Mediclinic is well-positioned to deliver sustainable long-term growth."

Group financial SUMMARY

 
 GBPm                       2017        2016   Variance 
                                                      % 
 Revenue                   2 749       2 107        30% 
 EBITDA(1)                   509         382        33% 
 Underlying EBITDA(1)        501         428        17% 
 Operating profit            362         288        26% 
 Earnings(2)                 229         177        29% 
 Underlying earnings(1)      220         219          - 
 Earnings per share 
  (pence)                   31.0        29.6         5% 
 Underlying earnings 
  per share (pence)(1)      29.8        36.7      (19%) 
 Total dividend per 
  share (pence) (3)         7.90        7.90          - 
 Net debt                  1 669       1 536         9% 
 
 
 1   The Group uses underlying income statement 
      reporting as non-IFRS measures in evaluating 
      performance and as a method to provide 
      shareholders with clear and consistent 
      reporting. The reconciliations between 
      the statutory and the non-IFRS measures 
      are in the 'Financial Review' section below. 
 2   Earnings refer to profit attributable to 
      equity holders. 
 3   The total dividend per share for the year 
      ended 31 March 2017 in British pound comprises 
      the proposed final dividend of 4.70 pence 
      per share (FY16: 5.24 pence) and the interim 
      dividend of 3.20 pence per share, paid 
      in December 2016 (FY16: 2.66 pence).

The Group delivered financial results for FY17 in line with guidance. The Swiss and Southern African platforms generated good revenue and underlying EBITDA growth. Mediclinic's reported financial results for FY17 benefited from the addition of Al Noor's operations, however, the Middle East platform did not meet our expectations, impacted by the Abu Dhabi business. The combination of the Al Noor and Mediclinic businesses was completed on 15 February 2016 with only 46 days of consolidated reporting included in the twelve months ended 31 March 2016 (the "prior year" or "FY16"). The Group's FY17 financial results, reported in pounds ("GBP"), benefited from the translation impact of the weaker GBP compared to all three platform local currencies.

Group revenue grew by 30% and underlying EBITDA grew by 17%. When compared to pro forma FY16 revenue (including Al Noor for the twelve months ended 31 March 2016), revenue increased by 15%. On a constant currency basis, the Group's revenue and underlying EBITDA for the reporting period increased by 15% and 3% respectively. The Group's underlying EBITDA margin declined to 18.2% (FY16: 20.4%), impacted by the Middle East platform.

Depreciation and amortisation increased by 56% to GBP145m (FY16: GBP93m). The increase was mainly due to Al Noor operations being included for twelve months compared to 46 days in the prior year. Included in amortisation is an accelerated charge of GBP7m in relation to the Al Noor trade name.

Finance cost increased by 28% to GBP74m (FY16: GBP58m). The increase was mainly driven by the Mediclinic bridge facility, which was refinanced with new borrowing facilities in Southern Africa and the Middle East, announced in June 2016. Included in finance cost is a non-cash fair value gain on the ineffective Swiss interest rate swap of GBP13m (FY16: GBP8m).

The Group's effective tax rate decreased from 22.4% in the prior year to 20.8% for the period under review mainly due to one-off non-deductible expenses incurred in the prior year, offset by a reduced contribution from Middle East non-taxable earnings.

Underlying earnings of GBP220m were flat (FY16: GBP219m), with Spire Healthcare Group ("Spire") contributing GBP12m (FY16: GBP6m). Underlying earnings per share decreased by 19% to 29.8p (FY16: 36.7p), largely impacted by the shares issued to acquire and adverse operating performance of Al Noor. Earnings per share, which includes one-off and exceptional income and charges, increased by 5%. The proposed final dividend per share is 4.70p, representing a 27% pay-out ratio to underlying earnings, in line with the Groups dividend pay-out ratio target of 25% to 30%.

Group results are subject to movements in foreign currency exchange rates. Refer to the 'Financial Review' section below for exchange rates used to convert the operating platforms' results and financial position to British pounds.

Details of the FY17 results analyst presentation in London in addition to the webcast and conference call registration information are available at the end of this report or visit the Group's website at www.mediclinic.com.

OPERATING REVIEW

HIRSLANDEN

 
                               2017        2016   Variance 
                                                         % 
 Movement in bed days 
  sold                       (0.7%)        3.4% 
 Movement in revenue 
  per bed day sold             3.0%        1.9% 
 Inpatients (000's)             100          99       1.7% 
 
 Revenue (CHFm)               1 704       1 657         3% 
 Underlying Revenue 
  (CHFm)                      1 704       1 647         3% 
 Underlying EBITDA 
  (CHFm)                        340         325         5% 
 Underlying EBITDA 
  margin                      20.0%       19.7% 
 Expansion capex (CHFm)          74          68         9% 
 Maintenance capex 
  (CHFm)                         89          76        17% 
 Underlying EBITDA 
  converted to cash            101%         88% 
 Average GBP/CHF exchange 
  rate                         1.29        1.47      (12%) 
 
 Revenue (GBPm)               1 321       1 130        17% 
 Underlying revenue 
  (GBPm)                      1 321       1 123        18% 
 Underlying EBITDA 
  (GBPm)                        264         221        19%

Hirslanden accounted for 48% of the Group's revenues (FY16: 54%) and 53% of its underlying EBITDA (FY16: 52%).

As at the end of the reporting period, Hirslanden operated 16 hospitals and 4 clinics with a total of 1 677 inpatient beds and 9 402 employees (6 760 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.

During the period under review, revenues increased by 3% to CHF1 704m (FY16: CHF1 657m). This was driven by a 1.7% growth in inpatient admissions. The reduction in both bed days sold (-0.7%) and the average length of stay (-2.3%) was offset by an increase of 3.0% in the average revenue per bed day sold. This is largely due to an increase in the average severity of cases, with an increasing number of doctors performing complex procedures at Hirslanden hospitals. Outpatient revenues increased by 9% and now contributes nearly 20% to overall Hirslanden revenues.

Underlying EBITDA increased by 5% to CHF340m (FY16: CHF325m) with the underlying EBITDA margin increasing to 20.0% from 19.7% due to several productivity measures and cost savings initiatives implemented during the year and an underlying tariff provision release of CHF8m. These were offset by continued investment in Hirslanden 2020 and the ongoing shift in patient mix from semi and private to basic insured. Operating profit increased by 7% to CHF259m (FY16: CHF243m). Hirslanden contributed GBP121m to the Group's underlying earnings compared to GBP101m in the prior year.

Hirslanden invested CHF74m in expansion capital projects and new equipment and CHF89m on the replacement of existing equipment and upgrade projects as well as investments in Hirslanden 2020 and relocation of the corporate head office. In April 2016, Hirslanden Clinique Cecil in Lausanne opened a new hybrid operating theatre and an outpatient surgery unit. In August 2016, Hirslanden Klinik Aarau opened its third cardiac catheterisation laboratory. At Hirslanden Klinik St. Anna and Hirslanden Klinik Stephanshorn, two new modular operating theatres were completed in October and December 2016, respectively. Further important development projects completed included new doctors' consulting rooms for Hirslanden Clinique La Colline, restructuring of radiology for Hirslanden Klinik Stephanshorn and restructuring of the sterilisation unit for Hirslanden Klinik Permanence. Hirslanden Klinik Im Park in Zurich opened its new outpatient surgery centre in April 2017, which includes a ward for procedures requiring short inpatient stays. Building work commenced on an expanded emergency department for Klinik Hirslanden in Zürich and there are plans for a range of other expansion projects to increase the business' capacity.

During the year, Hirslanden increased efficiency in various areas of the business. Supply costs and labour costs were successfully reduced, while more focused management led to increased utilisation of our infrastructure. Hirslanden is focused on achieving further efficiency gains and optimisation, leveraging off the broader Group's economies of scale to manage cost pressures.

There were a number of regulatory developments in Switzerland during the year. In April 2017, the Zurich Cantonal Parliament voted not to approve the proposed VVG levy. As part of a Cantonal budget review and cost savings initiative, the Canton had proposed a levy to be introduced based on the proportion of privately insured patients treated in listed hospitals. This complex matter went through an extended legislative process and Hirslanden engaged with the relevant public authorities to raise concerns regarding the process, equality and the impact the proposed levy would have had on the business. Hirslanden will continue to monitor developments in the canton whilst maintaining its dialogue and engagement with the relevant public authorities to ensure that it can, on a sustainable basis, deliver high-quality, cost-efficient, healthcare to patients.

The national outpatient tariff ("TARMED") is still in revision and the current tariff structure is valid until the end of the 2017 calendar year. The Swiss Federal Government has released proposed adjustments to TARMED as a transitional solution whilst healthcare providers and funders continue to negotiate and agree a revised tariff structure. The government proposal is targeting annual savings of around CHF700m across the public and private outpatient sectors. Outpatient services contributed approximately 20% of Hirslanden revenues, at around CHF300m in FY17. Based on initial analyses of the complex proposal, the expected annualised impact on Hirslanden outpatient revenues is around CHF30m before any mitigating actions are considered. These mitigations could include improved utilisation and increased efficiencies that would help to reduce the impact of the transitional solutions proposed by the Federal Government on the underlying EBITDA and margins of the business. Due to its implementation date on 1 January 2018, the impact on Hirslanden is expected to be limited in the FY18 financial year.

There continues to be a significant focus on the shift of basic medical treatments from the inpatient to the outpatient sector ("outmigration"). The Federal Government is preparing a framework for the outmigration of services, likely to be ready for implementation from 1 January 2018, across Switzerland. The Zurich Cantonal Parliament, in April 2017, approved an amendment to the cantonal hospital law, providing a legal basis for the cantonal government to create a list of interventions that in future should generally be treated as outpatient rather than inpatient services. The final list of interventions will be agreed following a working group review. In the Canton of Lucerne similar measures are expected to be implemented from 1 July 2017.

Hirslanden is responding to the trend of outmigration with the opening of new outpatient facilities and the creation of an integrated medical network that facilitates the access to healthcare for patients. This is also important because outpatient clinics are a well-established route for the subsequent allocation of patients to hospitals and specialists. The establishment of outpatient facilities is part of the Hirslanden 2020 strategic programme. This programme has two main goals: to increase the efficiency of the existing business by implementing standardised systems and processes; and to develop new areas of business, such as outpatient facilities. Having opened the new outpatient surgery centre at Klinik Im Park, Hirslanden will also open two new medical centres in Zurich (Seefeldstrasse) and Cham (canton of Zug) in spring 2018 and a further one at Schuppis (canton of St. Gallen) in 2019.

MEDICLINIC SOUTHERN AFRICA

 
                               2017     2016   Variance 
                                                      % 
 Movement in bed days 
  sold                         0.8%     2.9% 
 Movement in revenue 
  per bed day sold             5.8%     6.3% 
 Admissions ('000s)             579      575       0.6% 
 
 Revenue (ZARm)              14 367   13 450         7% 
 Underlying EBITDA 
  (ZARm)                      3 049    2 877         6% 
 Underlying EBITDA 
  margin                      21.2%    21.4% 
 Expansion capex (ZARm)         790      758         4% 
 Maintenance capex 
  (ZARm)                        515      317        62% 
 Underlying EBITDA 
  converted to cash            104%     109% 
 Average GBP/ZAR exchange 
  rate                        18.41    20.73      (11%) 
 
 Revenue (GBPm)                 780      649        20% 
 Underlying EBITDA 
  (GBPm)                        165      139        19%

Mediclinic Southern Africa accounted for 28% of the Group's revenues (FY16: 31%) and 33% of its underlying EBITDA (FY16: 32%).

In Southern Africa (including South Africa and Namibia), as at the end of the reporting period, Mediclinic operated 52 hospitals and 2 day clinics with a total of 8 095 beds and 16 848 employees. The platform is the third largest private hospital provider in Southern Africa.

During the period under review, revenue increased by 7% to ZAR14 367m (FY16: ZAR13 450m). Bed days sold and average revenue per bed day increased by 0.8% and 5.8%, respectively. Admissions increased by 0.6% with growth in medical cases partially offset by a decrease in surgical day cases as the outmigration trend continues. The average length of stay increased by 0.2%.

Underlying EBITDA increased by 6% to ZAR3 049m (FY16: ZAR2 877m) resulting in the underlying EBITDA margin decreasing to 21.2% from 21.4% due to the ongoing shift in mix towards medical versus surgical cases, wage and cost inflation, including higher price increases on pharmaceuticals (sold at zero margin) and investment in additional clinical personnel. Operating profit increased by 15% to ZAR2 584m (FY16: ZAR2 252m). Mediclinic Southern Africa contributed GBP67m to the Group's underlying earnings compared to GBP63m in the prior year, impacted by an additional ZAR182m (GBP10m) interest charge on additional debt following the refinance of the Group's bridge loan.

Mediclinic Southern Africa invested ZAR790m on expansion capital projects and new equipment and ZAR515m on the replacement of existing equipment and upgrade projects. The number of beds increased by 78 taking the total number of beds to 8 095. Key projects completed during the year were at Mediclinic Upington, Mediclinic Worcester, Mediclinic Emfuleni and Mediclinic Windhoek. The building projects in progress are expected to add some 54 additional beds by the end of FY18, taking the total number of licensed beds across the operating platform to 8 149. Several additional building projects are due for completion in FY19 and FY20, which are expected to add some 350 additional beds in both existing facilities and new day clinics.

During FY16, Mediclinic Southern Africa announced the proposed acquisition of a controlling share in Matlosana Medical Health Services Proprietary Limited ("MMHS"), based in Klerksdorp in the North-West Province of South Africa. MMHS owns two multi-disciplinary hospitals, Wilmed Park Hospital (144 licensed beds) and Sunningdale Hospital (62 licensed beds), as well as a 51% share in Parkmed Neuro Clinic, a psychiatric hospital (50 licensed beds). This proposed acquisition supports Mediclinic's core focus of providing acute care, multi-disciplinary specialist hospital services. Although substantially completed, the transaction remains subject to approval by the competition authorities. In January 2017, Mediclinic Southern Africa also announced the proposed acquisition of a 50% + 1 share interest in Life Path Health, which operates seven mental health facilities and is in the process of establishing three further facilities, with applications approved by Department of Health for further facilities. This transaction is subject to a number of conditions precedent.

The Competition Commission is currently undertaking a market inquiry into the private healthcare sector in South Africa to understand both whether there are features of the sector that prevent, distort or restrict competition and how competition in the sector can be promoted. The inquiry was due to publish its recommendations in December 2016, but has advised of further delays with the HMI now guiding that the final publication is expected at the end of the 2017 calendar year. Mediclinic has submitted documentation to the inquiry and will continue to engage with all stakeholders as draft documents are published through the year to achieve an agreeable outcome.

The South African Government is seeking to address the shortcomings of the public health system through the phased introduction of a National Health Insurance system over a 14-year period. A draft White Paper outlining the financing and design of the envisaged system has been released for consultation and Mediclinic has submitted comprehensive comments. However, there remain a large number of obstacles that still need to be addressed before greater clarity about the outcomes can be communicated.

The results above were delivered against a continued weak macro-economic environment, stagnant medical scheme membership and increased competition in the private hospital sector. However, some incremental growth opportunities remain in Southern Africa as a result of the ageing population, new technology and services and an increase in the proportion of cases with chronic disease codes. These include the expansion of Mediclinic Southern Africa's existing hospitals, the establishment of new day clinics and investment in related business opportunities such as mental health.

MEDICLINIC MIDDLE EAST

 
                               2017    2016   Variance 
                                                     % 
 Inpatients ('000s) 
  (1)                            69      73     (4.8%) 
 Outpatients ('000s) 
  (1)                         3 173   3 514     (9.7%) 
 Movement in bed days        (6.2%)     n/a 
  sold(1) 
 
 Revenue (AEDm)               3 109   1 802        72% 
 Underlying EBITDA 
  (AEDm)                        364     384       (5%) 
 Underlying EBITDA 
  margin                      11.7%   21.3% 
 Expansion capex (AEDm)         188     171        10% 
 Maintenance capex 
  (AEDm)                         57      32        78% 
 Underlying EBITDA 
  converted to cash            120%     99% 
 Average GBP/AED exchange 
  rate                         4.80    5.54      (13%) 
 
 Revenue (GBPm)                 648     328        98% 
 Underlying EBITDA 
  (GBPm)                         76      70         9% 
 
 
 1.   Operational metrics are reported on a 
       pro forma basis combining Al Noor and 
       Mediclinic for FY16.

Mediclinic Middle East accounted for 24% of the Group's revenues (FY16: 16%) and 15% of its underlying EBITDA (FY16: 16%).

In the Middle East, as at the end of the reporting period, the combined business operated 6 hospitals and 31 clinics with a total of 714 beds and 6 375 employees. The platform is one of the largest private healthcare providers in the UAE with the majority of its operations in Dubai and Abu Dhabi (including Al Ain).

The Mediclinic Middle East financial results represent the combined business for FY17. In FY16, Al Noor's results were only consolidated from 15 February 2016.

During the period under review, revenue increased by 72% to AED3 109m (FY16: AED1 802m). The existing Dubai business increased revenue by 5% including the related ramp up benefit from the new City Hospital North Wing. However, the Abu Dhabi business underperformed, down 19% compared to the prior year pro forma revenue. On a pro forma basis, inpatient admissions and day cases declined by 4.8% and outpatient attendance decreased by 9.7%. Bed days sold decreased by 6.2%. Abu Dhabi inpatient and outpatient volumes were down 12% and 14% respectively versus the prior year due to the unforeseen changes in the regulatory environment with the introduction of a co-payment on local "Thiqa" insurance card holders, a need to align Al Noor with the sustainable business and operational practices of the Group, doctor vacancies, increased competition and the sale of several non-core assets. Thiqa patient volume declines were greater than other insurance categories in Abu Dhabi with inpatients down 33% and outpatients down 31%.

Underlying EBITDA decreased by 5% to AED364m (FY16: AED384m) and the underlying EBITDA margin decreased to 11.7% from 21.3%. Despite good progress made in respect of the integration benefits from the combination, this was more than offset by the revenue shortfall. Operating profit decreased by 58% to AED134m (FY16: AED321m). Mediclinic Middle East contributed GBP33m to the Group's underlying earnings compared to GBP57m in the comparative period.

In early June 2016, the platform amended and increased the existing debt facilities to AED1 079bn (of which AED220m remains undrawn) from AED282m in the prior year, to refinance the Group bridge loan facility, as well as to continue to fund existing expansion projects across the UAE.

The provision for impairment of receivables increased by AED113m (AED89m relating to Abu Dhabi receivables) and was charged to the income statement. In FY16, AED25m (AED9m relating to Abu Dhabi receivables) was charged to the income statement. Furthermore, an opening balance sheet adjustment of AED73m was made to the Al Noor receivables to finalise the Al Noor purchase price allocation.

Mediclinic Middle East invested AED188m on expansion capital projects and new equipment and AED57m on the replacement of existing equipment and upgrade projects. The major components of the expansion capital expenditure were the Mediclinic City Hospital North Wing and Mediclinic Parkview Hospital projects in Dubai. The former was successfully opened in September 2016 and houses, amongst other disciplines, the Comprehensive Cancer Centre, Dubai's most advanced facility for the diagnosis and treatment of cancer, built in association with Hirslanden in Switzerland. Patient volumes since opening the North Wing have been encouraging. Construction of the Parkview Hospital, the seventh hospital of the platform, is progressing well and is on track to be completed in the fourth quarter of the financial year ending 31 March 2019.

As part of the ongoing investment in the region, a partner was selected for an Electronic Health Record system which will be implemented over the coming years. By creating unified records for patients, regardless of which facility they receive treatment at, the system will enable the business to deliver improved service quality and seamless care for patients.

The regulatory environment in the Middle East had a significant impact on the platform's performance this year. On 30 June 2016, the Health Authority Abu Dhabi ("HAAD") announced a number of amendments to Abu Dhabi's health insurance programmes with immediate effect as of 1 July 2016. Changes to the Thiqa plan (health insurance for UAE Nationals or others of similar status in Abu Dhabi) stipulated that patients receive 80% coverage of the fees for outpatient and inpatient services provided by private healthcare facilities in Abu Dhabi (previously 100% for most services). It was mandatory for private healthcare providers to collect the full co-payment from patients, which Mediclinic adhered to with immediate effect. A further change saw the Thiqa plan cover only 50% of the cost if patients sought medical services outside Abu Dhabi (including Dubai and the Northern Emirates). In Dubai, UAE nationals are covered under the ENAYA and SAADA health insurance programme, under the supervision of the Dubai Health Authority, with a 10% co-payment for inpatient and outpatient services in public and private sector. As mentioned, these changes had a significant impact on the Thiqa patient volumes in the Abu Dhabi business. However, on 26 April 2017, following a period of engagement with various authorities and stakeholders, His Highness Sheikh Mohamed bin Zayed Al Nahyan, Crown Prince of Abu Dhabi and Deputy Supreme Commander of the UAE Armed Forces, ordered the waiving of the 20% Thiqa co-payment when receiving treatment at private healthcare facilities in Abu Dhabi, with immediate effect. It was also confirmed that the co-payment for services provided to Thiqa patients outside of Abu Dhabi would be reduced from 50% to 10%. Preparations are ongoing for the introduction of Diagnosis Related Groups in Dubai expected to be implemented in April 2018. The platform continues to maintain an active dialogue with government authorities on regulatory changes within the UAE healthcare sector.

A key focus during the year has been integrating the Abu Dhabi-based Al Noor Hospitals Group with the established Mediclinic Middle East business in Dubai. The regional management team successfully addressed a number of key issues including the establishment of a clear operational and clinical strategy in Abu Dhabi, doctor vacancies, integrating the functional departments of the two businesses, conforming revenue cycle management with the Middle East business, identifying synergies in procurement and headcount and consolidating the two corporate offices and executive management teams. The Group remains on track to generate annualised synergies of AED75m from the combined Middle East business. Some 136 new doctor appointments were made in the Middle East during FY17 and a further 52 doctors are currently in the process of recruitment helping to fill the vacant positions that resulted from the departure of doctors in the twelve months leading up to the Al Noor combination and at the start of FY17.

As part of an extensive review of the Abu Dhabi business, certain units, non-core to the central strategy of the platform, were identified for divestment. The Group has classified AED42m assets and AED9m liabilities as held for sale in relation to these units. The platform completed the sale of Rochester Wellness, consisting of two clinics in Dubai and Oman, to Emirates Health during the year. In November 2016, the platform completed the sale of Gulf International Cancer Centre to Proton Partners International. The construction of a new hospital in the Western Region was postponed.

Several new facilities were opened in Abu Dhabi during the year. These included the Mediclinic Al Jowhara Hospital (formerly Al Noor Hospital - Al Jowhara), a 51-bed multi-disciplinary hospital in Al Ain that was delayed by several months, clinics in Ghayati (Western Region) and Al Yahar (Al Ain), as well as the Aspetar Clinic (Al Ain). The Khalifa City A clinic was opened in April 2017. Areas of opportunity were identified in Abu Dhabi, including the expansion and redevelopment of Mediclinic Al Noor Hospital (formerly Al Noor Hospital - Khalifa Street) and the creation of a new Comprehensive Cancer Centre at Mediclinic Airport Road Hospital (formerly Al Noor Hospital - Airport Road). In September 2016, the platform completed the purchase of the remaining 25% interest in the Al Madar group of clinics, based in Abu Dhabi. The important strategic decision to re-brand Al-Noor facilities to Mediclinic was taken in February 2017 reflecting the ongoing and future investment in the Abu Dhabi business. The project commenced in April 2017 and due to regulatory requirements, is expected to take approximately one year to complete. As a result of the re-branding decision, an accelerated amortisation charge of AED36m in connection with the acquired Al Noor trade name asset has been recognised in FY17. The remaining balance of the trade name will be fully amortised in FY18. The accelerated amortisation charge has been excluded in determining underlying earnings.

Although the region faces a low oil price environment and softening of consumer sentiment, the Middle East remains a growth market, where the combination of Mediclinic and Al Noor has created one of the leading private healthcare providers in the region. Recent regulatory changes provide support for the gradual recovery in performance of the Abu Dhabi business and future investment decisions. Opportunities include the provision of services for a growing and ageing population, which is facing an increased incidence of lifestyle-related medical conditions, in a region where governments are seeking to diversify their economies away from dependence on oil revenues. Mediclinic has confidence in its long-term Middle East growth strategy and continues to focus on building a high quality, multi-disciplinary clinical service offering in Abu Dhabi that emulates the Group's market leading Dubai operation.

SPIRE HEALTHCARE GROUP

Mediclinic has a 29.9% investment in Spire. The investment in Spire is accounted for on an equity basis recognising the reported profit of GBP53.6m for the twelve months to 31 December 2016 ("Spire's FY16"). The equity accounted share of profit from Spire recognised by Mediclinic in FY17 was GBP12m (FY16: GBP6m) after adjusting for the amortisation of intangible assets recognised in the notional purchase price allocation for the Group's acquisition of its equity investment.

Spire's FY16 saw solid growth with adjusted revenue up 5.8%, adjusted EBITDA up 5.4% and comparable EPS (excluding exceptionals and tax one-offs) up 4.9%. Total patient admissions grew 2.3% driven by self-pay and NHS volume growth. After adjusting for St Anthony's and prior year disposals, Spire's adjusted EBITDA margin remained stable at 18.2%, while EBITDA conversion to operating cash flow increased to 115% before exceptional items and tax.

OUTLOOK

The Group's main strategic focus remains to ensure high-quality care and optimal patient experience. To this end, Mediclinic continues to invest in its people, patient facilities and the technology within the facilities. The Group's growing international scale also enables it to unlock further value through promoting collaboration and best practice between its operating platforms and to extract further synergies and cost-efficiencies. The Group is well-positioned to deliver long-term value to its shareholders with a well-balanced portfolio of global operations, a leading position across all four attractive healthcare markets and a platform for future growth.

Demand for Mediclinic's services across its platforms remains robust, underpinned by an ageing population, growing disease burden and technological innovation. However, the increase in demand across the platforms is impacted by lower economic growth and greater competition. In addition, there is an increased focus on the affordability of delivering healthcare which is resulting in changing care delivery models and greater regulatory oversight.

The Group provides the following guidance for the financial year ending 31 March 2018 ("FY18"):

 
 --   Hirslanden: Given the already high occupancy 
       rates and stable bed numbers the Group 
       anticipates modest revenue growth. The 
       underlying EBITDA margin is expected to 
       be lower. This is due to the tariff and 
       regulatory environment including the impact 
       from the proposed national TARMED adjustment 
       and outmigration framework coming in the 
       fourth quarter FY18, increasing costs relating 
       to several major projects including Hirslanden 
       2020 and assumes no further tariff provision 
       releases that benefited FY17. The impacts 
       of these will partially be offset by ongoing 
       efficiency gains. 
 --   Mediclinic Southern Africa: The Group expects 
       revenue growth in line with inflation despite 
       the challenging macro-economic environment, 
       greater competition and funder constraints. 
       Despite cost inflation running above tariff 
       increases, the underlying EBITDA margin 
       is expected to remain broadly stable through 
       increased efficiencies. 
 --   Mediclinic Southern Africa and Hirslanden 
       business days will be impacted by two Easter 
       holiday periods in the current year. 
 --   Mediclinic Middle East: The Dubai operating 
       performance is expected to remain stable 
       despite the competitive landscape. A gradual 
       improvement is expected in the Abu Dhabi 
       business over the next couple of years. 
       As a result, the Group expects only a marginal 
       improvement in Middle East revenues for 
       the full year and a gradual improvement 
       in underlying EBITDA margins over time, 
       including the impact associated with the 
       opening of new facilities. First half FY18 
       Middle East performance versus the prior 
       year comparator is expected to be lower 
       largely due to the higher patient volumes 
       and revenues in Abu Dhabi prior to the 
       regulatory changes, asset sales and business 
       and operational alignment initiatives during 
       FY17. 
 --   The Group's budgeted capital expenditure 
       is GBP281m in constant currency. This comprises 
       of GBP118m in Hirslanden, GBP71m in Mediclinic 
       Southern Africa and GBP92m in Mediclinic 
       Middle East.

FINANCIAL REVIEW

Underlying non-IFRS financial measures

The Group uses underlying income statement reporting as non-IFRS measures in evaluating performance and as a method to provide shareholders with clear and consistent reporting. The underlying measures are intended to remove volatility associated with certain types of one-off income and charges from reported earnings. Historically EBITDA and underlying 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 underlying EBITDA are used by analysts and investors in assessing performance.

The rationale for using non-IFRS measures:

 
 --   it tracks the underlying operational performance 
       of the Group and its operating segments 
       by separating out one-off and exceptional 
       items; 
 --   non-IFRS measures are used by management 
       for budgeting, planning and monthly financial 
       reporting; and 
 --   non-IFRS measures are used by management 
       in presentations and discussions with investment 
       analysts.

The Group's policy is to adjust, inter alia, the following types of income and charges from the reported IFRS measures to present underlying results:

 
 --   restructuring costs; 
 --   profit/loss on sale of significant assets; 
 --   past service cost charges / credits in 
       relation to pension fund conversion rate 
       changes; 
 --   significant prior year tax and deferred 
       tax adjustments; 
 --   accelerated IFRS 2 charges; 
 --   accelerated amortisation charges; 
 --   mark-to-market fair value gains / losses, 
       relating to ineffective interest rate swaps; 
 --   significant impairment charges; 
 --   significant insurance proceeds; and 
 --   significant transaction costs incurred 
       during acquisitions.

EBITDA is defined as operating profit before depreciation and amortisation, 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 underlying measures used by the Group are not necessarily comparable with those used by other entities.

The Group has consistently applied this definition of underlying measures as it has reported on its financial performance in the past as the directors believe this additional information is important to allow shareholders to better understand the Group's trading performance for the reporting period. It is the Group's intention to continue to consistently apply this definition in the future.

 
 Earnings reconciliations 
 
                                Total   Switzerland   Southern   Middle     United   Corporate 
                                                        Africa     East    Kingdom 
 2017 STATUTORY                  GBPm          GBPm       GBPm     GBPm       GBPm        GBPm 
  RESULTS 
                             --------  ------------  ---------  -------  ---------  ---------- 
 
                                    2 
 Revenue                          749         1 321        780      648          -           - 
 Operating profit                 362           201        140       28          -         (7) 
 Profit attributable 
  to equity holders*              229           141         67       22         12        (13) 
 
 RECONCILIATIONS 
 
 Operating profit                 362           201        140       28          -         (7) 
 Add back: 
 - Other gains 
  and losses                        2             -          -      (1)          -           3 
 - Depreciation 
  and amortisation                145            76         25       44          -           - 
                             --------  ------------  ---------  -------  ---------  ---------- 
 EBITDA                           509           277        165       71          -         (4) 
 
 One-off and 
  exceptional 
  items: 
 Past service 
  cost credit                    (13)          (13)          -        -          -           - 
 Restructuring 
  costs                             5             -          -        5          -           - 
 Underlying EBITDA                501           264        165       76          -         (4) 
                             --------  ------------  ---------  -------  ---------  ---------- 
 
 Profit attributable 
  to equity holders*              229           141         67       22         12        (13) 
 One-off and 
  exceptional 
  items: 
 Past service 
  cost credit                    (13)          (13)          -        -          -           - 
 Restructuring 
  costs                             5             -          -        5          -           - 
 Fair value gains 
  on ineffective 
  cash flow hedges               (13)          (13)          -        -          -           - 
 Other gains 
  and losses                      (1)             -          -      (1)          -           - 
 Accelerated 
  amortisation                      7             -          -        7          -           - 
 Tax on one-off 
  and exceptional 
  items                             6             6          -        -          -           - 
                             --------  ------------  ---------  -------  ---------  ---------- 
 Underlying earnings              220           121         67       33         12        (13) 
                             --------  ------------  ---------  -------  ---------  ---------- 
 Weighted average 
  number of shares 
  (millions)                    736.9 
 Underlying earnings 
  per share (pence)              29.8

*Profit attributable to equity holders in Switzerland is shown after the elimination of intercompany loan interest of GBP16m.

 
 
 
                               Total       Switzerland   Southern Africa   Middle East   United Kingdom   Corporate 
 2016 STATUTORY                 GBPm              GBPm              GBPm          GBPm             GBPm        GBPm 
  RESULTS 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 
 Revenue                       2 107             1 130               649           328                -           - 
 Operating profit                288               165               109            58                -        (44) 
 Profit attributable 
  to equity holders*             177               113                53            55                6        (50) 
 
 RECONCILIATIONS 
 Revenue                       2 107             1 130               649           328                -           - 
 Pre-acquisition 
  Swiss tariff provision 
  release                        (7)               (7)                 -             -                -           - 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 Underlying revenue            2 100             1 123               649           328                -           - 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 
 Operating profit                288               165               109            58                -        (44) 
 Add back: 
 - Other gains and 
  losses                           1                 -                 -             -                -           1 
 - Depreciation 
  and amortisation                93                63                20            10                -           - 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 EBITDA                          382               228               129            68                -        (43) 
 
 One-off and exceptional 
  items: 
 Transaction cost 
  (Al Noor acquisition)           41                 -                 -             -                -          41 
 Accelerated share-based 
  payment charges                 10                 -                10             -                -           - 
 Pre-acquisition 
  Swiss tariff provision 
  release                        (7)               (7)                 -             -                -           - 
 Restructuring costs               2                 -                 -             2                -           - 
 Underlying EBITDA               428               221               139            70                -         (2) 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 
 Profit attributable 
  to equity holders*             177               113                53            55                6        (50) 
 One-off and exceptional 
  items: 
 Transaction cost 
  (Al Noor acquisition)           41                 -                 -             -                -          41 
 Accelerated share-based 
  payment charges                 10                 -                10             -                -           - 
 Pre-acquisition 
  Swiss tariff provision 
  release                        (7)               (7)                 -             -                -           - 
 Restructuring costs               2                 -                 -             2                -           - 
 Fair value gains 
  on ineffective 
  cash flow hedges               (8)               (8)                 -             -                -           - 
 Other gains and 
  losses                           1                 -                 -             -                -           1 
 Tax on one-off 
  and exceptional 
  items                            3                 3                 -             -                -           - 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 Underlying earnings             219               101                63            57                6         (8) 
                            --------  ----------------  ----------------  ------------  ---------------  ---------- 
 Weighted average 
  number of shares 
  (millions)                   598.4 
 Underlying earnings 
  per share (pence)             36.7

*Profit attributable to equity holders in Switzerland is shown after the elimination of intercompany loan interest of GBP17m.

Group financial performance

Group revenue increased by 30% to GBP2 749m (2016: GBP2 107m) for the reporting period.

Underlying operating profit before interest, tax, depreciation and amortisation ("underlying EBITDA") was 17% higher at GBP501m (2016: GBP428m), underlying margins declined from 20.4% to 18.2%, and basic underlying earnings per share were 19% lower at 29.8 pence (2016: 36.7 pence).

During the reporting period, the following exceptional and one-off items were adjusted for in determining underlying earnings:

 
 --   GBP13m (GBP10m after tax) mark-to-market 
       fair value gain, relating to the ineffective 
       Swiss interest rate swaps. The Group uses 
       floating-to-fixed interest rate swaps on 
       certain loan agreements to hedge against 
       interest movements which have the economic 
       effect of converting floating rate borrowings 
       to fixed rate borrowings. The Group applies 
       hedge accounting and therefore fair value 
       adjustments are booked to the consolidated 
       statement of comprehensive income. 
 
       With the removal of the Swiss franc/Euro 
       peg during January 2015 and the advent 
       of negative interest rates in Switzerland, 
       the Swiss interest rate hedges became ineffective 
       once Libor moved below zero as bank funding 
       at Libor plus relevant margins is subject 
       to a zero rate Libor floor. Effective from 
       1 October 2014, the mark-to-market movements 
       are charged to the income statement. As 
       these are non-cash flow items and to provide 
       balanced operational reporting, the Group 
       excluded the charge in the measurement 
       of underlying performance in the 2015 financial 
       year and consistently excludes the gain 
       arising this year. The swaps expire in 
       2017 and 2018. 
 --   A past-service cost credit of GBP13m (GBP10m

       after tax) arising in the main Hirslanden 
       pension fund. This relates to a change 
       in the pension fund conversion rate advised 
       by an independent professional. The underlying 
       income statement has been adjusted as the 
       credit is not related to the current year 
       underlying performance of the Swiss hospital 
       operations. 
 --   Accelerated amortisation of GBP7m relating 
       to the Al Noor trade name. 
 --   Restructuring costs of GBP5m relating to 
       the integration of the Al Noor operations. 
       Consistent with last year's treatment, 
       the underlying income statement has been 
       adjusted for these costs following the 
       combination in 2016. Currently, no further 
       restructuring costs associated with this 
       transaction are expected to be adjusted 
       beyond 31 March 2017. 
 --   GBP1m gain on the mark-to-market of a put 
       option.

Foreign exchange rates

Although the Group reports its results in British pound, the operating segments profits are generated in Swiss franc, UAE dirham and the South African rand. Consequently, movement in exchange rates affected the reported earnings and reported balances in the statement of financial position.

Foreign exchange rate sensitivity:

 
 --   The impact of a 10% change in the GBP/CHF 
       exchange rate for a sustained period of 
       one year is that profit for the year would 
       increase/decrease by GBP14m (2016: increase/decrease 
       by GBP11m) due to exposure to the GBP/CHF 
       exchange rate. 
 --   The impact of a 10% change in the GBP/ZAR 
       exchange rate for a sustained period of 
       one year is that profit for the year would 
       increase/decrease by GBP8m (2016: increase/decrease 
       by GBP7m) due to exposure to the GBP/ZAR 
       exchange rate. 
 --   The impact of a 10% change in the GBP/AED 
       exchange rate for a sustained period of 
       one year is that profit for the year would 
       increase/decrease by GBP2m (2016: increase/decrease 
       by GBP6m) due to exposure to the GBP/AED 
       exchange rate.

During the period under review, the average and closing exchange rates were the following:

 
                            2017     Variance         2016 
                                            % 
 Average rates: 
    GBP/CHF                 1.29        (12%)         1.47 
    GBP/AED                 4.80        (13%)         5.54 
    GBP/ZAR                18.41        (11%)        20.73 
 
 Period end rates: 
    GBP/CHF                 1.25         (9%)         1.38 
    GBP/AED                 4.59        (13%)         5.28 
    GBP/ZAR                16.74        (21%)        21.21

Cash flow

The Group continued to deliver strong cash flow converting 101% (2016: 96%) of underlying EBITDA into cash generated from operations. Cash and cash equivalents increased from GBP305m to GBP361m.

Interest-bearing borrowings

Interest-bearing borrowings increased from GBP1 841m at 31 March 2016 to GBP2 030m at 31 March 2017. This increase is mainly as a result of the change in the closing exchange rates, offset by a loan amortisation payment. During the reporting period, the bridge facility was repaid using additional financing facilities in South Africa and the Middle East.

 
                       2017    2016 
                       GBPm    GBPm 
 Interest-bearing     2 030   1 841 
 Less: cash and 
  cash equivalents    (361)   (305) 
                     ------  ------ 
 Net debt             1 669   1 536 
                     ------  ------ 
 Total equity         4 164   3 570 
 Debt-to-equity 
  capital ratio         0.4     0.4

Assets

Property, equipment and vehicles increased from GBP3 199m at 31 March 2016 to GBP3 703m at 31 March 2017. This increase is mainly as a result of additions as well as the change in closing exchange rates.

Intangible assets increased from GBP1 941m at 31 March 2016 to GBP2 156m mainly because of the change in closing exchange rates.

Income tax

The Group's effective tax rate decreased from 22.4% in the prior year to 20.8% for period under review predominantly due to the following:

 
 --   The tax rate decreased by 4.2% in respect 
       of prior year one-off non-deductible expenses 
       which were not incurred in the period under 
       review. This was related to Al Noor transaction 
       costs as well as an accelerated IFRS2 charge; 
       and 
 --   The tax rate increased by 3.0% due to a 
       reduced contribution by Middle East to 
       earnings.

Tax strategy

The Group is committed to conduct its tax affairs consistent with the following objectives:

 
 --   comply with relevant laws, rules, regulations, 
       and reporting and disclosure requirements 
       in whichever jurisdiction it operate; and 
 --   maintain mutual trust and respect in dealings 
       with all tax authorities in the jurisdictions 
       the Group do business.

Whilst 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 the intentions of the relevant legislature. The Group interprets relevant tax laws in a reasonable way and ensures that transactions are structured in a way that is consistent with a relationship of co-operative compliance with tax authorities. It also actively considers the implications of any planning for the Group's wider corporate reputation.

In order to meet these objectives, various procedures are implemented. The Audit and Risk Committee has reviewed the Group's tax strategy and related corporate tax matters.

DIVID policy and PROPOSED dividend

The Group's dividend policy is to target a pay-out ratio of between 25% and 30% of underlying earnings. The Board may revise the policy at its discretion.

The Board proposes a final dividend of 4.70 pence per ordinary share for the year ended 31 March 2017 for approval by the Company's shareholders at the annual general meeting on Tuesday, 25 July 2017. Together with the interim dividend of 3.20 pence per ordinary share for the six months ended 30 September 2016 (paid on 12 December 2016), the total final proposed dividend reflects a 27% distribution of underlying Group earnings attributable to ordinary shareholders.

Shareholders on the South African register will be paid the ZAR cash equivalent of 80.60500 cents (64.48400 cents net of dividend withholding tax) per share. A dividend withholding tax of 20% will be applicable to all shareholders on the South African register who are not exempt therefrom. The ZAR cash equivalent has been calculated using the following exchange rate: GBP1: ZAR17.15, being the 5-day average ZAR/GBP exchange rate on Friday, 19 May 2017 at 3:00pm GMT Bloomberg.

The final dividend will be paid on Monday, 31 July 2017 to all ordinary shareholders who are on the register of members at the close of business on the record date of Friday, 23 June 2017.

The salient dates for the dividend will be as follows:

 
 Dividend announcement date          Wednesday, 24 
                                      May 2017 
 Last date to trade cum dividend     Tuesday, 20 June 
  (SA register)                       2017 
 First date of trading ex-dividend   Wednesday, 21 
  (SA register)                       June 2017 
 First date of trading ex-dividend   Thursday, 22 
  (UK register)                       June 2017 
 Record date                         Friday, 23 June 
                                      2017 
 Shareholder approval at AGM         Tuesday, 25 July 
                                      2017 
 Payment date                        Monday, 31 July 
                                      2017

Share certificates may not be dematerialised or rematerialised within Strate from Wednesday, 21 June 2017 to Friday, 23 June 2017, both dates inclusive. No transfers between the UK and SA registers may take place from Wednesday, 24 May 2017 to Friday, 23 June 2017, both days inclusive.

Tax treatment for shareholders on the South African register

South African tax resident shareholders on the South African register:

In terms of the Company's Dividend Access Trust structure, the following South African tax resident shareholders on the South African register will receive a component of the dividend from the Dividend Access Trust and therefore regarded as a local South African dividend, with the remaining component from the Company and therefore regarded as a foreign non-South African dividend. For purposes of South African dividend withholding tax, the entire dividend of 80.60500 cents per share is taxable at a rate of 20%, unless an applicable exemption applies:

 
 1.   in the case of shares held in certificated 
       form, who are registered on the South 
       African register with an address in South 
       Africa (other than PLC Nominees Proprietary 
       Limited (or any successor entity through 
       which shares held in dematerialised form 
       are held)); and 
 2.   in the case of shares held in dematerialised 
       form, in respect of whom the South African 
       transfer secretaries of the Company have 
       determined, in good faith and by reference 
       to the information provided to them by 
       the eligible shareholders and/or their 
       brokers and/or central securities depository 
       participants, that such eligible shareholders 
       are either (i) tax resident in South 
       Africa or (ii) have an address in South 
       Africa and have not expressly indicated 
       that they are not tax resident in South 
       Africa as at the dividend record date.

The component of the dividend payable by the Dividend Access Trust and by the Company will be announced on the JSE's Stock Exchange News Service and on the LSE's Regulatory News Service as soon as possible after the record date, 23 June 2017, of the dividend.

Non-South African tax resident shareholders on the South African register:

Non-South African tax resident shareholders on the South African register will be paid the dividend by the Company in the usual way and not through the Dividend Access Trust. The entire dividend of 80.60500 cents per share payable to such shareholders will therefore be regarded as a foreign dividend and exempt from South African dividend withholding tax, provided that the relevant exemption forms have been completed and submitted as prescribed.

BOARD CHANGES

The following Board changes occurred during the reporting period, as announced on 11 May 2016 and 22 February 2017 respectively:

 
 --   Jurgens Myburgh was appointed as an executive 
       director and Chief Financial Officer of 
       the Company on 1 August 2016, following 
       the resignation of Craig Tingle as the 
       Chief Financial Officer on 15 June 2016. 
 --   Desmond Smith, being an independent non-executive 
       director of the Company, was appointed 
       as the Senior Independent Director in the 
       place of Ian Tyler who resigned as a director 
       of the Company on 21 February 2017.

DIRECTORS' RESPONSIBILITIES STATEMENT

Each of the Directors confirms that, to the best of their knowledge:

 
 --   the preliminary financial information, 
       which has been prepared in accordance with 
       International Financial Reporting Standards 
       as adopted by the European Union ('IFRS'), 
       give a true and fair view of the assets, 
       liabilities, financial position and profit 
       or loss of the Group; and 
 --   the preliminary announcement includes a 
       fair summary of the development and performance 
       of the business and the position of the 
       Group.

After making enquiries, the Directors considered it appropriate to adopt the going concern basis in preparing the financial statements.

The names and functions of the Company's directors are listed on the Company's website.

By order of the Board.

 
 Danie Meintjes    Jurgens Myburgh 
 Chief Executive   Chief Financial 
  Officer           Officer

23 May 2017

Cautionary statement

This announcement contains certain forward-looking statements relating to the business of the Company and its subsidiaries (collectively, the "Group"), 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 customers, its ability to engage consultants and general practitioners and to operate its business and increase referrals, the integration of prior acquisitions, the Group's estimates for future performance and its estimates regarding anticipated operating results, future revenue, capital requirements, shareholder structure and financing. In addition, even if the Group's actual results or development are consistent with the forward-looking statements contained in this preliminary announcement, those results or developments may not be indicative of the Group's results or developments in the future. In some cases, you can identify forward-looking statements by words such as "could," "should," "may," "expects," "aims," "targets," "anticipates," "believes," "intends," "estimates," or similar words. These forward-looking statements are based largely on the Group's current expectations as of the date of this preliminary announcement 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 and poor performance by healthcare practitioners who practice at our 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 preliminary announcement will in fact be realised and no representation or warranty is given as to the completeness or accuracy of the forward-looking statements contained in this preliminary announcement.

The Group is providing the information in this announcement as of this date, and we disclaim any intention or obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION

as at 31 March 2017

 
                                               2017     2016 
                                     Notes     GBPm     GBPm 
-----------------------------------  -----  -------  ------- 
ASSETS 
Non-current assets                            6 353    5 618 
                                            -------  ------- 
  Property, equipment and vehicles            3 703    3 199 
  Intangible assets                           2 156    1 941 
  Equity accounted investments       4          465      455 
  Other investments and loans                     8        6 
  Derivative financial instruments                -        1 
  Deferred income tax assets                     21       16 
                                            -------  ------- 
Current assets                                1 069      931 
                                            -------  ------- 
  Inventories                                    90       75 
  Trade and other receivables                   591      547 
  Other investments and loans                    16        - 
  Current income tax assets                       2        2 
  Derivative financial instruments                -        2 
  Cash and cash equivalents                     361      305 
  Assets classified as held for 
   sale                              6            9        - 
                                            -------  ------- 
Total assets                                  7 422    6 549 
                                            -------  ------- 
EQUITY 
  Share capital                                  74       74 
  Share premium reserve                         690      690 
  Treasury shares                               (2)      (2) 
  Retained earnings                           5 525    5 320 
  Other reserves                            (2 201)  (2 573) 
                                            -------  ------- 
Attributable to equity holders 
 of the Company                               4 086    3 509 
Non-controlling interests                        78       61 
                                            -------  ------- 
Total equity                                  4 164    3 570 
                                            -------  ------- 
LIABILITIES 
Non-current liabilities                       2 668    2 192 
                                            -------  ------- 
  Borrowings                         5        1 961    1 524 
  Deferred income tax liabilities               527      446 
  Retirement benefit obligations                154      179 
  Provisions                                     23       24 
  Derivative financial instruments                2       19 
  Cash-settled share-based payment 
   liability                                      1        - 
                                            -------  ------- 
Current liabilities                             590      787 
                                            -------  ------- 
  Trade and other payables                      472      431 
  Borrowings                         5           69      317 
  Provisions                                     22       19 
  Retirement benefit obligations                 10        9 
  Derivative financial instruments                7        1 
  Current income tax liabilities                  8       10 
  Liabilities classified as held 
   for sale                          6            2        - 
                                            -------  ------- 
Total liabilities                             3 258    2 979 
                                            -------  ------- 
Total equity and liabilities                  7 422    6 549 
                                            -------  -------

CONDENSED CONSOLIDATED INCOME STATEMENT