MEDICLINIC INTERNATIONAL PLC

2138002S5BSBIZTD5I602021-04-012022-03-31iso4217:GBP2138002S5BSBIZTD5I602020-04-012021-03-31iso4217:GBPxbrli:shares2138002S5BSBIZTD5I602022-03-312138002S5BSBIZTD5I602021-03-312138002S5BSBIZTD5I602020-03-31ifrs-full:IssuedCapitalMember2138002S5BSBIZTD5I602020-03-31ifrs-full:CapitalRedemptionReserveMember2138002S5BSBIZTD5I602020-03-31ifrs-full:SharePremiumMember2138002S5BSBIZTD5I602020-03-31mediclinicplc:ReverseAcquisitionReserveMember2138002S5BSBIZTD5I602020-03-31mediclinicplc:FinancialAssetsAtFVOCIReserveMember2138002S5BSBIZTD5I602020-03-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2138002S5BSBIZTD5I602020-03-31ifrs-full:ReserveOfCashFlowHedgesMember2138002S5BSBIZTD5I602020-03-31ifrs-full:RetainedEarningsMember2138002S5BSBIZTD5I602020-03-31ifrs-full:EquityAttributableToOwnersOfParentMember2138002S5BSBIZTD5I602020-03-31ifrs-full:NoncontrollingInterestsMember2138002S5BSBIZTD5I602020-03-312138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:IssuedCapitalMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:CapitalRedemptionReserveMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:SharePremiumMember2138002S5BSBIZTD5I602020-04-012021-03-31mediclinicplc:ReverseAcquisitionReserveMember2138002S5BSBIZTD5I602020-04-012021-03-31mediclinicplc:FinancialAssetsAtFVOCIReserveMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:ReserveOfCashFlowHedgesMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:RetainedEarningsMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:EquityAttributableToOwnersOfParentMember2138002S5BSBIZTD5I602020-04-012021-03-31ifrs-full:NoncontrollingInterestsMember2138002S5BSBIZTD5I602021-03-31ifrs-full:IssuedCapitalMember2138002S5BSBIZTD5I602021-03-31ifrs-full:CapitalRedemptionReserveMember2138002S5BSBIZTD5I602021-03-31ifrs-full:SharePremiumMember2138002S5BSBIZTD5I602021-03-31mediclinicplc:ReverseAcquisitionReserveMember2138002S5BSBIZTD5I602021-03-31mediclinicplc:FinancialAssetsAtFVOCIReserveMember2138002S5BSBIZTD5I602021-03-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2138002S5BSBIZTD5I602021-03-31ifrs-full:ReserveOfCashFlowHedgesMember2138002S5BSBIZTD5I602021-03-31ifrs-full:RetainedEarningsMember2138002S5BSBIZTD5I602021-03-31ifrs-full:EquityAttributableToOwnersOfParentMember2138002S5BSBIZTD5I602021-03-31ifrs-full:NoncontrollingInterestsMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:IssuedCapitalMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:CapitalRedemptionReserveMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:SharePremiumMember2138002S5BSBIZTD5I602021-04-012022-03-31mediclinicplc:ReverseAcquisitionReserveMember2138002S5BSBIZTD5I602021-04-012022-03-31mediclinicplc:FinancialAssetsAtFVOCIReserveMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:ReserveOfCashFlowHedgesMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:RetainedEarningsMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:EquityAttributableToOwnersOfParentMember2138002S5BSBIZTD5I602021-04-012022-03-31ifrs-full:NoncontrollingInterestsMember2138002S5BSBIZTD5I602022-03-31ifrs-full:IssuedCapitalMember2138002S5BSBIZTD5I602022-03-31ifrs-full:CapitalRedemptionReserveMember2138002S5BSBIZTD5I602022-03-31ifrs-full:SharePremiumMember2138002S5BSBIZTD5I602022-03-31mediclinicplc:ReverseAcquisitionReserveMember2138002S5BSBIZTD5I602022-03-31mediclinicplc:FinancialAssetsAtFVOCIReserveMember2138002S5BSBIZTD5I602022-03-31ifrs-full:ReserveOfExchangeDifferencesOnTranslationMember2138002S5BSBIZTD5I602022-03-31ifrs-full:ReserveOfCashFlowHedgesMember2138002S5BSBIZTD5I602022-03-31ifrs-full:RetainedEarningsMember2138002S5BSBIZTD5I602022-03-31ifrs-full:EquityAttributableToOwnersOfParentMember2138002S5BSBIZTD5I602022-03-31ifrs-full:NoncontrollingInterestsMember 001_015 contents_Chair_CEO_MARKET REVIEW F_17_05 016_029 STRATEGY_KPI_BUSINESS MODEL F_30_05 030_033 SEC 172 F_10_05 034_046 Sustainable development overview F_30_05 047_057 TCFD_NON financial F_30_05 058 071 Clinical Services Overview_F_30_05 072-089 CFO report 14 30_05 090_101 FIVE YEAR_RISK MANAGEMENT F_11_05 102_108 GOVERNANCE_BOARD_EXCO_01_06 109_120 CORPORATE GOVERNANCE STATEMENT F_01_06 121_131 Audit & Risk Report 01_06 132_142 Clinical Performance Committee_ESG_NOMCOM_F_01_06 143_167 Remuneration Committee Report 01_06 168_171 OTHER DISCLOSURES_directors responsibilitiesF_13_05 172_179 Financial content & Auditors' report 24_05 180_244 Consolidated financial statements 01_06 245_257 Notes 29 Investments in Subsidiaries F_25_05 258_262 Company financial statements_25_05 263_268 SHAREHOLDER INFORMATION & Company Info_glossary SHAPING OUR TOMORROW 2022 ANNUAL REPORT STRATEGIC REPORT Introduction 3 Strategy roadmap 4 At a glance 6 Chair’s Review 9 Investment case Strategy and performance 10 Group Chief Executive Ocer’s Report 14 Market review 16 Strategy overview 23 Key performance indicators Business delivery and resource management 25 Business model 26 Stakeholder engagement 30 Section 172 statement 34 Sustainable development overview 47 TCFD report 57 Non-ﬁnancial information statement Operations and risk 58 Clinical services overview 72 Group Chief Financial Ocer’s Report 90 Five-year summary 91 Risk management report GOVERNANCE AND REMUNERATION REPORT 102 Chair’s introduction 103 Board of Directors 108 Group Executive Committee 109 Corporate Governance Statement 121 Audit and Risk Committee Report 132 Clinical Performance Committee Report 135 ESG Committee Report 137 Nomination Committee Report 143 Remuneration Committee Report 168 Other disclosures 171 Statement of directors’ responsibilities FINANCIAL STATEMENTS 172 Independent Auditors’ Report 180 Group annual ﬁnancial statements 258 Company annual ﬁnancial statements ADDITIONAL INFORMATION 263 Shareholder information 265 Company information 266 Forward-looking statements 267 Glossary of terms MEDICLINIC INTERNATIONAL PLC 2021 ANNUAL REPORT1 OUR PURPOSE IS TO ENHANCE THE QUALITY OF LIFE ICON NAVIGATION USED THROUGHOUT THE REPORT Reference to our website Page driver to other content Case studies Video content Targets AndreasKlinik Cham Zug, Switzerland Airport Road Hospital, the Middle East REPORT PROFILE REPORTING SCOPE, BOUNDARY AND CYCLE We publish this annual report and ﬁnancial statements (‘Annual Report’) in respect of the ﬁnancial year ended 31 March 2022 (the ‘reporting period’ or ‘year under review’ or ‘period under review’ or ‘FY22’) with accompanying reports in respect of both the 2021 calendar year and FY22, available on our website from the date of the distribution of this Annual Report and the Company’s notice of annual general meeting (‘AGM’) by no later than 21 June 2022. 2022 Clinical Services Report 2022 Sustainable Development Report 2022 Notice of Annual General Meeting This Annual Report presents our environmental, social and governance (‘ESG’), clinical and ﬁnancial performance, and reports on the operations of our subsidiaries in Switzerland, South Africa and Namibia, and the Middle East (collectively, the ‘Group’). It also compares results with those of the prior ﬁnancial year (‘FY21’) and the 2020 ﬁnancial year (‘FY20’) representing a pre-pandemic period, and indicates focus areas for the ﬁnancial year/s ahead (‘FY23’, ‘FY24’). REPORTING PRINCIPLES This Annual Report contains information deemed useful and relevant to stakeholders, with due regard to their expectations through continuous engagement, or information that the Company’s board of directors (the ‘Board’) believes may inﬂuence stakeholders’ perception or decision-making. This Annual Report was prepared in accordance with the: • listing rules and disclosure guidance and transparency rules of the Financial Conduct Authority (‘FCA’) (‘Listing Rules’ and ‘DTRs’); • listings requirements of the JSE (‘Listings Requirements’); • UK Corporate Governance Code published by the Financial Reporting Council (‘FRC’) in July 2018 (the ‘Code’); • UK Companies Act 2006 (the ‘Act’) and other relevant UK legislation; and • UK-adopted international accounting standards. Our sustainable development reporting (supplemented by the 2022 Sustainable Development Report, which is available at annualreport.mediclinic.com) was prepared in accordance with the Global Reporting Initiative Sustainability Reporting Standards 2016 (‘GRI Standards’) and the UK non-ﬁnancial reporting regulations. EXTERNAL AUDIT AND ASSURANCE The Company’s and Group’s annual ﬁnancial statements were audited by the Group’s independent external auditors, PricewaterhouseCoopers LLP (the ‘external auditors’ or ‘PwC’), in accordance with International Standards on Auditing (UK) (‘ISA’). The Group follows various other voluntary external accreditation, certiﬁcation and assurance initiatives, complementing the Group’s combined assurance model, as reported on in the 2022 Clinical Services Report and 2022 Sustainable Development Report, available at annualreport.mediclinic.com. APPROVAL OF ANNUAL REPORT AND FINANCIAL STATEMENTS The Board approved this report, including the Strategic Report and Governance and Remuneration Report (including the Remuneration Report and the Directors’ Report contained therein), on 24 May 2022. Dame Inga Beale Non-executive Chair 24 May 2022 Our purpose drives everything we do as an organisation, galvanising our teams across geographies to deliver care for our clients. Dr Ronnie van der Merwe Group Chief Executive Ocer STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 1 STRATEGIC REPORT Introduction 3 Strategy roadmap 4 At a glance 6 Chair’s Review 9 Investment case Strategy and performance 10 Group Chief Executive Ocer’s Report 14 Market review 16 Strategy overview 23 Key performance indicators Business delivery and resource management 25 Business model 26 Stakeholder engagement 30 Section 172 statement 34 Sustainable development overview 47 TCFD report 57 Non-ﬁnancial information statement Operations and risk 58 Clinical services overview 72 Group Chief Financial Ocer’s Report 90 Five-year summary 91 Risk management report Louis Leipoldt, South Africa MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT2 STRATEGY ROADMAP 1 4 2 35 6 2026 STRATEGIC GOALS 1 Become an integrated healthcare provider across the continuum of care 4 Evolve as a data-driven organisation 5 Minimise our environmental impact 2 Improve our value proposition signiﬁcantly 3 Transform our services and client engagement through innovation and digitalisation 6 Grow in existing markets and expand into new markets OUR VISION Be the partner of choice that people trust for all their healthcare needs ENABLED BY ENGAGING OUR STRATEGY OUR KEY STAKEHOLDERS OUR APPROACH TO SUSTAINABILITY THROUGH OUR COMMITMENT TO REINFORCED BY OUR PURPOSE Enhancing the quality of life See page 16 See page 26 Client centred Trusting and respectful Patient safety focused Performance driven Team orientated OUR VALUES CONSERVE CONNECT COMPLY Employees, alumni and potential applicants Governments and authorities Healthcare insurers Investors Medical practitioners Clients See page 7 See page 34 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 3 AT A GLANCE 74 Hospitals 2 20 Day case clinics 5 5 Subacute hospitals 3 453 Theatres SWITZERLAND Hirslanden, the largest private healthcare provider in Switzerland, is recognised for clinical excellence and outstanding client experience. www.hirslanden.ch SOUTH AFRICA AND NAMIBIA Mediclinic Southern Africa, one of the three largest private healthcare providers in the region, boasts highly specialised acute care infrastructure and has a relentless focus on oering value to all its partners and clients. www.mediclinic.co.za THE MIDDLE EAST Mediclinic Middle East is established as a leading healthcare provider in the United Arab Emirates (‘UAE’) with a trusted brand and strong reputation in this developing region, oering clinical care of internationally recognised standards. www.mediclinic.ae THE UK We have a 29.9% stake in Spire Healthcare Group plc (‘Spire’), a leading independent hospital group with 39 hospitals and eight clinics. www.spirehealthcare.com OUR OPERATIONS A UNIQUELY INTEGRATED INTERNATIONAL HEALTHCARE PARTNER We are a diversiﬁed international private healthcare services group, establish¹, established in South Africa in 1983, with divisions in Switzerland, Southern Africa (South Africa and Namibia) and the Middle East. 22 Outpatient clinics 6 2 Mental health facilities 4 11 538 Beds 34 964 Full-time equivalents Notes  In addition to three operating divisions, UK and Corporate are not reportable operating segments as they are not separately included in the reports provided to the chief operating decision-maker. 2 Provides patient treatment with specialised medical and nursing sta, and medical equipment. 3 Provides comprehensive goal-orientated inpatient care designed for a patient who has had an acute illness, injury or exacerbation of a disease process. 4 Provides specialised treatment of serious mental disorders. 5 Provides elective procedures, surgical procedures and planned medical procedures, but admits and discharges patients on the same day. 6 Provides consultations (by general practitioner, specialist or allied healthcare professional) with no theatre facilities. 7 Number of full-time employees who could have been employed if reported number of hours worked by part-time employees had been worked by full-time employees instead. Switzerland UK The UAE South Africa and Namibia OPERATING PROFIT £280m 34% FY21: £209m FY20: £(184)m See the Group Chief Executive Ocer’s Report on page 10 and the Group Chief Financial Ocer’s Report on page 72 for more on Spire MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT4 (15) 71 (7) FINANCIAL HEADLINES Notes  See page 80 of the Group Chief Financial Ocer’s Report for more on the Group’s use of adjusted non-IFRS ﬁnancial measures Other non-IFRS measures, which include constant currency, cash conversion, return on invested capital (‘ROIC’), net incurred debt and leverage ratio, are further discussed, with reconciliations from the most comparable IFRS measure provided, on pages 81–86. 2 Adjusted earnings before interest, tax, depreciation and amortisation (‘EBITDA’). 3 Adjusted operating proﬁt. 4 Adjusted basic earnings per share (‘EPS’). See headline EPS (‘HEPS’) calculation on page 196 STATUTORY REVENUE £3 233m 8% FY21: £2 995m FY20: £3 083m EPS 20.5p 122% FY21: 9.2 pence FY20: (43.4) pence Contribution to revenue (£’m) 0 500 1000 1500 2000 2500 3000 3500 1503 909 820 1 Switzerland 47% Southern Africa 28% The Middle East 25% Corporate 0% Contribution to adjusted EBITDA (£’m) 0 0 100 25 200 50 300 75 400 100 500 125 600 150 700 175 200 236 170 68 123 51 Switzerland 45% Southern Africa 33% The Middle East 23% Corporate (1)% Contribution to adjusted earnings (£’m) Switzerland 43% Southern Africa 41% The Middle East 30% Spire (9)% Corporate (5)% (8) REVENUE 10% 24% in constant currency in constant currency EPS 4 22.6p 65% FY21: 13.7 pence FY20: 24.0 pence ADJUSTED 1 EBITDA 2 £522m 22% As a % of revenue 16.1% OPERATING PROFIT £280m 34% FY21: £209m FY20: £(184)m As a % of revenue 8.7% FY21: 7.0% FY20: n/a OPERATING PROFIT 3 £311m 41% FY21: £221m FY20: £327m As a % of revenue 9.6% FY21: 7.4% FY20: 10.6% FY21: £426m FY20: £541m FY21: 14.2% FY20: 17.5% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 5 CHAIR’S REVIEW Q&A WHAT HAS ‘SHAPING OUR TOMORROW’ MEANT FOR THE BOARD? We focused on two speciﬁc aspects: the continuum of care, which is about delivering integrated healthcare services that meet clients’ future expectations; and digital transformation, which will improve service delivery and drive eciencies inside the organisation. Dame Inga Beale Non-executive Chair INNOVATING AND EVOLVING FOR THE FUTURE Scan the QR code or visit annualreport.mediclinic.com to view the video interview SUCCESSFULLY DELIVERING HEALTHCARE DURING THE SECOND YEAR OF THE PANDEMIC The year under review is the second full year in which Mediclinic has met the challenges of COVID-19 and, I am pleased to report, we delivered further progress in executing our strategy. The Business model described on page 25 clearly indicates how well positioned the Group is to create long-term value going forward. The Market review on pages 14–15 highlights the long-term drivers of demand for healthcare services, including an ageing population and growing disease burden. The fundamental purpose of investing across the continuum of care is to deliver future growth throughout the various care settings we are expanding into; this will ensure our services remain relevant to the future needs of our clients. By executing our strategy, the Group is broadening its engagement and strengthening long-term client relationships. During the reporting period, we continued to demonstrate the vital role Mediclinic plays in delivering urgent and emergency healthcare services. Trust in healthcare is critical to long-term success and we have earned that trust over nearly 40 years. Not only does this position us favourably to attract and retain clinical personnel, but it also cements our leading market positions, attracting new clients into the healthcare ecosystems we are creating. Many of the strategic milestones achieved this year will be covered throughout the report. However, I am particularly excited about Mediclinic’s digital healthcare initiatives. The MyMediclinic 24x7 application was launched in April 2021 in the Middle East; during a visit there, I was able to see ﬁrst-hand the value such software and services create for clients, doctors and healthcare systems. This is a great example of how a Group-wide strategy is being rolled out across the divisions – a key focus area I discussed in last year’s annual report – as we seek to demonstrate the unique value Mediclinic can create through its international perspective, scale and expertise. The Group’s ﬁnancial performance improved signiﬁcantly in FY22 compared with the previous year, as we continued to adapt to the pandemic’s disruptive eects. The results were driven by a strong recovery in client activity, with the Group treating around 750 000 inpatient and day case admissions, driving an associated revenue increase of 7%, and outpatient revenue up 10% from the previous year. With revenue in all three divisions above pre-pandemic levels, we remain focused on encouraging clients to make use of our facilities, digital applications and integrated services, while ensuring that operational eciencies continue to be delivered as we grow. The detailed overview of ﬁnancial performance is on pages 72–89. At the end of FY20, the Board took the prudent and appropriate decision to suspend the dividend as part of the Group’s eorts to maintain its liquidity position and maximise its ability to navigate through the pandemic. Given the ﬁnancial strength of the Company today, the resilience we displayed throughout the pandemic and a more stable outlook, though subject to macroeconomic factors, the Board felt it appropriate to propose a ﬁnal dividend of 3.00 pence. I would like to thank investors for their commitment and support during the pandemic. 6 OUR VALUES IN ACTION CLIENT CENTRED We determine clients’ needs, involve them in decisions, actively manage their experiences and deliver on promises. 161 000+ client surveys received in FY22 TRUSTING AND RESPECTFUL Our people treat others with courtesy and kindness, embrace diversity, provide and welcome feedback, and respect privacy. 3.98 employee engagement grand mean score (out of ﬁve) PATIENT SAFETY FOCUSED We prioritise clients’ safety, identify and manage risks, and accurately record and securely store patient information. 150+ clinical indicators measured PERFORMANCE DRIVEN We set objectives and measure progress, honour decisions and address challenges, complaints and ineciencies. 5 dashboards included in Board reports TEAM ORIENTATED We support colleagues, collaborate on problem-solving and decision- making, encourage team spirit and create opportunities for idea sharing. 84% participation rate in employee engagement survey through active data management, and leverage skills and experience on a global scale. A HEALTHY CULTURE Our unique approach to ESG matters is to ‘Conserve Connect Comply’, which is ﬁrmly embedded in both the Group’s culture and how we conduct business. From FY23 onwards, we are also proposing the inclusion of certain ESG performance metrics in our long-term and short-term incentive (‘LTI’ and ‘STI’) schemes for management in the revised Remuneration Policy. More details are available on pages 144–145 and 147. While the Sustainable development overview on pages 34–46 and the standalone 2022 Sustainable Development Report detail our strong ESG performance and material issues, we must, and can, do more. I am a ﬁrm believer that diversity of people drives diversity of thought. The results thereof are better outcomes and the advancement of businesses, both ﬁnancially and socially. In November 2021, during a virtual leadership event, I joined Ronnie in discussing the topic of diversity and inclusion with the top 400 leaders in the organisation. Mediclinic is launching many such initiatives to ensure that every employee not only has an opportunity to contribute to the conversation, but also feels safe and heard. Mediclinic regards its responsibility towards our various stakeholders and the environment very seriously. We have an exemplary track record, high standards and dedication to transparency – aspects which, I believe, contribute signiﬁcantly to our reputation as a trusted, respected brand and employer. Our approach to ESG is no dierent. Having previously set ambitious targets to become carbon neutral and have zero waste to landﬁll by 2030, this year’s focus was on progressing our development of detailed roadmaps to support the achievement of these goals. In FY22, we also aligned our disclosure with the requirements of the Task Force on Climate- related Financial Disclosures (‘TCFD’) – more details are available on page 47. THE COLLECTIVE POWER OF OUR GROUP During the course of my two years with Mediclinic, the connectivity between all divisions improved signiﬁcantly under the leadership of our Group Chief Executive Ocer (‘CEO’), Dr Ronnie van der Merwe, and the Group Executive Committee. This year, some investors asked me why we operate as a Group in three dierent healthcare systems. The Board believes we are uniquely positioned to beneﬁt in the divisions through our international perspectives and collective power. More so than single-country operators, we are able to see trends and opportunities emerge, standardise our approach to key functions and processes, benchmark internally I am a ﬁrm believer that diversity of people drives diversity of thought. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 7 CHAIR’S REVIEW CONTINUED Throughout this journey, our people remain central to our success. EVOLVING THE ROLE OF THE BOARD As a Board, we must ensure the right balance is struck between providing the necessary governance and oversight for investors while simultaneously looking to the future, supporting and encouraging management to evolve the business. Regarding the latter, we fully embrace the aims and ability of management to deliver on the Mediclinic Group Strategy and encourage rapid execution which, in turn, will support our growth aspirations. As planned, Alan Grieve and Trevor Petersen stepped down as directors of the Company in February 2022. Both possess exceptional organisational knowledge and have dedicated many years of service to their roles. It has been a pleasure working alongside them and beneﬁtting from their experience. Dr Felicity Harvey succeeded Alan as Senior Independent Director (‘SID’) and has already engaged directly with the Group’s top investors, along with myself, to share her industry knowledge and hear their views. We remain committed to strengthening and diversifying the Board. In this, I was pleased to welcome two new independent directors: Natalia Barsegiyan – who became a member of the Audit and Risk Committee and the ESG Committee – and Zarina Bassa, who forms part of the Remuneration Committee and will join the Audit and Risk Committee with eect from 1 January 2023. Consequently, we now enjoy equal representation on the Board of male and female Board members. This provides the necessary diversity of views, cultures and backgrounds, in addition to independence, to ensure the appropriate decisions are made with all stakeholders in mind. A key function of this Annual Report is to aid understanding of how my fellow directors and I have exercised our duties – under Section 172 of the Companies Act 2006 (‘Section 172’) – to promote the long-term success of Mediclinic, with consideration for all stakeholders’ views. While more details are available on page 30, I would like to highlight one key decision: constituting a new ESG Committee, of which I am the Chair, in September 2021. Previously, ESG and clinical governance had been combined under a single committee. Such is the advancement of our ESG strategy that we thought it appropriate to give it the requisite attention. It will support management in adopting the right culture, attracting the right people and providing prominence to the right activities, enabling many key elements of our Group strategy to fall into place.  FOCUS ON PROFITABLE GROWTH As we look ahead, the Board believes the opportunities and outlook for the Group remain positive. Momentum is building as we see the eects of the pandemic on our operations lessen and client volumes grow. Financial performance has improved materially. Leverage is reducing and returns are advancing towards our weighted average cost of capital (‘WACC’). Management remains focused on driving eciencies and productivity. These factors are expected to see proﬁtability return towards pre-pandemic levels over the medium term. Throughout this journey, our people remain central to our success. I thank our dedicated teams of doctors and nurses for living our purpose to enhance the quality of life every day. They have accomplished far more than the Board and management could ever have asked of them, especially during the past two years. Our strategic execution will provide them with new and exciting opportunities as we continue our expansion across the continuum of care in pursuit of further growth. Nurturing and developing their skills and promoting wellness are critical to our prosperity and I look forward to seeing them grow with the business in the years to come. Dame Inga Beale Non-executive Chair 24 May 2022 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT8 • As a recognised employer and partner of choice, attracts and retains the best talent and independent medical practitioners across all disciplines • Collaborates with governments and authorities to oer healthcare services and participates in initiatives to strengthen relationships across public and private healthcare sectors • Innovates with healthcare insurers and industry partners to deliver products and services that meet the changing needs of clients • Internationally recognised clinical expertise and a relentless focus on improving patient safety and clinical outcomes • Committed to providing cost-ecient, quality care and outstanding client experiences as part of our mission to create value every day • Digitalisation competencies centred on transforming services to oer seamless, integrated client journeys across physical and virtual care settings • Robust cash generation • Drives enhanced returns through increased asset turnover and value- oriented capital allocation • Responsible approach to leverage through proactive management of debt levels, costs and maturity, providing ﬁnancial ﬂexibility for future growth • Dividend policy payout ratio of between 25% to 35% of adjusted EPS • Group beneﬁts of scale and standardisation deliver cost savings and operating eciencies INVESTMENT CASE 1 2 3 5 64 PARTNER OF CHOICE CLIENT CENTRED TRUST OPPORTUNITIES FOR GROWTH HIGH BARRIERS TOENTRY STRONG FINANCIAL PROFILE • Established leading market positions with nearly 40 years of healthcare experience • Operates world-renowned tertiary care facilities • One of the largest private healthcare service providers and doctor networks across the Europe, Middle East and Africa (‘EMEA’) region • International expertise across a balanced portfolio of developed (Switzerland and the UK) and emerging market (Southern Africa and the Middle East) operations • Committed to sustainable development with clear ESG goals that advance the growth prospects of the Group and safeguard our people, clients and planet • Market share growth propelled by leading market positions and diverse services • Focused expansion into new services across the continuum of care through investment in innovation, digital transformation and technology • Disciplined approach to grow into new geographies by leveraging our core competencies • Leverages international expertise and internal clinical benchmarking for eective management of large multidisciplinary acute facilities, Centres of Excellence (‘CoEs’) and specialised services • Extensive and well-invested asset portfolio providing operational ﬂexibility, including expansion across the continuum of care and other lighter asset investments to grow the business • Hub-and-spoke healthcare models supported by widespread physical and virtual integrated client referral channels • Detailed knowledge of complex and diverse reimbursement models underpinned by data science management Klinik Im Park, Switzerland Following a clear strategic roadmap to accomplishing our vision, we are constantly evolving and expanding our integrated healthcare system to oer clients easy access to convenient, high-quality healthcare in the most suitable care setting at the most appropriate cost. By approaching this with disciplined capital allocation and a commitment to a better tomorrow, we expect to deliver superior and sustainable value to shareholders. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 9 GROUP CEO’S REVIEW TOWARDS THE MEDICLINIC OF THE FUTURE DELIVERING AGAINST OUR PRIORITIES Amid the ongoing challenges posed by COVID-19, the Group made good progress in the achievement of our ﬁnancial, operational and strategic goals during the year under review, further strengthening our foundation for future growth. To guide our actions during FY22, I set out four key priorities at the start of the year: 1. Deal with the pandemic eectively; 2. Progress towards pre-pandemic proﬁtability; 3. Execute on the Mediclinic Group Strategy; and 4. Further improve our Group value. DEALING WITH THE PANDEMIC EFFECTIVELY Our international perspective and centrally coordinated Clinical Services function proved instrumental in navigating the pandemic eectively, leveraging insight and best practice from across the Group to improve our response to each wave. Through multidisciplinary task forces at Group and divisional level, we continually evaluate our ongoing pandemic response, allowing for optimised treatment pathways. We also remain focused on the safety and wellbeing of every employee and partner doctor, adapting our support as the pandemic’s impact evolves. Since the onset of the pandemic, we have diligently cared for approximately 85 000 COVID-19 inpatients. Even though COVID-19 patient volumes were similar compared with the prior year, we experienced a signiﬁcant increase in overall client activity, driven by demand for our broad range of healthcare services. In FY22, we treated around 750 000 inpatient and day case admissions, up 14% compared with FY21, with outpatient revenue increasing by 10%. Collaborating with and supporting public and private stakeholders in all our geographies has proven vital in combatting the pandemic. In Switzerland, we administered over 1 million COVID-19 vaccine doses at our vaccination centres, and partnered with 12 cantons to manage repetitive polymerase chain reaction (‘PCR’) saliva testing on our digital platform, TOGETHER WE TEST. Our on-site vaccination centres in South Africa assisted with the delivery of a further 360 000 vaccines, while ﬁve of our facilities in the Middle East provide ongoing support to the world-class, government-led vaccination and testing programmes in the region. Q&A HOW HAVE THE PEOPLE OF MEDICLINIC INSPIRED YOU IN THE PAST YEAR? To navigate challenges posed by the pandemic, teams across the business had to quickly adapt and evolve. I have witnessed strong teams at our facilities work together more eectively than ever before, and this team-orientated approach has spread throughout the entire organisation. Dr Ronnie van der Merwe Group Chief Executive Ocer Collaborating with and supporting public and private stakeholders in all our geographies has proven vital in combatting the pandemic. GROUP CHIEF EXECUTIVE OFFICER’S REPORT Scan the QR code or visit annualreport.mediclinic.com to view the video interview 10 PROGRESSING TOWARDS PRE-PANDEMIC PROFITABILITY Our ability to provide our full breadth of services improved in FY22 compared with FY21. The Omicron variant proved less clinically severe than previous variants, resulting in fewer COVID-19 inpatient admissions compared with other waves; however, stang and patient scheduling were severely disrupted at times by the variant’s higher transmissibility. Encouragingly, we were able to exit the fourth quarter strongly across all three divisions as the wave receded. The Group delivered a strong operational and ﬁnancial performance this year, in line with the improved outlook we indicated at the half-year results. Group revenue in FY22 was up 8% at £3 233m (FY21: £2 995m), adjusted EBITDA was up 22% at £522m (FY21: £426m) and the adjusted EBITDA margin signiﬁcantly improved by nearly 200 basis points to 16.1% (FY21: 14.2%), signalling our progress towards pre-pandemic proﬁtability (FY20: 17.5%). Reported operating proﬁt was up 34% at £280m (FY21: £209m); adjusted operating proﬁt was up 41% at £311m (FY21: £221m). Reported earnings were up 122% at £151m (FY21: £68m). Reported and adjusted EPS were up 122% at 20.5 pence (FY21: 9.2 pence) and 65% at 22.6 pence (FY21: 13.7 pence), respectively. Cash and cash equivalents increased during the year to £534m (FY21: £294m), with cash conversion at 127% (FY21: 77%). The leverage ratio reduced to 3.9x at year end (FY21: 5.1x), and ROIC increased to 4.0% (FY21: 3.0%). The Board has proposed that the dividend be reinstated with a ﬁnal dividend of 3.00 pence per share (FY21: nil). EXECUTING ON OUR GROUP STRATEGY The Group strategy aims to position Mediclinic as an integrated healthcare partner, harnessing data, technology and innovation to facilitate our growth across the continuum of care while oering sustainable value to our clients. To facilitate this, from 1 April 2022, we appointed Koert Pretorius, former CEO of our Southern Africa division, as Group Chief Operating Ocer and reﬁned Magnus Oetiker’s role to focus purely on strategy. I believe these changes will increase the speed of strategy execution while maintaining operational discipline in the business of today. It will also improve project alignment, resource allocation and operational excellence across the Group and divisions, and support our Group priority of returning to pre-COVID-19 levels of proﬁtability. DIGITAL TRANSFORMATION Traditionally, we have invested signiﬁcantly in our global infrastructure, creating a valuable and market-leading portfolio of facilities. The pandemic, however, greatly increased the need for convenience and ease in accessing quality healthcare. We are growing our information and communications technology (‘ICT’), electronic health records (‘EHRs’) and digital initiatives accordingly to enable seamless and coordinated client journeys across physical and virtual care settings. Through our collaboration with Mehiläinen, we are broadening our capacity to provide innovative digital healthcare solutions for clients and healthcare professionals on the BeeHealthy platform. We have launched client-facing applications in all three geographies, and are piloting various digital patient pathways. This will allow us to foster stronger direct relationships with our clients, enhancing clinical outcomes, client experience and stakeholder value. Our virtual care initiative digitalises existing services to create a real-time healthcare system which comprises telehealth services, remote patient monitoring (‘RPM’) and virtual critical care unit solutions. We are also well advanced in robotic process automation (‘RPA’), which drives productivity and eciency gains, and allows our people to prioritise valued-added activities. INNOVATION We established our healthcare technology and innovation hub in Switzerland during the year under review, and our precision medicine services have launched in the Middle East and Switzerland, with Southern Africa to follow shortly. These services, led by specialist geneticists, enable disease treatment and prevention tailored to individual clients’ genetic, environmental and lifestyle variables. The Group strategy aims to position Mediclinic as an integrated healthcare partner, harnessing data, technology and innovation to facilitate our growth. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 11 GROWTH AND EXPANSION ACROSS THE CONTINUUM OF CARE In Switzerland, our numerous public- private partnerships (‘PPPs’) support cantonal hospitals to expand care delivery, while Hirslanden, along with Medbase and the insurance partners Groupe Mutuel, Helsana and SWICA, launched a joint digital ecosystem called Compassana, which will allow Swiss clients to coordinate their care. We also recently opened OPERA Bern day case clinic, our ﬁfth in Switzerland, and are piloting an innovative insurance product in the same region, in collaboration with Medbase and Helsana Insurance, which oers supplementary insured clients access to high-quality, integrated care. In Southern Africa, we opened two new day case clinics during the period, taking the division’s total to 14. Following the opening of our ﬁrst renal facility in South Africa in partnership with BGM Renal Care in February 2021, three further facilities were opened during the period. Co-locating these services at existing facilities ensures a comprehensive, vertically integrated approach to renal care in the acute and chronic environment. In July 2021, we also partnered with Icon Oncology to open a new ﬂagship oncology service. We grew our services in the Middle East through the 100-bed expansion and the new integrated oncology unit at Airport Road Hospital in Abu Dhabi. In November 2021, we acquired the remaining 70% shares in the Bourn Hall Fertility Centre to further enhance our in vitro fertilisation (‘IVF’) oering. In Dubai, we successfully launched a new Mediclinic Perform sports medicine and rehabilitation centre, and a cosmetic facility, Enhance, is due to open by the end of May. We entered into the ﬁrst-ever healthcare PPPs awarded by the Dubai Health Authority to operate two dialysis centres. RPM and home care services present new growth opportunities. The Group invested in DomoSafety, a Swiss at-home health monitoring business; acquired Ayadi Home Healthcare in the Middle East; and commenced an RPM pilot with the Abu Dhabi Government. Furthermore, we converted 35 licensed beds in the Middle East to provide long-term patient care as we look to these and other specialties like mental health for further expansion. The Group’s entry into the Kingdom of Saudi Arabia together with the Al Murjan Group is progressing well. We expect to open the 236-bed private hospital in 2023. SUSTAINABLE DEVELOPMENT Sustainable development is one of our core strategic focus areas and is ingrained in how we do business. Our people, clients and the planet are our priority as we seek to build healthier and happier societies for a better future, which drives value for all stakeholders. We have allocated around £8m of capital investment per annum over the next three years towards projects that drive environmental improvements as we seek to achieve our 2030 targets, reducing costs and diversifying our energy reliance. Excellent, cost-eective initiatives are already underway, including water usage minimisation, alternatives to traditional energy sources and packaging reduction. During the period, we completed our ﬁrst sustainability-linked syndicated loan in South Africa and signed agreements to procure renewable energy at lower rates than traditional energy taris while transitioning to 100% renewable electricity supply in Switzerland. GROUP CHIEF EXECUTIVE OFFICER’S REPORT CONTINUED Our people, clients and the planet are our priority as we seek to build healthier and happier societies for a better future. Constantiaberg, South Africa MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT12 FURTHER IMPROVING OUR GROUP VALUE Our purpose, to enhance the quality of life, drives everything we do as an organisation, galvanising our teams across geographies to deliver care for our clients. To enhance the Group’s position as a market leader, we are not restricted by geography or function, but instead harness the skills, knowledge, best practice and innovation from each of the three continents where we operate. We have seen clinical collaboration in areas such as virtual critical care units, COVID-19 treatment pathways and RPM. Our Digital Transformation and Innovation functions collaborate with partners from around the globe. Procurement initiatives ensure the consistency and security of supply, as well as competitive pricing which supports our proﬁtability. ESG projects enhance our position as a trusted healthcare partner. All of these are being managed centrally to ensure we beneﬁt from economies of scale, eciencies and coordinated care, which will continue to set us apart from less diversiﬁed healthcare providers. SPIRE’S PERFORMANCE Spire’s partnership with the National Health Service (‘NHS’) in the UK continued with a volume-based contract in the ﬁrst quarter of 2021 – nine Spire hospitals became NHS cancer hubs. Similar agreements were established in the wake of the Omicron wave. The group delivered a strong ﬁnancial performance in the year ended 31 December 2021, with revenue growth of 20%. Spire also completed the sale and leaseback of its Cheshire hospital and reﬁnancing of its borrowing facilities, paying down £100m of debt. We continue to work with the company’s management and board to deliver on Spire’s strategy of being the ﬁrst choice for private healthcare in the UK, and a key partner of the NHS, while progressing eciency programmes and growth initiatives. POSITIVE GROUP OUTLOOK It has been four years since my appointment as Group CEO, and three years since we introduced a comprehensive strategy for the entire organisation. During this time, there is no doubt we have matured in our approach to strategy execution and our ability to work cohesively towards enhancing our collective value. This gives me conﬁdence in our future and the opportunities being created for the Group to deliver sustainable value. In FY23, we expect a combination of volume growth and eciency gains to continue to drive the Group towards pre-pandemic proﬁtability, alongside a meaningful improvement in earnings. We continually invest in our people, referral networks, innovative insurance products and digital initiatives as we expand across the continuum of care in an integrated and value-focused way. Our organisation’s resilience, the trust we have built with our clients and partners, and our ability to seize opportunities are only possible as a result of our people; it is impossible to feign the fortitude, positivity and commitment that our employees display every day, let alone the success that has resulted from their eorts. I wish to thank every employee and supporting doctor for their contribution in this. Dr Ronnie van der Merwe Group Chief Executive Ocer 24 May 2022 PEOPLE AND CULTURE 4 600+ appointments in the past year CREATING OPPORTUNITY 132 nationalities across ﬁve geographies 40% female and 40% male representation target at senior level DEVELOPING SKILLS 30 questions in employee engagement survey 24/7 ethics line available to all employees BEING HEARD 1.45m+ COVID-19 vaccines administered during FY22 96%, 96% and 72% of employees vaccinated against COVID-19 in Southern Africa, the Middle East and Switzerland, respectively ENABLING HEALTH AND SAFETY 10 partnerships with tertiary institutions to assist with clinical training EMBRACING DIVERSITY To enhance the Group’s position as a market leader, we are not restricted by geography or function, but instead harness the skills, knowledge, best practice and innovation from each of the three continents where we operate. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 13 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION ALWAYS IN DEMAND OUR MARKETS Although COVID-19 has had a fundamental impact on many industries and economies across the globe, the demand for healthcare services has not wavered. Over recent years, the healthcare industry has been adapting to rapid development in the global landscape, most notably driven by ageing populations, a growing burden of lifestyle diseases, advances in new medical technology, the development of virtual care and emerging healthcare consumerism. These provide opportunities for growth across the continuum of care. LIFELONG PARTNERSHIP Healthcare encounters are changing. Today, clients seek a partner to accompany them through life and champion their wellness and mental health so they can manage their health – regardless of time or place. Due to the rapid advancement of technology and services, their expectations extend beyond treatment and recovery to prevention and enhancement. AFFORDABILITY The healthcare regulatory environment is evolving as stakeholders focus on the aordability of care in light of ever- increasing demand. This has resulted in outmigration of care, an approach that aims to reduce the cost of certain low- acuity services and procedures by oering these in more appropriate care settings. In addition, there is an ongoing drive for greater care coordination and data sharing to ensure ecient delivery of enhanced clinical outcomes. > 3x increase 56% USD7trn in people aged 80 and older, from 137m in 2017 to 425m in 2050 1 ±50% of our lives spent in less-than- good health, including 12% in poor health 2 of the global disease burden by 2030 will be due to chronic disease 3 global wellness and preventative care spend by 2025, up by over 40% from USD4.9trn in 2019 4 34x increase in telehealth use compared with pre-pandemic baseline 8.7m 84 years stable population 6 OPPORTUNITIES • Expand across the continuum of care: day case clinics, genetics, radiology, family medicine, virtual care • Leverage collaboration in the sector to expand referral networks and create new insurance products • Pursue additional PPPs • Mature, high-quality healthcare system • Ageing population • Mandatory health insurance with the option to purchase supplementary cover 74% 9 of bed capacity provided by public cantonal hospitals, the largest providers of healthcare HEALTHCARE 11.3% 3.7% of gross domestic product (‘GDP’) spent on healthcare, above the OECD average of 8.8% 7 GDP growth in 2021, recovering from 2.4% contraction in 2020 8 average life expectancy, three years more than other Organisation for Economic Co-operation and Development (‘OECD’) countries 7 SWITZERLAND IMPACT ON STAKEHOLDERS Clients: Increasing need for healthcare, but empowered to demand it on their own terms Employees, alumni and potential applicants: Training required for new technology; skills shortages Governments and authorities: Insucient service provision aecting aordability, skills and access Healthcare insurers: Growing demand and greater focus on aordable, accessible healthcare solutions Investors: Opportunity cost of not addressing emerging trends Medical practitioners: Support needed with next-generation developments; training required for new technology MARKET REVIEW Employees Investors Medical practitioners Clients Healthcare insurers Clients Governments and authorities MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT14 The UAE Government is investing in diversiﬁcation strategies and stimulus packages to reduce dependency on hydrocarbons, attract expatriates to the region and reduce carbon footprint of power generation by 70% through UAE Vision 2050. OUR MARKETS OUR RESPONSE OPPORTUNITIES • Expand across the continuum of care: primary care, day case clinics, dialysis, mental health, oncology, radiology, genetics • Develop delivery models and insurance products for private-pay and employed- but-uninsured markets OPPORTUNITIES • Expand across the continuum of care: oncology, genetics, RPM, long-term care, palliative care, virtual care, diagnostics, sports medicine • Expand into neighbouring countries • Introduce new clinical specialties, technologies and high-acuity care to the region • Leverage strong international brand and reputation We are leveraging our expertise and leading market positions to partner and collaborate with other public and private healthcare providers, evolving across the continuum of care. This approach helps entrench us into the healthcare delivery systems of the countries in which we operate, making the Group even more relevant to our stakeholders over the long term. Although our divisions operate in unique legal, regulatory and economic environments, they share and strive towards the same Group strategic goals and high ESG standards. • Mandatory health insurance • Signiﬁcant degree of variability in the types of healthcare services oered, the breadth and depth of clinical expertise, business and operating practices, client experience and clinical outcomes 45% 10 average insurance solvency ratio (25% required by Medical Schemes Act, No. 131 of 1998, in South Africa) • Mature acute hospital sector • Network formations common practice HEALTHCARE HEALTHCARE See the Strategy overview on page 16 for progress during the year Sources 1 ‘Ageing and health’ fact sheet, World Health Organization 2 ‘Adding years to life and life to years’, McKinsey Health Institute 3 ‘Lifestyle diseases: An Economic Burden on the Health Services’, United Nations Chronicle 4 The Global Wellness Economy: Looking Beyond COVID Report, Global Wellness Institute 5 ‘Telehealth: A quarter-trillion-dollar post-COVID-19 reality?’, McKinsey Health Institute 6 ‘Switzerland population’, Worldometer 7 ‘Health at a glance 2021’, OECD, describing countries that belong to the OECD, all with high Human Development Index 8 ‘Switzerland GDP growth rate’, Trading Economics 9 ‘Privatkliniken Schweiz 2020’ 10 Council for Medical Schemes 2020/2021 Annual Report 11 ‘The South African economy records a positive fourth quarter’, Statistics South Africa 12 ‘Total population of the UAE: 2020’, The World Bank – CAGR 2015-2020 13 ‘Population of the UAE 2021’, Edarabia 14 ‘UAE to post strong economic growth in 2022 and 2023’, Fitch Solutions 8.9m 10 9.9m 12 4.9% 11 89% 13 3.4% 14 stable population of privately insured members population in the UAE with a ﬁve-year compound annual growth rate of 1.3% recovery in GDP in 2021, following 6.4% decline in 2020 expatriate population as a percentage of total population of the UAE expected GDP growth in the UAE in 2021, with an estimated increase of 4.6% in 2022 and 3.9% in 2023 SOUTHERN AFRICA THE MIDDLE EAST STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 15 STRATEGY OVERVIEW ‘I carefully considered the nature of the relationship between Mediclinic and those who make use of our services within an evolving healthcare landscape. A patient is a person receiving medical care; a client is a person who receives advice. The latter implies a level of trust and a long-term relationship that extends beyond mere treatment. We want our patients to interact with Mediclinic beyond the conventional treatment process, rather as a client who turns to us to enhance their quality of life.’ Dr Ronnie van der Merwe Group Chief Executive Ocer 1 4 2 35 6 BECOME AN INTEGRATED HEALTHCARE PROVIDER ACROSS THE CONTINUUM OF CARE EVOLVE AS A DATA-DRIVEN ORGANISATION IMPROVE OUR VALUE PROPOSITION SIGNIFICANTLY TRANSFORM OUR SERVICES AND CLIENT ENGAGEMENT THROUGH INNOVATION AND DIGITALISATION MINIMISE OUR ENVIRONMENTAL IMPACT GROW IN EXISTING MARKETS AND EXPAND INTO NEW MARKETS 2026 STRATEGIC GOALS PRINCIPAL AND EMERGING RISKS (ASDESCRIBEDINTHE RISK MANAGEMENT REPORTONPAGE 91) 1. Economic and business environment 2. Regulatory and compliance 3. Information systems security and cyberattacks 4. Pandemics and infectious diseases 5. Disruptive innovation and digitalisation 6. Competition 7. Workforce risks 8. Climate change 9. Patient safety, quality of service and operational stability 10. Availability and cost of capital 11. Financial and credit risk 12. Business investments and acquisitions GOALS AND PROGRESS POSITIONING TO BE A HEALTHCARE PARTNER MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT16 1 BECOME AN INTEGRATED HEALTHCARE PROVIDER ACROSS THE CONTINUUM OF CARE PROGRESS DURING FY22 • Expanded through investment in own facilities, bolt-on investments and partnerships See page 12 • Deﬁned business plans per division • Continued development of care coordination model FOCUS AREAS FOR FY23 • Implement standardised BeeHealthy platform See page 19 • Implement client-centred, seamless care coordination across the continuum of care LINK TO PRINCIPAL AND EMERGING RISKS 1, 2, 3, 4, 5, 6, 9, 10, 12 LINK TO KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Financial institutions • Healthcare insurers • Industry partners • Investors OUR STRATEGY IN ACTION: A COMPLETE APPROACH TO CANCER CARE Our cancer service oering demonstrates how we are integrating care to the beneﬁt of clients. Cancer is one of the leading threats to life globally, accounting for nearly one in six deaths in 2020. Yet early detection and prompt treatment can signiﬁcantly improve life expectancy and quality. The journey of diagnosis, treatment and management is far from straightforward, however. Involving a myriad of services and experts, its fragmented nature can consume valuable time and costs while uncoordinated treatment risks being inecient. To address these challenges, in May 2021, we opened an integrated oncology unit in the Middle East at Airport Road Hospital, creating one point of care to provide clients with unswerving support throughout. The new Abu Dhabi unit supplements our Comprehensive Cancer Centre (‘CCC’) in Dubai, developed in collaboration with our Swiss operations. At Airport Road, we bring together experts in oncology, radiotherapy and nuclear medicine. A multidisciplinary tumour board discusses each new case to determine an optimal, personalised treatment plan. Sophisticated equipment enables advanced detection and precise treatment while a breast care nurse and buddy service provide personalised support. This integrated approach is also in evidence at our ﬂagship cancer facility in Southern Africa. The ZAR45-million oncology unit at our Constantiaberg hospital, opened in partnership with Icon Oncology, consolidates clinical capabilities and industry expertise under one roof. Like our advanced oncology units in Switzerland and the Middle East, it boasts a Varian Truebeam Linear Accelerator for targeted radiation therapy. By oering full-service chemotherapy and radiotherapy alongside surgery, we can streamline the client journey and deliver the right care at the right time. The ﬁrst of its kind in the region, the integrated oncology facility is indicative of our strategy. We recognise that an individual’s health needs are not conﬁned to isolated incidents but span a sequence of episodes necessitating diverse contributions. This is why we are expanding across the continuum of care – our goal is nothing less than accompanying our clients throughout their entire healthcare journey. SETTING THE STANDARD One in ﬁve Swiss women with breast cancer is treated at one of our breast cancer centres across the country – testament to the high-quality care provided by our teams. Our focus on cancer includes a CCC and a unit dedicated to prostate cancer at Klinik Hirslanden, Zurich. Certiﬁcation by the Swiss Cancer League and the German Cancer Society demonstrates our commitment to holistic treatment founded on the latest scientiﬁc evidence. Note  Based on ﬁnancial year healthcare revenue. CLIENT ACTIVITY BREAKDOWN 1 8% FY21: 70% FY21: 6% FY21: 24% Inpatient cases Day surgery cases Outpatient cases 24% 68% • Develop further service oerings that prevent, care, recover and enhance • Align reimbursement models with the respective continuum of care oering STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 17 STRATEGY OVERVIEW CONTINUED 2 IMPROVE OUR VALUE PROPOSITION SIGNIFICANTLY PROGRESS DURING FY22 • Elevated client experience as integral part of clinical care • Introduced Net Promoter Score® (‘NPS®’) as new client experience measure and integrated into management incentive metrics • Implemented safety event reporting system • Enhanced research collaboration and established research committee in Southern Africa • Established minimum standards for obstetrics and surgical safety FOCUS AREAS FOR FY23 • Implement minimum standards for safe surgery and obstetrics • Improve clinical cost eciency and care eectiveness by: – implementing Early Recovery After Surgery principles; – optimising care process through digitalisation and virtual care; and – managing outcome and cost variation in elective surgery • Gain integrated view of client needs and incorporate their voice in decision- making by: – improving NPS® across all care settings; and – embedding client advisory groups LINK TO PRINCIPAL AND EMERGING RISKS 1, 2, 4, 5, 6, 7, 9 LINK TO KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Healthcare insurers • Industry partners • Medical practitioners Client feedback is crucial for service excellence, perhaps nowhere more so than in healthcare. Measuring client experience not only enables us to shape our care services to better meet their needs, it also helps us achieve our goal of zero preventable harm to patients. Research has shown that better patient experience is associated with favourable outcomes. Satisﬁed clients make better use of the clinical advice given and there are lower rates of in-hospital complications. We have, therefore, been surveying inpatients since 2014 using the internationally recognised Press Ganey® survey and this has now been expanded to include clients in other settings such as day case clinics and emergency centres. Additionally, we provide multiple feedback channels to capture the client’s unﬁltered voice. In FY22, we introduced a taxonomy to systematically analyse complaints and implement quality improvement projects in response. We furthermore have employees dedicated to handling these matters across all our geographies. But our expansion across the continuum of care has necessitated the implementation of a single client experience metric that applies across physical and virtual settings. For this reason we have implemented NPS® to track customer satisfaction. Moreover, from FY23, management’s variable remuneration will be linked to NPS® achievement. See page 144 for more OUR STRATEGY IN ACTION: PROMOTING CLIENT CENTRICITY UNDERSTANDING NET PROMOTER SCORE® One question = top indicator of customer loyalty ‘How likely are you to recommend us to a friend, family member or colleague?’ NOT AT ALL LIKELY EXTREMELY LIKELY 0–6 DETRACTORS Dissatisﬁed clients whose negativity can harm a brand 7–8 PASSIVES Satisﬁed but indierent, will switch readily 9–10 PROMOTERS Loyal clients that refer others % promoters – % detractors = NPS® INTERPRETING THE SCORE NPS® -100–0 0–30 31–70 71–100 RANKING Needs improvement Good Great Excellent HOW IS NPS® DETERMINED? • Partner with clients to create true client centricity • Aim for zero preventable harm toclients • Reduce the ‘cost of us’ We have expanded our client experience measures to ensure we thoroughly understand clients’ needs and adapt our care accordingly. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT18 3 TRANSFORM OUR SERVICES AND CLIENT ENGAGEMENT THROUGH INNOVATION AND DIGITALISATION PROGRESS DURING FY22 • Partnered with Mehiläinen (business-to- consumer tool BeeHealthy) to launch client app in Switzerland, virtual clinic in Southern Africa and virtual clinic pilot in the Middle East See alongside • Established Centre of Expertise for automation and solid pipeline for initiatives • Mapped Group digital capabilities and expanded on virtual intensive care unit (‘ICU’) project • Established innovation hub in Switzerland • Launched innovation and digital transformation ambassadors • Initiated cultural transformation projects FOCUS AREAS FOR FY23 • Drive innovation pipeline with at least 11 distinct innovation projects across three horizons • Build relationships with other innovation centres and start-up curators • Increase uptake of automation • Drive adoption and expand use cases for BeeHealthy • Establish baseline for real-time sensing capability LINK TO PRINCIPAL AND EMERGING RISKS 3, 4, 5, 6, 10, 12 LINK TO KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Industry partners • Medical practitioners Our Mediclinic apps deliver on clients’ expectations of a healthcare experience that is convenient, personalised, and easy to use. Our promise of ‘Expertise you can trust’ is being realised in novel ways through our client-facing apps. Made possible by our partnership with Nordic healthcare provider Mehiläinen, our healthcare apps utilise the BeeHealthy platform to combine authoritative content with digitally delivered expert healthcare. Since April 2021, Swiss mothers-to-be can turn to us for health support via their smartphones. On discovering she is pregnant, a woman might ﬁrst use the Hirslanden app to work out her due date and receive customised weekly information on her progress. If she suers from morning sickness, she can chat to a midwife and make an appointment if in-person care is recommended. When it comes to choosing a maternity hospital, she can take a virtual tour, then visit her chosen facility in the real world for a birth preparation course. This journey will soon be expanded to incorporate IVF and family planning for prospective parents, and early infant care for those who have just welcomed a baby. This interplay between our physical and virtual oerings enables us to proactively guide clients through seamless, well-deﬁned healthcare journeys and achieve better outcomes as a result, as well as improve client experience. Clients who might have delayed consulting a doctor can get medical advice and an e-prescription via smartphone where and when it suits them. This enables Mediclinic to reach clients outside of our normal sphere and opens up opportunities to enhance our service. Already the pregnancy journey has been expanded to include paediatrician and GP chats as well as lifestyle coaching in Switzerland. Additional products such as birth kits can be oered through an online shop. The end-to-end solution is not only a beneﬁt for clients; it oers us several strategic advantages. Continuous insight into client needs and preferences empowers us to improve our oering, shaping not only the business of today, but the business of tomorrow through the use of data. This allows us to become a more business-to- consumer-focused organisation. We are working on BeeHealthy as a Group and sharing the learnings across the geographies, which has accelerated implementation. In September 2021, our subsidiary, Intercare, launched a pilot for a digital clinic in Southern Africa. This on-demand service uses chat-based symptom assessments and oers video consultations. Roll-out to the public is planned during FY23. Furthermore, apps oer operational beneﬁts through the use of digital services to ﬁnd a doctor or make an appointment. Online bookings decrease the burden on our engagement centres – in the Middle East, some 28 000 appointments a month are now booked digitally. They also reduce the number of non-arrivals at appointments due to the ease of cancelling and rescheduling. This makes more ecient use of doctors’ time and frees up our employees to do what they do best: bring the human touch to healthcare. OUR STRATEGY IN ACTION: INNOVATIVE SERVICE DELIVERY THROUGH TECHNOLOGY • Establish radical innovation capability • Optimise through automation • Drive digital transformation • Establish comprehensive virtual care oering • Optimise people, technology and data through healthcare informatics to improve care STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 19 STRATEGY OVERVIEW CONTINUED 4 EVOLVE AS A DATA-DRIVEN ORGANISATION PROGRESS DURING FY22 • Established data lake and commenced Cloud migration, enabling us to source and integrate data (structured and unstructured) across many applications and processes, and support dierent data usage scenarios, including real-time predictive and prescriptive analytics • Created solutions for ESG, mobile device management and continuum of care scenario evaluation in support of other strategic goals FOCUS AREAS FOR FY23 • Create data solution to better understand clients, learning how they engage with us in order to improve our value proposition • Develop machine learning solutions that: – identify revenue leakage; – reduce cost; and – support value-based and virtual care LINK TO PRINCIPAL AND EMERGING RISKS 3, 5 LINK TO KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Governments and authorities • Healthcare insurers • Industry partners • Medical practitioners 5 MINIMISE OUR ENVIRONMENTAL IMPACT PROGRESS DURING FY22 • Centralised environmental data management • Reached agreement with Energy Exchange of Southern Africa (‘Energy Exchange’) to initially procure renewable energy for ﬁve facilities in Southern Africa • Procured 38 554MWh of clean energy in the Middle East • Finalised roadmaps to become carbon neutral and have zero waste to landﬁll in Southern Africa • Ongoing implementation of ISO 14001:2015 environmental management system (‘EMS’) in Switzerland and the MIddle East • Achieved most qualitative targets to reduce carbon emissions and waste to landﬁll FOCUS AREAS FOR FY23 • Finalise action plans to reduce anaesthetic gases and NO emissions in Southern Africa and the Middle East, respectively • Finalise Swiss roadmap to become carbon neutral and develop roadmap to reduce waste and increase recycling • Finalise Middle East roadmap to become carbon neutral and have zero waste to landﬁll • Progress ISO 14001:2015 EMS implementation in Switzerland and the Middle East LINK TO PRINCIPAL AND EMERGING RISKS 8 LINK TO KEY STAKEHOLDERS • Clients • Communities • Employees, alumni and potential applicants • Financial institutions • Industry partners • Medical practitioners • Professional societies • Suppliers See the Sustainable development overview on page 34 • Build data lake that curates all data assets • Manage data as strategic asset • Develop company culture of using data every day for fact-based decision-making • Implement data-driven innovation using advanced analytics, artiﬁcial intelligence and machine learning • Become carbon neutral by 2030 • Have zero waste to landﬁll by 2030 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT20 6 GROW IN EXISTING MARKETS AND EXPAND INTO NEW MARKETS PROGRESS DURING FY22 • Proactively searched for and investigated growth opportunities • Completed market analyses of identiﬁed priority areas, including country and site visits FOCUS AREAS FOR FY23 • Deliver on geographical strategies for growth across the continuum of care • Continue with building and preparing to open ﬁrst hospital in Kingdom of Saudi Arabia LINK TO PRINCIPAL AND EMERGING RISKS 1, 2, 5, 6, 10, 12 LINK TO KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Financial institutions • Industry partners • Investors • Medical practitioners OUR STRATEGY IN ACTION: GROWTH ACROSS THE CONTINUUM OF CARE PREVENT, CARE, RECOVER AND ENHANCE Innovation both inside and outside healthcare is increasingly inﬂuencing the way clients perceive the quality of care, as well as how and where it should be oered. Expansion across the continuum of care widens our service focus, improves accessibility, delivers integrated care solutions and creates the opportunity to form a lasting relationship with clients. It also allows us to deliver services in the most appropriate care setting at an optimal cost. During the year under review, we continued to expand our service oering through acquisitions, partnerships, collaborations and own investments. We also made strides in strengthening existing services through technology and innovation, laying the foundation for coordinated care. • Grow in existing markets based on the continuum of care goal • Expand into new markets STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 21 STRATEGY OVERVIEW CONTINUED CARE PREVENT RECOVER ENHANCE DIGITAL & CLIENT ENGAGEMENT Invested in at-home health- monitoring company DomoSafety in Switzerland Acquired Ayadi home healthcare business in the Middle East Launched precision medicine service Opened four renal care facilities in Southern Africa and entered into PPPs in the Middle East to operate two dialysis centres Opened three day case clinics Opened oncology centre in partnership with Icon Oncology in Southern Africa and integrated oncology unit in the Middle East See page 17 Entered into four PPPs Commenced infrastructure expansions at two hospitals Opened nuclear medicine unit Finished two hospital expansions, including 100-bed hospital expansion in Abu Dhabi Opened two outpatient clinics Launched sports medicine unit, Mediclinic Perform Cosmetic centre opening early FY23 Partnered with Mehiläinen to launch client app in Switzerland, virtual clinic in Southern Africa and virtual clinic pilot in the MIddle East See page 19 Acquired remaining 70% of Bourn Hall Fertility Centre Launched new insurance product with Helsana, Medbase Converted acute care beds to long-term care beds Launched HomeCareOnline for RPM Baby client-journey framework established and implemented Launched digital online booking Established care collaboration centre for coordination of chronic disease management (incorporating RPM), virtual clinic pilot for sta, and pharmacy home delivery OUR STRATEGY IN ACTION: GROWTH ACROSS THE CONTINUUM OF CARE CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT22 In pursuit of our strategy execution and value creation, we track a broad range of key performance indicators (‘KPIs’) that materially impact on the business, and align all our operations in improving these to deliver long-term success. ALIGNING KPIs WITH REMUNERATION Our LTI and STI schemes are aligned with the Mediclinic Group Strategy, with speciﬁc targets on revenue growth, adjusted EPS, ROIC, gender diversity and carbon emission reduction for LTI participants, and targets on adjusted operating proﬁt, cash conversion, NPS® and operational performance for STI participants. This ensures a comprehensive, transparent approach that balances ﬁnancial and non-ﬁnancial metrics. OUR PERFORMANCE See the Remuneration Committee Report on page 143 KEY PERFORMANCE INDICATORS FINANCIAL KPIs 1 REVENUE 2 (£’M) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Revenue measures growth generated from both our core business and our expansion across the continuum of care, and aligns with the growth ambition within our strategy. FY22 PERFORMANCE Despite ongoing challenges presented by the pandemic, revenue increased by 8% (10% in constant currency terms) during the period, driven by increased client activity, up 9% in constant currency terms compared with pre-pandemic FY20 (FY22 in constant currency: £3 366m). 3 083 2 995 3 233 1 6 ROIC (%) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? ROIC indicates the ecient and eective use of capital in our operations by delivering improved net operating proﬁt after tax. By focusing on improved asset turnover and delivery of proﬁtable growth, we seek to achieve our Group WACC over the medium term. FY22 PERFORMANCE ROIC increased to 4.0%, driven by the material improvement in Group proﬁtability compared with the ﬁrst year of the pandemic in FY21, while still reﬂecting COVID-19-impacted results. 4.4 3.0 4.0 ADJUSTED EPS (PENCE) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Adjusted EPS measures proﬁtable growth that results from successful strategy delivery. FY22 PERFORMANCE Adjusted EPS was up 65%, reﬂecting a strong operational and ﬁnancial performance. All three divisions’ earnings in local currency were ahead of pre-pandemic levels with only translation dierences resulting in Group adjusted earnings being down 6% compared with pre-pandemic levels (FY20: £177m). 24.0 13.7 22.6 ADJUSTED OPERATING PROFIT (£’M) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Adjusted operating proﬁt measures proﬁtability, which is considered a primary driver of our success, and incorporates depreciation and amortisation. FY22 PERFORMANCE Strong operational and ﬁnancial performance delivered a recovery in adjusted operating proﬁt, which was ﬂat on the pre-pandemic FY20 period in constant currency terms (FY22 in constant currency: £326m). 327 221 311 CASH CONVERSION (%) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Cash generated from operations is applied to investments in existing infrastructure and future growth. Driving EBITDA performance and cash conversion provides the liquidity and ﬁnancial ﬂexibility to pursue our growth strategy. 109 77 127 1 2 3 6 1 2 3 6 1 6 1 2 3 6 FY22 PERFORMANCE Cash generated from operations increased year on year by 101% to £663m (FY21: £330m), supported by strong EBITDA performance and improvement in cash conversion through catch-up of the slower recovery in the prior year. FY21 FY20 FY22 FY21 FY20 FY22 FY21 FY20 FY22 FY21 FY20 FY22 FY21 FY20 FY22 1 Become an integrated healthcare provider across the continuum of care 4 Evolve as a data-driven organisation 5 Minimise our environmental impact 2 Improve our value proposition signiﬁcantly 3 Transform our services and client engagement through innovation and digitalisation 6 Grow in existing markets and expand into new markets LINK TO STRATEGIC GOALS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 23 KEY PERFORMANCE INDICATORS CONTINUED NON-FINANCIAL KPIs GENDER DIVERSITY Female representation at senior management level (%) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Gender diversity at senior and executive management levels ensures our people are led by a leadership team that is representative of our gender-diverse workforce. FY22 PERFORMANCE Female representation in senior management increased from 36.0% to 36.9% against the Group target of at least 40% female and at least 40% male representation at senior management and executive level. 36.9 2 3 NPS® 6 LINK TO STRATEGIC GOAL WHY IS THIS A KPI? NPS® is a client experience metric that measures loyalty. We introduced it during the period as the client experience measure for all physical and virtual care settings because it is comparable across the Group, applies to all service oerings in the continuum of care, and tracks the quality of service provided to our clients. FY22 PERFORMANCE In the past, the NPS® was collected as part of the Press Ganey® survey tool, but not actively reported on. As the Group continues to increase its focus on being a business-to- consumer organisation, we created greater awareness and included it in operational dashboards during the ﬁnancial year. 51 FY22 CARBON EMISSION REDUCTION 5 Group Scope 1 and 2 CO emissions (tonnes) LINK TO STRATEGIC GOALS WHY IS THIS A KPI? Carbon emissions play a substantial role in climate change, which, in turn, has a signiﬁcant impact on the business. By reducing our carbon emissions, we mitigate the eects of climate change on the Company and, globally, improve public health and maintain biodiversity. FY22 PERFORMANCE By meeting most qualitative targets to reduce carbon emissions, we reduced total Scope 1 and 2 CO emissions for the Group by 16.2%, despite the increase in client activity during the period. 211 969 36.0 226 048 2 5 2 See the TCFD report on page 47 See the client experience case study in the Strategy overview on page 18 34.5 Notes  See page 80 of the Group Chief Financial Ocer’s Report for more on the Group’s use of adjusted non-IFRS ﬁnancial measures Other non-IFRS measures, which include cash conversion and ROIC, are further discussed, with reconciliations from the most comparable IFRS measure provided, on pages 81–86. 2 Revenue refers to fees charged for medical and other non-medical services, including rental income. See note 4 to the Group annual ﬁnancial statements on page 190 3 WACC considers the respective debt and equity costs and ratios. 4 See note 33 to the Group annual ﬁnancial statements on page 238 5 Reporting on carbon emission reduction commenced only in 2021 and is disclosed on a calendar-year basis. As such, only two data points are disclosed. 6 Reporting on NPS® commenced only during the period. As such, no prior-year data is available. FY21 FY20 FY22 CY20 CY21 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT24 We are driven by our purpose – it motivates us every day and aligns more than 34 000 employees BUSINESS MODEL To deliver our purpose, we rely onourcapabilities and resources… …enabling us to grow the business of todayand the business of tomorrow… …while creating value that beneﬁts allourstakeholders TALENT AND EXPERTISE across more than 415 dierent roles leverage skills and experience on a global scale for current and future success NATURAL RESOURCES are managed responsibly to minimise our impact on the environment, contain operating costs and ensure ongoing access to water and energy supplies PARTNERSHIPS AND COLLABORATIONS facilitate rapid product and service delivery, so we can meet the changing needs of clients INTERNATIONAL PERSPECTIVE enables us to identify emerging trends and opportunities, standardise our approach to key functions and processes, and benchmark internally TECHNOLOGY Digital competencies transform services to oer seamless, integrated client journeys Data improves our decision- making and allows us to oer better care Medical technology enables traditional surgical procedures to be done in less invasive ways in and out of hospital Automation drives productivity and eciency gains, empowering our people to prioritise valued- added activities PARTNER TO CARE • Improving the health and wellbeing of our people • Improving overall access to quality healthcare • Supporting health authorities in combatting COVID-19 PARTNER TO CREATE • Creating jobs, delivering training and imparting skills • Contributing to the economy • Helping educate and prepare future healthcare workers PARTNER TO IMPROVE • Enhancing clinical outcomes and client experience • Building and implementing scalable, replicable operations • Enhancing eciency and optimising resource use • Minimising environmental impact Growing our integrated healthcare oering by expanding across the continuum of care and improving coordination across physical and virtual care settings Improving our current value to clients through access to the most appropriate care in the most appropriate setting Investing in regional expansion of existing operations and bolt-on investments See the Clinical services overview on page 58 for more on client value, our services and geographical footprint P R E V E N T R E C O V E R C A R E E N H A N C E CLIENTS = + VALUE COSTCLINICAL OUTCOMES CLIENT EXPERIENCE See page 26 for more on the value we create for stakeholders inpatient and day case admissions employee beneﬁt and contractor costs incurred in FY22 Commitment to achieving carbon neutrality and zero waste to landﬁll by 2030 ±750 000 2030 £1.5bn STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 25 All stakeholders are important to us, and engagement is prioritised and improved upon continuously. Each year, we identify priority stakeholder groups, and report on the most material ones. This section includes the actions (‘A’) and decisions (‘D’) taken during the period in response to feedback received from our key stakeholders, and the outcomes from these and past actions. See the 2022 Sustainable Development Report at annualreport.mediclinic.com for a more comprehensive overview of our stakeholders CLIENTS IMPORTANCE Our business is built on our clients’ wellbeing and our ability to build long-term relationships with them HOW WE ENGAGE • Systematic patient rounds during hospital stay • Dedicated client-experience employees • 24-hour helplines • Press Ganey® patient experience index surveys • Health awareness days and campaigns • Client-centred product and programme development • Corporate events • Client advisory groups • NPS® feedback HOW THE BOARD COMPLEMENTS THOSE EFFORTS • Clinical Performance Committee meets regularly with Group and divisional chief clinical ocers; reviews clinical performance indicators, Ward-to-Board accountability reports, client experience data, clinical risk and internal audit reports, ethics reports, and follow-up action plans • Audit and Risk Committee reviews reports on fraud and ethics, information security and data privacy arrangements • Investment Committee considers proposals to invest in facilities • Board reviews summary clinical performance reports and dashboards; considers impact of decisions and dividends on facilities, services and investments • Director patient safety training; site visits to facilities WHAT MATTERS TO THEM • Easy access to safe, quality and cost-eective healthcare • Appropriate care settings • Treatment information • The right to make decisions on their care • Client experience • Personal data and patient rights • Timely communication • Operational eciency • Courteous, empathetic and personalised care LINK TO STRATEGIC GOALS 1 2 3 4 5 6 See the Clinical services overview on page 58 STAKEHOLDER ENGAGEMENT EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Introduced client-facing apps in all three divisions See the BeeHealthy case study in the Strategy overview on page 19 D: Established sports medicine centre in the Middle East D: New hospital in George, South Africa, to be developed to replace existing facilities D: Established City Hospital in Dubai as cardiovascular CoE A: Rolled out patient safety event management software across the Group OUTCOME FOR CLIENTS • Easy access to a broader range of digital healthcare services • Easy access to world-class facilities and technology • Adoption of tools to deliver further patient safety improvements • New facilities and specialisms to meet changing client needs VALUE CREATED 17% increase in total client activity in FY22 LINK TO STRATEGIC GOALS 1 Become an integrated healthcare provider across the continuum of care 4 Evolve as a data-driven organisation 5 Minimise our environmental impact 2 Improve our value proposition signiﬁcantly 3 6 Transform our services and client engagement through innovation and digitalisation Grow in existing markets and expand into new markets MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT26 EMPLOYEES, ALUMNI AND POTENTIAL APPLICANTS IMPORTANCE Our workforce is key to maintaining high standards and achieving Mediclinic’s strategic and ESG goals HOW WE ENGAGE • Recruitment and retention strategies • Consistent support of engagement initiatives • Progress in diversity goals and an inclusive approach • Commitment to employee health and wellbeing HOW THE BOARD COMPLEMENTS THOSE EFFORTS • The designated non-executive director provides an annual report on workforce engagement to the Board and helps to convey the voice of employees in meetings • The Board gains views of employees through direct interaction with leadership and site visits • It also monitors the culture of the organisation through a variety of qualitative and quantitative information • Nomination Committee oversees the development of a diverse talent pipeline to senior leadership roles • Remuneration Committee reviews and provides feedback on workforce remuneration arrangements See the Remuneration Committee Report on page 143 • ESG Committee reviews progress against employee sub-goals and objectives in Mediclinic’s Sustainable Development Strategy WHAT MATTERS TO THEM • Employment opportunities • Recognition and fair remuneration • Flexible work arrangements • An ethical, safe, fair and healthy working environment • Access to growth and development opportunities through relevant assignments and/or learning material LINK TO STRATEGIC GOALS 1 2 3 4 5 6 See the Corporate Governance Statement on page 109 EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Action plans to address outcomes from employee engagement survey A: Strategies and initiatives supporting the aims and objectives of the Group Diversity and Inclusion Policy and talent development A: Reviewed human resources strategy and investment in human resources technology A: Closely monitored safety, morale and wellbeing of sta, recognising the impact of COVID-19 A: Educated employees and aliated doctors on COVID-19 vaccinations and supported them in receiving vaccines OUTCOME FOR EMPLOYEES • Increased opportunities arising from focus on talent development and diversity and inclusion • Increased exposure to the Board for Group Executive Committee and their teams • Increased wellbeing support during COVID-19 VALUE CREATED 7% increase in 2021 employee engagement survey participation rate, the highest since commencement STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 27 STAKEHOLDER ENGAGEMENT CONTINUED GOVERNMENTS AND AUTHORITIES IMPORTANCE Compliance with applicable legislation and regulations safeguards our ability to oer services HOW WE ENGAGE • Regular meetings • Participation in conferences, seminars, national health training and education, and PPPs to enable healthcare, training and research • Representation on industry bodies and government boards • Engagement with senior country leaders HOW THE BOARD COMPLEMENTS THOSE EFFORTS • Clinical Performance Committee and Board consider outcomes of management’s dialogue and provide support with regulators • Clinical, regulatory and legal compliance reports reviewed by relevant committees and/or Board WHAT MATTERS TO THEM • Transparency and disclosure • Initiatives and collaboration on issues such as skills shortages and the cost of private healthcare • Universal access to aordable, quality healthcare OUTCOME FOR GOVERNMENTS AND AUTHORITIES We proved ourselves a reliable partner, capable of delivering eective and ecient healthcare outcomes VALUE CREATED 4 new PPPs during FY22 HEALTHCARE INSURERS IMPORTANCE Privately insured patients constitute our largest client base HOW WE ENGAGE • Regular discussions on value-based reimbursement models • Annual tari negotiations in a fair and transparent manner • Network formation discussions HOW THE BOARD COMPLEMENTS THOSE EFFORTS Reviews reports on outcomes of tari negotiations and value-based reimbursement models WHAT MATTERS TO THEM • Quality of care • Aordability of care • Integrated clinical services • Network arrangements OUTCOME FOR HEALTHCARE INSURERS Conﬁdence in us as a partner and provider of eective and ecient healthcare outcomes across the continuum of care VALUE CREATED 200+ registered healthcare insurer partnerships LINK TO STRATEGIC GOALS 1 2 4 6 LINK TO STRATEGIC GOALS 1 2 4 6 EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Actively sought or responded to opportunities to support national and local authorities’ eorts to deal with the COVID-19 pandemic A: Proactively responded to tari reforms D: Introduced Chair to senior representatives A: Proactively engaged on National Health Insurance in South Africa through public hearings and submissions EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Worked closely with healthcare insurers to address regulatory reforms A: Developed new products to increase the addressable market MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT28 INVESTORS IMPORTANCE Our owners and providers of equity capital deserve to have their priorities understood and addressed HOW WE ENGAGE • Established investor relations programme ensures regular and transparent communication • Financial results reporting and presentations • Stock exchange announcements • Corporate website HOW THE BOARD COMPLEMENTS THOSE EFFORTS • Board and ESG, Nomination and Remuneration committees consider guidance issued by investors and feedback received at AGMs • Direct engagement with major institutional investors and investor representative bodies, as necessary • Reviews regular internal reports and external brieﬁngs on investor sentiment and feedback WHAT MATTERS TO THEM • Financial sustainability and performance • Disciplined capital allocation • Diverse opportunities for long-term value creation • Our strategic and ESG goals • Regulatory environment • Operational drivers of each division OUTCOME FOR INVESTORS • Wider opportunities to engage directly with the Chair of the Board, the chairs of Board committees and other non-executive directors • ESG investors able to meet with specialists in certain ﬁelds VALUE CREATED 25% total shareholder return (‘TSR’) outperformance over a 12-month period by Mediclinic against comparator group (FTSE 250, excluding Financial Services and Extraction companies) MEDICAL PRACTITIONERS IMPORTANCE Medical practitioners enable our continued success and quality-of-care improvements HOW WE ENGAGE • Regular meetings and information sharing • Participation in hospital clinical committees and hospital boards • Continuous professional education events • Engagement events • Annual Clinical Services Report HOW THE BOARD COMPLEMENTS THOSE EFFORTS • Clinical Performance Committee considers outcomes of doctor satisfaction surveys and recommended action plans • Also provides input on measures taken to support doctors in provision of eective and ecient patient care • Reviews feedback from external clinical experts appointed to provide objective guidance to management and clinical performance committees WHAT MATTERS TO THEM • Facilities and equipment • Nursing care • Patient safety • Client experience • Involvement in strategic clinical issues • Implementation of EHRs • Continued professional development • Adaptability in the face of an evolving healthcare industry OUTCOME FOR MEDICAL PRACTITIONERS • Continuous support for delivery of eective and ecient treatment • Digital solutions that expand healthcare oering and improve experience for doctors and clients VALUE CREATED 5 900+ medical practitioner partnerships in Switzerland and Southern Africa LINK TO STRATEGIC GOALS 1 3 6 LINK TO STRATEGIC GOALS 1 2 3 4 5 6 See the Clinical services overview on page 58 See the Section 172 statement on page 30 for information on how the Board collectively, together with its directors individually, is committed to acting in a way that promotes our success to the beneﬁt of all stakeholders EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Regular meetings with Group CEO, Group Chief Financial Ocer (‘CFO’) and Head of Investor Relations A: Meetings with Chair and SID A: Held online shareholder engagement event ahead of AGM A: Engaged shareholders on voting at AGM and on remuneration matters EXAMPLE OF ACTIONS AND DECISIONS TAKEN A: Reviewed Swiss doctor performance management framework D: Developed Group frameworks for obstetrics, surgery and procedures A: Completed roll-out of EHRs in Switzerland and the Middle East A: Launched client-facing applications in all geographies See the Corporate Governance Statement on page 109 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 29 SECTION 172 STATEMENT During the year, the Board made a number of decisions crucial to promoting our purpose, strategy and success, in each case having regard to our key stakeholders and other relevant matters set out in Section 172. This section illustrates how the Board reached some of these key decisions. The Board adopts the following general approach in its discussions and decision-making: • The papers for each meeting include a reminder of directors’ Section 172 duties and our key stakeholders. In addition, each paper supporting a discussion and request for a decision from the Board and its committees includes a table setting out the Section 172 factors and corresponding considerations. The Chair of the Board and committee chairs ensure that the ensuing discussions are properly informed by all relevant Section 172 matters. • The Board assesses and approves our purpose, values and strategy, ensures the strategy is aligned with our culture, and is responsible for promoting those values and culture. • The Board regularly monitors progress on the implementation of our strategy and associated business plan, and reviews both annually to ensure they remain appropriate. • Details of how the Board and its committees engage with our key stakeholders can be found on pages 26–29 of this Strategic Report and pages 115–117 of the Governance and Remuneration Report. • The Board and its committees consider the potential consequences of its decisions in the short, medium and long term. It ensures that the Group’s risk management processes identify any resulting risks to the business and its stakeholders, and have plans to appropriately address these risks. . SECTION 172 IN ACTION SECTION 172 CONSIDERATIONS Promote the success of the business for the beneﬁt of our shareholders, having regard to: (a) the likely long-term consequences of any decision; (b) the interests of the Company’s employees; (c) the need to foster business relationships with suppliers, customers and others; (d) the impact of the Company’s operations on the community and the environment; (e) the desirability of maintaining a reputation for high standards of business conduct; and (f) the need to act fairly between the Company’s shareholders. PRINCIPAL AND EMERGING RISKS (as described in the Risk management report on page 91) 1. Economic and business environment 2. Regulatory and compliance 3. Information systems security and cyberattacks 4. Pandemics and infectious diseases 5. Disruptive innovation and digitalisation 6. Competition 7. Workforce risks 8. Climate change 9. Patient safety, quality of service and operational stability 10. Availability and cost of capital 11. Financial and credit risk 12. Business investments and acquisitions The Board regularly monitors progress on the implementation of our strategy and associated business plan, and reviews both annually to ensure they remain appropriate. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT30 CAPITAL ALLOCATION PLAN AND DIVIDEND BACKGROUND The Investment Committee and then the Board held several discussions on the principles governing the allocation of the Group’s capital and their application in practice. KEY ISSUES DISCUSSED • The sources of, and demands for, operating and non-operating capital, the broad capital allocation framework and proposed allocations of capital for the next ﬁve years • Optimal levels of debt funding • Potential non-operating uses of capital • Alternative sources of non-operating capital and their advantages and disadvantages SECTION 172 CONSIDERATIONS (a), (b), (d) • The Group’s strategy and business plan for the next ﬁve years • The impact of the temporary suspension of major capital projects • The various views on leverage of institutional investors and providers of debt funding • The adequacy of the proposed maintenance and capital expenditure levels • Investors’ expectations regarding leverage and dividends • The going concern and viability analyses performed at various stages during the year • The prudence of preserving the Group’s liquidity due to the uncertainty caused by COVID-19 balanced against the gradual strengthening of our performance and the desire to execute on our strategy OUTCOMES • Discussing this at committee level allowed for a detailed examination and subsequent tuning of the proposal, supporting a focused and thorough discussion by the Board and incorporation into the Group’s strategy and business plan • As with many other businesses, in May 2021 and November 2021, the Board took the prudent and appropriate decision to continue to suspend the dividend to maintain liquidity preservation • In May 2022, the Board assessed the ﬁnancial performance of the Group and the dierent interests of our stakeholders and decided to resume the dividend, as noted in the Chair’s Review on page 6 • The Board was satisﬁed that the allocations planned for each of the uses of the Group’s capital were appropriately balanced LINK TO STRATEGIC GOALS LINK TO PRINCIPAL AND EMERGING RISKS 1, 4, 5, 7, 10, 12 LINK TO KEY STAKEHOLDERS Clients Employees, alumni and potential applicants Financial institutions Industry partners Investors Medical practitioners Al Noor Hospital, the Middle East 1 5 2 3 6 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 31 SECTION 172 STATEMENT CONTINUED APPOINTMENT OF TWO NEW DIRECTORS BACKGROUND The Nomination Committee Report in the 2021 Annual Report conﬁrmed that work was underway to appoint two new directors to ﬁll the vacancies created by the planned retirement of Alan Grieve and Trevor Petersen. The Nomination Committee managed the search process with an external agency, providing updates to the Board at each stage of the process and ﬁnal recommendations on its preferred candidates for the roles. KEY ISSUES DISCUSSED AND PROCESS • The candidate brief for each vacancy, taking account of (among other things): the current and future needs of the business, a detailed review of the Board’s composition, the outcome of the recent Board evaluation, and the Board Diversity Policy • The key criteria to be prioritised in the candidate briefs: one international- and one South Africa-based candidate, an understanding of the Company’s listed environment, ﬁnancial literacy, and experience in audit, remuneration and digital transformation • The quality and diversity of the initial list of candidates, which included individuals from diverse geographical backgrounds, experience, knowledge and skills • An initial assessment of their level of competence against the set criteria, other commitments, and actual or potential conﬂicts of interest • The shortlist of candidates selected for an informal discussion with the Chair and the Group CEO and interviews with the Nomination Committee, and a more detailed assessment against the speciﬁc briefs • Input from the chairs of the Audit and Risk and the Remuneration committees was sought and considered during the process, in view of the roles anticipated for the new directors • Candidates’ references, existing time commitments, and actual or potential conﬂicts of interest were explored SECTION 172 CONSIDERATIONS (a), (b), (c), (d), (e) • The candidates’ ability to support the development and delivery of our strategy and their alignment to our purpose and culture • Insights into our key stakeholders and approach to stakeholder engagement that they would contribute • Their integrity and commitment to supporting high standards of corporate governance and business ethics • Their other appointments and time commitments OUTCOME The governance processes adopted for the identiﬁcation and selection of the Nomination Committee’s preferred candidates led to the appointment of Natalia Barsegiyan and Zarina Bassa as directors. Each brings important skills, experience and attributes that strengthen the Board’s composition and support the current strategy and future needs of the business. APPOINTMENT OF TWO NEW DIRECTORS CONTINUED LINK TO STRATEGIC GOALS LINK TO PRINCIPAL AND EMERGING RISKS 1, 5, 6, 7 LINK TO KEY STAKEHOLDERS Clients Employees, alumni and potential applicants Investors 1 5 2 3 64 RESTRUCTURING OF THE GROUP EXECUTIVE COMMITTEE BACKGROUND Management proposed to restructure and expand the Group Executive Committee. The Nomination Committee provided guidance and support, and the Chair was involved in the process for making two new appointments to the Group Executive Committee. KEY ISSUES DISCUSSED • The Group’s current and future leadership requirements and new roles required • Potential candidates for the roles, the importance of following a robust and objective selection process • The gender and ethnic diversity of the Group Executive Committee, their direct reports and the talent pipeline leading up to those roles • The importance of providing training and development opportunities to persons placed in new roles to support their success • The adjustments required to succession plans for the Group Executive Committee and their direct reports • The importance of executing a strong and timely communication strategy SECTION 172 CONSIDERATIONS (a), (b), (e) • The leadership team’s increased capacity to deliver improvements in the Group’s ﬁnancial performance from the existing business, continue to position us for the future, and execute on other elements of our strategy and ESG goals • The potential opportunity to make further progress towards the objectives and targets set out in the Group Diversity and Inclusion Policy • The impact of the changes on the working groups, reporting structures and dierent constituencies within the Group and their likely response MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT32 RESTRUCTURING OF THE GROUP EXECUTIVE COMMITTEE CONTINUED OUTCOMES • Enhanced positioning of the Group Executive Committee to focus on strategy and governance priorities and of the Group Operations Committee to focus on strategy execution • Appointment of Koert Pretorius (CEO of Southern Africa) to newly created role of Group Chief Operating Ocer • Resulting vacancy created an internal promotion opportunity – after a rigorous selection process, Greg van Wyk (Chief Human Resources Ocer of Southern Africa) was appointed to succeed Koert in leading the Southern Africa operations • The separation of the Group Chief Strategy and Human Resources Ocer role into separate streams and appointment of a Group Chief Human Resources Ocer will create an opportunity to further increase the diversity of the Group Executive Committee (Magnus Oetiker will remain in the Group Chief Strategy Ocer role) LINK TO STRATEGIC GOALS LINK TO PRINCIPAL AND EMERGING RISKS 1, 5, 6, 7 LINK TO KEY STAKEHOLDERS Clients Employees, alumni and potential applicants Governments and authorities Healthcare insurers Industry partners Investors Medical practitioners 1 5 2 3 64 AGREEMENT TO PROCURE RENEWABLE ELECTRICITY BACKGROUND The Board discussed and approved an agreement between our Southern Africa operations and Energy Exchange to procure renewable electricity up to a total value of £110m. KEY ISSUES DISCUSSED • Energy Exchange being the only platform through which the Southern Africa operations could purchase renewable energy • Entering into the agreement was a smaller related-party transaction under the FCA’s Listing Rules, as Remgro is a substantial shareholder in Mediclinic, and one of the founding partners and 35% shareholder in Energy Exchange • Jannie Durand’s declaration of interest in the agreement and conﬂict of interest as CEO of Remgro SECTION 172 CONSIDERATIONS (a), (c), (d), (e), (f ) The Board, excluding Jannie and his alternate, Pieter Uys, carefully considered: • the key commercial terms of the agreement; • the importance of the agreement for our Southern Africa operations to become carbon neutral by 2030; • Jannie’s declarations; and • the written opinion provided by Morgan Stanley (the Company’s ﬁnancial sponsor for UK-listing purposes) that the terms of the agreement were fair and reasonable as far as Mediclinic’s shareholders were concerned OUTCOMES • Following careful consideration – and in accordance with the Act, the Company’s Articles of Association as adopted on 22 July 2020 (‘Articles’), and the relationship agreement between the Company and its principal shareholder, Remgro (‘Relationship Agreement’), as described on page 169 – the Board (excluding Jannie and Pieter) agreed to approve the agreement and Jannie’s conﬂict of interest on the basis that doing so would promote the success of the Company for the beneﬁt of its stakeholders as a whole by supporting the delivery of the Group’s carbon-neutral strategy • The governance processes followed and conditions attached to the approval of Jannie’s conﬂict of interest ensured the Group was able to pursue its strategic objectives while acting fairly between the Company’s shareholders LINK TO STRATEGIC GOALS LINK TO PRINCIPAL AND EMERGING RISKS 8 LINK TO KEY STAKEHOLDERS Employees, alumni and potential applicants Communities Investors Suppliers 2 5 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 33 This Sustainable development overview is a condensed version of the Group’s 2022 Sustainable Development Report, available at annualreport.mediclinic.com. It covers the most important sustainable development activities across the Group with speciﬁc reference to our material issues, initiatives and outcomes for the 2021 calendar year, unless stated otherwise. SUSTAINABLE DEVELOPMENT OVERVIEW DOING THE RIGHT THING Dame Inga Beale, Chair of the Board and the ESG Committee, sheds light on what sustainability means for Mediclinic. Q. WHAT DOES MEDICLINIC’S COMMITMENT TO ESG MEAN FOR CLIENTS AND INVESTORS? While we have to take into account the pressures from investors, concentrating on ESG is the right thing to do, which means it is the right thing for our clients. Our focus has to be on giving them the best quality care. If we do not have an environment that attracts the best talent, we cannot deliver the best care. So, it all ﬁts together to make sure we are doing the right thing for all stakeholders. Q. WHAT HAS BEEN THE OUTCOME FROM THE BOARD’S INCREASED FOCUS ON EMPLOYEE ENGAGEMENT? We had a wonderful session where Ronnie asked the entire Board to join a virtual leadership event with several hundred Mediclinic employees from our divisions around the world. As a Board, we were able to hear what was on our employees’ minds and they asked us questions. What I loved about that was the pressure the employees are putting on top management and the Board, telling us what we have to focus on. CONTENT 2022 SUSTAINABLE DEVELOPMENT REPORT SUSTAINABLE DEVELOPMENT OVERVIEW Highlights • n/a Interview with Dame Inga Beale • abbreviated Our approach to sustainability • abbreviated Our material issues • abbreviated Conserve Climate change • abbreviated Carbon neutrality Energy consumption Waste management Water usage Environmental management systems Biodiversity Connect Our signiﬁcant stakeholders • n/a Our clients • abbreviated Our people • abbreviated Recruitment and retention Employee engagement Diversity and inclusion Wellbeing Our communities • abbreviated Future workforce CSI Human rights Our suppliers Comply ESG governance structure • abbreviated Governance • n/a Ethics • abbreviated Information assets • abbreviated Healthcare infrastructure • abbreviated Independent assurance • n/a Five-year data overview • n/a Scan the QR code to view a condensed video version of the interview Concentrating on ESG is the right thing to do, which means it is the right thing for our clients. Dame Inga Beale Non-executive Chair MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT34 SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 OUR ENVIRONMENTAL TARGETS • 2030 carbon neutral • 2030 zero waste to landﬁll IN 2021 • 94% of our Swiss hospitals use hydropower • New photovoltaic (‘PV’) installations at ﬁve hospitals in Southern Africa, increasing the total to 18 • 38 554MWh of clean energy procured for all facilities in Abu Dhabi SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 OUR SOCIAL AMBITIONS • Introduce NPS® performance metric as part of STI scheme for management • Achieve at least 40% female and at least 40% male representation at senior management and executive level throughout the organisation • Be among the top three employers of choice in each of our markets IN 2021 • 36% increase in clients surveyed in Press Ganey® experience index since last year • 1.4% increase in female representation at senior management and executive level since last year SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 OUR GOVERNANCE GOALS • Quadruple the number of people using data products for decision-making by 2026 • Introduce data privacy online learning IN 2021 • Information and cybersecurity and data privacy employee awareness campaign • Anti-bribery and ethics line awareness campaign aimed at onboarding employees and suppliers CONSERVE CONNECT COMPLY 1 Become an integrated healthcare provider across the continuum of care 4 Evolve as a data-driven organisation 5 Minimise our environmental impact 2 Improve our value proposition signiﬁcantly 3 6 Transform our services and client engagement through innovation and digitalisation Grow in existing markets and expand into new markets LINK TO STRATEGIC GOALS OUR APPROACH TO SUSTAINABILITY MEDICLINIC’S SUSTAINABLE DEVELOPMENT MISSION STATEMENT ‘We are committed to ensuring that every day we improve sustainability by managing our resources responsibly and eciently to the beneﬁt of our stakeholders and the environment.’ SUSTAINABILITY MODEL Minimising environmental impact Building stakeholder trust Being an ethical and responsible corporate citizen STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 35 SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED OUR MATERIAL ISSUES OUR SIGNIFICANT STAKEHOLDERS The ESG Committee reviews the Group’s material sustainability issues annually. This is done to ensure our management initiatives target the sustainable development matters that are most signiﬁcant to Mediclinic and directly aect our ability to create long-term value for signiﬁcant stakeholders. Our top ESG priorities are: • Energy eciency • Reduction of carbon emissions • Waste management • Employee engagement • Employee wellness and safety • Diversity and inclusion • Client value proposition • Protection of information assets FIGURE 1: HEAT MAP OF OUR MATERIAL ISSUES 1 Climate change 2 Environmental management system 3 Energy eciency 4 Carbon emissions 5 Waste management 6 Water use 7 Biodiversity 8 Employee engagement 9 Employee wellness and safety 10 Diversity and inclusion 11 Human rights 12 Client value proposition 13 Corporate social investment (‘CSI’) 14 Supply chain 15 Ethics 16 Anti-corruption 17 Protection of information assets 18 Healthcare infrastructure See Stakeholder engagement on page 26, the Section 172 statement on page 30, and the Corporate Governance Statement on page 109 for more on stakeholder engagement See the 2022 Sustainable Development Report at annualreport.mediclinic.com for further details IMPORTANCE TO STAKEHOLDERSLow High IMPORTANCE TO THE BUSINESSLow High Performing well Performing relatively well Requiring greatest focus CONSERVE Material issue 1: Minimising environmental impact CONNECT Material issue 2: Building stakeholder trust COMPLY Material issue 3: Being an ethical and responsible corporate citizen 1 4 8 14 12 18 16 17 15 3 9 5 6 11 2 10 13 7 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT36 MATERIAL ISSUE 1: MINIMISING ENVIRONMENTAL IMPACT Preserving the health of the planet is essential to help our clients lead healthier lives, reduce costs and risks, and protect the wellbeing of our communities. During 2021, there were no incidents of material non-compliance with any environmental legislation, regulations, accepted standards or codes applicable to the Group, with no signiﬁcant ﬁnes imposed. RISKS TO THE BUSINESS • Business interruptions • Increased operational costs • Reputational damage • Impact of carbon tax and climate change legislation • Fines and penalties RISK MITIGATION • Environmental goal forms part of Mediclinic Group Strategy • Risk management process and systems of internal control embedded in the Group • Annual review of policies governing risk management, sustainable development, environment and waste management CONSERVE 2021 IN GROUP NUMBERS 1 Total Scope 1 & 2 CO 2 emissions in tonnes (t) 2 Total energy consumption in gigajoule (GJ) Total water usage in megalitres (ML) 3 Total waste diverted from landﬁll in tonnes (t) 211 969 1 284 086 2020: 1 648 2020: 2 629 2020: 226 048 2020: 1 188 023 1 685 5 563 Notes 1 Data reported in line with the 2021 Carbon Footprint Report and succeeds the data provided in the 2021 Sustainable Development Report. 2 Decrease in total Scope 1 and 2 emissions due to the purchase of nuclear power with zero emissions for hospitals in Abu Dhabi (nuclear power accounts for 50% of the total electricity consumption in the Middle East). 3 Water usage increased compared with 2020, but is still lower than pre-pandemic usage. See the 2022 Sustainable Development Report at annualreport.mediclinic.com for carbon emissions, energy consumption, water and waste ﬁgures for the Group and per division for the last ﬁve calendar years CLIMATE CHANGE See the TCFD report on page 47 for our response to climate change and its impact on our business, as well as our year-on-year comparative ﬁgures on carbon emissions, energy consumption, waste and water BECOMING CARBON NEUTRAL BY 2030 CARBON EMISSIONS Our commitment to carbon-neutral status is supported by a sound strategy. Emission-reduction activities help save costs, secure energy supply, and leave a healthy planet for posterity. Rising electricity costs are an incentive to reduce consumption by investing in energy-ecient equipment and renewable energy sources. The boundary for carbon neutrality covers Scope 1 and 2 emissions. Our business can eliminate Scope 2 emissions by purchasing 100% renewable energy, but it must also oset direct carbon emissions and reconsider energy consumption and emissions from power generation. ANAESTHETIC GASES We are working to reduce the use of harmful anaesthetic gases in Southern Africa and the Middle East. Control strategies include elimination, substitution, engineering control (CO 2 absorbers, gas capturing technologies), administrative controls, and education and awareness. Currently, no immediate action or expenditure is required in Switzerland due to the use of less-harmful gases. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 37 ENERGY CONSUMPTION Electricity is the main contributor to our carbon footprint. Healthcare facilities require signiﬁcant energy; medical equipment and air-ﬁltration and -conditioning units run continuously at many hospitals. Improved operational eciency of technical installations, the introduction of various new energy-ecient and renewable technologies, and changes in employee behaviour are essential for reducing energy use. The main sources of direct energy are gas and diesel oil, motor gasoline, liqueﬁed petroleum gas and natural gas. Indirect energy sources refer to electricity. Returning to business as usual and continuing to address COVID-19 within facilities resulted in an overall increase in the use of energy in 2021. HAVING ZERO WASTE TO LANDFILL BY 2030 Our Group Waste Management Policy outlines our objectives to refuse, reuse, reduce, recycle and recover. We follow stringent protocols to ensure waste management within the Group complies with all applicable legislation and regulations. During 2021, there were no incidents at our facilities or oces leading to signiﬁcant spills. SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED Note 1 In Switzerland, our market-based hydroelectricity emissions are assumed to be zero, with a Certiﬁcate of Origin to support such assumption. Note 1 Newster sterilisers use patented frictional heat treatment technology for the sustainable processing of HCRW. SWITZERLAND • Purchased electricity mainly from European hydroelectricity for all but one hospital and the Corporate Oce • 16 of 17 hospitals registered as CO 2 -reduced businesses and monitored annually by the Energy Agency of the Swiss Private Sector • Replaced ventilation, heating and cooling systems with energy- ecient alternatives and adjusted operating times • LED light ﬁttings • Renewed ICT infrastructure • Used energy-ecient systems and equipment in all facilities SWITZERLAND • Healthcare risk waste (‘HCRW’) transported by licensed companies and incinerated at waste stations • Monitored and archived weight and waste type by hospital, transport provider and incinerator • Processed food waste in biogas facility SOUTHERN AFRICA • Agreement to purchase renewable energy starting with ﬁve facilities • Renewable energy through PV systems • Solar panels for water heating • Supervisory control and data acquisition systems (‘SCADA’) to monitor consumption • Completed hospital audits and agreed potential savings • Implemented energy- ecient practices SOUTHERN AFRICA • Waste management tenders to incorporate new requirements • HCRW transported and treated by licensed companies by means of autoclave or electrothermal deactivation • Incinerated anatomical waste • Donated redundant furniture and equipment • Recovered cooking oil for biodiesel • Newster technology 1 implemented at one hospital THE MIDDLE EAST • Purchased clean energy for all facilities in Abu Dhabi • Chiller replacement at two hospitals • Plans to replace ﬂeet vehicles with hybrid options • Installed smart thermostats at the Corporate Oce and selected clinics • Adjusted air- conditioning temperature • LED light ﬁttings and movement sensors THE MIDDLE EAST • HCRW, chemical waste handled by approved environmental service providers • Implemented food waste reduction initiatives • Recycling of cooking oil • Investigating projects to sterilise medical waste and compost organic waste REGIONAL INFORMATION REGIONAL INFORMATION Our Group Waste Management Policy outlines our objectives to refuse, reuse, reduce, recycle and recover. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT38 UNLOCKING CIRCULAR ECONOMIES Our Group Sustainable Development Strategy recognises the value of circular economies to reduce waste. During 2021, we agreed to reduce waste at the source with Johnson & Johnson MedTech. This initiative focuses on single-use medical devices and packaging not being recycled. Feasibility studies to determine stakeholder readiness will be scalable to include single-use medical devices and products from other suppliers. ENVIRONMENTAL MANAGEMENT SYSTEMS We align our environmental management practices with international best practices and national legislation to provide assurance regarding the environmental quality, safety and reliability of our processes and services. Moreover, we have opted to implement the ISO 14001:2015 EMS in all our hospitals. PROTECTING BIODIVERSITY The ISO 14001:2015 EMS provides a clear understanding of how our activities impact biodiversity, enabling us to take corrective measures. For each new building project, we undertake an environmental impact assessment to determine whether a more comprehensive assessment is required. In 2021, no new building projects in the ﬁnancial year required an environmental impact assessment. None of our owned, leased and managed facilities are in, or adjacent to, protected areas or areas of high biodiversity value. USING AND REUSING WATER RESOURCES SUSTAINABLY Good quality fresh water is essential for hygiene, quality care and infection prevention and control. Initiatives across Mediclinic support sustainable water usage and we beneﬁt from the expertise gained across our divisions as they address water-use challenges unique to each geography. SWITZERLAND • EMS implementation at ﬁve hospitals and Corporate Oce in progress • All hospitals but one part of H+ programme for occupational health and safety SWITZERLAND • Operational water quantity and quality risk assessments in progress • Waste water treated directly by local municipalities • Water-ﬂow limiters on taps, water-saving valves in toilets • Replaced kitchen dishwashers SWITZERLAND Pilot project implemented at two hospitals, with results expected in the ﬁrst quarter of FY23. Pilot to be extended to one hospital per region in FY23. SOUTHERN AFRICA • 44 of 50 hospitals ISO 14001-certiﬁed by British Standards Institute • Conducted ISO 14001 gap audits at 39 facilities, with average score of 81% compliance with EMS requirements SOUTHERN AFRICA • Completed operational water quantity and quality risk assessments • Installed bulk water storage facilities • Increased boreholes to 40 • Water-saving instruments in washers, washing machines and autoclaves • Recycling of autoclave water at certain facilities • Priority focus on detecting and ﬁxing leaks SOUTHERN AFRICA Feasibility study initiated, with results expected in the ﬁrst quarter of FY23. Pilot project at two hospitals planned for FY23 pending outcome of feasibility study. THE MIDDLE EAST • EMS implementation at ﬁve hospitals in progress • Annual environmental, health and safety audits at all facilities THE MIDDLE EAST • Operational water quantity and quality risk assessments in progress • Reduction in cistern water and automatic ﬂushing • Condensation water from CSSD autoclaves used for irrigation • Control sensors on taps in units • Investigation of water- conserving shower heads THE MIDDLE EAST Feasibility study completed, with pilot project in FY23 initiated at three hospitals in Dubai. REGIONAL INFORMATION REGIONAL INFORMATION REGIONAL INFORMATION STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 39 SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED MATERIAL ISSUE 2: BUILDING STAKEHOLDER TRUST Our employees, aliated doctors, suppliers and industry partners form the foundation that enables us to oer our services to clients and communities. RISKS TO THE BUSINESS • Poor employee engagement and wellbeing • Inability to recruit healthcare practitioners to meet business demand • Ageing nursing workforce with decreasing entrants to profession • Poor clinical outcomes and services • Medical malpractice liability • Reputational damage • Inability to continue business due to inadequate supplies CONNECT 2021 IN GROUP NUMBERS Gallup® employee engagement grand mean score (out of ﬁve) Female representation in senior and middle management roles 1 Total absenteeism rate 2 New suppliers Contribution to CSI 3.98 37.0% 3.8% 3 192 £7.9m 2020: 3.98 2020: 35.6% 2020: 3.9% 2020: 3 230 2020: £7.8m Notes 1 Disclosed on a ﬁnancial-year basis. 2 Actual days lost expressed as a percentage of total days scheduled to be worked by the workforce during 2021. Notes 1 Number of full-time employees who could have been employed if reported number of hours worked by part-time employees had been worked by full-time employees instead. 2 Includes Mediclinic International plc’s one employee based in the UK. 3 Increase from 2020 to 2021 largely attributable to overall business growth. CONNECTING TO OUR PEOPLE Our workforce is key to maintaining high standards and achieving Mediclinic’s strategic and ESG goals. We maintain a two-way conversation to improve the working environment. EMPLOYEE OVERVIEW CONNECTING TO OUR CLIENTS Our business is built on our clients’ wellbeing. Client surveys and dedicated client- experience employees contribute towards strengthened long-term relationships.  average total Group monthly employee beneﬁt and contractor cost ±£124m Switzerland Southern Africa The Middle East 7996 7 32118366 2020: 7 815 2020: 18 644 2020: 7 071 Group 33683 FULL-TIME EQUIVALENTS 1 PER GEOGRAPHY AT 31 DECEMBER 2021 FULL-TIME EMPLOYEES 2020: 33 530 59% of full-time employees across the Group involved in client care Average tenure across the Group RISK MITIGATION • Group Sustainable Development Strategy with social objectives • Implementation of Mediclinic Diversity and Inclusion Strategy • Eective execution of employee engagement action plans • Extensive training and skills development programmes • Establishment of Global Leadership Development Framework • Continued implementation of a Group learning architecture to support Group strategy • CSI initiatives monitored by senior management with feedback to ESG Committee • Group purchasing organisation established to secure products at reduced prices • Five-year Group procurement vision to optimise end-to-end supply chain performance See the Clinical services overview on page 58 for our unique approach to creating value for clients 5–14 years: 42% > 15 years: 14% < 5 years: 44% MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT40 RECRUITMENT AND RETENTION RECRUITMENT The healthcare industry has a very competitive employer market. We continuously monitor regional and global industry challenges and trends to anticipate any changes needed to our recruitment approach. Our recruitment practices aim to optimise attraction of scarce and critical skills through targeted employer branding initiatives. RETENTION We optimise retention by providing opportunities for a diverse workforce to thrive, and by creating an inclusive environment. Our retention strategies include employee engagement, ﬂexible work practices that not only address future skill needs but also speak to employee expectations, and investment in career growth and development through implementation of global learning frameworks and systems. Every year, employees are invited to share their perceptions of the workplace through the Your Voice employee engagement survey, which provides the opportunity to proactively assess employees’ sense of belonging, whether they feel valued and whether they feel empowered to do their best every day. These results are analysed and trends are explored through focus groups to understand perceptions and ultimately optimise engagement and retention. Exit interviews are conducted in a safe, non-threatening manner to help us gain valuable insight into patterns that exceed healthy turnover benchmarks. REMUNERATION, REWARDS AND BENEFITS Our employees are remunerated fairly and in a manner that supports our Group strategy while attracting, retaining and motivating scarce skills. In line with our value of high performance, we reward eligible employees for achieving strategic objectives through a combination of STI and LTI, with additional beneﬁts oered in line with local practices and regulatory compliance. EMPLOYEE ENGAGEMENT We encourage and enable continuous employee engagement across the entire organisation through various methods, including: • the annual Your Voice employee engagement survey and resultant action plans; • training and performance management; • access to various supporting resources such as interactive call centres; • occupational health clinics and wellbeing programmes; and • ethics lines. See ‘Workforce engagement’ in the Corporate Governance Statement on page 109 YOUR VOICE We use our annual Your Voice employee engagement survey to measure employee engagement, identify gaps at a team level, and support line managers in developing action plans to address employee engagement concerns. Research by Gallup® has shown that highly engaged employees contribute to better ﬁnancial results, improved clinical outcomes and increased patient safety. TRAINING AND DEVELOPMENT Every team member’s growth is valued and we are dedicated to providing accessible learning opportunities that can optimally enable employee performance and support career growth. During the critical performance management process, line managers and employees align expectations and goals to ensure the focused and deliberate contribution of each employee to the team and, ultimately, the divisional and Group goals. Continuous performance conversations are encouraged across the Group, with formal annual/six-monthly performance tracking conversations between managers and employees. Managers are held accountable for speciﬁc measurable objectives. These objectives are aligned to those of a function and, ultimately, a division that contributes to organisational achievement of the strategic goals. To support succession planning, the Group Talent Review Committee actively reviews the bench strength, development momentum and diversity of pipelines biannually in January and August. LABOUR RELATIONS All policies and procedures are maintained according to applicable local labour legislation. New employees are orientated on employment policies (i.e. misconduct, incapacity, and disciplinary and grievance procedures), which are also available internally. In most cases, an elected workplace forum meets regularly with facility management to ensure sound labour relations. We optimise retention by providing opportunities for a diverse workforce to thrive, and by creating an inclusive environment. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 41 SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED DIVERSITY AND INCLUSION Our dedication to diversity and inclusion is strongly endorsed by the Board and executive management, and we allocate ﬁnancial resources for the eective implementation of our long-term Diversity and Inclusion Strategy. A Group Talent Centre of Expertise (consisting of representatives from all divisions) governs and guides the planning and implementation of initiatives from a Group perspective. Divisional teams implement geography-speciﬁc initiatives, which may vary within the broad Group themes, to contextualise the content and achieve local objectives. AT ORGANISATIONAL LEVEL Over the past year, the Board and Group Executive Committee actively monitored progress on gender diversity at senior management level. In this, we have uniform gender and generational focus areas across all geographies, supplemented by division-speciﬁc diversity priorities. See the 2022 Sustainable Development Report at annualreport.mediclinic.com for a summarised employment equity report and comprehensive information on diversity and inclusion GENDER PAY GAP An in-depth gender pay gap analysis was conducted in December 2021 to understand the state of gender pay equity within the organisation and to support our Diversity and Inclusion Strategy. The analysis revealed that the gender pay gap as experienced at 1 December 2021 is a result of fewer women holding senior positions within the Company compared with men. At the time of the analysis, 74% of our permanent employees were women. EQUAL PAY FOR EQUAL WORK In addition, an equal pay analysis across the Group showed that there are no inexplicable dierences between employees performing the same job at the same job level. The analysis demonstrated that at Mediclinic, men and women receive equal pay for equal work. See the Nomination Committee Report on page 137 and the Corporate Governance Statement on page 109 for more information on representation at Board and executive level OUR TARGETS GROUP • At least 40% female and at least 40% male representation at senior management and executive level throughout the organisation SOUTHERN AFRICA • Racial representation aligned with broad-based black economic empowerment (‘B-BBEE’) • Employment equity targets per occupational level THE UAE • An Emiratisation target of 5% Emirati representation by March 2023 and 10% by March 2024 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT42 WELLBEING We oer a wide variety of initiatives, services (on-site and o-site), and activities tailored to local considerations. These cover dierent aspects of employee wellbeing, including occupational health and wellness, as well as physical, community and environmental, intellectual, emotional and mental, and ﬁnancial wellness. Occupational health services are also provided and the health, safety and cleanliness of all our facilities adhere to health and safety policies and procedures aligned to national regulations. Notes 1 Oered in accordance with local regulations and best practice. Whether the cost is covered by the employee, division, health insurance or government depends on the individual circumstances and geography. 2 Oered to qualifying employees. Part-time work arrangements 2 Remote work arrangements 2 Purchase of additional leave Family planning Occupational health services and primary care Aordable, healthy on-site catering Occupational health audits Free ﬁtness facilities at some locations Wellbeing awareness drives and/or programmes Free employee assistance helpline Conﬁdential counselling Wellbeing committee • Select facilities • For Corporate Oce • Responsible for all employees Transport and accommodation for frontline workers during COVID-19 pandemic, if required • For qualifying employees SWITZERLAND SOUTHERN AFRICA THE MIDDLE EAST Health and safety governance • Committees at facility level and Corporate Oce • Corporate function Sharps injury management and safety procedures Supplier compliance Mandatory consideration for vendor selection and evaluation Inspections • Planned and unplanned visits by authorities evaluate occupational health and safety at facilities • Planned and unplanned visits by authorities evaluate occupational health and safety at facilities • Annual licensing by authorities subject to inspection with safety aspect COVID-19 testing 1 Vaccinations • Hepatitis B Annual ﬂu • Annual ﬂu • Hepatitis B Annual ﬂu Air composition, temperature and humidity • Compliance with Swiss Labour Law standards • Compliance with local legislation REGIONAL INFORMATION SAFETY WELLBEING STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 43 SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED CONNECTING TO OUR COMMUNITIES We care for our neighbours by acting responsibly in our operations and making a positive impact in their lives. Earning their trust plays an important part in the sustainability of our business. FUTURE WORKFORCE To secure healthcare for tomorrow, we actively invest in training opportunities for healthcare students and support of applicable studies. HUMAN RIGHTS Our commitment to conducting business in a manner that respects and promotes human rights and dignity is entrenched in our Code of Business Conduct and Ethics. We undertake to: • avoid and not contribute to any indirect adverse human rights impacts linked to our operations or services by our suppliers or other business relations; • respect clients’ rights, including but not limited to privacy, conﬁdentiality, dignity, no discrimination, comprehensive health status and treatment information, a second opinion, access to medical records, self-determination and participation, refusal of treatment and the right to complain; • value diversity and equal opportunities for all employees; and • not tolerate any form of unfair discrimination, such as access to employment, career development, training or working conditions based on gender, age, religion, nationality, race/ethnic origin, language, HIV/Aids status, family status, disability, etc. During 2021, there were no material incidents of discrimination or violations involving rights of indigenous peoples in the Group. MODERN SLAVERY AND HUMAN TRAFFICKING The Mediclinic Modern Slavery and Human Tracking Statement details the steps we have taken to prevent such abuses, including any direct form of forced labour or child labour in our business or indirectly through our supply chain. CORPORATE SOCIAL INVESTMENT We contribute to the wellbeing of our communities by investing in sustained initiatives that address socio-economic issues. CSI activities are structured around the improvement of healthcare through training and education, sponsorships, donations, employee volunteerism, PPPs and joint ventures. CSI focus areas are determined per geography to address the needs of the speciﬁc region. The Group’s Modern Slavery and Human Tracking Statement can be found on the home page of the Company’s website at www.mediclinic.com The Mediclinic Supply Chain Management Philosophy is available at www.mediclinic.com CONNECTING TO OUR SUPPLIERS Expert, responsible suppliers enable us to oer our healthcare services in a way that improves wellbeing for people and the planet. Our Supply Chain Risk Management Policy and Code of Business Conduct and Ethics provide a supplier selection framework that aligns with our purpose and culture while delivering high-quality products and services. We strive to do business with third parties who are environmentally responsible and inﬂuence our suppliers and service providers to limit their impact on the environment. Suppliers are reviewed during onboarding and regularly thereafter to ensure they comply with ISO 9000 and/or ISO 13485 quality management certiﬁcation, relevant ISO certiﬁcation of the products utilised, CE Medical Device Regulation certiﬁcation and/or certiﬁcation by the Food and Drug Administration of the United States of America. Mediclinic predominantly procures in local markets of operation. We do not import directly or procure across borders unless there are challenges. None of our divisions procure less than 98% of spend from local suppliers. Centralised procurement prevents employees and medical practitioners at hospital level from inﬂuencing decisions. Employees involved in purchasing are bound by strict ethical principles and corporate policies on gifts and invitations to ensure impeccable standards of integrity. Additional measures were put in place to monitor supplier conduct. OUR TARGET We aim to realise eective savings through governance, safety and control over all procurement in the Group by harnessing standardised procedures and information management and driving adoption across business units through a simpliﬁed human interface. Note 1 CE marking = a certiﬁcation mark that indicates conformity with health, safety and environmental protection standards for products sold within the European Economic Area (‘EEA’); also found on products sold outside the EEA that are manufactured in, or designed to be sold in, the EEA. To secure healthcare for tomorrow, we actively invest in training opportunities for healthcare students and support of applicable studies. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT44 MATERIAL ISSUE 3: BEING AN ETHICAL AND RESPONSIBLE CORPORATE CITIZEN We endeavour to conduct business with transparency, honesty and integrity, applying sound governance and compliance principles across the Group to foster an ethical culture. RISKS TO THE BUSINESS • Fines and possible prosecution • Reputational damage • Inability to continue business due to legal and non-regulatory compliance • Financial damage caused by poor governance • Cyber incidents • Data privacy breaches • Poor facility conditions RISK MITIGATION • Visible ethical leadership • Regular fraud and ethics feedback to management, the Board and relevant committees • Independent ethics lines • Group Risk Management and Compliance, and Internal Audit functions • Annual review of policies governing ethics, competition law compliance, risk management, investor relations, data privacy and information security • Data privacy awareness campaigns and e-learning • Key ﬁnancial controls • Planned facility maintenance and upgrades • Facility audits COMPLY 2021 IN GROUP NUMBERS Calls to ethics lines 1 Board members with ESG knowledge and experience Board committees Investment in capital projects and new equipment 2 Investment in equipment replacement and property upgrades 2 Expenditure on repair and maintenance 2 187 7 2020: 5 FY21: £72m FY21: £54m FY21: £61m 2020: 148 2020: 4 6 £84m £95m £67m Notes 1 Twenty-four high-priority cases were reported during the year. These were subsequently investigated and closed. 2 Capital expenditure is audited annually by PwC as part of the Annual Report. Consequently, amounts are disclosed on a ﬁnancial-year basis. PREVENTING BRIBERY AND CORRUPTION Our Code of Business Conduct and Ethics guides honourable business conduct while a Group-wide monitoring programme reinforces regulatory compliance. We have independent ethics lines for whistleblowers to report concerns conﬁdentially or anonymously. Information on our ethics lines forms part of onboarding materials for all new recruits and suppliers. Over the years, the majority have been grievance-related calls. Only in exceptional cases has information exposed unethical, corrupt or fraudulent behaviour. The Group’s Anti-bribery Policy and Guidelines govern the oering of gifts, hospitality and entertainment; approval is given only if a proper business case exists without reputational risk. This policy prohibits the direct sponsorship of supplier and/or third-party events, ensuring all such sponsorships are administered and overseen by the relevant division. In 2021, we observed no incidents of material non-compliance with the Code of Business Conduct and Ethics, Anti-bribery Policy or any applicable legislation concerning corruption, bribery or antitrust, with no signiﬁcant ﬁnes imposed. Additionally, Mediclinic was not subject to any signiﬁcant ﬁnes or non-monetary sanctions for non-compliance with laws or regulations in the social or economic arena. See the Audit and Risk Committee Report on page 121 for more and page 71 for a summary of our approach to clinical ethical issues Our Code of Business Conduct and Ethics is available at www.mediclinic.com STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 45 SUSTAINABLE DEVELOPMENT OVERVIEW CONTINUED MAINTAINING HIGH-QUALITY HEALTHCARE INFRASTRUCTURE To ensure the best overall experience for both clients and employees, we continuously invest in capital projects, innovation and digital transformation, new equipment to expand and refurbish our facilities, replacement of existing equipment, and repair and maintenance of existing property and equipment. Our facilities can be high-risk environments in which complex treatment processes are executed using sophisticated equipment and techniques. Independent accreditation ensures we adhere to international standards, thereby reducing the risk of injury or harm. SUSTAINING EFFECTIVE AND TRANSPARENT GOVERNANCE See the 2022 Sustainable Development Report at annualreport.mediclinic.com for more on compliance with consumer protection laws and governance of advertising The Group Tax Strategy is available on the ‘Risk management’ section of our website at www.mediclinic.com PROTECTING INFORMATION ASSETS We have an eective information and cybersecurity programme to protect our technology, information assets and users. Our operations span multiple geographies, necessitating an adequate international data network and Group approach to threat management. DATA PRIVACY We protect stakeholders’ personal data through an extensive Group-wide data privacy project, which ensures compliance with all relevant data protection legislation in our countries of operation, including the European Union’s General Data Protection Regulation (‘GDPR’). OTHER JURISDICTIONS All our registered entities in other jurisdictions comply with relevant data privacy legislation as well as the principles of GDPR. We have an eective information and cybersecurity programme to protect our technology, information assets and users. See the 2022 Sustainable Development Report at annualreport.mediclinic.com for more on independent assurance MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT46 TCFD REPORT Driven by our purpose to enhance the quality of life, at Mediclinic we have an unwavering motivation to prevent, treat, care and protect. We acknowledge that climate change poses a material risk to our operations, the environment and society, and that appropriate action is required to reduce this impact. Mediclinic is committed to stepping up to the climate change challenge and transparently reporting on progress. The disclosures made in this report are consistent with the TCFD recommendations, bar the speciﬁc exclusions as indicated in the index alongside. Although we believe we have a sound risk management process and strategy to mitigate the eects of climate change on our business, we acknowledge that further work needs to be done to quantify the ﬁnancial and operational impact of the three temperature scenarios identiﬁed in this report. In this, we are committed to evolving our processes and reporting. See the 2022 Sustainable Development Report at annualreport.mediclinic.com for supplementary information on our Group Sustainable Development Strategy and related practices See our CDP Report on our website at www.mediclinic.com Notes 1 At the time of writing this report, our detailed impact analysis, including time frames and transition plans, and the associated ﬁnancial modelling of each risk/opportunity item described in this report, still had to be ﬁnalised, and, as a result, will be available only during the next reporting period. The impact analysis will involve assessing the impact and likelihood (exposure) of each identiﬁed item. Based on this assessment, we will be able to determine the potential ﬁnancial impact for each risk/opportunity item relative to the three scenarios and time horizons speciﬁed in this report. The analysis will be done per geography as the risk proﬁles for some risk items/opportunities dier signiﬁcantly depending on the operating environment. The outcome of this analysis will enable us to classify a risk or opportunity as low, medium or high, based on the ﬁnancial impact determined. The outcome of this detailed impact analysis will enable us to prioritise our most signiﬁcant risks in order to build resilience and improve mitigating actions. We will also be able to prioritise opportunities to maximise potential positive impacts. This process, and the outcome thereof, will be included in future TCFD reports. 2 Measuring Scope 3 emissions is a challenge, as these refer to emissions that are beyond our direct control. In 2021, we worked on aligning the reporting of Scope 3 emissions between the dierent geographies. Scope 3 emissions that are material to us currently include purchased goods and services, electricity transmission and distribution losses (in Southern Africa and the Middle East), upstream transportation (in Southern Africa and the MIddle East), waste generated in operations, business travel, employee commuting and downstream leased assets (in Southern Africa). Capital goods and investments must still be evaluated. Our main focus for the next year will be to improve data quality and coverage. 3 Although internal targets have been set to manage climate-related risks and opportunities, these will be reported on only in the future. TCFD CONTENT INDEX ELEMENT RECOMMENDATIONS PAGE REFERENCE COMPLIANCE OR ADDITIONAL COMMENTARY Governance a) Describe the board’s oversight of climate-related risks and opportunities 48–49 b) Describe management’s role in assessing and managing climate-related risks and opportunities 48–49 Strategy a) Describe the climate-related risks and opportunities the organisation has identiﬁed over the short, medium and long term 49–50, 53 See note 1 alongside b) Describe the impact of climate-related risks and opportunities on the organisation’s businesses, strategy and ﬁnancial planning 50 See note 1 alongside c) Describe the resilience of the organisation’s strategy, taking into consideration dierent climate-related scenarios, including a 2°C or lower scenario 51 Risk management a) Describe the organisation’s processes for identifying and assessing climate- related risks 51–52 b) Describe the organisation’s processes for managing climate-related risks 54 c) Describe how processes for identifying, assessing and managing climate-related risks are integrated into the organisation’s overall risk management 51–54 Metrics and targets a) Disclose the metrics used by the organisation to assess climate-related risks and opportunities in line with its strategy and risk management process 54 b) Disclose Scope 1, Scope 2 and, if appropriate, Scope 3 Greenhouse Gas (‘GHG’) emissions, and the related risks 54–55 See note 2 alongside c) Describe the targets used by the organisation to manage climate-related risks and opportunities and performance against targets 54 See note 3 alongside STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 47 GOVERNANCE BOARD OVERSIGHT As part of its function to promote Mediclinic’s sustainable success, the Board has oversight of our sustainability and risk management eorts. Climate change is a principal risk of the Group. See the Risk management report on page 91 for further details on our principal risks and how they are determined The Audit and Risk Committee is responsible for reviewing principal risks and advising the Board on the likelihood, potential impact, management and mitigation thereof. The Audit and Risk Committee Chair reports all feedback, which includes progress on climate-related risks, to the Board at regular intervals. In 2020, the Board approved the Group Sustainable Development Strategy, setting ESG goals. This ESG strategy encompasses the opportunities identiﬁed to improve environmental practices, as set out in the ‘Strategy’ section of this report. The Board reviews progress on the Group strategic goal to minimise our environmental impact. To support the achievement of the Mediclinic Group Strategy, the risk management process is fully integrated into the strategic planning process. To ensure focused implementation of objectives related to our environmental sub-goals, the Board has approved the inclusion of carbon emission reduction as a performance target for the LTI scheme for FY23, in principle, subject to feedback from shareholders. See the Remuneration Committee Report on page 143 The Chair of the Board has encouraged all Board members to join Chapter Zero, the UK Chapter of the Climate Governance Initiative. Developed in collaboration with the World Economic Forum, Chapter Zero equips non-executive directors to lead crucial boardroom discussions on the impacts of climate change. The Board is committed to equipping itself with the understanding and skills necessary for appropriate decision-making on climate change-related aspects. During 2021, the Board approved the constitution of an ESG Committee to ensure ecient oversight of the Group’s ESG strategy and related practices. Previously, this oversight function formed part of the responsibilities of the Clinical Performance and Sustainability Committee, which now solely focuses on the Group’s clinical performance. The ESG Committee thoroughly assesses opportunities for improving our environmental practices and recommends to the Board, for approval, any material Note 1 ISO 14001:2015 speciﬁes the requirements for an EMS that an organisation can use to enhance its environmental performance and manage its responsibilities in a systematic manner. All hospital managers are trained to utilise this system. changes proposed by the Group Executive Committee. The ESG Committee is led by the Chair of the Board, who reports all feedback to the Board at regular intervals. Any material concerns are brought to the Board for discussion, together with suitable recommendations for their resolution. MANAGEMENT RESPONSIBILITY The Group Chief Governance Ocer is responsible for sustainable development activities, which includes addressing climate-related risks and opportunities, as described on page 49. Divisional environmental data is reported to the Group’s Environmental Sustainability department. The Group Executive Committee, supported by the Group General Manager: Risk Services, recommends Mediclinic’s proposed principal risks to the Audit and Risk Committee and, ultimately, the Board for approval. Principal risks are risks that can materially aect Mediclinic’s business model, performance, prospects, solvency, liquidity or reputation. These are determined through a strategic risk review process where top risks are identiﬁed and assessed by divisional executive committees and the Group Executive Committee, with input from non-executive directors. Political, economic, social, technological, environmental and legal developments that may impact the Group’s operations and business model viability in the short, medium or long term are reviewed to identify emerging physical and transition risks such as new climate policy or technological shifts. The Group’s Enterprise-wide Risk Management (‘ERM’) Policy follows the International Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control – Integrated Framework and is reviewed annually. See the Risk management report on page 91 The mitigation of climate change is the responsibility of the Group Manager: Environmental Sustainability, who is supported by divisional environmental leads. Material feedback is included in monthly reports to the Group Executive Committee. With the ISO 14001:2015 EMS fully functional in our Southern Africa hospitals, implementation in Switzerland and the Middle East is in progress. The EMS assists management in determining climate change-related risks and opportunities per facility. The Group Executive Committee assesses opportunities for improving our environmental practices and recommends related targets and roadmaps to the ESG Committee for approval. The Board is committed to equipping itself with the understanding and skills necessary for appropriate decision-making on climate change-related aspects. TCFD REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT48 FIGURE 1: MEDICLINIC’S CLIMATE CHANGE GOVERNANCE ORGANOGRAM BOARD Assesses the Company’s emerging and principal risks and reviews eectiveness of risk management and internal control systems Number of Board members with ESG skills and experience: 7 AUDIT AND RISK COMMITTEE Oversees evaluation of risk management systems and advises Board on risk management and mitigation ESG COMMITTEE Biannually reviews Group ESG strategy and approves implementation plans as well as roadmaps to environmental targets GROUP EXECUTIVE COMMITTEE Identiﬁes opportunities for improving environmental practices and recommends roadmaps for achieving targets; biannually reviews principal risks GROUP MANAGER: ENVIRONMENTAL SUSTAINABILITY Responsible for developing environmental targets and roadmaps, overseeing execution at divisional level, and monitoring and reporting on progress GROUP GENERAL MANAGER: RISK SERVICES Manages and reports on environmental risks DIVISIONAL ENVIRONMENTAL LEADS Oversee energy usage in each division and reduce consumption GROUP CHIEF GOVERNANCE OFFICER Coordinates sustainable development activities across the Group, with monthly progress reports to Group Executive Committee STRATEGY CLIMATE-RELATED RISKS AND OPPORTUNITIES Business interruptions due to extreme events – such as ﬂoods, storms, droughts, ﬁres and earthquakes – could have a signiﬁcant impact on Mediclinic. The impacts of climate change, including sea-level rise, heat waves, storms, drought and wildﬁres, will inﬂuence global migration and the demand for our facilities in aected areas. The consequences will be felt directly and indirectly via resource availability and population movements from rural to urban areas or from vulnerable coastal communities, with consequences across our market and workforce. Further identiﬁed climate-related risks include increased costs for water and electricity, the impact of carbon tax, the cost for compliance to climate change legislation, ﬁnes and penalties, and potential reputational damage. See the Risk management report on page 97 for further details on identiﬁed short-, medium- and long-term risks In order to minimise our contribution towards climate change and appropriately manage its potential impact on our business, we developed a Group ESG strategy, matured the Group Environmental Policy and Group Sustainable Development Policy, and introduced a Group Waste Management Policy. The Group ESG strategy includes the sub-goals of becoming carbon neutral and having zero waste to landﬁll by 2030. These sub-goals have been rolled up to the Mediclinic Group Strategy to reinforce their importance and ensure the necessary resources are allocated. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 49 to the potential revenue loss should water availability be restricted. OPPORTUNITY FOUR: Shift in consumer preference. The reputational beneﬁts of being a sustainable brand and responsible corporate citizen could result in improved revenues and market share growth. By containing costs and managing our impact on the environment while providing high-quality care and facilities, we position ourselves as a respected and trusted provider of healthcare services. OPPORTUNITY FIVE: Eligibility for sustainability-linked loans with improved interest margins. During 2021, our Southern Africa division concluded the ﬁrst syndicated sustainability-linked loan in Africa. Carbon emission reduction and diversion of waste from landﬁll count as two of the four loan metrics. OPPORTUNITY SIX: Burden of disease. Increased incidence of certain chronic, communicable and non-communicable diseases arising from climate change provides the opportunity to develop aordable targeted quality care models. PPPs that target these diseases could increase revenue and quality care models while delivering cost-eective quality care. The dierence in temperature rise between the climate scenarios has stark consequences for human wellbeing. During the past decade, with an average temperature rise of 1.1°C above pre-industrial levels, the migration of regional occupational diseases, such as malaria, from Southern Africa’s northern to central regions was evident Our sub-goals to become carbon neutral and have zero waste to landﬁll by 2030 present six climate-related opportunities: OPPORTUNITY ONE: Investing in energy-ecient technology and procuring renewable energy at lower prices and with fewer harmful emissions. The implementation of the EMS at all hospitals across the Group will lead to improved operational eciency of technical installations, the introduction of various new energy eciencies – including renewable technologies – and positive change in employee behaviour. OPPORTUNITY TWO: Increasing the amount of waste that is recycled and recyclable. The shortage of landﬁll sites, their ever-increasing cost and the associated GHG emissions make this opportunity compelling. An increase in waste recycling mitigates related cost concerns and also helps reduce associated carbon emissions. OPPORTUNITY THREE: Reducing water usage and consumption. This is key to Mediclinic mitigating the risks related to water scarcity and reduced water quality. Being situated in a water- scarce part of the world, our Southern Africa operations have unlocked many opportunities to reduce and recycle water, ensuring minimal impact on communities and securing the water required to function. This is further enabled by the Corporate Sustainable Water Management Strategy, which was adopted in 2016 and is reviewed annually. Investigations to implement similar measures in Switzerland and the Middle East are ongoing. The opportunity beneﬁt can be directly related at Mediclinic hospitals, necessitating the need for medical assistance. IMPACT ON THE BUSINESS The eect of climate change on the business is a valid concern. Our strategy, therefore, not only focuses on ﬁnancial output, but also on managing and utilising social and environmental resources eciently to ensure long-term sustainability. From a climate change perspective, our strategy is informed by the divisional safety, health and environmental policies, the Group Environmental Policy, the Group Sustainable Development Policy and the Code of Business Conduct and Ethics. The aforementioned policies are reviewed annually by management, with recommendations to the ESG Committee. The Group Safety, Health and Environmental Policy guides the identiﬁcation and management of risks and opportunities relating to water use and recycling, energy use and conservation, emissions and climate change, and waste management and recycling. Responsible resource use oers Mediclinic a strategic advantage. We work continuously to reduce fuel and electricity consumption and associated carbon emissions. In this way, we contain operating costs and ensure ongoing access to water and energy supplies. During FY22, £7m was budgeted for initiatives to minimise the Group’s environmental impact. These funds were mostly utilised for energy-saving technologies, LED light replacements, PV installations at facilities for energy generation, and renewal of ICT components for better energy eciency. Over the next three years, nearly £8m per annum has been budgeted to invest in environmental projects. These funds will be utilised to expand on the initiatives set out above. It is the responsibility of each division to budget for the initiatives and programmes associated with this environmental goal. Once the divisional executive committees have approved budget requirements, the budgets are presented to the Group Executive Committee and Board for approval. TCFD REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT50 IDENTIFY RISKS Pinpoint risks, including climate-related risks, using publications, data and available literature ASSESS RISKS Quantify risks based on impact and likelihood; thereafter, prioritise risks MANAGE RISKS Identify mitigating steps and actions for each risk item OUR RISK MANAGEMENT PROCESS REPORT RISKS Disclosure will include the TCFD recommendations BUSINESS RESILIENCE Mediclinic’s use of the EMS facilitates climate change risk assessments based on speciﬁc scenarios, followed by action plans in each facility’s environmental management programme (‘EMP’). The EMS has been in operation in our Southern Africa division since 2002. Climate-related opportunities and risks are incorporated into the Group’s ESG strategy. Sub-goal 2: ‘Mitigate the impact of climate change’ has dedicated objectives to address transition and physical risks. The ESG strategy is annually reviewed and updated by the Group Executive Committee to adapt to actual physical events and to conﬁrm the possible pathways to various scenarios. The Group’s Environmental Risks and Opportunities Aspect Survey is updated annually, taking into consideration the previous year’s physical events, change in ambient temperature, climate-related legislation, carbon tax legislation, change in objectives and goals, and controlled and uncontrolled conditions. The ESG strategy considers major environmental factors such as carbon emissions, energy, water, waste and biodiversity, and any impacts speciﬁc to a geography and/or facility. See the Risk management report on page 97 As part of the revised ESG strategy, Mediclinic has undertaken climate scenario analysis, as described on page 52. RISK MANAGEMENT RISK IDENTIFICATION At Mediclinic, the objective of risk management is to establish an integrated and eective risk management framework within which important risks, including climate-related ones, are identiﬁed, quantiﬁed, prioritised and managed for an optimal risk/reward proﬁle. The ERM Policy deﬁnes the risk management objectives, risk appetite and tolerance, methodology, process and responsibilities of the various risk management role players in the Group, and is subject to annual review. Regarding climate-related risks, the ERM takes into consideration the Group’s ESG strategy, Sustainable Development Policy and the Safety, Health and Environmental Policy, reviewed annually. Our ERM Policy includes the following levels: • Top-down: At Group level, key risks to the business are identiﬁed, understood, assessed and prioritised. This process includes climate-related and other environmental risks. • Bottom-up: At asset or operational level, individual hospitals perform an environmental risk assessment and each division completes an online Environmental Risks and Opportunities Aspect Survey to determine its risk proﬁle annually. Based on the survey scores achieved per hospital and per area, high-risk areas and individual risk items are identiﬁed. These areas/items have the potential to lead to a ﬁnancial, operational or reputational impact and will be addressed through each hospital’s EMP with action plans for risk mitigation. The ESG strategy is annually reviewed and updated by the Group Executive Committee to adapt to actual physical events and to conﬁrm the possible pathways to various scenarios. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 51 • World takes immediate action to reduce global emissions; coordinated action taken • High level of transition risks for this scenario • Physical risks for this scenario will be limited compared with scenario 3 • No introduction of new policies beyond the policies already known and announced • Limited transition risks for this scenario • Physical risks are the highest under this scenario SCENARIO 1: 1.5°C increase – Paris ambition • World takes action to reduce global emissions, but more slowly than in scenario 1; coordinated action taken but with a delayed start • High level of transition risks for this scenario • Physical risks for this scenario will be limited compared with scenario 3 SCENARIO 2: 2.0°C increase – Policy action but with delayed start SCENARIO 3: 3.0°C increase – Business as usual The following scenarios have been identiﬁed: These scenarios are aligned with the TCFD recommendations in the following ways: • at least one provides for a 2°C or lower scenario that considers transition to a lower-carbon economy; • they categorise the risks identiﬁed as transition or physical risks (see page 53); and • they are modelled to the year 2050, aligning with the Paris Agreement and other governmental net-zero 2050 targets. TIME HORIZONS We selected the following intervals to represent a range of time horizons for our impact modelling: Short term: 1–5 years Medium term: 6–10 years Long term: 11 years – 2050 The ongoing identiﬁcation of potential risk items and the assessment thereof will be done annually; this will ensure emerging risks are included and risk proﬁles adjusted to align with the changing environment and new information and projections. Fundamentally, the ﬁnancial impacts of climate change on an organisation are determined by the speciﬁc climate-related risks and opportunities to which it is exposed and its strategic decisions on managing these risks – i.e. whether to mitigate, transfer, accept or control – and seizing these opportunities. OUR APPROACH Since we own the majority of the buildings in which we operate, it is crucial we understand climate-related risks and the modiﬁcations required to render facilities resilient. Therefore, we established an internal working task team representing key stakeholders and business functions across the Group. This enables us to understand how our strategy addresses climate-related risks and opportunities. Identiﬁed material risks will be assessed by evaluating their impact and likelihood, and these ratings will be adjusted for the three scenarios discussed alongside. OUR CLIMATE SCENARIOS We have identiﬁed three climate scenarios to gain an understanding of climate-related risks and opportunities, and to assess our business resilience to these risks. To determine the most plausible climate scenarios across our geographies, we used publicly available data and information as well as veriﬁed environmental data, in combination with the Intergovernmental Panel for Climate Change (‘IPCC’) 6 th Assessment Report (‘AR6’) of August 2021, IPCC AR6 Regional Fact Sheet Africa, IPCC AR6 Regional Fact Sheet Europe and IPCC AR6 Regional Fact Sheet Asia. The South African Risk and Vulnerability Atlas (SARVA 3.0, 2020), a central repository for a wide range of climate and environmental data for South Africa, was also used. TCFD REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT52 Risk factors Potential risk impact Mitigating actions taken TRANSITION RISKS: Risks relating to policy, legal, technological and market changes arising from the transition to a lower-carbon economy • Carbon tax • Climate-related legislation • Cost of investment in new technology • Increase in cost due to carbon tax • The cost of ﬁnes and reputational damage • High cost of implementing new technology  Implementation of ESG strategy sub-goal 1: ‘Become carbon neutral by 2030’  Implementation of ESG strategy sub-goal 2: ‘Mitigate the impact of climate change on our business’  Eective management of the EMS PHYSICAL RISKS: Risks resulting from the physical impacts of climate change. These can be event driven (acute) or longer-term climate shifts (chronic) Acute Extreme weather events that include ﬂoods, storms, droughts, sandstorms, heat waves, etc. Partial or complete closure or total loss of impacted facility/ies depending on frequency and intensity of events  Insurance for property damage and/or business interruptions  Eective management of the EMS Major Incident Framework – Emergency Preparedness Chronic (Referring to sustained higher temperatures, sea-level rise, etc.): • Rising temperatures resulting in increased electricity consumption due to the need for additional cooling • Rising temperatures leading to water shortages and subsequently aecting water quality • Increase in cost due to increased energy consumption for additional cooling • Increase in cost due to potential water scarcity or water quality being compromised  Investing in energy-ecient technology  Procuring renewable energy at lower prices  Implementation of ESG strategy sub-goal 3: ‘The eective use and reuse of our water resources’ The table below includes the most signiﬁcant climate-related risks and opportunities identiﬁed as well as the requisite mitigating actions. Opportunity factors Potential opportunity impact OPPORTUNITIES: Eorts to mitigate and adapt to climate change also produce opportunities for managing operating costs and increasing revenue • Investing in energy-ecient technology and procuring renewable energy at lower prices • Increasing the amount of waste that is recycled and recyclable, executing on the objectives associated with having zero waste to landﬁll by 2030 • Reducing water usage and consumption • Shift in consumer preference • Sustainability-linked loans • Increase and shifting of disease burden • Saving on energy costs • Saving on associated waste costs • Saving on water costs • Improved revenues and market growth due to enhanced reputation • Improved borrowing costs • Increase in admissions and revenue due to greater disease burden RISKS OPPORTUNITIES STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 53 MANAGEMENT PROCESS The annual Environmental Risks and Opportunities Aspect Survey identiﬁes risk areas at hospital level and establishes a clear response strategy with action plans to mitigate identiﬁed risks and shortcomings in risk management. The EMP includes appointing persons responsible for completing the actions and setting targets, objectives and due dates. The EMP is reviewed at least quarterly by each facility’s top management to ensure its continuing suitability, adequacy and eectiveness. Progress is documented in the EMP. Second-party EMS gap audits are conducted by the Corporate Oce to ensure compliance and assess the environmental performance of action plans set out in the EMP. Divisional CEOs receive an update on environmental performance during the three-monthly Environmental Management Review. RISK INTEGRATION Results from the Environmental Risks and Opportunities Aspect Survey are used to assess environmental risks within the Group risk register. High risks will be reported on and addressed at Group level. The risk or aspect identiﬁcation informs environmental objectives aimed at making meaningful improvements to our environmental performance. Environmental risks are elevated to the ESG and the Audit and Risk committees for due consideration and guidance. The ESG Committee meets twice a year and the Audit and Risk Committee on a quarterly basis. METRICS AND TARGETS We continuously review priorities to maintain momentum in our journey to becoming carbon neutral and having zero waste to landﬁll by 2030. These assist us in monitoring our progress against climate change-related risks and opportunities. With the assistance of external consultants, the divisions measure their carbon footprint using the GHG Protocol with boundaries established under the operational control approach. These measures include, in varying degrees: • Scope 1 emissions: direct emissions from Mediclinic-owned or -controlled equipment (stationary fuels); air- conditioning and refrigeration gas reﬁlls; anaesthetic and other gas consumption; emergency response vehicles; and ﬂeet and pool vehicles (mobile fuels). • Scope 2 emissions: indirect emissions from purchased electricity. • Scope 3 emissions: indirect emissions in the supply chain; business travel activities; employee commuting; upstream and downstream third-party distribution; oce paper consumption; electricity transmission; and distribution losses and waste. • Non-Kyoto Protocol GHG emissions, such as from Freon, which is used in air-conditioning and refrigerant equipment. Emission data was converted into a carbon dioxide equivalent (‘COe’) using recognised calculation methods and emission factors, and stating assumptions made where relevant. We calculate energy consumption by using the Department for Environment, Food and Rural Aairs’ 2021 fuel conversions and GRI standards methodology. The applicable metrics are reported below: • Carbon emissions (tonnes CO 2 e) • Direct and indirect energy consumption (calculations are done in kilowatt hour and then converted to gigajoules [GJ]) • Waste diverted from landﬁll (tonnes) • Water usage (kilolitres) In 2020, we increased our reporting boundary to cover the Group’s operations in Switzerland, Southern Africa and the Middle East. This comprises Hirslanden, Mediclinic Southern Africa, Mediclinic Middle East, Medical Innovations and Mediclinic Group Services. In previous CDP submissions, only Mediclinic Southern Africa was reported. We do not have operations in the UK with signiﬁcant emissions or energy consumption, and only report per calendar year on the data of the geographical regions in which we operate. Our internal targets, inclusive of 2020 as the baseline year and 2021 as the target year, have been set in Southern Africa and the Middle East for activities to reduce carbon emissions, with a particular focus on electricity and GHG-emitting activities with high global warming potential. In Switzerland, hydroelectricity is utilised, which has minimal harmful emissions. With the Swiss operations being close to carbon neutral, their internal environmental targets are based on the improvement of operational eciencies and eciency targets set by the Energy Agency of the Swiss Private Sector. CO- and kWh-reduced certiﬁcates will be awarded upon achievement. RELATED RISKS LINKED TO THE TARGETS SET: Transition and physical risks Scope 2 emissions are the biggest contributor to our carbon footprint, particularly in Southern Africa and the Middle East. To reduce our carbon emissions, the respective roadmaps to carbon neutrality focus on drastically reducing the use of electricity associated with high CO 2 emissions. This will be achieved through: • procurement of renewable and clean energy where available; • PV installation at facilities where feasible; • energy-ecient technologies such as LED light replacements, chiller replacements, upgrade of the SCADA building monitoring system, replacement of district heating with geothermal probes for CO reduction, window replacement for improved insulation, and replacement of emergency diesel and heating for better emission values; and • changes in human behaviour to reduce energy use. To reduce our carbon emissions, the respective roadmaps to carbon neutrality focus on drastically reducing the use of electricity associated with high CO 2 emissions. TCFD REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT54 BECOMING CARBON NEUTRAL BY 2030 GROUP SWITZERLAND 1 SOUTHERN AFRICA THE MIDDLE EAST 2021 2020 2021 2020 2021 2020 2021 2020 Scope 1 emissions 34 656 30 736 6 670 4 780 22 215 2 22 083 5 771 3 3 869 Scope 2 emissions 177 313 195 312 646 595 154 982 4 151 054 21 686 43 379 Total Scope 1 & 2 211 969 5 226 048 7 316 5 374 177 197 173 136 27 456 47 248 Scope 3 emissions 65 068 54 278 5 915 143 47 115 39 576 12 038 14 559 Non-Kyoto Protocol emissions 3 122 5 815 0 0 2 292 3 180 830 2 635 Total Scope 1 & 2 CO 2 e/full-time equivalent 6.25 n/a 0.94 0.72 9.32 10.96 3.86 6.97 Notes 1 Increase in Scope 1 and 2 emissions due to operational requirements; Scope 3 increase due to the inclusion of the portion of waste that is incinerated (not included in previous reporting). 2 Increase due to diesel consumption on account of load shedding, anaesthetic gases used in theatre and use of mobile fuel. 3 Increase due to use of air-conditioning and refrigeration gases, diesel consumption as a result of generators used in tents for COVID-19 PCR testing and expansion project at Airport Road Hospital, Abu Dhabi, where diesel boilers were installed. 4 Scope 2 emissions (purchased electricity) increased as a result of an increase in the emission factor (conversion of kWh to COe), even though total electricity consumption decreased year on year. 5 Decrease in total Scope 1 and 2 emissions due to the purchase of nuclear power with zero emissions for hospitals in Abu Dhabi. (Nuclear power accounts for 50% of the total electricity consumption in the Middle East.) 6 Increase due to resumption of business travel and upstream transportation. Notes 1 Increase due to higher fuel-oil use and inclusion of purchased diesel and mobile fuel not included in prior year’s reporting. 2 Increase due to higher diesel consumption on account of load shedding, as well as use of mobile fuel and aviation fuel. 3 Increase in district heating and electricity consumption. 4 Increase in district cooling and electricity consumption inﬂuenced by expansion of Airport Road Hospital, Abu Dhabi, and operational requirements. TABLE 1: CARBON EMISSIONS (TONNES COe) In the Middle East, sources of clean energy are limited. In 2021, 38 554MWh of clean energy was purchased for all facilities in Abu Dhabi. TABLE 2: DIRECT AND INDIRECT ENERGY CONSUMPTION (GJ) GROUP SWITZERLAND SOUTHERN AFRICA THE MIDDLE EAST 2021 2020 2021 2020 2021 2020 2021 2020 Direct energy purchased 266 344 224 524 117 147 1 86 932 117 940 2 103 132 31 257 34 398 Direct energy produced 4 620 3 021 3 063 1 584 1 557 1 437 0 0 Indirect energy consumed 1 013 123 960 478 176 665 3 172 290 542 950 548 249 293 507 4 237 258 Total energy consumption 1 284 086 1 188 023 296 876 260 807 662 447 652 818 324 764 271 656 Energy consumption/full-time equivalent 37.84 36.02 38.00 35.09 34.84 35.05 45.70 40.08 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 55 We implemented several initiatives to reduce waste, in particular healthcare general waste, including: • standardised waste management tenders where applicable; • increased recycling; • implementation of circular economies with key suppliers; • behavioural change aimed at refusing waste and recycling; and • use of new waste technologies where feasible. TABLE 3: WASTE MANAGEMENT TABLE 4: WATER USAGE FROM UTILITIES Note 1 In Switzerland, there is no waste to landﬁll as all waste is incinerated. Note 1 Water usage increased compared with 2020 but was still lower than pre-pandemic usage. The increase was mainly due to returning to business as usual and increased hand-washing and laundry during COVID-19 waves. Total waste generated HCRW Total waste to landﬁll Total waste diverted from landﬁll Waste diverted from landﬁll as a percentage of total waste (%) GROUP 2021 17 843 5 246 7 034 5 563 31.1 2020 14 276 4 766 6 882 2 629 13.4 SWITZERLAND 2021 4 043 2 375 0 4 3 668 90.7 2020 1 371 352 0 1 019 43.4 SOUTHERN AFRICA 2021 8 363 3 741 3 034 1 588 19.0 2020 7 892 3 438 3 094 1 360 13.6 THE MIDDLE EAST 1 2021 5 437 3 1 130 4 000 307 5.7 2020 5 006 976 3 781 249 5.0 Water usage (kL) kL/full-time equivalent GROUP 2021 1684 707 49.65 2020 1 647 749 50.18 SWITZERLAND 2021 344 500 44.09 2020 366 648 49.33 SOUTHERN AFRICA 2021 1 086 815 57.16 2020 1 029 058 55.25 THE MIDDLE EAST 1 2021 253 391 35.66 2020 252 042 37.19 HAVING ZERO WASTE TO LANDFILL BY 2030 We will continue to develop our roadmaps, consider new technologies and evolve targets to ensure we reach our 2030 sub-goals of becoming carbon neutral and having zero waste to landﬁll. Notes 1 Although business returned to normal in 2021, hospitals were still coping with the COVID-19 pandemic and the associated increase in HCRW generated and disposal of personal protective equipment. This resulted in an even larger increase in waste generated than the prior year. 2 Includes a total of 2 690 tonnes of healthcare general waste that is incinerated, which was not previously reported on. 3 In the Middle East, food waste is not processed or reused, HCRW is disposed of after treatment and hazardous chemical waste is shipped to Germany for incineration. 4 No waste to landﬁll as all waste is incinerated. USING WATER SUSTAINABLY Healthcare is a water-intensive industry, with the main uses being cooling equipment, plumbing ﬁxtures, medical process rinses, laundry and landscaping. To reduce water use, we are: • implementing water-saving technologies in facilities; • changing human behaviour; and • setting annual targets for decreased consumption. TCFD REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT56 The table below sets out where stakeholders can ﬁnd information in the Strategic Report that relates to non-ﬁnancial matters detailed under Section 414CB of the Act. NON-FINANCIAL INFORMATION STATEMENT NON-FINANCIAL MATTER RELEVANT POLICIES AND STATEMENTS READ MORE IN THIS REPORT PAGE REFERENCE Anti-corruption and anti-bribery • Anti-bribery Policy 1 • ERM Policy • Fraud Risk Management Policy 1 • Group Privacy and Data Protection Policy • Regulatory Compliance Policy • Code of Business Conduct and Ethics • Sustainable development overview (Material issue 3: Being an ethical and responsible corporate citizen) 45 Business model n/a • Business model • Strategy overview 25 16 Employees • Board Diversity Policy • Code of Business Conduct and Ethics • Employee relations policies • Group Diversity and Inclusion Strategy • Health and safety policies and procedures • Chair’s Review • Group Chief Executive Ocer’s Report • Business model • Sustainable development overview (Material issue 2: Building stakeholder trust) 6 10 25 40–44 Environmental matters • Group Sustainable Development Policy • Group Environmental Policy • Group Waste Management Policy • Strategy overview • Sustainable development overview (Material issue 1: Minimising environmental impact) • TCFD report 16 37–39 47–56 Non-ﬁnancial KPIs n/a • Key performance indicators • Sustainable development overview • Clinical services overview 23 34 58 Principal risks ERM Policy Risk management report 91 Respect for human rights • Code of Business Conduct and Ethics • Group Diversity and Inclusion Strategy • Modern Slavery and Human Tracking Statement Sustainable development overview (Material issue 2: Building stakeholder trust) 40–44 Social matters • Code of Business Conduct and Ethics • Group Supply Chain Risk Management Policy • Group purpose • Values • Chair’s Review • Strategy overview • Business model • Sustainable development overview 6 16 25 34 Note 1 These policies include anti-corruption matters. See the 2022 Sustainable Development Report at annualreport.mediclinic.com and policy documents at www.mediclinic.com for further details STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 57 CLINICAL SERVICES OVERVIEW This Clinical services overview is a condensed version of the Group’s 2022 Clinical Services Report, available at annualreport.mediclinic.com. It covers the most important clinical characteristics across the Group with speciﬁc reference to our initiatives and clinical outcomes for the 2021 calendar year, unless stated otherwise. CONTENT 2022 CLINICAL SERVICES REPORT CLINICAL SERVICES OVERVIEW Milestones • • Interview with Dr René Toua • abbreviated How we create value • abbreviated Our healthcare landscape • abbreviated Better ways to connect Our clients • n/a Patient experience • abbreviated Health awareness • n/a Better ways to care Clinical performance 1 • abbreviated Better care settings • n/a Partnerships • n/a Independent assurance • n/a Clinical ethics summary • abbreviated Note  Clinical performance covered in the standalone 2022 Clinical Services Report includes international benchmarking, never events, adverse events, hand hygiene, healthcare-associated infections, device-associated infections, surgical site infections, antimicrobial stewardship, mortality, readmission, re-operation and extended stay. KEEPING CLIENTS AT HEART Dr René Toua, Group Chief Clinical Ocer, reﬂects on the past year. Our focus is on understanding our clients and capturing their unﬁltered voices. Dr René Toua Group Chief Clinical Ocer Q. WHAT MILESTONES DID MEDICLINIC ACHIEVE IN INTEGRATING CARE IN 2021? Providing integrated care requires more than just a clinical model. We need the right technology platform. In 2021, we made signiﬁcant strides with the latter and it is in various stages of implementation across all our geographies. Q. WHAT IS MEDICLINIC DOING TO BETTER UNDERSTAND CLIENTS? Our focus is on understanding our clients and capturing their unﬁltered voices. To do this, we are embedding client advisory groups and have also increased the number of patient-reported outcomes that are measured. In the past, client feedback focused on inpatient settings – it is now expanded to cover all care settings: physical and virtual. Data also plays a crucial role as it allows us to create a 360° view of our clients, enabling us to understand their needs better. See the 2022 Clinical Services Report at annualreport.mediclinic.com for the full interview MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT58 March Through TOGETHER WE TEST, we began providing COVID-19 repetitive testing to Swiss companies and schools as well as health and public organisations. The canton of Schwyz became the ﬁrst to adopt our online platform, which facilitates logistics, laboratory analysis and reporting of results. By the end of the year, 12 cantons and over 9 000 organisations had made use of the service, with more than 4.5 million tests having been performed. We broke ground on a multiyear development at Klinik St. Anna in Lucerne. The ﬁrst stage of the extension will house the Institute for Radiology and Nuclear Medicine, enabling the hospital to expand its service. In Southern Africa, as part of our strategy to oer services across the healthcare spectrum, we expanded our Milnerton hospital to include Intercare Milnerton Medical and Dental Centre. The co-location of the primary care facility expedites care coordination and complements the acute hospital’s oering. The Bloemfontein day case clinic became our 13 th facility in Southern Africa for same-day surgery. The clinic has three fully equipped theatres and its focus on planned surgery facilitates scheduling, oering clients convenience while simultaneously making treatment more ecient and cost-eective. Three months later, Winelands day case clinic followed. Intercare Milnerton Medical and Dental Centre January From the beginning of 2021, patients could take comfort that the Diabetes Clinical Care Programme at Welcare Hospital had been accredited by Joint Commission International (‘JCI’) – a ﬁrst for Dubai. The programme brings together a multidisciplinary team comprising endocrinologists, nutritionists and diabetes educators. With 16.3% of the UAE’s adult population suering from diabetes, quality holistic care is ever more important. February In collaboration with the canton of Thurgau, we opened Switzerland’s ﬁrst vaccination centre on a boat. Up to 170 people a day could be assisted on the MS Thurgau, moored on Lake Constance. Prof. Stephen Roche, a surgeon at our Constantiaberg hospital in South Africa, collaborated on an international mixed-reality (‘MR’) surgery trial. Using HoloLens 2, Microsoft’s MR headset, he participated in three holographic surgeries: one performed in Cape Town and two in Europe. Operated with hand gestures and voice commands, the headset lets surgeons view and manipulate 3D images while consulting with colleagues elsewhere. We opened the ﬁrst of four renal clinics in Southern Africa in Bloemfontein. Realised through a merger with BGM Renal Care, this further integrates our comprehensive healthcare oering to clients. MILESTONES STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 59 April Together with the canton of Zurich, we opened the canton’s biggest vaccination centre at Messe Zürich – the city’s convention centre. By administering vaccines at ﬁve-minute intervals, our centre delivered up to 4 000 vaccinations a day. Messe Zürich May The Mala Connected Trophy was awarded to our Middle East division for work done on implementing EHRs. Following an agreement with the Dubai Health Authority (‘DHA’), we began operating the DHA’s Al Barsha Dialysis Centre. Running the 60-bed centre – which also oers preventive renal services – aligns with our drive to set the gold standard in kidney care in the UAE. JCI- accredited City Hospital in Dubai is home to a pioneering transplant programme. Al Barsha Dialysis Centre August We opened our ﬂagship cancer treatment facility in Southern Africa at our Constantiaberg hospital. The ZAR45-million oncology unit, operated in partnership with Icon Oncology, oers patients access to a range of specialists and treatments in a single venue. The investment in technology enables us to provide full-service chemotherapy and state-of-the-art radiation therapy. This coordinated approach reduces wastage and brings clients the best quality and most eective care at the most aordable price. October The UAE’s ﬁrst robotic kidney surgery was performed at City Hospital in Dubai. Using the da Vinci Surgical System, a joint team from Mediclinic and the Mohammed Bin Rashid University of Medicine and Health Sciences removed a kidney from a living donor. In a ﬁrst for the UAE, the stroke programme at our City Hospital was recognised by the American Heart Association for its advanced imaging capabilities, availability of specialised treatments and qualiﬁed employees. Following inspection in September, the hospital was awarded Comprehensive Stroke Centre accreditation on 29 October – World Stroke Day. November With the 100% acquisition of Bourn Hall Fertility Centre in Dubai, we further expanded our oering across the continuum of care. The provision of IVF neatly complements our maternity and neonatal intensive care services, and newly launched precision medicine. The opening of a second fertility centre in Abu Dhabi in 2022 will capitalise on this. December The tumour centre of Klinik St. Anna in Lucerne successfully met the stringent criteria of the German Cancer Society in a two-day audit by independent experts. The certiﬁcation guarantees high-quality oncological care based on an interdisciplinary approach and the latest scientiﬁc ﬁndings. INTERNATIONAL RECOGNITION FOR QUALITY Seven of our hospitals ranked in the top 30 for Switzerland according to Newsweek’s list of the World’s Best Hospitals for 2022. That equates to nearly a quarter of the top hospitals in the country, even though we represent only around 5% of Swiss hospital beds. The same list ranked three of our Middle East hospitals in the top 28 in the UAE. The Newsweek ranking is a reﬂection of the 2021 calendar year and draws on surveys of medical experts, patient experience feedback and KPIs such as hygiene measures. In both countries, we had the number-one-ranked private hospital. CLINICAL SERVICES OVERVIEW CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT60 SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 SUPPORTS ESG GOAL Be the partner of choice that stakeholders trust OUR AMBITIONS FOR 2022 • Reduce the number of never events and adverse obstetric outcomes • Standardise obstetric and surgical care • Implement an enhanced intensive care and emergency centre strategy in Southern Africa IN 2021 • Group clinical management system: - implemented safety event reporting module at all divisions - implemented patient feedback module pilot • Progress with establishment of KPIs SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 SUPPORTS ESG GOAL Be the partner of choice that stakeholders trust OUR AMBITIONS FOR 2022 • Quantify and reduce variation in clinical care outcomes • Quantify and reduce cost of care complications • Expand fast-track orthopaedics in Switzerland • Pilot home care in Southern Africa IN 2021 • Expanded alternative care settings and treatment modalities, e.g. telemedicine and home care • Expanded disciplines covered by indication boards to include oncology, complex visceral and cardiac surgery, and bariatric surgery 1 Become an integrated healthcare provider across the continuum of care 4 Evolve as a data-driven organisation 5 Minimise our environmental impact 2 Improve our value proposition signiﬁcantly 3 Transform our services and client engagement through innovation and digitalisation 6 Grow in existing markets and expand into new markets LINK TO STRATEGIC GOALS VALUE COST CLINICAL OUTCOMES CLIENT EXPERIENCE SUPPORTS STRATEGIC GOALS 1 2 3 4 5 6 SUPPORTS ESG GOAL Be the partner of choice that stakeholders trust OUR AMBITIONS FOR 2022 • Launch training initiative on key principles of great client experiences • Expand patient-reported outcome measures • Establish patient advisory groups • Measure client experience in integrated care solutions and virtual care IN 2021 • Expanded Press Ganey® survey to all care settings • Implemented NPS® as an additional client loyalty measure See the client experience case study in the Strategy overview on page 18 • Embedded standardised complaint taxonomy THE VALUE EQUATION CLIENT EXPERIENCE Partnering with clients to create true client centricity Aiming for zero preventable harm to clients Reducing the cost of us (clinical) CLINICAL OUTCOMES COST STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 61 CLINICAL SERVICES OVERVIEW CONTINUED FACILITIES 17 hospitals 7 secondary care community hospitals 7 tertiary care city hospitals 4 SWITZERLAND Including: day case clinics HEALTHCARE SERVICES DIAGNOSTICS ROUTINE ELECTIVE PROCEDURES SPECIALISED TREATMENTS EMERGENCY CARE ADVANCED TECHNOLOGY PRECISION MEDICINE CLIENT APP RESEARCH AND TRAINING COVID-19 VACCINATION CENTRES COVID-19 ONLINE REPETITIVE TESTING Inpatient 80% Day cases 4% Outpatient 16% Care settings WORLD-CLASS CARE • 6 certiﬁed breast cancer centres • CCC at Klinik Hirslanden • Prostate cancer centre at Klinik Hirslanden • Tumour centre at Klinik St. Anna • Certiﬁed stroke centre at Klinik Hirslanden • 4 cardiac centres • CAR-T therapy at Klinik Hirslanden • 9 hospitals oer robotic surgery • CyberKnife at Klinik Hirslanden QUALITY ASSURANCE • ISO 9001:2015 certiﬁcation for all participating facilities • ISO 13485 certiﬁcation for reprocessing of medical devices – 5 facilities • German Cancer Society certiﬁcation – 2 cancer centres • Joint Accreditation Committee ISCT-Europe and EBMT (‘JACIE’) accreditation – Klinik Hirslanden • Swiss Cancer League certiﬁcation – 6 breast cancer centres • Swiss Cancer League and Swiss Society for Senology certiﬁcation – Bern Biel Cancer Centre • Swiss Federation of Clinical Neuro- Societies certiﬁcation (2020–2023) – Klinik Hirslanden Stroke Centre Cardiology 12% Laboratory 1% General medicine 2% General surgery 29% Obstetrics and gynaecology 7% Orthopaedics 19% Paediatrics 1% Internal medicine 16% Oncology 1% SPECIALTY SPLIT Radiology 12%  34%34% EMERGENCY 2 NON-SURGICAL ELECTIVE 32% Notes 1 Based on revenue. 2 Reﬂecting inpatient and day case admissions only. In Switzerland, major trauma, neonatal intensive care and advanced critical care handled by cantonal and university teaching facilities. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT62 Canton of Aargau 1 Hirslanden Klinik Aarau 1 Canton of Bern 4 Klinik Beau-Site 5 Klinik Linde 1 6 Klinik Permanence 7 Salem-Spital 1 Canton of Geneva 8 Clinique des Grangettes 1 9 Clinique La Colline Canton of Basel-Land 3 Klinik Birshof Hospitals Canton of Appenzell Ausserrhoden 2 Klinik Am Rosenberg Canton of Vaud 13 Clinique Bois-Cerf 14 Clinique Cecil 1 Canton of Zurich 16 Klinik Hirslanden 1 17 Klinik Im Park 1 Canton of Lucerne 10 Klinik St. Anna 1 11 St. Anna in Meggen Canton of St. Gallen 12 Klinik Stephanshorn 1 Canton of Zug 15 AndreasKlinik Cham Zug 1 Day case clinics Canton of Lucerne 1 St. Anna im Bahnhof Canton of Zurich 2 Operationszentrum Bellaria 3 OPERA Zumikon Canton of St. Gallen 4 OPERA St. Gallen AUSTRIA FRANCE GERMANY 1 4 6 7 5 15 9 8 2 14 13 11 3 12 17 2 10 3 Geneva Bern Zurich SWITZERLAND 1 16 ITALY 4 Lucerne SWITZERLAND Note 1 Hospital with obstetrics department. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 63 CLINICAL SERVICES OVERVIEW CONTINUED FACILITIES 1 SOUTHERN AFRICA HEALTHCARE SERVICES ROUTINE ELECTIVE PROCEDURES SPECIALISED TREATMENTS EMERGENCY CARE TRANSPLANT MEDICINE ADVANCED TECHNOLOGY CLIENT APP RESEARCH AND TRAINING 50 14 42 5 subacute hospitals hospitals 2 mental health facilities day case clinics emergency transport bases and 19 industrial site bases in South Africa QUALITY ASSURANCE 37 hospitals participate in COHSASA 5 accreditation programme 6 WORLD-CLASS CARE • Solid Organ Transplant Centre at Wits Donald Gordon Medical Centre in partnership with Wits University • Haematology and Bone Marrow Transplant Centre at our Constantiaberg hospital • 45 emergency centres • Arthroplasty network • 9 cardiac centres • 2 electrophysiology centres • Robotic surgery at our Durbanville hospital • 36 neonatal ICUs for high-risk infants, 34 of which form part of VON 4 Notes  Includes Intercare facilities.  Based on revenue.  Reﬂecting inpatient and day case admissions only.  The two ICUs not on VON have only one bed each.  Council for Health Service Accreditation of Southern Africa (‘COHSASA’).  The accreditation programme was paused during COVID-19 with COHSASA granting an extended grace period for reaccreditation. Reaccreditation has now restarted. Accreditation is limited to the largest hospitals caring for the more complex cases. These hospitals undergo regular reaccreditation surveys on a rotational basis, the ﬁndings of which are shared with the hospitals and the Southern Africa Corporate Oce. Learning points emerging from ﬁndings inform focus areas for improvement initiatives, which also beneﬁt smaller non-participating hospitals. In addition, the smaller facilities adhere to all the required regulatory requirements and industry standards. Inpatient 90% Day cases 7% Outpatient 3% Care settings 25% EMERGENCY 3 NON-SURGICAL ELECTIVE 32%  Cardiology 7% Nursing and allied health professionals 1% General medicine 7% General surgery 20% Obstetrics and gynaecology 9% Orthopaedics 15% Paediatrics 8% Internal medicine 32% Oncology 1% SPECIALTY SPLIT 43% 64 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT Cape Town 4 1 34 36 40 43 42 44 45 48 37 7 6 49 11 47 35 12 1 2 26 22 31 28 NAMIBIA SOUTH AFRICA 29 17 23 24 20 8 16 10 25 9 Windhoek Bloemfontein Cape Town Pretoria Johannesburg Johannesburg 41 18 27 Pretoria 50 1 2 2 4 6 7 8 9 10 11 12 13 3 5 14 15 32 33 38 3 5 14 3 4 5 1 2 46 39 19 21 13 30 Hospitals Free State 1 Mediclinic Bloemfontein 2 Mediclinic Hoogland 3 Mediclinic Welkom Gauteng 4 Intercare Medfem Hospital 5 Mediclinic Emfuleni 6 Mediclinic Heart Hospital 7 Mediclinic Kloof 8 Mediclinic Legae 9 Mediclinic Medforum 10 Mediclinic Midstream 11 Mediclinic Morningside 12 Mediclinic Muelmed 13 Mediclinic Sandton 14 Mediclinic Vereeniging 15 Wits Donald Gordon MedicalCentre 1 KwaZulu-Natal 16 Mediclinic Newcastle 17 Mediclinic Pietermaritzburg 18 Mediclinic Victoria Limpopo 19 Mediclinic Lephalale 20 Mediclinic Limpopo 21 Mediclinic Thabazimbi 22 Mediclinic Tzaneen Mpumalanga 23 Mediclinic Ermelo 24 Mediclinic Highveld 25 Mediclinic Nelspruit Subacute hospitals 1 Intercare Hazeldean Subacute and Rehabilitation Hospital 2 Intercare Irene Subacute and Rehabilitation Hospital 3 Intercare Sandton Subacute and Rehabilitation Hospital 4 Intercare Tyger Valley Subacute Hospital 5 Welkom Medical Centre Subacute Hospital Mental health facilities 1 Denmar Specialist PsychiatricHospital 2 Mediclinic Neuro Clinic Day case clinics 1 Intercare CenturyCity Day Hospital 2 Intercare Hazeldean Day Hospital 3 Intercare Irene Day Hospital 4 Intercare Sandton Day Hospital 5 Mediclinic Bloemfontein DayClinic 6 Mediclinic Cape Gate DayClinic 7 Mediclinic Durbanville DayClinic 8 Mediclinic Limpopo Day Clinic 9 Mediclinic Nelspruit Day Clinic 10 Mediclinic Newcastle DayClinic 11 Mediclinic Stellenbosch DayClinic 12 Mediclinic Vergelegen DayClinic 13 Mediclinic Winelands DayClinic 14 Welkom Medical Centre Day Clinic Namibia 26 Mediclinic Otjiwarongo 27 Mediclinic Swakopmund 28 Mediclinic Windhoek Northern Cape 29 Mediclinic Gariep 30 Mediclinic Kimberley 31 Mediclinic Upington North West 32 Mediclinic Brits 33 Mediclinic Potchefstroom Western Cape 34 Mediclinic Cape Gate 35 Mediclinic Cape Town 36 Mediclinic Constantiaberg 37 Mediclinic Durbanville 38 Mediclinic Geneva 39 Mediclinic George 40 Mediclinic Hermanus 41 Mediclinic Klein Karoo 42 Mediclinic Louis Leipoldt 43 Mediclinic Milnerton 44 Mediclinic Paarl 45 Mediclinic Panorama 46 Mediclinic Plettenberg Bay 47 Mediclinic Stellenbosch 48 Mediclinic Vergelegen 49 Mediclinic Winelands Orthopaedic Hospital 50 Mediclinic Worcester Note 1 Associated company being equity accounted (Mediclinic Southern Africa holds 49.9%). SOUTHERN AFRICA STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 65 CLINICAL SERVICES OVERVIEW CONTINUED FACILITIES THE MIDDLE EAST HEALTHCARE SERVICES OUTPATIENT CARE REMOTE CARE TELEMEDICINE CLIENT APP DIAGNOSTICS PRECISION MEDICINE ROUTINE ELECTIVE PROCEDURES SPECIALISED TREATMENTS EMERGENCY CARE ADVANCED TECHNOLOGY RESEARCH AND TRAINING 7 2 22 hospitals day case clinics outpatient clinics QUALITY ASSURANCE • CAP 4 accreditation – City Hospital laboratory • EASO 5 ’s Collaborating Centres for Obesity Management accreditation – specialised unit at 3 hospitals • ISO 15189:2009 certiﬁcation for 9 laboratories • JCI accreditation for all facilities, except Springs, dialysis centres and fertility centres • JCI Clinical Care Programme certiﬁcation – diabetes clinical programme at Welcare Hospital, acute coronary syndrome programme at City Hospital and Airport Road Hospital, and breast cancer programme at City Hospital • Surgical Review Corporation CoE accreditation – specialised bariatric unit at Airport Road Hospital WORLD-CLASS CARE • CCC in the North Wing adjacent to City Hospital • 7 cardiology units 3 • 2 cardiac centres • Robotic surgery at City Hospital • Stroke centre at City Hospital • 7 neonatal ICUs for high-risk infants, all of which form part of VON Inpatient 25% Day cases 12% Outpatient 63% Care settings 20% EMERGENCY 2 NON-SURGICAL ELECTIVE 30%50% Cardiology 5% Laboratory 13% General medicine 12% General surgery 7% Obstetrics and gynaecology 7% Orthopaedics 5% Paediatrics 7% Internal medicine 28% Oncology 6% SPECIALTY SPLIT  Nursing and allied health professions 3% Radiology 7% Notes  Based on revenue.  Reﬂecting inpatient and day case admissions only. 3 Al Jowhara Hospital does not have a catheterisation laboratory and does not oer interventional cardiology.  College of American Pathologists (‘CAP’).  European Association for the Study of Obesity (‘EASO’). MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT66 1 Mediclinic Airport Road Hospital 2 Mediclinic Al Ain Hospital 3 Mediclinic Al Jowhara Hospital 4 Mediclinic Al Noor Hospital 5 Mediclinic City Hospital 6 Mediclinic Parkview Hospital 7 Mediclinic Welcare Hospital 1 Bourn Hall Al Ain 2 Bourn Hall Dubai 3 ENEC 4 Mediclinic Al Bawadi 5 Mediclinic Al Madar 6 Mediclinic Al Mamora 7 Mediclinic Al Qusais 8 Mediclinic Al Sufouh 9 Mediclinic Al Yahar 10 Mediclinic Arabian Ranches 11 Mediclinic Baniyas 12 Mediclinic Ibn Battuta 13 Mediclinic Khalifa City 14 Mediclinic Madinat Zayed 15 Mediclinic Meadows 16 Mediclinic Me‘aisem 17 Mediclinic Mirdif 18 Mediclinic Mussafah 19 Mediclinic Springs 20 Mediclinic Zakher Hospitals Outpatient clinics Day case clinics 1 Mediclinic Deira 2 Mediclinic Dubai Mall SAUDI ARABIA ARABIAN GULF 1 2 3 4 5 6 4 9 11 13 14 18 20 Dubai Al Ain Abu Dhabi UNITED ARAB EMIRATES 3 Dubai 5 7 6 7 8 12 15 16 17 19 1 2 10 Public-private partnerships 1 Al Barsha Dialysis Centre 2 Al Tawar Dialysis Centre 1 THE MIDDLE EAST 1 2 2 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 67 The wellbeing of clients and building long-term relationships with them form the cornerstone of the business and the Group’s ability to pursue its purpose. BETTER WAYS TO CONNECT PATIENT EXPERIENCE What do we survey? Admissions process Condition of room Nurses Physicians Tests and treatments Visitor experience Meals Personal issues (i.e. privacy, safety, hygiene, respect) Discharge process Overall experience Client experience refers to a wide spectrum of interactions our clients have with us. Patient experience is a subsection of client experience and relates to the experience of a patient in most settings across the continuum of care. Notes  New metric introduced in 2021. As such, no prior-year comparable data available. 2 The 2020 results are for a nine-month period; surveying started on 1 April 2020. NPS® In 2021, we introduced NPS®, a client experience metric that measures loyalty, and will expand this to all client interactions across the continuum of care. See the client experience case study in the Strategy overview on page 18 2021 IN GROUP NUMBERS 85 56 79 35 91 2020: 84 2020: 80 2020: 91 Overall mean score (out of 100) PRESS GANEY® INPATIENT SURVEY PRESS GANEY® EMERGENCY CENTRE SURVEY 2 PRESS GANEY® AMBULATORY SURGERY SURVEY NPS® INPATIENT NPS® EMERGENCY CENTRE Press Ganey® We benchmark and publicly report on patient experience at a divisional level through Press Ganey®, an internationally recognised leading provider of patient experience measurement for healthcare organisations. Patients are surveyed after discharge, and this valuable feedback helps us better understand patients’ needs and adapt care services accordingly. CLINICAL SERVICES OVERVIEW CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT68 CLINICAL PERFORMANCE BETTER WAYS TO CARE To ensure the best possible outcomes for patients, we use a simple, yet powerful clinical performance framework built on a sound clinical governance foundation. See the Clinical Performance Committee Report on page 132 for more on clinical governance CLINICAL INDICATORS We measure more than 150 clinical indicators monthly in line with a standardised set of deﬁnitions and classiﬁcations. Many of these outcome indicators are self-reported while others are derived from administrative data. These indicators are monitored for trends and used to identify opportunities for improvement. The hospitals closely monitor their results and compare themselves with other hospitals in the same division. A subset of these indicators is compared against international benchmarks. STATISTICAL SIGNIFICANCE Statistical signiﬁcance is determined to identify areas of improvement that create knowledge leveraging and sharing opportunities to the beneﬁt of all divisions. By also identifying areas of concern, it allows us to determine key focus areas for future initiatives. Where variation in the current year’s data is found to be statistically signiﬁcant compared with prior reporting periods, the applicable data in the graph is marked with an orange dot and an explanation is provided, if available. In these instances it is unlikely that the changes in the numbers are due to chance. See the 2022 Clinical Services Report at annualreport.mediclinic.com for more on statistical signiﬁcance and how it is calculated PATIENT SAFETY Achieving patient safety requires a collective commitment to building a patient safety culture. This means each employee focuses on reporting and learning from patient safety events. An open culture where teams are comfortable discussing patient safety events and concerns is fostered through the inclusive completion of systems analysis of serious reportable events in hospitals. Fundamental to this is the ‘just culture’ (Frankl framework), wherein employees involved in adverse events are treated fairly. The result is an informed culture: teams learn from patient safety events to mitigate future incidents. Moreover, they also learn from one another when things go right by sharing best practices. Note 1 The never event rate is reported to the third decimal to negate the obscuring eect of rounding. FIGURE 1: NEVER EVENTS 1 2020 2021 2019 The Middle East 0.012 (20) 0.011 (20) 0.014 (27) 2020 2021 2019 Southern Africa 0.017 (3) 0.035 (6) 2020 2021 2019 Switzerland 0.006 (3) 0.002 (1) 0.002 (1) 0.007 (1) NEVER EVENTS We adhere to the World Health Organization surgical safety checklist to ensure standard practices are followed, increase teamwork and communication during surgery, decrease the risk of errors and prevent adverse events. The implementation of the surgical safety checklist remains a key focus area. We report on only a subset of surgical and procedural never events at present, focusing on the correct identiﬁcation of patients, procedures and sites, and the prevention of retained foreign objects. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 69 ADVERSE EVENTS An important aspect of improving quality and safety in patient care is preventing adverse events that could harm patients, including hospital-associated pressure ulcers, falls and medication errors. 2.03 1.92 2.26 Falls 1.51 1.17 Medication errors 0.78 0.52 Hospital-associated pressure ulcers FIGURE 2: ADVERSE EVENTS Rate per 1 000 patient days 0.14 SWITZERLAND Statistically signiﬁcant 1.26 The 73.86% decrease in the hospital- associated pressure ulcer rate from 0.52 in 2020 to 0.14 in 2021 is statistically signiﬁcant. The change in patient demographics due to COVID-19 and improvement projects contributed to the reduction in the rate. The division commenced reporting on medication errors in 2018. The 16.56% decrease in the medication error rate from 1.51 in 2020 to 1.26 in 2021 is statistically signiﬁcant and was inﬂuenced by improved reporting through the electronic safety reporting system and a focus on improving medication safety. SOUTHERN AFRICA FIGURE 3: ADVERSE EVENTS Rate per 1 000 patient days 1.13 1.08 1.12 Falls 0.71 0.98 0.74 Medication errors 0.23 0.30 0.41 Hospital-associated pressure ulcers Additional mechanisms involving pharmacists for reporting near-miss medication events related to prescription and dispensing have been implemented. This reporting is supplementary to the safety event management system, quantitative, and dependent on time availability of pharmacists. The data collection to date has been used to guide hospitals to identify speciﬁc areas for quality improvement and prevention of medication errors, and to provide a measurement tool to track progress. THE MIDDLE EAST FIGURE 4: ADVERSE EVENTS Rate per 1 000 patient days Falls 9.21 2.94 8.87 Medication errors Hospital-associated pressure ulcers 0.29 0.61 Statistically signiﬁcant 0.23 0.47 0.52 0.42 The increase in the hospital-associated pressure ulcer rate by 110.34% from 0.29 in 2020 to 0.61 in 2021 is statistically signiﬁcant and was mainly due to COVID-19. All patients are risk-assessed for pressure injuries, and appropriate preventive measures are implemented. CLINICAL SERVICES OVERVIEW CONTINUED 2020 2020 2020 2021 2021 2021 2019 2019 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 2020 2021 2019 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT70 CLINICAL ETHICS SUMMARY ISSUE MEDICLINIC’S RESPONSE Advanced care planning, end-of-life and terminal care Clinical governance structures to report, audit and address in line with local regulations and legislation Assisted reproductive technology and IVF • Centres governed by local regulatory and legal framework • Compliance monitored by licensing authorities Competence and scope of practice Clinical governance structures to monitor and address concerns Doctor cover, availability and response • On-call rosters at emergency centres • Reporting system for non-compliant independent doctors, human resources process for employed doctors Doctor qualiﬁcations and performance, and illegal practice • Formal process veriﬁes registration, qualiﬁcations and credentials • Feedback from peers solicited • Established prevention policies and investigations of, among others, deteriorating clinical quality indicators and complaints Drug trials and medical research • Aligned with the Declaration of Helsinki and local legislation • Approval by independent, accredited ethics committee and recorded on a registry • No unocial drug testing allowed • Clinical research approval committee and policies Employee and patient protection • Occupational health specialists at each hospital • Healthcare employees screened for pulmonary tuberculosis, and screened and vaccinated against Hepatitis B if necessary • HIV/Aids diagnosis and support oered to aected employees in accordance with local regulations • In case of Methicillin-resistant Staphylococcus aureus, healthcare employees screened and decolonised if necessary • Annual ﬂu vaccine, other vaccines when indicated • In Switzerland, radiation exposure monitored centrally ISSUE MEDICLINIC’S RESPONSE Ethical behaviour and billing, and falsiﬁcation of diagnosis and documentation • Regular documentation and clinical coding audits at hospital level • Human resources policies for misconduct and criminal behaviour • Ethics lines for reporting Euthanasia Neither practised nor condoned Forced female circumcision Informed consent required for any medical or surgical intervention Genetics • Testing and counselling according to local regulations and legislation • Data privacy principles and rules apply to results Inappropriate care Managed by indication boards in Switzerland, cost per event in Southern Africa and the Middle East Organ trade Organ donation and receipt process carefully documented and in line with applicable legislation Pharmacy Policies, procedures and audits to comply with legislation, ethical and operational requirements Remuneration, kickbacks Perverse incentives prohibited Reporting and disclosure of safety events • Formal safety event reporting system at hospital level • Recorded events discussed at clinical hospital committees Technology (including robotics) • Equipment must be CE-certiﬁed and approved by the local regulator and/or certiﬁed by the Food and Drug Administration of the United States of America • Used for approved indication as dictated by guidelines • Clinical safety proven before new technology implemented Termination of pregnancy • Strict control measures to ensure legal compliance • Freedom of choice for employees regarding participation STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 71 GROUP CHIEF FINANCIAL OFFICER’S REPORT DRIVING VALUE THROUGH STRATEGY EXECUTION Page 80 in the ‘Financial review’ section sets out the Group’s use of adjusted non-IFRS ﬁnancial measures. Other non-IFRS measures, which include constant currency, cash conversion, ROIC, net incurred debt and leverage ratio, are further discussed, with reconciliations from the most comparable IFRS measure provided, on pages 81–88. GROUP FINANCIAL SUMMARY Stellenbosch, South Africa Q&A WHAT ARE THE GROUP’S KEY PRIORITIES FOR CAPITAL ALLOCATION AS YOU LOOK AHEAD? For us, capital allocation is about generating operating cash ﬂows and then allocating these in a way that drives value and improved returns. We not only focus on maintaining and growing current facilities, but also pursue opportunities in businesses across the continuum of care, in innovation and digitalisation, and through bolt-on investments. Jurgens Myburgh Group Chief Financial Ocer FY22 £’m FY21 £’m Variance FY22 vs FY21 1 FY20 £’m Variance FY22 vs FY20 1 Reported results Revenue 3 233 2 995 8% 3 083 5% Operating proﬁt 280 209 34% (184) 253% Earnings 3 151 68 122% (320) 147% EPS (pence) 20.5 9.2 122% (43.4) 147% Total dividend per share (pence) 3.00 – 100% 3.20 (6)% Adjusted results 4 Adjusted EBITDA 522 426 22% 541 (3)% Adjusted operating proﬁt 311 221 41% 327 (5)% Adjusted earnings 167 101 65% 177 (6)% Adjusted EPS (pence) 22.6 13.7 65% 24.0 (6)% Net incurred debt 1 269 1 483 (14)% 1 622 (22)% Cash conversion 127% 77% 109% Notes  The percentage variances are calculated in unrounded sterling values and not in millions. 2 2020 Full-year Results Announcement was published on 2 June 2020. 3 Reported earnings refers to proﬁt for the year attributable to equity holders. 4 The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and to provide consistent and comparable reporting. See the policy and ‘Reconciliations’ section on pages 80–86 5 Net incurred debt reflects bank borrowings and excludes IFRS 16 lease liabilities.  See calculation on page 85 Scan the QR code or visit annualreport.mediclinic.com to view the video interview 72 ADJUSTED RESULTS The Group delivered a strong ﬁnancial performance compared with FY21, driven by increased client activity. Compared with pre-pandemic levels, the volumes in Switzerland and the Middle East increased, while Southern Africa gradually recovered after a more severe impact from the pandemic. The improvement in FY22 was despite the disruption of further COVID-19 waves – with the Omicron wave proving particularly challenging from a stang and patient scheduling perspective due to its high transmissibility and regulated self-isolation. Group revenue was up 8% at £3 233m (FY21: £2 995m) and up 10% in constant currency terms. Compared with pre-pandemic FY20, Group revenue was up 5% (FY20: £3 083m) and up 9% in constant currency terms. Revenue increased in all three divisions compared with both the prior year and the pre-pandemic FY20 year. Adjusted EBITDA was up 22% at £522m (FY21: £426m) and up 24% in constant currency terms. Across the Group, incremental COVID-19-related expenses totalled around £27m (FY21: £32m), reﬂecting the ongoing treatment of COVID-19 inpatients during various pandemic waves. The Group’s adjusted EBITDA margin increased materially to 16.1% (FY21: 14.2%), driven by the revenue performance. Compared with the pre-pandemic FY20 period, adjusted EBITDA was down 3% (up 1% in constant currency terms). The adjusted EBITDA margin is approaching pre-pandemic levels (FY20: 17.5%) while still reﬂecting increases in employee costs and in consumable and supply costs driven by COVID-19-related expenses and input costs associated with higher acuity revenue, the impact of which is expected to reduce over time. Adjusted depreciation and amortisation were up 1% to £209m (FY21: £207m) and down 3% compared with the pre-pandemic period (FY20: £217m), reﬂecting prudent delays in capital expenditure and translation dierences more than osetting the IFRS 16 impact of the commissioning of Airport Road Hospital in Abu Dhabi. Adjusted operating proﬁt was up 41% at £311m (FY21: £221m; FY20: £327m), resulting in an improved ROIC of 4.0% compared with 3.0% in FY21. In constant currency terms, adjusted operating proﬁt was up 41% and ﬂat compared with FY21 and FY20, respectively. Adjusted net ﬁnance cost was down 8% at £67m (FY21: £72m; FY20: £78m), mainly due to the eect of lower net borrowings more than osetting the IFRS 16 impact of the Airport Road Hospital commissioning. GROUP RESULTS • Group revenue increased by 8% compared with FY21 (up 10% in constant currency), driven by growth in client activity; revenue up 5% on pre-pandemic levels (up 9% in constant currency) • Group adjusted EBITDA increased by 22% compared with FY21 (up 24% in constant currency), driven by revenue growth, and adjusted EBITDA margin improved to 16.1% (FY21: 14.2%); adjusted EBITDA up 1% in constant currency compared with pre-pandemic FY20 • Adjusted operating proﬁt of £311m; up 41% on FY21 and down 5% on pre-pandemic FY20; in constant currency terms up 41% and ﬂat compared with FY21 and FY20, respectively • Operating proﬁt up 34% to £280m (FY21: £209m) • Adjusted earnings and adjusted EPS increased by 65% compared with prior year; local currency adjusted earnings ahead of pre-pandemic levels in all three divisions • Reported earnings up 122% to £151m (FY21: £68m) and reported EPS up 122% to 20.5 pence (FY21: 9.2 pence) • Operating performance and cash conversion of 127% (FY21: 77%) delivered increase in cash and cash equivalents to £534m (FY21: £294m) • Recovery in proﬁtability and reduction in net incurred debt reduced leverage ratio (including lease liabilities) to 3.9x (FY21: 5.1x) • Proposed ﬁnal dividend of 3.00 pence per share in line with dividend policy payout ratio STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 73 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED The adjusted tax charge was £45m (FY21: £27m; FY20: £56m) and the adjusted eective tax rate for the period was 19.5% (FY21: 19.3%; FY20: 22.3%). Adjusted non-controlling interests were up 72% to £19m (FY21: £11m; FY20: £18m), reﬂecting higher contributions from Southern Africa hospitals with outside shareholdings. Adjusted net loss from equity-accounted investments increased from £10m in FY21 to £13m in FY22, reﬂecting the net loss reported by Spire for the 12 months ended 31 December 2021. Both adjusted earnings and adjusted EPS were up 65% at £167m (FY21: £101m), and 22.6 pence (FY21: 13.7 pence; FY20: 24.0 pence), respectively. All three divisions’ earnings in local currency were ahead of pre-pandemic levels with only translation dierences resulting in Group adjusted earnings being down 6% compared with pre-pandemic levels (FY20: £177m). The Group delivered cash conversion of 127% (FY21: 77%), with all three divisions above the Group target of 90–100%, through catch-up of the slower recovery in the prior year. Ongoing investment across the Group to enhance the existing facilities and deliver future growth resulted in capital expenditure of £178m. As planned, this was up on the prior year (FY21: £126m), a period when capital expenditure was reduced in light of the initial uncertainty posed by the pandemic. FY22 spend was lower than planned due to the timing of projects with FY23 expected to reﬂect a catch-up, forecast to total around £251m in constant currency terms. Given the recovery in proﬁtability and cash conversion, the Group’s leverage ratio (including lease liabilities) signiﬁcantly reduced during the year to 3.9x (FY21: 5.1x). While the Swiss and Middle East divisions continued to pay down debt by around £91m, translation dierences at year end resulted in reported incurred bank debt remaining broadly ﬂat at £1 803m (FY21: £1 777m). Strong cash generation supported a reduction in net incurred debt by £214m to £1 269m (FY21: £1 483m). At the end of FY20, the Board took the prudent and appropriate decision to suspend the dividend, as part of the Group’s response to maintaining its liquidity position through the pandemic and maximising its support in combatting COVID-19. The Board believes the Group is in a stronger ﬁnancial position and the outlook, though subject to macroeconomic factors, is more certain than at any time in the past two years. Therefore, the Board is proposing to reinstate the dividend in line with the dividend policy targeting a payout ratio of 25–35% of adjusted earnings, and has proposed a ﬁnal dividend per share of 3.00 pence (FY21: nil), representing 25% of 2H22 adjusted EPS. In arriving at FY22 adjusted operating proﬁt, reported operating proﬁt was adjusted for the following items: • past service cost of £9m relating to Swiss pension beneﬁt plan changes and £2m relating to Middle East end-of-service beneﬁt obligation; • insurance proceeds of £7m received for the damage of buildings and equipment at Klinik Hirslanden, Zurich; • accelerated depreciation of £19m relating to the dismantling of two hospital wings as part of an expansion project at Klinik St. Anna, Lucerne; • impairment charges of £7m relating to damaged buildings and equipment at Klinik Hirslanden; and • fair value adjustment of £1m on the deemed disposal of the equity- accounted investment, Bourn Hall. Prior period FY21 operating proﬁt was adjusted for the following items: • accelerated depreciation of £10m relating to the dismantling of two hospital wings as part of an expansion project at Klinik St. Anna; • impairment charges of £4m relating to Southern Africa; and • insurance proceeds of £2m received for the loss of equipment in Southern Africa. Operating proﬁt in FY20 was adjusted for the following items: • recognition of an impairment charge of £481m to Middle East goodwill; • recognition of an impairment charge of £33m to ﬁxed assets in Switzerland; • impairment reversal of £4m relating to properties in Switzerland; • impairment charges of £2m relating to Southern Africa; and • fair value adjustments on derivative contracts of £1m. Reported revenue was up 8% to £3 233m (FY21: £2 995m), driven by the recovery in client activity and reduced restrictions on elective and non-urgent care. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT74 FY22 reported earnings were further adjusted for the following items: • Mediclinic’s share of the equity-accounted gain on sale and leaseback from Spire of £7m; • Mediclinic’s share of the equity-accounted tax credit in respect of Spire’s sale and leaseback of £5m; • increase in the redemption liability related to Clinique des Grangettes, Geneva, due to remeasurement of £1m; and • related tax impact on adjusting items of £4m. FY21 reported earnings were further adjusted for the following items: • Mediclinic’s share of the equity-accounted impairment loss from Spire of £60m; • reversal of previously recorded impairment losses against the carrying value of the equity investment in Spire of £60m; • increase in the redemption liability related to Clinique des Grangettes due to remeasurement of £23m; and • related tax impact on adjusting items of £2m. FY20 reported earnings were further adjusted for the following items: • increase in the redemption liability related to Clinique des Grangettes due to remeasurement of £5m; • recognition of an impairment charge on the equity investment in Spire of £10m; • the reduction of Swiss property deferred tax liabilities of £29m resulting from corporate tax reforms in Switzerland; and • related tax impact on adjusting items of £3m. REPORTED RESULTS Reported revenue was up 8% to £3 233m (FY21: £2 995m), driven by the recovery in client activity and reduced restrictions on elective and non-urgent care. Depreciation and amortisation increased by 5% to £228m (FY21: £217m) and includes accelerated depreciation of £19m (FY21: £10m) relating to the expansion project at Klinik St. Anna. Operating proﬁt was up by 34% to £280m (FY21: £209m). Net ﬁnance cost decreased by 29% to £68m (FY21: £95m) with the prior year reﬂecting the remeasurement of the redemption liability related to Clinique des Grangettes of £23m. The Group’s eective tax rate for the period was 19.5% (FY21: 24.4%). The higher eective tax rate in the prior year was due to the remeasurement of the redemption liability, which is not deductible for tax purposes and had a tax eect of £4m. Earnings and EPS were both up 122% at £151m (FY21: £68m) and at 20.5 pence (FY21: 9.2 pence), respectively. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 75 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED DIVISIONAL RESULTS FY22 FY21 FY20 Variance FY22 vs FY21 Variance FY22 vs FY20 FY22 FY21 FY20 Variance FY22 vs FY21 Variance FY22 vs FY20 Revenue £3 233 £2 995 £3 083 8% 5% Switzerland £1 503 £1 478 £1 438 2% 5% 1 885 1 784 1 804 6% 4% Southern Africa £909 £734 £907 24% 0% 18 416 15 573 17 031 18% 8% Middle East £820 £781 £737 5% 11% 4 111 3 760 3 445 9% 19% Corporate £1 £2 £1 (50)% – n/a n/a n/a Adjusted EBITDA £522 £426 £541 22% (3)% Switzerland £236 £225 £245 5% (4)% 297 272 306 9% (3)% Southern Africa £170 £106 £188 60% (10)% 3 430 2 209 3 536 55% (3)% Middle East £123 £102 £110 21% 12% 614 492 521 25% 18% Corporate £(7) £(7) £(2) – 250% n/a n/a n/a Adjusted EBITDA margin 2 Group 16.1% 14.2% 17.5% Switzerland 3 15.6% 15.1% 17.0% Southern Africa 18.6% 14.2% 20.8% Middle East 14.9% 13.1% 15.1% Adjusted operating proﬁt £311 £221 £327 41% (5)% Switzerland £121 £107 £119 13% 2% 151 128 149 18% 1% Southern Africa £131 £71 £151 85% (13)% 2 656 1 477 2 838 80% (6)% Middle East £68 £51 £57 33% 19% 338 248 273 36% 24% Corporate £(9) £(8) – 13% 100% n/a n/a n/a Adjusted operating proﬁt margin 2 Group 9.6% 7.4% 10.6% Switzerland 7.9% 7.1% 8.2% Southern Africa 14.4% 9.5% 16.7% Middle East 8.2% 6.6% 7.9% The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and to provide consistent and comparable reporting. Notes 1 Divisional currency for Switzerland is shown in Swiss franc (CHF), Southern Africa in South African rand (ZAR) and Middle East in UAE dirham (AED). 2 Adjusted EBITDA and adjusted operating proﬁt as a percentage of revenue. 3 The numerator used for calculating the adjusted EBITDA and adjusted operating proﬁt margins of Switzerland includes government grants of £16m (CHF19m) (FY21: £10m [CHF13m]) disclosed as ‘Other income’. See the policy and ‘Reconciliations’ section on pages 80–86 Group currency (millions) Divisional currency (millions) 1 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT76 SWITZERLAND A robust performance in Switzerland was underpinned by the recovery in client activity, exceeding pre-pandemic levels. As Switzerland adapted its response to the pandemic, it enabled greater operational ﬂexibility to healthcare providers to deliver care for non-COVID-19 patients while continuing to provide signiﬁcant support to health authorities and caring for COVID-19 patients. Revenue for the period increased by 6% to CHF1 885m (FY21: CHF1 784m; FY20: CHF1 804m), exceeding pre-pandemic revenue by 4%. This was due to a good recovery in inpatient activity, up 2.1% compared with FY21, and 2.0% compared with the pre-pandemic period. The general insurance mix remained broadly ﬂat at 51.3% (FY21: 51.0%), with supplementary insured volumes up 1.4% and general insured volumes up 2.7% as the division continued to support cantonal health authorities during the pandemic. Inpatient revenue per case increased by 1.1% due to higher acuity. As a result, inpatient revenue increased by 3%. Average length of stay increased by 0.4%, which in combination with the increase in inpatient activity delivered an occupancy rate of 62.6% (FY21: 61.1%). Outpatient and day case revenue also recovered well during the period, up 6%, contributing some 20% (FY21: 20%) to total revenue in the period. The division engaged extensively with Swiss cantonal authorities in planning for and navigating the pandemic, and, as part of this, provided hospital bed and sta capacity. In recognition and reimbursement of the support and capacity provided, several Swiss cantonal authorities introduced appropriate ﬁnancial contributions for hospitals to oset certain costs and disruptions to operations. As a result, total government grants of CHF19m (FY21: CHF13m) were recognised as other income. The increase in revenue supported a 9% increase in adjusted EBITDA to CHF297m (FY21: CHF272m), recovering towards pre-pandemic levels (FY20: CHF306m). The adjusted EBITDA margin increased to 15.6% (FY21: 15.1%; FY20: 17.0%) while the division continued to absorb COVID-19- related expenses of around CHF18m (FY21: CHF10m) and the direct and indirect impact on operational performance due to the pandemic. Adjusted depreciation and amortisation increased by 2% to CHF146m (FY21: CHF143m; FY20: CHF157m). Adjusted operating proﬁt increased by 18% to CHF151m (FY21: CHF128m; FY20: CHF149m). Adjusted net ﬁnance cost was ﬂat at CHF58m (FY21: CHF58m; FY20: CHF58m). Adjusted earnings increased by 44% to CHF67m (FY21: CHF47m), ahead of pre-pandemic levels (FY20: CHF57m). Despite COVID-19, the division signiﬁcantly improved its cash conversion to 126% (FY21: 66%) through improvement of its net working capital, enabling a CHF50m voluntary payment of senior debt. Total capex spent during FY22 was broadly in line with expectations at CHF129m (FY21: CHF81m), comprising maintenance capex of CHF68m (FY21: CHF38m) and expansion capex of CHF61m (FY21: CHF43m). The continued improvements in operating cash ﬂow expected in Switzerland will enable the Group to proportionately increase the division’s annual capital investment while continuing to generate appropriate free cash ﬂow to equity holders (including the annual CHF50m debt repayment). FY23 total capex is forecast at around CHF155m. Expansion capex of around CHF60m includes investment in the projects at Klinik St. Anna and Klinik Aarau to strengthen the competitive position and growth opportunities of these key hospitals. Maintenance capex is forecast at around CHF95m (including around CHF4m for ESG projects that will enhance our long-term sustainability), in line with the medium-term maintenance capex spend, which is expected to average around 4–5% of revenue. Klinik Aarau, Switzerland STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 77 SOUTHERN AFRICA Despite the signiﬁcant demands and disruption caused by the pandemic, the division delivered an exceptional performance compared with the prior year. The Group has continued to treat the majority of its COVID-19 inpatients in its Southern Africa division, with over 40 000 cared for in FY22 (FY21: around 35 000). The division continued to adapt and eectively navigate multiple pandemic waves during the year, treating 18% more non-COVID-19 admissions compared with FY21. The most severe and sustained wave to date impacted the division during 1H22, peaking in July 2021. In 2H22, the onset of the Omicron wave resulted in a rapid spike in COVID-19 admissions in December 2021. However, this remained below peak admissions compared with previous waves, before starting to recede quickly in January 2022. The greater challenge during the Omicron wave, as experienced in the other divisions, was the impact on stang self-isolation and patient scheduling due to the variant’s increased transmissibility. Revenue for the period increased by 18% to ZAR18 416m (FY21: ZAR15 573m; FY20: ZAR17 031m), reﬂecting the recovery in client activity. Revenue was ahead of pre-pandemic levels by 8%. Compared with FY21, paid patient days (‘PPDs’) increased by 14% and remained marginally below pre-pandemic levels, down 3%. COVID-19-related PPDs were around 17% of total PPDs during the period, compared with around 18% in FY21. The lowest six-month level of COVID-19-related PPDs since the pandemic began was experienced in 2H22 at 7% of total PPDs, as non-COVID-19 inpatient activity increased. Occupancy improved with the growth in PPDs to average 64.3% (FY21: 56.3%), approaching pre-pandemic levels (FY20: 67.9%). Encouragingly, February and March 2022 had the strongest occupancy levels experienced since the start of the pandemic at 69%. Average revenue per bed day was up 3.2% compared with FY21 and up 11.7% on pre-pandemic levels, continuing to reﬂect the elevated acuity of treatments. The average length of stay was down 2.5% compared with FY21, reﬂecting the increase in non-COVID-19 PPDs and their shorter average length of stay compared with COVID-19 inpatients. Adjusted EBITDA increased by 55% to ZAR3 430m (FY21: ZAR2 209m), driven by the revenue performance, and recovering towards pre-pandemic levels (FY20: ZAR3 536m). The adjusted EBITDA margin materially increased in FY22 to 18.6% (FY21: 14.2%). The eects of COVID-19-related costs of around ZAR207m in FY22 (FY21: ZAR323m) and the change in case mix continued to impact the margin when compared with the pre-pandemic period (FY20: 20.8%). Depreciation and amortisation were broadly ﬂat at ZAR772m (FY21: ZAR763m; FY20: ZAR698m), mainly due to the prudent delay to investments in the prior period due to the pandemic. Adjusted operating proﬁt increased by 80% to ZAR2 656m (FY21: ZAR1 477m; FY20: ZAR2 838m). Net ﬁnance cost decreased by 17% to ZAR465m (FY21: ZAR561m; FY20: ZAR554m) due to interest income on increased deposits and lower base interest rates. Adjusted earnings increased to ZAR1 359m (FY21: ZAR519m), ahead of pre-pandemic levels (FY20: ZAR1 335m). The division converted 108% (FY21: 111%) of adjusted EBITDA into cash generated from operations. Total capex spent during the period increased to ZAR957m (FY21: ZAR702m), comprising maintenance capex of ZAR654m (FY21: ZAR302m) and expansion capex of ZAR303m (FY21: ZAR400m). Expansion projects during the year included Brits, Hoogland and Midstream hospitals, and Vergelegen and Winelands day case clinics. FY23 total capex is forecast at around ZAR1 360m. Expansion capex is forecast at around ZAR635m, including projects at George, Legae, Vereeniging, Brits and Medforum hospitals and Pietermaritzburg day case clinic. In addition, further investment in ICT infrastructure projects will be made to support future growth initiatives including initial investment in an EHR. FY23 maintenance capex is forecast at around ZAR725m (including around ZAR60m for ESG projects that will enhance our long- term sustainability), broadly in line with the medium-term maintenance capex spend, which is expected to average around 3–4% of revenue. Vergelegen day case clinic, South Africa GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT78 THE MIDDLE EAST In the Middle East, the Group delivered a strong performance driven by inpatient and outpatient volume growth. Volumes reached new highs exceeding the pre-pandemic period, underpinned by investment over recent years to expand and enhance facilities and services in the region. Similar to August 2020, counter-seasonal holiday trends due to global travel restrictions resulted in elevated client volumes compared with the pre-pandemic 1H20 period, a trend which is expected to normalise in FY23. Revenue for the period increased by 9% to AED4 111m (FY21: AED3 760m; FY20: AED3 445m), which includes around AED315m (FY21: AED485m) in COVID-19- related and new revenue streams. Inpatient admissions and day cases were up 17% and outpatient cases up 16%. The volume increase was partly oset by a decrease in the average revenue per inpatient and day case admission, and in outpatient cases by 10% and 2%, respectively, reﬂecting a move towards pre-pandemic acuity levels and revenue mix. Despite ongoing COVID-19-related costs of around AED10m (FY21: AED28m), adjusted EBITDA increased 25% to AED614m (FY21: AED492m; FY20: AED521m) due to the revenue performance. As a result, the adjusted EBITDA margin increased to around pre-pandemic levels at 14.9% (FY21: 13.1%; FY20: 15.1%). Adjusted depreciation and amortisation increased by 10% to AED272m (FY21: AED248m; FY20: AED249m), largely reﬂecting the phased commissioning at Airport Road Hospital during the period, with an additional increase to be reﬂected in FY23. Adjusted operating proﬁt increased by 36% to AED338m (FY21: AED248m; FY20: AED273m). Net ﬁnance cost increased by 2% to AED79m (FY21: AED78m; FY20: AED91m), due to a reduction in gross debt and the base rate, and revised lease agreement rental savings, oset by the IFRS 16 interest associated with the Airport Road Hospital commissioning. Adjusted earnings increased by 51% to AED257m (FY21: AED170m; FY20: AED181m). The division signiﬁcantly improved its cash conversion to 141% (FY21: 73%) through catch-up of under-recovery in the prior year. Total capex spent during the period was lower than expected at AED141m (FY21: AED124m), mostly related to timing dierences for expansion projects with the catch-up expected in FY23. FY22 investment comprised maintenance capex of AED41m (FY21: AED36m) and expansion capex of AED100m (FY21: AED88m), which mostly related to investment at Airport Road Hospital for the upgrade at the existing wing following the opening of the new facility and the EHR roll-out. FY23 total capex is forecast at around AED275m. Expansion capex is forecast at AED190m, reﬂecting the catch-up from the lower than expected FY22 investment. Additional new projects are planned at Parkview and Al Jowhara hospitals, Me’aisem and Reem Mall clinics, and the opening of Mediclinic Enhance. Expansion capex is expected to materially reduce in FY24. FY23 maintenance capex is forecast at around AED85m (including around AED8m for ESG projects that will enhance our long-term sustainability), in line with the medium-term maintenance capex spend, which is expected to average around 2–3% of revenue. Al Tawar Dialysis Centre, the Middle East The division signiﬁcantly improved its cash conversion to 141% (FY21: 73%) through catch-up of under-recovery in the prior year. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 79 Based on the most recent trends and expectations, COVID-19-related cases are expected to recede further, leading to an increase in more normalised client activity and fewer direct COVID-19-related costs. The underlying demand for Mediclinic’s broad range of services, its trusted and leading market positions, expansion across the continuum of care and new digital oerings are together expected to deliver sustained growth in revenue and proﬁtability over the coming years. This – combined with targeted cash conversion, disciplined capital allocation, reduced leverage, improved returns and a clearly deﬁned approach to sustainable development – is all expected to positively drive shareholder value. The Group is subject to macroeconomic factors, including inﬂationary and supply chain dynamics, and is proactively managing these through, among other levers, global procurement mobilisation, as well as productivity and eciency gains. FY23 GUIDANCE The Group expects the positive momentum in revenue growth, margin improvement and earnings of FY22 to continue in FY23, driven by increased client activity supported by expected underlying economic growth in all three regions. Seasonal trends in patient activity levels, most notably in Switzerland and the Middle East, are expected to return, in the absence of any material new waves of COVID-19. Improving proﬁtability and strong cash generation are expected to support continued deleveraging. Switzerland expects to deliver modest FY23 revenue growth and EBITDA margin improvement to around 16%. Southern Africa expects to deliver FY23 revenue growth in the mid-single digit percentage range and an EBITDA margin improvement, approaching 20%. The Middle East expects to deliver FY23 revenue growth in the high-single digit percentage range and an EBITDA margin improvement approaching the mid-15% range. ADJUSTED NON-IFRS FINANCIAL MEASURES Reported results represent the Group’s overall performance and have been presented in accordance with IFRS. Management also uses adjusted non-IFRS measures to assess the ﬁnancial and operational performance of the Group. Adjusted results may be considered in addition to, but not as a substitute for, or superior to, information presented in accordance with IFRS. Such measures may not be comparable to similar measures presented by other companies. Adjusted results provide investors and analysts with complementary information to better understand the ﬁnancial performance and position of the Group from period to period. Adjusted results are used by management for budgeting and planning purposes, as well as by the directors for evaluating management’s performance and in setting management incentives. The main alternative performance measures used by the Group are explained and/or reconciled with our IFRS measures as presented in the ﬁnancial statements. The Group’s policy is to adjust, among others, the following types of signiﬁcant income and charges from the reported IFRS measures to present adjusted results: • cost associated with major restructuring programmes; • proﬁt/loss on sale of assets and transaction costs incurred on corporate transactions; • gains or losses on the remeasurement of previously held equity interests in acquirees in terms of IFRS 3; • remeasurement of right-of-use assets and lease liabilities as a result of lease modiﬁcations in terms of IFRS 16 Leases; • past service cost charges/credits in relation to retirement beneﬁt obligations; • accelerated depreciation and amortisation charges; • mark-to-market fair value gains/losses relating to derivative ﬁnancial instruments including ineective interest rate swaps; • remeasurement of redemption liabilities due to changes in estimated underlying value; • impairment charges and reversal of impairment charges; • insurance proceeds for items of property, equipment and vehicles impaired; • prior-year tax adjustments and signiﬁcant tax rate changes; and • tax and non-controlling interest impact of the above items. EBITDA is deﬁned as operating proﬁt before depreciation and amortisation and impairments of non-ﬁnancial assets, excluding other gains and losses. EBITDA and adjusted EBITDA are regarded as useful metrics to analyse the performance of the business from period to period. Measures like adjusted EBITDA are used by analysts and investors in assessing performance. EBITDA eliminates potential dierences in performance caused by variances in capital structures and cost and age of capitalised assets The Group has consistently applied this deﬁnition of adjusted measures in reporting on its ﬁnancial performance in the past as the directors believe this additional information is important to allow shareholders to better understand the Group’s trading performance for the reporting period. It is the Group’s intention to continue to apply this deﬁnition consistently in the future. GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED OUTLOOK FINANCIAL REVIEW Note 1 The policy has been expanded in the current year to include gains or losses on the remeasurement of previously held equity interests in acquirees in terms of IFRS 3. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT80 FY22 results Total £’m Switzerland £’m Southern Africa £’m Middle East £’m Spire £’m Corporate £’m Operating proﬁt/(loss) 280 93 131 65 – (9) Add back: - Other gains and losses 3 – – 2 – 1 - Depreciation and amortisation 228 134 39 54 – 1 - Impairment of property, equipment and vehicles 7 7 – – – – EBITDA 518 234 170 121 – (7) - Past service cost 11 9 – 2 – – - Insurance proceeds (7) (7) – – – – Adjusted EBITDA 522 236 170 123 – (7) Operating proﬁt/(loss) 280 93 131 65 – (9) - Past service cost 11 9 – 2 – – - Insurance proceeds (7) (7) – – – – - Impairment of properties, equipment and vehicles 7 7 – – – – - Accelerated depreciation and amortisation 19 19 – – – – - Fair value adjustments on remeasurement of investment in associate 1 – – 1 – – Adjusted operating proﬁt/(loss) 311 121 131 68 – (9) Proﬁt/(loss) for the year 1 170 54 79 48 (3) (8) Non-controlling interests (19) (8) (11) – – – - Past service cost 11 9 – 2 – – - Insurance proceeds (7) (7) – – – – - Impairment of properties, equipment and vehicles 7 7 – – – – - Accelerated depreciation and amortisation 19 19 – – – – - Fair value adjustments on remeasurement of investment in associate 1 – – 1 – – - Remeasurement of redemption liability (written put option) 1 1 – – – – - Equity-accounted portion of gain on sale and leaseback (7) – – – (7) – - Equity-accounted portion of tax impact of sale and leaseback (5) – – – (5) – - Tax on adjusting items (4) (4) – – – – Adjusted earnings 167 71 68 51 (15) (8) Weighted average number of shares (millions) 737.2 Adjusted EPS (pence) 22.6 RECONCILIATIONS NON-IFRS FINANCIAL MEASURES Note 1 Proﬁt for the year in Switzerland is shown after the elimination of intercompany loan interest of £18m. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 81 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED FY21 results Total £’m Switzerland £’m Southern Africa £’m Middle East £’m Spire £’m Corporate £’m Operating proﬁt/(loss) 209 97 69 51 – (8) Add back: - Other gains and losses (2) – (1) (1) – – - Depreciation and amortisation 217 128 36 52 – 1 - Impairment of properties, equipment and vehicles, and intangible assets 3 – 3 – – – - Impairment of intangible assets 1 – 1 – – – EBITDA 428 225 108 102 – (7) - Insurance proceeds (2) – (2) – – – Adjusted EBITDA 426 225 106 102 – (7) Operating proﬁt/(loss) 209 97 69 51 – (8) - Insurance proceeds (2) – (2) – – – - Impairment of properties, equipment and vehicles, and intangible assets 3 – 3 – – – - Impairment of intangible assets 1 – 1 – – – - Accelerated depreciation and amortisation 10 10 – – – – Adjusted operating proﬁt/(loss) 221 107 71 51 – (8) Proﬁt/(loss) for the year 1 79 32 29 35 (10) (7) Non-controlling interests (11) (6) (5) – – – - Insurance proceeds (2) – (2) – – – - Impairment of properties, equipment and vehicles, and intangible assets 3 – 3 – – – - Impairment of intangible assets 1 – 1 – – – - Accelerated depreciation and amortisation 10 10 – – – – - Remeasurement of redemption liability (written put option) 23 23 – – – – - Equity-accounted portion of impairment of intangible assets 60 – – – 60 – - Reversal of impairment of associate (60) – – – (60) – - Tax on adjusting items (2) (2) – – – – Adjusted earnings 101 57 26 35 (10) (7) Weighted average number of shares (millions) 737.2 Adjusted EPS (pence) 13.7 RECONCILIATIONS CONTINUED NON-IFRS FINANCIAL MEASURES CONTINUED Note 1 Proﬁt for the year in Switzerland is shown after the elimination of intercompany loan interest of £18m. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT82 FY20 results Total £’m Switzerland £’m Southern Africa £’m Middle East £’m Spire £’m Corporate £’m Operating (loss)/proﬁt (184) 90 149 (423) – – Add back: - Other gains and losses (4) – – (1) – (3) - Depreciation and amortisation 217 126 37 53 – 1 - Reversal of impairment of properties (4) (4) – – – – - Impairment of properties, equipment and vehicles, and intangible assets 34 33 1 – – – - Impairment of intangible assets 482 – 1 481 – – EBITDA 541 245 188 110 – (2) No adjustments – – – – – – Adjusted EBITDA 541 245 188 110 – (2) Operating (loss)/proﬁt (184) 90 149 (423) – – - Reversal of impairment of properties (4) (4) – – – – - Impairment of properties, equipment and vehicles, and intangible assets 34 33 1 – – – - Impairment of intangible assets 482 – 1 481 – – - Fair value adjustments on derivative contracts (1) – – (1) – – Adjusted operating proﬁt 327 119 151 57 – – Proﬁt/(loss) for the year 1 (299) 68 84 (442) (8) (1) Non-controlling interests (21) (8) (13) – – – - Reversal of impairment of properties (4) (4) – – – – - Impairment of properties, equipment and vehicles, and intangible assets 34 33 1 – – – - Impairment of intangible assets 482 – 1 481 – – - Fair value adjustments on derivative contracts (1) – – (1) – – - Remeasurement of redemption liability (written put option) 5 5 – – – – - Impairment of associate 10 – – – 10 – - Tax rate changes 2 (26) (26) – – – – - Tax on adjusting items (3) (3) – – – – Adjusted earnings 177 65 73 38 2 (1) Weighted average number of shares (millions) 737.2 Adjusted EPS (pence) 24.0 RECONCILIATIONS CONTINUED NON-IFRS FINANCIAL MEASURES CONTINUED Notes 1 Proﬁt for the year in Switzerland is shown after the elimination of intercompany loan interest of £17m. 2 Tax rate changes of £26m are shown after taking non-controlling interests of £3m into consideration. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 83 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED RECONCILIATIONS CONTINUED NON-IFRS FINANCIAL MEASURES CONTINUED DEPRECIATION AND AMORTISATION Adjusted and reported depreciation and amortisation were calculated as follows: NON-CONTROLLING INTERESTS Adjusted non-controlling interests were calculated as follows: INCOME TAX Adjusted income tax was calculated as follows: NET FINANCE COST Adjusted and reported net ﬁnance cost was calculated as follows: SHARE OF NET PROFIT OF EQUITY-ACCOUNTED INVESTMENTS Adjusted share of net (loss)/proﬁt of equity-accounted investments was calculated as follows: FY22 £’m FY21 £’m FY20 £’m Depreciation and amortisation 228 217 217 Accelerated depreciation and amortisation (19) (10) – Adjusted depreciation and amortisation 209 207 217 FY22 £’m FY21 £’m FY20 £’m Non-controlling interests 19 11 21 Adjusting items attributable to non-controlling interests – – (3) Adjusted non-controlling interests 19 11 18 FY22 £’m FY21 £’m FY20 £’m Income tax expense 41 25 24 Swiss tax rate changes – – 29 Tax impact of adjusting items 4 2 3 - Past service cost 2 – – - Accelerated depreciation 2 2 – - Reversal of impairment of properties – – (1) - Impairment of properties – – 4 Adjusted income tax expense 45 27 56 Adjusted eective tax rate 1 19.5% 19.3% 22.3% FY22 £’m FY21 £’m FY20 £’m Finance cost 74 99 92 Finance income (6) (4) (9) Net ﬁnance cost 68 95 83 Remeasurement of redemption liability (written put option) (1) (23) (5) Adjusted ﬁnance cost 67 72 78 FY22 £’m FY21 £’m FY20 £’m Share of net (loss)/proﬁt of equity-accounted investments (1) (70) 2 Equity-accounted portion of impairment of intangible assets – 60 – Equity-accounted portion of gain on sale and leaseback (7) – – Equity-accounted portion of tax impact of sale and leaseback transaction (5) – – Adjusted share of net (loss)/proﬁt of equity-accounted investments (13) (10) 2 Note 1 The eective tax rate percentages are calculated in unrounded sterling values and not in millions. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT84 Note 1 Switzerland 126% (FY21: 66%), Southern Africa 108% (FY21: 111%), the Middle East 141% (FY21: 73%). Notes 1 Tax on adjusted operating proﬁt is calculated as adjusted operating proﬁt before tax multiplied by underlying statutory tax rates of each entity in the country where it operates. 2 The return on average invested capital percentages are calculated in unrounded sterling values and not in millions. RECONCILIATIONS CONTINUED NON-IFRS FINANCIAL MEASURES CONTINUED CASH CONVERSION Cash conversion, calculated as cash generated from operations as a percentage of adjusted EBITDA, is shown as a non-IFRS measure as this is used by management and investors to measure cash generation by the Group. Cash conversion was calculated as follows: RETURN ON INVESTED CAPITAL ROIC is included as a non-IFRS measure as it is used by management to help inform and reﬂect capital allocation decisions within the business. ROIC is calculated as adjusted operating proﬁt after tax paid expressed as a percentage of average invested capital. Average values for total invested capital are calculated as the average monthly balance for the year. ROIC was calculated as follows: FY22 £’m FY21 £’m Cash from operations (a) 663 330 Adjusted EBITDA (b) 522 426 Cash conversion ([a]/[b] x 100) 1 127% 77% FY22 £’m FY21 £’m Adjusted operating proﬁt 311 221 Tax on adjusted operating proﬁt (58) (38) Adjusted operating proﬁt after tax (a) 253 183 Total assets 7 207 6 672 Less: equity-accounted investments (165) (171) Less: current liabilities (823) (684) Add back: short-term portion of interest-bearing borrowings and lease liabilities 171 146 Invested capital 6 390 5 963 Average invested capital (b) 6 254 6 120 Return on average invested capital ([a]/[b] x 100) 2 4.0% 3.0% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 85 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED RECONCILIATIONS CONTINUED NON-IFRS FINANCIAL MEASURES CONTINUED CONSTANT CURRENCY The Group uses constant currency measures primarily for comparable performance analysis. Constant currency measures are presented using prior-year exchange rates, which exclude the impact of ﬂuctuations in foreign currency exchange rates. Constant currency values are calculated by translating both the current and the prior-period local currency amounts into sterling using the prior-year average exchange rates. Constant currency measures using FY21 average exchange rates were calculated as follows: Constant currency measures using FY20 average exchange rates were calculated as follows: FY22 £’m FY21 £’m Variance Revenue 3 233 2 995 Retranslation at prior-year rates 52 – Revenue in constant currency at prior-year rates 3 285 2 995 10% Adjusted EBITDA 522 426 Retranslation at prior-year rates 6 – Adjusted EBITDA in constant currency at prior-year rates 528 426 24% Adjusted operating proﬁt 311 221 Retranslation at prior-year rates 1 – Adjusted operating proﬁt in constant currency at prior-year rates 312 221 41% FY22 £’m FY20 £’m Variance Revenue 3 233 3 083 Retranslation at FY20 rates 133 – Revenue in constant currency at FY20 rates 3 366 3 083 9% Adjusted EBITDA 522 541 Retranslation at FY20 rates 23 – Adjusted EBITDA in constant currency at FY20 rates 545 541 1% Adjusted operating proﬁt 311 327 Retranslation at FY20 rates 15 – Adjusted operating proﬁt in constant currency at FY20 rates 326 327 (0)% PROPERTY, EQUIPMENT AND VEHICLES, AND INTANGIBLE ASSETS Property, equipment and vehicles increased to £4 385m at 31 March 2022 (FY21: £4 052m), mainly due to the recognition of a right-of-use asset to the value of £102m in respect of the expansion at Airport Road Hospital, as well as the strengthening of the period-end Swiss franc, South African rand and UAE dirham rates against sterling. Total capital expenditure for the period was £178m (FY21: £126m). Maintenance and expansion capex amounted to £94m (FY21: £54m) and £84m (FY21: £72m), respectively. The underspend compared with expectations was due to timing dierences, which are expected to be reﬂected in FY23. Mediclinic is one of the largest private healthcare providers across Europe, Middle East and Africa, with unique clinical expertise and scale. Aligned with the Group’s strategic goals and balanced approach to capital allocation, we will seek to execute on opportunities to grow within our existing business across the continuum of care, invest in various innovation and digital transformation initiatives, and pursue opportunities for regional expansion through bolt-on investments at the appropriate time. Intangible assets increased to £1 126m at 31 March 2022 (FY21: £1 061m), mainly due to the impact of the strengthening period-end UAE dirham rate against sterling on the Middle East goodwill. INVESTMENT IN ASSOCIATES SPIRE Mediclinic holds a 29.9% investment in Spire which is equity accounted. Spire reported its full-year ﬁnancial results for the period ended 31 December 2021 on 3 March 2022. For the 12 months ended 31 December 2021, Spire reported a loss after taxation of £9m, which included a gain on sale and leaseback of £23m and a related tax credit of £16m (31 December 2020: loss of £234m, which included a goodwill impairment charge of £200m). Mediclinic’s equity-accounted loss amounted to £3m (FY21: £70m loss). The adjusted equity-accounted loss amounted to £15m (2021: £10m loss). STATEMENT OF FINANCIAL POSITION MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT86 STATEMENT OF FINANCIAL POSITION CONTINUED Notes 1 Non-IFRS measure reﬂecting net debt as a percentage of adjusted EBITDA. 2 Non-IFRS measure reﬂecting adjusted EBITDA less expenses related to short-term leases as a percentage of total rent and interest paid. NET DEBT AND LIQUIDITY The Group’s leverage ratio 1 reduced to 3.9x at 31 March 2022 from 5.1x at FY21 year end. Incurred bank debt marginally increased to £1 803m (FY21: £1 777m) due to translation dierences, while lease liabilities increased to £786m (FY21: £676m) mainly due to additional lease liabilities associated with the commissioning of the hospital expansion and new integrated oncology unit at Airport Road Hospital, Abu Dhabi. The Group maintains a strategy of responsible leverage, largely using its extensive asset base to secure cost-ecient borrowings. The Group’s ﬁxed charge cover ratio 2 improved to 4.3x (FY21: 3.6x). While property ownership drives operational and ﬁnancial beneﬁts, the approach is not ﬁxed, reﬂecting the business needs of the Group as it expands across the continuum of care, which includes less asset-intensive investments and partnerships. Debt is ring-fenced within each division, with no cross guarantees or cross defaults. Borrowings are denominated in the same currency as the divisions’ underlying revenue and therefore not exposed to foreign exchange rate risk. In August 2021 in Southern Africa, we successfully completed the reﬁnancing of existing debt through a new sustainability-linked banking facility. The new facility comprises ZAR7 950m senior secured debt and a ZAR500m revolving credit facility (‘RCF’), replacing the previous facilities. The new ﬁve-year agreement is priced initially at three-month JIBAR plus 1.54% and 1.60% on the senior secured debt and RCF, respectively. In FY22, debt repayments in Switzerland and the Middle East totalled around CHF51m and AED250m, respectively. The Middle East division currently expects to continue repaying all incurred debt, which funded the multiyear expansion period that supports the division’s future growth aspirations, by August 2023. Cash and cash equivalents increased to £534m at 31 March 2022 compared with £294m at 31 March 2021. All three divisions’ cash and cash equivalents increased during the period supported by the improved operating performance and strong cash conversion. INTEREST RATE SENSITIVITY After taking the interest rate swaps into account, the Group’s net debt is exposed to movements in variable interest rates. The sensitivity of interest rates can be summarised as follows: • Switzerland: At 31 March 2022, the SARON was -0.70% (FY21: -0.75%). Interest rates would have to increase by 70 basis points to have an impact on post-tax proﬁt for the period with all other variables held constant. An increase in the interest rate of 25 basis points would have no impact on post-tax proﬁt for the period (FY21: no impact). • Southern Africa: Post-tax proﬁt for the period would decrease/increase by £0.4m (FY21: decrease/increase by £0.7m) if the interest rates had been 100 basis points higher/lower in Southern Africa with all other variables held constant; and • The Middle East: Post-tax proﬁt for the period would decrease/increase by £0.1m (FY21: decrease/increase by £0.4m) if the interest rates had been 50 basis points higher/lower in the Middle East with all other variables held constant. FY22 £’m FY21 £’m Borrowings 1 803 1 777 Less: cash and cash equivalents (534) (294) Net incurred debt 1 269 1 483 Lease liabilities 786 676 Net debt 2 055 2 159 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 87 GROUP CHIEF FINANCIAL OFFICER’S REPORT CONTINUED STATEMENT OF FINANCIAL POSITION CONTINUED NET DEBT AND LIQUIDITY CONTINUED COVENANTS The Group had headroom over all covenants, waived or eective, at the end of FY22, with the headroom on all three leverage ratios improving in line with improved operating performance. In Switzerland, we have a covenant waiver in place and the ﬁrst test will be performed at the end of September 2022. The following table illustrates the headroom to the covenant tests: SWISS PENSION BENEFIT OBLIGATION In Switzerland, we provide deﬁned contribution pension plans in terms of Swiss legislation to employees, the assets of which are held in separate trustee-administered funds. These plans are funded from employee and company contributions, taking into account the recommendations of independent qualiﬁed actuaries. Because of the strict deﬁnition of deﬁned contribution plans in IAS 19, these plans are classiﬁed as deﬁned beneﬁt plans, since the funds are obliged to take some investment and longevity risk in terms of Swiss law. The IAS 19 net pension liability was valued by the actuaries at the end of the year and amounted to £6m (FY21: net asset of £83m), consisting of a net pension asset of £1m (FY21: £110m) relating to one of the plans and a net pension liability of £7m (FY21: £27m) relating to three of the plans. An asset ceiling restriction was applied to one of the plans and resulted in a net liability of £nil. The net pension asset is included under ‘Retirement beneﬁt assets’ in the Group’s statement of ﬁnancial position, whereas the net pension liabilities are included under ‘Retirement beneﬁt obligations’. The decrease in the net pension asset was largely due to the recognition of an asset ceiling of £194m on one of the pension plans and an increase in the liability due to plan amendments that resulted in the recognition of past service cost of £9m, partly oset by an increase in the plan assets. DERIVATIVE FINANCIAL INSTRUMENTS Through the acquisition of Clinique des Grangettes, Geneva, the Group entered into a put/call agreement over the remaining 40% interest of Clinique des Grangettes and Clinique La Colline. At 31 March 2022, the value of the redemption liability related to the written put option amounted to £126m (FY21: £115m). Status Headroom variable FY22 Headroom 1 FY21 Headroom 1 Compliant Switzerland Leverage ratio Waived 2 EBITDA 13% 5% n/a Economic capital ratio Eective Equity 27% 30% Yes Loan-to-value ratio Eective Property value 17% 17% Ye s Southern Africa Leverage ratio Eective EBITDA 52% 6% Yes Net interest cover ratio Eective Equity 56% 18% Yes Middle East Leverage ratio Eective EBITDA 95% 48% Yes Debt service coverage ratio Eective Cash ﬂow 54% 21% Yes Minimum net worth Eective n/a > AED700m > AED700m Ye s Minimum monthly receivables Eective n/a > AED100m 3 > AED240m 3 Yes Notes 1 Headroom is calculated with reference to the indicated headroom variable, keeping other inputs constant. 2 Waived covenant compliance tests are to be performed at the end of September 2022 for Switzerland. 3 Average of last three months. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT88 FOREIGN EXCHANGE RATES Although the Group reports its results in sterling, the divisional proﬁts are generated in Swiss franc, South African rand and UAE dirham. During the reporting period, the average and closing exchange rates were as follows: GOING CONCERN For the purposes of assessing liquidity speciﬁcally and going concern broadly at 31 March 2022, the Group modelled a combination of severe but plausible downside scenarios on a month-by-month basis and also applied appropriate mitigation actions which would be within the Group’s control. The eect of the downside scenarios was informed by knowledge and insight gained during the COVID-19 pandemic. Due to the mostly ﬁxed employee cost base across the business, lower revenue due to either a reduction in taris or volumes will most likely have the most pronounced impact on EBITDA. Compared with the business plan, in modelling the severe but plausible scenarios, the combined adverse eect of reduction of taris and volumes after mitigation amounts to an aggregate decline of 18% of EBITDA over the 18-month period to 30 September 2023 compared with the base case. On a monthly basis, the EBITDA eect ranges from 12% to 29% compared with the base case. Based on the assumptions applied and the eect of mitigating actions, most within the control of the Group, the analyses demonstrate that the divisions will continue to be able to meet their obligations for the 18-month period to 30 September 2023. While recognising that there remains risk to the Group’s ﬁnancial performance for at least the next 12 months, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due for a period of at least 12 months from the date of approving the ﬁnancial statements. DIVIDEND POLICY AND PROPOSED DIVIDEND The Group’s existing dividend policy is to target a payout ratio of between 25% to 35% of adjusted earnings. The Board may revise the policy at its discretion. The Board proposes a ﬁnal dividend from retained earnings of 3.00 pence per ordinary share for the year ended 31 March 2022 for approval by the Company’s shareholders at the AGM on Thursday, 28 July 2022. See page 264 of Shareholder information for details on the ﬁnal dividend, including salient dates Jurgens Myburgh Group Chief Financial Ocer 24 May 2022 Movements in exchange rates aected the reported earnings and reported balances in the statement of ﬁnancial position. The resulting currency translation dierence, which is the amount by which the Group’s interest in the equity of the divisions increased because of spot rate movements, amounted to £182m (FY21: decrease of £235m) and was credited (FY21: debited) to the statement of comprehensive income. The increase was the result of the strengthening of the period-end rates against the sterling. Foreign exchange rate sensitivity: • The impact of a 10% change in the £/CHF exchange rate for a sustained period of one year is that proﬁt after tax would increase/decrease by £4m (FY21: increase/decrease by £1m) due to exposure to the £/CHF exchange rate. • The impact of a 10% change in the £/ZAR exchange rate for a sustained period of one year is that proﬁt after tax would increase/decrease by £8m (FY21: increase/decrease by £3m) due to exposure to the £/ZAR exchange rate. • The impact of a 10% change in the £/AED exchange rate for a sustained period of one year is that proﬁt after tax would increase/decrease by £5m (FY21: increase/decrease by £4m) due to exposure to the £/AED exchange rate. Average rates with reference to sterling FY22 FY21 Variance FY22 vs FY21 FY20 Variance FY22 vs FY20 Swiss franc 1.25 1.21 4% 1.25 0% South African rand 20.27 21.30 (5)% 18.76 8% UAE dirham 5.02 4.80 5% 4.67 7% Year-end rates with reference to sterling FY22 FY21 Variance Swiss franc 1.21 1.30 (7)% South African rand 19.23 20.37 (6)% UAE dirham 4.82 5.07 (5)% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 89 Presented in sterling, rounded to the nearest million FIVE-YEAR SUMMARY IFRS 16 Pre-IFRS 16 INCOME STATEMENTS FY22 £’m FY21 £’m FY20 £’m FY19 £’m FY18 £’m Revenue 3 233 2 995 3 083 2 932 2 876 Adjusted EBITDA 522 426 541 493 515 Operating proﬁt/(loss) 280 209 (184) 81 (288) Adjusted operating proﬁt 311 221 327 330 370 Reported earnings/(loss) 151 68 (320) (151) (492) Adjusted earnings 167 101 177 198 221 PER SHARE STATISTICS FY22 pence FY21 pence FY20 pence FY19 pence FY18 pence Basic earnings/(loss) basis 20.5 9.2 (43.4) (20.5) (66.7) Diluted earnings/(loss) basis 20.5 9.2 (43.4) (20.5) (66.7) Basic adjusted earnings basis 22.6 13.7 24.0 26.9 30.0 Diluted adjusted earnings basis 22.6 13.7 24.0 26.9 30.0 Dividends declared per share 3.00 - 3.20 7.90 7.90 IFRS 16 Pre-IFRS 16 STATEMENTS OF FINANCIAL POSITION FY22 £’m FY21 £’m FY20 £’m FY19 £’m FY18 £’m ASSETS Non-current assets 5 733 5 440 5 741 5 335 5 382 Current assets 1 474 1 232 1 213 1 091 961 Total assets 7 207 6 672 6 954 6 426 6 343 EQUITY Owners of the parent 3 107 2 849 2 890 3 151 3 286 Non-controlling interests 139 118 113 115 87 Total equity 3 246 2 967 3 003 3 266 3 373 LIABILITIES Non-current liabilities 3 138 3 021 3 182 2 576 2 445 Current liabilities 823 684 769 584 525 Total liabilities 3 961 3 705 3 951 3 160 2 970 Total equity and liabilities 7 207 6 672 6 954 6 426 6 343 STATEMENTS OF CASH FLOWS FY22 FY21 FY20 FY19 FY18 Cash generated from operations (£’m) 663 330 589 451 466 Adjusted EBITDA cash conversion (%) 127 77 109 91 90 Page 80 in the ‘Financial review’ section in the Group Chief Financial Ocer’s Report sets out the Group’s use of adjusted non-IFRS ﬁnancial measures. Non-IFRS measures, which include cash conversion, are further discussed, with reconciliations from the most comparable IFRS measure provided, on pages 81–86. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT90 RISK MANAGEMENT REPORT INTRODUCTION The Group’s ERM Policy follows the International Committee of Sponsoring Organizations of the Treadway Commission’s Internal Control – Integrated Framework and is reviewed annually. The policy deﬁnes the risk management objectives, methodology, risk appetite, risk identiﬁcation, assessment and response, as well as the responsibilities of the various risk management role players in the Group. Through risk management, an integrated and eective framework is established which seeks to identify, assess and manage important and emerging risks which could impact on our ability to achieve strategic, ﬁnancial and operational goals, and regulatory compliance. The risk management process is fully integrated into the strategic planning process and supports the achievement of our strategy. Become an integrated healthcare provider across the continuum of care Transform our services and client engagement through innovation and digitalisation Minimise our environmental impact Improve our value proposition signiﬁcantly Evolve as a data-driven organisation Grow in existing markets and expand into new markets See the Strategy overview on pages 16–22 The Board is ultimately accountable for the Group’s risk management processes and internal control system, and for determining the Group’s risk appetite. It receives regular updates on the current and emerging risks facing the business, and considers the impact these risks may have on key stakeholders and the achievement of our strategic goals. The Audit and Risk Committee supports the Board in the management of risk and is responsible for reviewing the eectiveness of the risk management and internal control processes during the year. See the Audit and Risk Committee Report on pages 121–131 The Board is further supported by the Clinical Performance Committee, which provides governance and oversight over clinical performance, related risks and control eectiveness, and the ESG Committee, which fulﬁls a similar function in relation to ESG matters including climate change. See the reports of the Clinical Performance and the ESG committees on pages 132–134 and 135–136, respectively Risks are classiﬁed according to their degree of controllability and relevance to our strategy. Risk management processes are tailored to the relevant risk type: • Strategic risks – We consider it appropriate to assume some risk in achieving our strategy and generating appropriate returns for shareholders. Strategic risks are dierent from preventable risks in that they are not inherently undesirable. The risk management system is designed to reduce the likelihood that the assumed risks materialise and to improve our ability to manage or contain the risk events, should they occur. • External risks/Threats – Certain risks arise from events or circumstances external to our inﬂuence or control, e.g. natural disasters, geopolitical tensions or macroeconomic changes. Management’s response focuses on identifying the sources of such risks and mitigating their impact on the business. • Internal preventable risks – These risks arise from within the Group and are controllable. They are managed through active prevention by monitoring operational processes and guiding behaviours and decisions towards desired norms. 1 4 5 2 3 6 2026 STRATEGIC GOALS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 91 STRATEGIC RISKS EXTERNAL RISKS/ THREATS INTERNAL PREVENTABLE RISKS 1 Economic and business environment 2 Regulatory and compliance 3 Information systems security and cyberattacks 4 Pandemics and infectious diseases 5 Disruptive innovation and digitalisation 6 Competition 7 Workforce risks 8 Climate change 9 Patient safety, quality of service and operational stability 10 Availability and cost of capital 11 Financial and credit risk 12 Business investments and acquisitions RISK MANAGEMENT REPORT CONTINUED 9 8 11 12 6 7 35 1 2 4 10 Higher Lower Likelihood Impact Higher PRINCIPAL RISKS AND UNCERTAINTIES Principal risks are risks that can materially aect our business model, performance, prospects, solvency, liquidity or reputation. These are determined through a strategic risk review process where top risks are identiﬁed and assessed by divisional executive committees and the Group Executive Committee (with input from non-executive directors). Our risk landscape is reviewed regularly by the Group Executive Committee and the Board. Political, economic, social, technological, environmental and legal developments that may impact the Group’s operations and business model viability in the short, medium or long term are reviewed to identify emerging and transition risks (i.e. climate policy or technological shifts). The Board reconsidered the Group’s key risks and have made the following changes to the principal risks: • The principal risks ‘Business projects’ and ‘Disruptive innovation and digitalisation’ were combined, and ‘Patient safety and clinical quality’ was combined with ‘Quality of service and operational stability’ due to the integrated or connected nature of these risk items. • Given the potential direct and indirect impacts the changing climate poses to our operations, ‘Climate change’ has been added as a principal risk. Divisional executive committee risk assessments Group Executive Committee risk assessment Principal risks Risk assessments at functional, project and operational level THE HEAT MAP SHOWS THE PRINCIPAL RISKS OF THE GROUP MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT92 1. ECONOMIC AND BUSINESS ENVIRONMENT TYPE OF RISK External risk/Threat OWNER Group CFO RISK APPETITE Moderate to signiﬁcant RISK RATING Critical PRINCIPAL RISK Downturn in the general economic and business environments impacting the aordability of healthcare for funders and self-paying patients. The business environment risks include the eect of market dynamics on taris and fees as well as political stability and geopolitical risks. KEY STAKEHOLDERS • Clients • Governments and authorities • Healthcare insurers • Investors CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled volume reduction and downturn in the macroeconomic and business environment. KEY MITIGATION • Monitor developments and trends in the economic and business environments and early warning indicators • Proactive monitoring and negotiation with funders • Focus on quality and continuum of care to reinforce our market position TREND FY22 FY21 Escalation due to the increase in the political and geopolitical risk landscape. LINK TO STRATEGY 2. REGULATORY AND COMPLIANCE TYPE OF RISK External risk/Threat OWNER Group Chief Governance Ocer and divisional CEOs RISK APPETITE Low RISK RATING Critical PRINCIPAL RISK Adverse changes in legislation and regulations impacting on the Group, or where failure to comply with legislation and regulations may result in losses, ﬁnes, penalties or damage to reputation. We are also exposed to an increasing compliance monitoring cost. The risks include healthcare reform by regulators aimed at reducing the cost of healthcare, broadening the access to quality healthcare, and increasing quality standards monitoring by regulators. KEY STAKEHOLDERS • Governments and authorities • Industry partners • Investors • Medical practitioners CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled reductions in taris and volumes. KEY MITIGATION • Proactive engagement with stakeholders • Health policy units created to conduct research and provide strategic input into reform processes • Active industry participation across all divisions • Company Secretarial, Legal and Compliance functions support operational management, monitor regulatory developments and, where necessary, obtain expert legal advice for the eective implementation of compliance initiatives • Compliance risks identiﬁed and assessed as part of compliance management processes TREND FY22 FY21 Increase due to healthcare reform and related impact on regulated taris, and the introduction of new legislation or regulations. LINK TO STRATEGY 1 2 3 4 5 6 1 2 3 4 5 6 Risk exposure has increased due to change in the business environment, increased investments, increased dependency of operations on information technology (‘IT’), information sensitivity, and associated cost. Proactive and continuous monitoring, favourable results of negotiations, eective treasury, and risk management processes have resulted in lowering of risk exposure. Risk exposure remains largely unchanged as the operating and regulatory environments have remained stable, and enhanced risk mitigation measures have kept the risk at the same level. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 93 RISK MANAGEMENT REPORT CONTINUED 3. INFORMATION SYSTEMS SECURITY AND CYBERATTACKS TYPE OF RISK External risk/Threat OWNER Group Chief Information Ocer RISK APPETITE Low RISK RATING Critical PRINCIPAL RISK Unauthorised access to information systems through external or internal attack or unauthorised breaches, resulting in the unavailability of systems, failure of data integrity and loss of conﬁdential data. KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Governments and authorities • Investors CONSIDERED IN VIABILITY ASSESSMENT Yes, considered the potential impacts on systems and operations and the possible eect of delayed billing on liquidity. KEY MITIGATION • Comprehensive information systems identity access management, change and physical access controls • Regular security reviews • Business continuity and disaster recovery plans • Group information security and data privacy policies • Insurance • Group ICT Security Committee TREND FY22 FY21 Escalation due to increased prevalence of ransomware attacks compared with the prior reporting period. LINK TO STRATEGY 4. PANDEMICS AND INFECTIOUS DISEASES TYPE OF RISK External risk/Threat OWNER Group Chief Clinical Ocer RISK APPETITE Low RISK RATING Critical PRINCIPAL RISK A pandemic occurs when an infectious disease rapidly infects many people and spreads to multiple countries and continents. These risks refer to our ability to respond eectively to the potential adverse clinical, operational and business eects caused by a pandemic or infectious disease. KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Governments and authorities • Investors • Medical practitioners • Professional societies CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled adverse impact on volumes caused by COVID-19 pandemic. KEY MITIGATION • Hospital and business incident response planning • Central coordination of task teams and clinical governance • Monitoring • Financial scenario planning • Communication strategy TREND FY22 FY21 The risk relating to the COVID-19 pandemic has decreased due to the eectiveness of the global response, vaccination programmes and the robust performance of the Group throughout the period. LINK TO STRATEGY 1 2 3 4 5 6 1 2 3 4 5 6 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT94 5. DISRUPTIVE INNOVATION AND DIGITALISATION TYPE OF RISK Strategic OWNER Group Chief Innovation Ocer RISK APPETITE Moderate to signiﬁcant RISK RATING High PRINCIPAL RISK The disintermediation and erosion of our business model due to the impact of technological development. It refers to the extent and speed at which new technologies (and combinations thereof) change and transform industries, and to what extent an organisation can exploit these opportunities by being responsive and innovative, while managing associated risks. We are implementing various business projects as we adapt to the evolving operational and regulatory environment and healthcare market. These business projects carry risks relating to occurrences that could interfere with successful completion of projects, including timelines, cost and quality. KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Industry partners • Investors • Medical practitioners CONSIDERED IN VIABILITY ASSESSMENT No KEY MITIGATION • Dedicated Innovation function, which includes digital transformation • Strategic planning processes • Proactive monitoring • Continuum of care strategy • Eective project governance practices, methodologies and reporting • Experienced project management teams • Proactive monitoring and oversight TREND FY22 FY21 Improved as we continue to invest in our innovation and digitalisation initiatives across the continuum of care. LINK TO STRATEGY 6. COMPETITION TYPE OF RISK External risk/Threat OWNER Group CEO and divisional CEOs RISK APPETITE Moderate RISK RATING Medium PRINCIPAL RISK Uncertainty created by existing and/or emerging competitors with alternative business models, including outmigration of care (partly driven by further technological developments) and the development of alternative care models. KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Healthcare insurers • Industry partners • Investors • Medical practitioners CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled reductions in volumes as well as taris. KEY MITIGATION • Proactive monitoring • Strategic planning processes • Quality and value of care processes TREND FY22 FY21 Providers in the healthcare market remained stable for the period under review with no signiﬁcant change in our risk proﬁle. LINK TO STRATEGY 1 2 3 4 5 6 1 2 3 4 5 6 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 95 RISK MANAGEMENT REPORT CONTINUED 7. WORKFORCE RISKS TYPE OF RISK Internal preventable risk OWNER Group Chief Strategy and Human Resources Ocer and divisional CEOs RISK APPETITE Low RISK RATING Medium PRINCIPAL RISK Availability, retention, recruitment and aordability of qualiﬁed healthcare workers. The availability and support of admitting medical practitioners, whether independent or employed, are critical to our services. Potential negative eect of COVID-19 on frontline healthcare workers, who are working under immense and unprecedented pressure for extended periods and putting their physical, mental and social wellbeing at risk. KEY STAKEHOLDERS • Employees, alumni and potential applicants • Investors • Medical practitioners CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled shortage of qualiﬁed and experienced healthcare employees as part of cost inﬂation in business environment scenario. KEY MITIGATION • Systems to monitor satisfaction, movement and proﬁles of medical practitioners • Details on the relationship and engagement with medical practitioners provided in the 2022 Sustainable Development Report • Employment, recruitment and retention strategies explained in the 2022 Sustainable Development Report • Extensive training and skills development programme and international recruitment programme explained in the 2022 Sustainable Development Report • The wellbeing of all employees is actively monitored and managed through well- established support structures, as expanded on in the 2022 Sustainable Development Report TREND FY22 FY21 Vacancies and turnover ratios in respect of skilled resources and medical practitioners are expected to remain at similar levels in the Group, supported by a growing number of wellbeing and mental health initiatives. LINK TO STRATEGY 1 2 3 4 5 6 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT96 8. CLIMATE CHANGE TYPE OF RISK External risk/Threat OWNER Group Chief Governance Ocer RISK APPETITE Low to moderate RISK RATING Medium PRINCIPAL RISK Potential impacts caused by long-term shifts in climate patterns. This includes the rise in temperatures across the globe as well as the increase in extreme weather events, which, in turn, may impact negatively on the economic environment. Climate changemay disrupt our day-to-day operations and increase our cost of doing business due to: • increased risk of extreme weather events; and • increased costs due to • increased electricity consumption, • carbon tax, • investment in new technology, and • water scarcity. KEY STAKEHOLDERS • Employees, alumni and potential applicants • Governments and authorities • Industry partners • Investors CONSIDERED IN VIABILITY ASSESSMENT No KEY MITIGATION • Group’s Sustainable Development Strategy addresses environmental risks See the Sustainable development overview on page 34 • Monitoring of the risks from climate change • Programmes to reduce waste to landﬁll • Reducing water and electricity usage • Investing in energy-ecient technologies and procuring renewable energy • Insurance cover • Group actions to mitigate and minimise the impact of climate change, and minimise our impact on the environment are described on pages 37–39 TREND FY22: New risk item added. FY21: - The risk is added as a principal risk as the eects of climate change are expected to make extreme climate events more frequent and signiﬁcant for the Group. LINK TO STRATEGY See the TCFD report on page 53 for a list of transitional and physical risks 1 2 3 4 5 6 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 97 RISK MANAGEMENT REPORT CONTINUED 9. PATIENT SAFETY, QUALITY OF SERVICE AND OPERATIONAL STABILITY TYPE OF RISK Internal preventable risk OWNER Group Chief Clinical Ocer and divisional chief operating ocers RISK APPETITE Low RISK RATING Medium PRINCIPAL RISK These risks ﬁrstly relate to all clinical risks associated with clinical care provision resulting in undesirable clinical outcomes. Such risks may also result in damage to Mediclinic’s reputation and impact on brand equity 1 . Operational risks refer to diverse types of operational events with a potential for ﬁnancial loss, operational interruptions or reputational damage. These risks refer to the quality of service and the stability of the operations, including: • incidents of poor service or where operational management fails to respond eectively to complaints; • operational interruptions, which refer to any disruption of the facility and may include the threat of disrupted electricity or water supply; and • ﬁre and allied perils causing damage or business interruption. KEY STAKEHOLDERS • Clients • Employees, alumni and potential applicants • Healthcare insurers • Industry partners • Investors • Medical practitioners CONSIDERED IN VIABILITY ASSESSMENT No KEY MITIGATION See the 2022 Clinical Services Report for a detailed analysis of the strategies to manage and monitor clinical risks • Accreditation processes • Clinical governance processes • Monitoring of clinical performance indicators • Focus on quality management processes • Stakeholder engagement and disclosure strategies • Clinical audits • Client experience surveys (both internal and external) • Complaints monitoring • Training programmes and supervision of service levels • Emergency backup electricity generation • Emergency and disaster planning • Extensive ﬁre-ﬁghting and detection systems, including comprehensive maintenance processes • Comprehensive insurance cover for ﬁnancial impact of disasters TREND FY22 FY21 These risks did not change signiﬁcantly and remained stable for the period under review. LINK TO STRATEGY Note 1 Brand equity refers to the commercial value derived from the consumer perception of our brand names rather than the services provided under those brand names. 1 2 3 4 5 6 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT98 10. AVAILABILITY AND COST OF CAPITAL TYPE OF RISK External risk/Threat OWNER Group CFO RISK APPETITE Moderate RISK RATING Medium PRINCIPAL RISK We require capital to ﬁnance strategic expansion opportunities and/or reﬁnance or restructure existing debt – the cost, terms and availability of which depend on prevailing market conditions. KEY STAKEHOLDERS • Financial institutions • Investors CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled increased cost of capital as part of cost inﬂation in business environment risk scenario. Modelled working capital as part of deterioration in the Middle East accounts receivable scenarios. KEY MITIGATION • Long-term planning of capital requirements and cash-ﬂow forecasting • Scrutiny of cash-generating capacity within the Group • Proactive and long-term agreements with banks and other funders relating to funding facilities • Systems to monitor compliance with requirements of debt covenants See note 25 to the Group annual ﬁnancial statements on page 215 for further details on capital risk management and the Group’s borrowings TREND FY22 FY21 Long-term ﬁnancing arrangements are in place. The Group’s leverage across the divisions has reduced and is at levels where the reﬁnancing at current market conditions should be possible. Although interest rates are expected to increase during FY23, they are not giving rise to an increase in the risk rating. LINK TO STRATEGY 11. FINANCIAL AND CREDIT RISK TYPE OF RISK External risk/Threat OWNER Group CFO RISK APPETITE Low RISK RATING Medium PRINCIPAL RISK Credit risks relate to possible loss arising from a funder’s inability to pay the outstanding balance owing, default by banks and/or other deposit-taking institutions, or the inability to recover outstanding amounts due from patients. Credit risk with respect to trade receivables consists mainly of medical schemes and insurance companies, which are required to maintain minimum reserve levels. In Switzerland and the Middle East, a large part of trade receivables is owed by cantonal or government-funded programmes. KEY STAKEHOLDERS • Healthcare insurers • Investors CONSIDERED IN VIABILITY ASSESSMENT Yes, modelled working capital deterioration. KEY MITIGATION • Preservation of a sound internal ﬁnancial control environment • Eective operational risk management processes • Eective monitoring and oversight of operations • Regulated minimum solvency requirements for funders • Monitoring of approved funders • Group Treasury Policy TREND FY22 FY21 The credit risks did not change signiﬁcantly and remained stable. LINK TO STRATEGY n/a 1 2 3 4 5 6 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 99 RISK MANAGEMENT REPORT CONTINUED 12. BUSINESS INVESTMENTS AND ACQUISITIONS TYPE OF RISK Strategic OWNER Group CFO RISK APPETITE Moderate RISK RATING Medium PRINCIPAL RISK Increased ﬁnancial exposure resulting from major strategic business investments and acquisitions, including the sensitivity of the assumptions made when capital is allocated and the eective implementation of major investment decisions. KEY STAKEHOLDERS • Governments and authorities • Industry partners • Investors CONSIDERED IN VIABILITY ASSESSMENT No KEY MITIGATION • Strategic planning processes • Due diligence processes • Investment mandates • Board oversight • Post-acquisition management processes TREND FY22 FY21 The investment and governance processes remained unchanged for the period under review. LINK TO STRATEGY 1 2 3 4 5 6 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT100 ASSESSMENT OF PROSPECTS T he directors have assessed the prospects of the Group by reference to its current ﬁnancial position, its recent performance, investment case, strategy, annual ﬁnancial planning and risk assessment. The Group’s strategy, which informs the annual ﬁnancial planning process, considers factors such as technological, social and environmental changes. ASSESSMENT PERIOD The directors have determined the ﬁve years to March 2027 to be an appropriate period for providing the viability statement as it is consistent with the annual planning period, which largely reﬂects the beneﬁt of investments made in the present period. ASSESSMENT OF VIABILITY The business plan reﬂects the Group’s strategy, associated risks and the directors’ best estimate of its prospects. Fundamental to the assessment of the Group’s prospects is the long-term business model of quality service delivery and revenue growth under acceptable risk tolerance. The annual ﬁnancial planning process includes a detailed bottom-up approach per division for the budget year (performed by each clinic and hospital) and an extension of the key assumptions to the forecast period. The budgets and ﬁve-year plans, including the Group strategic goals, are iteratively reviewed and ﬁnally approved by the divisional executive committees, the Group Executive Committee and the Board. The ﬁve-year period extends beyond the maturities of a material portion of the Group’s borrowings in each division. The Group expects to be able to reﬁnance existing borrowings on broadly similar terms and conditions before the existing facilities expire. See page 237 for the maturity proﬁle of the Group’s borrowings The impact of each scenario and certain scenarios in combination were modelled and assessed on EBITDA or proﬁt after tax as appropriate, net debt and debt covenant tests over the ﬁve-year forecast period. The principal risks and related key assumptions underlying each division’s business plans were stress tested. Due to the mostly ﬁxed employee cost base across the business, lower revenue – due to either a reduction in taris or volumes – has the most pronounced impact on EBITDA. See pages 186–187 for a further analysis of the going concern assertion, which has been adopted in preparing the ﬁnancial statements VIABILITY ASSESSMENT The assessment included stress tests of various severe but plausible scenarios. RISK SCENARIOS IMPACT 1. Adverse regulatory changes and pressure on taris Annual impact on Group EBITDA between 2.6% and 4.4% 2. Reduction in volumes Annual impact on Group EBITDA between 9.8% and 15.9% 3. Macroeconomic environment and cost inﬂation in business environment Annual impact on Group EBITDA between 4.6% and 11.3% 4. Deterioration in the Middle East accounts receivable collection Net debt impact between £4.0m and £5.0m 5. Deterioration in health insurance mix Annual impact on Group EBITDA between 1.5% and 9.4% 6. Impact of COVID-19 pandemic FY23 Group EBITDA of 5.6% VIABILITY STATEMENT The assessment described alongside showed that the business, with its geographically diverse portfolio, would be able to withstand any of the severe but plausible individual scenarios and the combinations modelled, ceteris paribus, by taking management action with the following key mitigating steps: reducing discretionary investment, initiating cost management initiatives, using drawdown of overdraft facilities, and improving net working capital days. Considering the Group’s prospects and principal risks and uncertainties, the directors conﬁrm that the Group will be able to continue in operation and meet its liabilities as they fall due, in the ordinary course of business, over the ﬁve-year period of their detailed assessment, ending 31 March 2027. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 101 GOVERNANCE AND REMUNERATION REPORT CHAIR’S INTRODUCTION I am pleased to present this year’s Governance and Remuneration Report. As I mentioned earlier in this Annual Report, it has been another challenging year for our people, management and my fellow Board members, and I am proud of how we supported not only each other, but also our clients, our colleagues and other stakeholders across the business. The Board and executive team remain committed to applying robust and eective corporate governance practices and the highest standards of integrity and ethics, embodied in our purpose, values and culture. These aspects are embedded in our policies, practices and day-to-day operations, actively managed by the Group’s leadership, and closely monitored by the Board. This Governance and Remuneration Report provides further details on our corporate governance, the activities of the Board and its committees during the year, and their alignment with the strategic direction of the Group. The Board continued to exercise keen oversight of the Group’s strategy and its implementation. In parallel, we took the opportunity to review the composition of the Board, and the structure of its committees and the Group Executive Committee, and align them more closely to the Group’s strategy. Natalia Barsegiyan and Zarina Bassa were welcomed to the Board as independent non-executive directors during the year, broadening and strengthening our existing skills and experience. We also welcomed Professor Wim de Villiers as an independent external expert adviser to support the work of the Clinical Performance Committee. The Board bid farewell to Alan Grieve and Trevor Petersen as they stepped down as directors, and we express our gratitude for their contribution during their many years of service. I am grateful to Dr Felicity Harvey for assuming the role of SID, and to Tom Singer and Steve Weiner for taking over as chairs of the Audit and Risk and the Remuneration committees, respectively. Following these changes, the composition of the Board exceeds the targets set by the Hampton-Alexander and Parker reviews, as well as the Board-level targets of the FTSE Women Leaders Review. The restructuring of the Group Executive Committee has created new opportunities to increase the diversity of the executive leadership team, in line with the aims and objectives of the Group’s Diversity and Inclusion Policy. The Nomination Committee will continue to work with management to strengthen the breadth, depth and diversity of the talent pipeline leading up to the executive directors. This eort will be supported in part by the new committee charged with oversight of ESG matters, reﬂecting the importance of this area to our success and to management, the Board and our stakeholders. The composition of each of the Board’s committees has been carefully designed to ensure they have the necessary skills and links to committees with overlapping interests, enhancing the ﬂow of information between them. The beneﬁt of these new arrangements started to become evident as we prepared to publish our ﬁrst TCFD report this year. Lintstock Ltd (‘Lintstock’) conducted a detailed Board evaluation during the period to ensure the Board continued to operate eectively and was well positioned to lead the Group going forward. The Board and its committees subsequently reviewed and updated their priorities as necessary, to ensure our time is allocated to the areas of most importance to the Group in the coming year. After a long period of meeting mostly virtually, we are excited by the opportunity for more in-person interactions in FY23. See page 114 of the Corporate Governance Statement and pages 30–33 of our Section 172 statement for more details of the Board’s principal areas of focus and key decisions We are looking forward to welcoming shareholders to our 2022 AGM (assuming no untoward developments). We will also be holding a pre-AGM online event for anyone unable to attend the AGM. I hope you will be able to join and engage with us at one of these opportunities. Dame Inga Beale Non-executive Chair 24 May 2022 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT102 CONTENTS 102 Chair’s introduction 103 Board of Directors 108 Group Executive Committee 109 Corporate Governance Statement 121 Audit and Risk Committee Report 132 Clinical Performance Committee Report 135 ESG Committee Report 137 Nomination Committee Report 143 Remuneration Committee Report 148 Directors’ Remuneration Policy 157 Annual Remuneration Report 168 Other disclosures 171 Statement of directors’ responsibilities 1 Dr Muhadditha Al Hashimi 2 Dr Ronnie van der Merwe 3 Jannie Durand 4 Steve Weiner 5 Dr Anja Oswald 6 Danie Meintjes 7 Natalia Barsegiyan 8 Jurgens Myburgh 9 Zarina Bassa 10 Tom Singer 11 Dame Inga Beale 12 Dr Felicity Harvey 21 3 4 5 6 7 8 9 10 11 12 BOARD OF DIRECTORS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 103 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT104 KEY STRENGTHS AND EXPERIENCE • Nearly 40 years’ business management and leadership experience • Instrumental in large-scale digital and cultural transformation As the ﬁrst female CEO of Lloyd’s of London, from 2014 to 2018, Inga led its expansion into Dubai, China and India, and advanced diversity and inclusion initiatives across the international insurance sector. Her background in global ﬁnancial services, insurance and risk management brings a dierent perspective to the Board’s debates. Previously, she held various senior leadership positions at Converium, Zurich Insurance Group, Canopius and GE Insurance Solutions. She has been an associate of the Chartered Insurance Institute since 1987 and was appointed Dame Commander of the Order of the British Empire in 2017 for services to the UK economy. KEY EXTERNAL APPOINTMENTS Independent non-executive director of Crawford & Company, Inc. and Willis Towers Watson plc, member of the supervisory board of NN Group N.V., and Patron of Insuring Women’s Futures. KEY STRENGTHS AND EXPERIENCE • Strong track record of leadership and management within private sector healthcare • Experience in strategy, organisational development, clinical performance, technology adoption and quality management • Qualiﬁed anaesthesiologist with expertise in intensive care, acute and chronic pain, and trauma, as well as managed healthcare principles and reimbursement models Ronnie joined Mediclinic in 1999 and served as Chief Clinical Ocer before his appointment as Group CEO. He was an executive director of Mediclinic International Ltd from 2010 up to the reverse takeover of Al Noor Hospitals Group plc. Ronnie has extensive knowledge of Mediclinic’s operations. He established the Clinical Services, Clinical Information, Advanced Analytics, Health Information Management and central Procurement functions at Mediclinic, driving growth. He holds an MBChB (Stellenbosch University), a DA (SA) (College of Anaesthetists of South Africa) and the FCA (SA) (Fellowship of the College of Anaesthetists of South Africa), and has completed the Advanced Management Program (Harvard Business School). KEY EXTERNAL APPOINTMENTS Non-executive director of Spire since 24 May 2018 under the terms of the shareholder agreement between Spire and Mediclinic. KEY STRENGTHS AND EXPERIENCE Over 20 years’ broad ﬁnancial and accounting experience As a qualiﬁed chartered accountant with extensive investment banking experience, Jurgens takes a balanced approach to ﬁnancial management and growth. Since joining Mediclinic as Group CFO, he has driven a structured approach to capital allocation with an emphasis on free cash ﬂow and ROIC. Previously, he served as CFO at Datatec Ltd. He qualiﬁed with KPMG and, in 2001, joined The Standard Bank of South Africa Ltd, where he was appointed as Head of Mergers and Acquisitions in 2009. He holds a BCom Hons in Accounting (University of Johannesburg) and is registered with the South African Institute of Chartered Accountants (‘SAICA’). KEY EXTERNAL APPOINTMENTS None. NATIONALITY: BRITISH APPOINTED: CHAIR DESIGNATE MARCH 2020, CHAIRJULY 2020 A Audit and Risk Committee C Clinical Performance Committee E ESG Committee I Investment Committee N Nomination Committee R Remuneration Committee Chair of committee DAME INGA BEALE NON-EXECUTIVE CHAIR NE I CR E I I NATIONALITY: SOUTH AFRICAN APPOINTED: AUGUST 2016 JURGENS MYBURGH GROUP CHIEF FINANCIAL OFFICER COMMITTEE MEMBERSHIP KEY The biographies of the directors and their committee memberships are set out in this section. NATIONALITY: SOUTH AFRICAN APPOINTED: JUNE 2018 DR RONNIE VAN DER MERWE GROUP CHIEF EXECUTIVE OFFICER BOARD OF DIRECTORS CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 105 KEY STRENGTHS AND EXPERIENCE • Signiﬁcant experience of healthcare and higher education industry in the UAE • Strategic and tactical expertise in operations, ﬁscal management and transaction negotiation Muhadditha contributes valuable insights into the Middle East’s geopolitical landscape. Previously, she was CEO of Dubai Healthcare City; CEO of the Mohammed Bin Rashid Al Maktoum Academic Medical Center; Deputy CEO of Tatweer; a member of Dubai Holding; Executive Dean of the Faculty of Health Sciences, Higher Colleges of Technology (‘HCT’); Acting Deputy Vice Chancellor of Academic Aairs at HCT; and Director of Education of the Harvard Medical School Dubai Center. She holds a BS in Medical Technology (University of Minnesota), an MSc in Clinical Laboratory Services (University of Minnesota) and a Doctor of Public Health (University of Texas). KEY EXTERNAL APPOINTMENTS President and chair of the board of trustees of the Sharjah Education Academy; chair of the Sharjah Private Education Authority; a member of the University of Sharjah’s board of trustees, Audit and Compliance Committee and Academic Committee. KEY STRENGTHS AND EXPERIENCE • Strong ﬁnance background with commercial and strategic focus • Extensive understanding of data analytics to support transformation Natalia is a former Chief Commercial Ocer of Yum! Brands, Inc. (owner of brands such as KFC) and former CFO of its subsidiary, Taco Bell. A certiﬁed professional accountant (RF CPA) and certiﬁed management accountant (USA CMA), she was born in Ukraine, and has lived and worked across the United States, Europe, Russia and the UK. She holds an MEng in Electrical Engineering (Moscow State University of Transport, Russia) and an MBA (Academy of National Economy, Russia), and completed executive education programmes on Valuation, Mergers and Acquisitions (Harvard), Financial Management (Stanford Graduate School of Business), and Organisational Design for Digital Transformation (MIT Sloan School of Management). KEY EXTERNAL APPOINTMENTS Non-executive director of Domino’s Pizza Group plc, chair of its Sustainability Committee and member of its Audit, Remuneration and Nomination committees; adviser to Kharis Capital, a private equity ﬁrm based in Belgium. C E C AN R E NATIONALITY: BRITISH APPOINTED: INDEPENDENT NON- EXECUTIVE DIRECTOR OCTOBER 2017, SID SEPTEMBER 2021 DR FELICITY HARVEY CBE SENIOR INDEPENDENT DIRECTOR NATIONALITY: EMIRATI APPOINTED: NOVEMBER 2017 DR MUHADDITHA AL HASHIMI INDEPENDENT NON-EXECUTIVE DIRECTOR NATIONALITY: FRENCH, RUSSIAN APPOINTED: AUGUST 2021 NATALIA BARSEGIYAN INDEPENDENT NON-EXECUTIVE DIRECTOR KEY STRENGTHS AND EXPERIENCE • Strategic and operational experience in complex, regulated environments • Strong ﬁnancial and accounting background • Diverse experience in listed companies across a breadth of sectors and jurisdictions Zarina has served as a non-executive director at several companies, including Kumba Iron Ore Limited, Mercedes Benz SA Ltd, Sun International Ltd, Vodacom South Africa Proprietary Ltd, Yebo Yethu Ltd and Woolworths Holdings Ltd, as well as SAICA, the Accounting Standards Board, and the Financial Services Board. She also chaired the South African Public Accountants’ and Auditors’ Board, and the South African Auditing Standards Board. Prior to that, she was a partner of Ernst & Young Inc. and, in 2002, joined the Absa Group, where she served as an executive director of Absa Bank, a member of the group’s executive committee and Head of the Private Bank. She holds a BAcc (University of Durban- Westville) and is registered with SAICA. KEY EXTERNAL APPOINTMENTS SID of Investec plc and Investec Ltd, the specialist banking and wealth management group with dual listings on the LSE and JSE, and non-executive director of certain of their subsidiaries; non-executive director of JSE Ltd and Oceana Group Ltd, South African companies listed on the JSE. NATIONALITY: SOUTH AFRICAN APPOINTED: FEBRUARY 2022 ZARINA BASSA INDEPENDENT NON-EXECUTIVE DIRECTOR R KEY STRENGTHS AND EXPERIENCE • In-depth knowledge of health sector with both clinical experience and public health expertise • Strong insight into healthcare technology and sustainable development Felicity was previously Director General for Public and International Health for the UK Government; Head of Medicines, Pharmacy and Industry Group at the Department of Health, London; Director of the UK Prime Minister’s Delivery Unit; Director of Prison Health for Her Majesty’s Prison Service; Head of Quality Management at NHS Executive; and Private Secretary to the Chief Medical Ocer. She holds an MBBS (St Bartholomew’s Medical College, University of London), a PgDip in Clinical Microbiology (The Royal London Hospital College, University of London) and an MBA (Henley Management College). She was appointed CBE in 2008 and is an Honorary Fellow of the Royal College of Physicians and a Fellow of the Faculty of Public Health. KEY EXTERNAL APPOINTMENTS Non-executive director of Guy’s and St Thomas’ NHS Foundation Trust and Halcyon Topco Ltd (ultimate parent company of Sciensus); visiting professor at the Institute of Global Health Innovation, Imperial College London; co-chair of the World Health Organization Independent Oversight and Advisory Committee for Health Emergencies Programme. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT106 KEY STRENGTHS AND EXPERIENCE • Over 20 years’ investment experience with substantial strategic and tactical expertise • Signiﬁcant knowledge of capital markets, ﬁnance and accounting, risk management, investor relations Jannie joined the Rembrandt Group in 1996 and became CEO of Remgro in 2012. He is the Board representative for Remgro, which holds a 44.56% interest in the Company. Jannie was a non-executive director of Mediclinic International Ltd from 2012 to 2016, when it combined with the Company (then Al Noor Hospitals Group plc) to become Mediclinic International plc. He holds a BAcc Hons in Accountancy (Stellenbosch University) and an MPhil in Management Studies (Oxford University). Jannie is registered with SAICA. KEY EXTERNAL APPOINTMENTS CEO of Remgro; non-executive chair for the following listed companies within the Remgro group: Distell Group Holdings Ltd, RCL Foods Ltd and Rand Merchant Investment Holdings Ltd. KEY STRENGTHS AND EXPERIENCE • Signiﬁcant operational, strategic and risk management experience • Extensive knowledge of the healthcare sector As the former Group CEO, Danie led Mediclinic’s eorts to invest in our workforce and is uniquely positioned to oversee and evaluate employee engagement. He was CEO of Mediclinic from 2010 up to his retirement on 1 June 2018. He became an executive director and Group CEO of the Company on 15 February 2016 upon the Company’s listing on the LSE. Danie served in various management positions in the Remgro group before becoming the Hospital Manager of Mediclinic Sandton in 1985. He joined Mediclinic’s Executive Committee in 1995 and became a director in 1996. He was seconded to the Group’s Dubai operations in 2006 and appointed CEO of Mediclinic Middle East in 2007. He served as a non-executive director of Spire from 2015 to 2018. He holds a BPL Hons in Industrial Psychology (University of the Free State) and completed the Advanced Management Program (Harvard Business School). KEY EXTERNAL APPOINTMENTS Non-executive director of Capitec Bank Holdings Ltd and Capitec Bank Ltd. KEY STRENGTHS AND EXPERIENCE • Experience in healthcare, clients’ needs and the medical operational sector • Experience in digital transformation and digital ecosystems in healthcare services • Insights into political, regulatory and administrative context of healthcare in Switzerland Anja was previously Deputy Medical Ocer in the Department of Health and Head of Medical and Pharmaceutical Services. She served on various cantonal, regional and national committees in Swiss health administration, working closely with political opinion leaders. She was also CEO of a healthcare start-up company and worked several years as a medical doctor in various hospitals. Anja holds an MD-PhD (University of Basel), specialising in Orthopaedic Surgery and Traumatology, as well as in Sports Medicine; an Executive MBA (University of Rochester-Bern); a certiﬁcate in General Management (University of Bern); and a certiﬁcate of the Swiss Board School (International Center for Corporate Governance of the University of St. Gallen). KEY EXTERNAL APPOINTMENTS CEO of Klinik Sonnenhalde AG; member of the boards of Integrierte Psychiatrie Winterthur and Zippsafe AG; Past-President of the Association of Private Hospitals in Basel. KEY STRENGTHS AND EXPERIENCE • Thorough understanding of UK-listed company environment, including risk management and internal control • Experience in healthcare, innovation and transformation Tom’s long career in ﬁnance makes him ideally suited to his role as Chair of the Audit and Risk Committee. He is a former non-executive director of Liberty Living Group PLC and DP Eurasia N.V. and previously served as CFO of InterContinental Hotels Group PLC and British United Provident Association (‘BUPA’), a provider of health-related services including private hospitals. Earlier in his career, Tom was CFO and Chief Operating Ocer of William Hill PLC and Finance Director of Moss Bros PLC. He started his career in professional services and spent a total of 12 years at Price Waterhouse and McKinsey. He is a qualiﬁed chartered accountant with a BSc Hons Finance and Accounting (University of Bristol) and has completed the Advanced Management Programme (INSEAD). KEY EXTERNAL APPOINTMENTS Non-executive director of Halfords Group plc, chair of their Audit Committee and member of their ESG, Nomination and Remuneration committees. I N C N IE I NATIONALITY: SOUTH AFRICAN APPOINTED: NON-EXECUTIVE DIRECTOR AUGUST 2018, NON- EXECUTIVE DIRECTOR FOR WORKFORCE ENGAGEMENT APRIL 2019 DANIE MEINTJES NON-EXECUTIVE DIRECTOR NATIONALITY: SWISS APPOINTED: JULY 2018 DR ANJA OSWALD INDEPENDENT NON-EXECUTIVE DIRECTOR NATIONALITY: BRITISH APPOINTED: JULY 2019 TOM SINGER INDEPENDENT NON-EXECUTIVE DIRECTOR NATIONALITY: SOUTH AFRICAN APPOINTED: FEBRUARY 2016 1 JANNIE DURAND NON-EXECUTIVE DIRECTOR BOARD OF DIRECTORS CONTINUED Note 1 Pieter Uys, the Head of Strategic Investment at Remgro, was appointed as Jannie’s alternate in April 2016. Prior to joining Remgro, he was a founding member and ultimately became the CEO of the Vodacom Group. Pieter holds an MEng in Electronic Engineering (Stellenbosch University) and an Executive MBA (Stellenbosch University). R A STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 107 KEY STRENGTHS AND EXPERIENCE • Signiﬁcant healthcare and international consumer goods experience • Finance and business transformation leadership roles in large, complex organisations in developed and developing markets Steve spent the majority of his ﬁnance career with the international consumer goods group Unilever, most recently as Group Controller responsible for performance management, accounting, reporting and control. He was a member of Unilever’s Global Finance Leadership Team, working closely with the group’s board and Audit Committee. He has a Masters in Finance (Columbia University) and a BSc in Management (Rutgers University). KEY EXTERNAL APPOINTMENTS Non-executive director of Guy’s and St Thomas’ NHS Foundation Trust, chair of their Transformation and Major Programmes Committee and member of their Audit and Risk, Quality and Performance, Remuneration, and Strategy and Partnership committees; non-executive director of King’s College Hospital NHS Foundation Trust and member of its Audit and Finance and Commercial committees. Indicates strong oversight or practical experience A RC NATIONALITY: AMERICAN APPOINTED: JULY 2020 STEVE WEINER INDEPENDENT NON-EXECUTIVE DIRECTOR HEALTHCARE SUSTAINABILITY RISK MANAGEMENT IT, CYBERSECURITY OTHER STAKEHOLDER MANAGEMENT INNOVATION, TRANSFORMATION MEDICAL/CLINICAL/ OPERATIONAL MARKETING AND CUSTOMER FOCUS AUDIT, FINANCE AND CONTROL STRATEGY, CAPITAL MARKETS, INVESTOR MANAGEMENT HUMAN RESOURCES, TALENT MANAGEMENT, COMPENSATION AND BENEFITS Dame Inga Beale Dr Ronnie van der Merwe Jurgens Myburgh Dr Felicity Harvey Dr Muhadditha Al Hashimi Natalia Barsegiyan Zarina Bassa Jannie Durand Danie Meintjes Dr Anja Oswald Tom Singer Steve Weiner BOARD SKILLS MATRIX MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT108 The Group CEO is supported by an experienced and capable executive management team, with extensive industry experience and organisational knowledge. The success of Mediclinic is testament to the strong management team and its ability to execute on the Mediclinic Group Strategy. See page 104 for the biographies of the Group CEO and Group CFO See the ‘About Mediclinic International’ section of our website at www.mediclinic.com for the complete biographies of the Group Executive Committee GROUP EXECUTIVE COMMITTEE DR DIRK LE ROUX Group Chief Information Ocer DR DANIEL LIEDTKE Chief Executive Ocer: Hirslanden MAGNUS OETIKER Group Chief Strategy Ocer GREG VAN WYK Chief Executive Ocer: Mediclinic Southern Africa KOERT PRETORIUS Group Chief Operating Ocer DAVID HADLEY Chief Executive Ocer: Mediclinic Middle East DR RENÉ TOUA Group Chief Clinical Ocer GERT HATTINGH Group Chief Governance Ocer DR TYSON WELZEL Group Chief Innovation Ocer CORPORATE GOVERNANCE STATEMENT COMPLIANCE WITH THE UK CORPORATE GOVERNANCE CODE AND LISTING RULES This Governance and Remuneration Report describes how the Board has applied the principles of the Code published by the FRC (www.frc.org.uk) and complied with its provisions. The ﬁve themes set out in the Code are covered in this Corporate Governance Statement (the ‘Statement’) and subsequent pages of the Governance and Remuneration Report or in other sections of the Annual Report, where indicated with cross references. The Board is pleased to report that during FY22 and up to 24 May 2022 (the ‘Last Practicable Date’), the Company complied with all the provisions of the Code, with the following exceptions: • Steve Weiner’s appointment as Chair of the Remuneration Committee on 13 September 2021 was not fully compliant with Provision 32 as, prior to that, he had served as a member of the Remuneration Committee for only 10 months. Nevertheless, the Nomination Committee had every conﬁdence that Steve had the appropriate skills and experience to carry out the role. He had attended ﬁve meetings of the Remuneration Committee after his appointment as a member, and was therefore familiar with its discussions • Under the Code and associated FRC guidance, the chair is not subject to the independence test after appointment, and excluded from the Board independence calculation, but is expected to exercise objective judgement throughout their service. The Code allows a chair who was independent upon appointment to be a member of the remuneration committee. However, there is no explicit indication on how the same chair should be treated for the purpose of calculating the independence of the nomination committee. The Board considers Dame Inga Beale to be fully independent, as explained on page 111 of the Annual Report, but notes that if this were not the case, the composition of the Nomination Committee would not be viewed as compliant with Provision 17 of the Code. In addition to complying with all other applicable corporate governance requirements in the UK in accordance with the Company’s primary listing on the LSE, the Board is also satisﬁed that the Company meets all the relevant requirements of the JSE Listings Requirements and the NSX Listings Requirements arising from its secondary listings on the JSE in South Africa and the NSX in Namibia, respectively. THEME PAGE/S Board leadership and Company purpose 26–34, 91–92, 102, 110–112, 114–117, 129 Division of responsibilities 110–114, 119, 136, 157–161 Composition, succession and evaluation 110–111, 117–119, 137–142 Audit, risk and internal control 89, 91–101, 121–131, 171 Remuneration 143–167 Midstream, South Africa and workings. In addition, as a member of the Audit and Risk and the Clinical Performance committees, he had excellent insight into the setting of appropriate ﬁnancial and non-ﬁnancial performance measures and targets for the STI and LTI schemes. • The Remuneration Committee has engaged with investors on the Company’s Remuneration Policy and outcome. However, the Remuneration Committee has not engaged directly with the workforce on remuneration matters and is therefore not fully compliant with Provisions 40 and 41 of the Code. See page 156 of the Remuneration Committee Report for a more detailed explanation STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 1092022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 109 BOARD COMPOSITION AND DIVERSITY At the date of this Annual Report, the Board comprised the non-executive Chair, two executive directors, seven independent non-executive directors and two non-executive directors. The Board seeks to construct an eective, robust, well-balanced and complementary Board, the capability of which is appropriate to the nature, complexity and strategic demands of the business. The Board and the Nomination Committee actively consider the structure, size and composition of the Board and its committees when contemplating new appointments and succession planning for the year ahead. Various diversity factors are taken into account in determining the optimal composition of the Board and its committees, together with the need to balance their composition and refresh this progressively over time. The Company’s non-executive directors come from varied industries, backgrounds and geographical locations and have appropriate experience of organisations with international reach. The skills and expertise of the Board have been further extended and reinforced through the appointment of Natalia Barsegiyan and Zarina Bassa during the year under review. See pages 139–141 of the Nomination Committee Report for more information on Board diversity, the Board Diversity Policy and Board succession planning EXTERNAL APPOINTMENTS AND CONFLICTS OF INTEREST The Board has well-established and eective procedures to identify and manage directors’ conﬂicts of interest, including those that may result from Remgro’s shareholding in the Company, and thus ensure that the overall independence of the Board is not compromised or overridden by the inﬂuence of a third party. Candidates for Board roles are required to complete a questionnaire prior to Board approval of their appointment to establish whether they have any direct or indirect, actual or potential conﬂict of interest or any direct or indirect interest in a proposed or existing transaction or arrangement entered into by the Company. Directors are required to complete this questionnaire annually and are reminded at each meeting of their duty to declare any new conﬂicts, interests in proposed transactions or changes to previous declarations. Candidates for Board roles are also requested to provide a list of their existing signiﬁcant external commitments and associated time commitments to inform the decisions made by the Nomination Committee and the Board. Following their appointment, the Board Charter requires directors to seek the Board’s approval prior to accepting any new appointments. Independence (%) Gender and ethnicity Independent non-executive directors Diverse ethnicity 3 Non-executive directors White 4 6 10 2 0 2 Executive directors Total 50% 50% 12 FIGURE 1: BOARD COMPOSITION AND DIVERSITY 1 18%18%64% Tenure 4 – non-executive directors (%) 3–6 years: 30% < 3 years: 50% > 6 years: 20%  FEMALE MALE TOTAL Notes 1 The composition of the Board is shown at the Last Practicable Date. 2 Calculation excludes the Chair of the Board, as per Provision 11 of the Code. 3 Diverse ethnicity refers to individuals of African, Asian, Middle Eastern, Central and South American background (as considered by the Parker Review) or from other historically disadvantaged ethnic groups. 4 Tenure is calculated at 31 March 2022, from the date of ﬁrst appointment as a director of the Company or one of its predecessor companies. Country of residence (number of directors) South Africa The UK France The UAE Switzerland 45 1 11 See the directors’ biographies and skills matrix on pages 104–107 The Board seeks to construct an eective, robust, well-balanced and complementary Board. CORPORATE GOVERNANCE STATEMENT CONTINUED 110 Any proposed appointment, new conﬂict of interest or interest in a proposed transaction notiﬁed to the Company is considered for authorisation by the Board at the next scheduled meeting. The relevant director is not permitted to count towards quorum nor vote on the corresponding resolution. The directors eligible to vote give particular consideration to the type of role, expected time commitments, the impact on the director’s ability to discharge their duties to Mediclinic, any relationships between the Group and the external organisation, and their duties as directors under the Act. Any authorisation is granted in accordance with the Act and the Articles, with conditions attached where appropriate. The ESG Committee annually reviews any authorisations granted by the Board and makes the appropriate recommendations to the Board. The Board is satisﬁed that the external commitments of the Chair and other non-executive directors serve to enhance their skills and experience for the beneﬁt of Mediclinic and do not aect their ability to commit sucient time to their roles as directors of the Company, as evidenced by their attendance records and contributions in meetings. DIRECTORS’ INDEPENDENCE The ESG Committee, at the request of the Board, also reviews the independence of the non-executive directors. Each review is undertaken by reference to Provision 10 of the Code and the director’s individual circumstances, including their external appointments and conﬂicts of interest, to ensure there are no relationships or matters likely to aect their judgement. Careful consideration is also given to the conduct and independence of thought and judgement exhibited by the director. The Board is satisﬁed that all seven directors identiﬁed as independent non-executive directors in their biographies are independent and free from any relationship that could aect their judgement and continue to demonstrate their independence by how they conduct themselves in Board meetings, including how they exercise independent thinking. The Board also carefully considered the independence of the Chair, in view of the composition of the Nomination Committee after Alan Grieve stepped down as a member on 13 September 2021. After following the approach adopted by the ESG Committee to assess the independence of the other non-executive directors, outlined above, the Board is satisﬁed that the Chair continues to be fully independent. DIRECTORS’ ELECTION/RE-ELECTION Under the Company’s Articles and the Code, a director appointed by the Board must stand for election at the ﬁrst AGM subsequent to such appointment and other directors must stand for re-election annually. Taking into account the results of the FY22 Board evaluation, the skills of each director and the composition of the Board, including the balance of independence, the Board considers that each of the current directors is committed to their role, has sucient time available to fully discharge their duties, and will continue to contribute positively and eectively to the Group’s long-term, sustainable success. The Board therefore recommends the election of Natalia Barsegiyan and Zarina Bassa (appointed on 1 August 2021 and 1 February 2022, respectively) and the re-election of all other current directors at the Company’s 2022 AGM. Remgro holds 44.56% of the issued ordinary shares of the Company and is therefore regarded as a controlling shareholder of the Company for the purposes of the Listing Rules. Accordingly, as explained in more detail in the 2022 Notice of AGM, the election or re-election of the independent non-executive directors must be approved by a majority of: (a) the shareholders of the Company; and (b) the independent shareholders of the Company. FIGURE 2: SUMMARY OF MEDICLINIC’S CORPORATE GOVERNANCE FRAMEWORK MANAGEMENT ACCOUNTABILITY BOARD OVERSIGHT BOARD OF THE COMPANY AUDIT AND RISK COMMITTEE INVESTMENT COMMITTEE CLINICAL PERFORMANCE COMMITTEE NOMINATION COMMITTEE ESG COMMITTEE REMUNERATION COMMITTEE GROUP EXECUTIVE COMMITTEE DIVISIONS AND BUSINESS UNITS See pages 121–131 See page 112 See pages 132–134 See pages 137–142 See pages 135–136 See pages 143–167 Information ﬂows between Committees as well up to Board MEDICLINIC’S CORPORATE GOVERNANCE FRAMEWORK The Board has adopted a robust corporate governance framework which encompasses the minimum expectations of the Board in terms of standards, ethical conduct and internal controls. The framework maps out where accountability resides in line with delegated authorities and is shaped in part by the areas of importance to the Group’s operations and to the Board. Oversight of delegated matters is supported by formalised reporting channels, described further below. Our governance framework guides all our decisions and outcomes, to support the delivery of our strategy STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 111 CORPORATE GOVERNANCE STATEMENT CONTINUED THE ROLE OF THE BOARD The Board is responsible for promoting Mediclinic’s long-term, sustainable success, in line with the Group’s purpose and vision. Consequently, the Board is deeply engaged in developing the Group’s strategic direction, ensuring it aligns with the Group’s purpose, vision, values and culture, and monitoring progress of its delivery. The Board is also responsible for organising and directing the aairs of the Group in a manner that supports the eective delivery of the Group’s strategy and reﬂects the Group’s purpose and values. DIVISION OF RESPONSIBILITIES There is a clear segregation of responsibilities between the Chair and Mediclinic’s executive leadership, set out in a Board Charter, which is reviewed annually by the Board. The charter clearly deﬁnes the roles of the Chair, SID, Group CEO, Company Secretary, non-executive directors and the Board committees. See the ‘Governance’ section of the Company’s website at www.mediclinic.com for further details of each of the above roles In particular: • The Chair is primarily responsible for leading the Board’s eective operation and governance. The Chair also ensures that the Board understands key stakeholders’ views and seeks assurance that they have been considered. The role is a non-executive one, but the Chair meets regularly with the Group CEO to stay informed and provide advice. • The Group CEO, supported by the wider Group Executive Committee, is responsible for implementing the Group’s strategy and leading the day- to-day operation of the business within the agreed delegations of authority, governance and processes, and with clearly deﬁned accountabilities. The Group CEO and Group CFO provide written reports at each Board meeting on executive matters and Board papers include dashboards tracking the Group’s ﬁnancial and non-ﬁnancial performance. • The SID’s role includes acting as a sounding board for the Chair, leading the performance evaluation of the Chair, and generally being available to directors and shareholders should they wish to discuss matters that have not been addressed through normal channels. • In order to operate eciently and provide the appropriate level of attention and consideration to relevant matters, the Board has established six committees that carry out certain tasks on its behalf in accordance with their expertise and written terms of reference. The composition of each committee is deliberately designed to ensure common membership between committees with overlapping interests and that individual directors are not overburdened by their committee roles. The terms of reference of each committee are reviewed at least annually by the Board to ensure they remain appropriate. Details of the key responsibilities and activities of the Audit and Risk, Clinical Performance, ESG, Nomination and Remuneration committees are set out in the separate reports for these committees that follow this Statement. The key responsibility of the Investment Committee is to provide strategic input and direction on capital allocation and growth opportunities in new geographies. It reviews and approves or makes recommendations to the Board on proposed investments and capital expenditures, in accordance with its authority levels. It further monitors the performance of approved investments and debt funding, including the reﬁnancing of existing facilities which fall within its remit. MATTERS RESERVED FOR THE BOARD The Board’s delegated authorities framework includes a schedule of matters reserved for approval by the Board, which covers areas material to the Group’s strategy and overall resilience. This schedule is reviewed annually by the Board and includes: • the Group’s purpose, values, strategy and strategic goals; • the annual budget and long-term ﬁnancial and business plan, and ﬁnancial results and reporting; • the Group’s dividend policy and dividend payments; • the Group’s risk appetite and system of risk management and internal control; • changes to the Group’s capital structure; • major acquisitions and disposals, and other transactions outside the delegated limits; • changes to the Board and Board committee structure, size and composition, including new appointments; and • succession plans for the Board and senior management. Other key elements of the Board’s role include: • establishing and overseeing a framework of prudent and eective controls; and • ensuring eective engagement with shareholders and other stakeholders. See the Risk management report and the Audit and Risk Committee Report on pages 91–92 and 128–129, respectively, as well as pages 115–117 of this Statement and Stakeholder engagement on pages 26–29 The composition of each committee is deliberately designed to ensure common membership between committees with overlapping interests. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT112 Notes 1 The ESG Committee was constituted with eect 1 September 2021. Prior to that, sustainable development matters were addressed by the former Clinical Performance and Sustainability Committee, which was refocused as a purely Clinical Performance Committee with eect 1 September 2021. 2 The number of meetings held refers to scheduled Board and committee meetings during FY22. In addition, the Board held one ad hoc meeting relating to the proposed takeover of Spire by Ramsay Health Care Limited. Between the Company’s ﬁnancial year end and the Last Practicable Date, the Board held one scheduled meeting, primarily to approve this Annual Report and related matters. The Investment Committee held three ad hoc meetings during the year to deal with urgent approvals required. Further details of the other committees’ meetings can be found in their separate committee reports that follow this Statement. 3 Attendance of committee meetings is shown for committee members only. Dr Muhadditha Al Hashimi was appointed to the Remuneration Committee on 13 September 2021. Natalia Barsegiyan was appointed to the Board and as a member of the Audit and Risk and the ESG committees on 1 August 2021. Zarina Bassa was appointed to the Board and as a member of the Remuneration Committee on 1 February 2022. Alan Grieve and Trevor Petersen stepped down from their roles as committee members from 13 September 2021 and retired from the Board on 14 February 2022. Table 1 alongside sets out the directors’ attendance record for scheduled Board and committee meetings during FY22. Meetings continued to be held as virtual or hybrid meetings due to various COVID-19 travel restrictions at the time. The new practices adopted have also facilitated greater participation by employees in relevant discussions, increasing the interaction between directors and senior leadership and their teams, and providing more visibility over the talent pipeline within the Group. Directors are expected to attend all Board and relevant committee meetings. Directors who are unable to attend a meeting due to certain exceptional circumstances, such as ill health or pre- existing or unexpected and unavoidable business or personal commitments, still receive the relevant papers. Where feasible, they will communicate their comments and observations to the Chair of the Board or relevant committee for raising as appropriate during the meeting. On the rare occasions where Jannie Durand is unable to attend a meeting, he ensures his alternate, Pieter Uys, attends in his place and is fully briefed in advance. Each director’s attendance record is considered as part of the formal annual review of their performance. Despite the challenges posed by COVID-19, directors’ external appointments had no, or extremely limited, impact on their attendance. The Board was satisﬁed that all absences from Board or committee meetings were the result of serious or unforeseen circumstances outside the directors’ control. COMMITTEES NAME BOARD AUDIT AND RISK CLINICAL PERFORMANCE 1 ESG 1 INVESTMENT NOMINATION REMUNERATION Number of meetings held 2 7 4 5 1 2 2 5 Directors at 31 March 2022 Dame Inga Beale 7/7 - - 1/1 2/2 2/2 5/5 Dr Ronnie van der Merwe 7/7 - 5/5 1/1 2/2 - - Jurgens Myburgh 7/7 - - - 2/2 - - Dr Felicity Harvey 7/ 7 - 5/5 1/1 - 2/2 - Dr Muhadditha Al Hashimi 3 7/7 - 5/5 - - - 3/3 Natalia Barsegiyan 3 4/5 3/3 - 1/1 - - - Zarina Bassa 3 2/2 - - - - - 2/2 Jannie Durand 6/7 - - - 2/2 1/2 - Danie Meintjes 7/7 - - 1/1 2/2 - - Dr Anja Oswald 7/7 - 4/5 - - 2/2 - Tom Singer 7/7 4/4 - - 1/1 - 5/5 Steve Weiner 7/7 4/4 5/5 - - - 5/5 Directors retired during the year Alan Grieve 3 6/6 2/2 - - 1/1 - - Trevor Petersen 3 5/6 2/2 - - - - 2/2 TABLE 1: BOARD AND COMMITTEE MEETING ATTENDANCE BOARD AND COMMITTEE MEETINGS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 113 Board and committee meetings follow clear agendas developed by the Chair of the Board or committee, the Group CEO and/or other relevant members of management and the Company Secretary. These are based on an annual plan of business and adjusted to reﬂect current strategic and operational developments. Each agenda is structured to prioritise matters for decision and discussion, and ensure that sucient time is allocated to address all necessary matters. Meeting papers are circulated at least one week in advance of each meeting via an electronic portal, which also includes a library of reference resources. In order to support fully informed decision- making, committee meetings are carefully sequenced to allow insights and decisions to be shared between committees on a timely basis. In addition, committee meetings are held in advance of Board meetings, allowing committee chairs to provide a prompt and full report on the key matters discussed. All committee papers are made available to all directors, except for those on matters of a particularly sensitive nature. In addition, copies of committee minutes are circulated to all Board members at the next opportune meeting. The Chair of each committee attends the AGM to respond to investors’ questions regarding the committee’s activities. FY22 PRINCIPAL AREAS OF FOCUS The Board’s principal areas of focus and key decisions taken during FY22 and up to the Last Practicable Date are set out alongside. See the Section 172 statement on pages 30–33 for more detailed information about some of the principal decisions made by the Board during FY22 Approval of: • the Group’s Capital Allocation Policy • adjustments to the Group’s strategy and monitoring of its implementation, including: – deep dives into innovation and digital transformation, and growth across the continuum of care and into new markets; – renewable energy purchase agreement with Energy Exchange; and – project to relocate, combine and expand two existing facilities on one site in the city of George, South Africa • FY22 budget and ﬁve-year plan and preparation for FY23 process • the Group’s response to Ramsay Health Care Limited cash oer to acquire Spire Approval of: • FY21 and FY22 preliminary results and Annual Report • FY22 interim results and trading updates • ﬁnal and interim dividend proposals • impact of COVID-19 • going concern and viability Consideration of: • the Group’s holistic performance through Group CEO report and suite of ﬁnancial and non-ﬁnancial information dashboards at each Board meeting Consideration of: • senior leadership succession plans and development • workforce and stakeholder engagement outcomes and eectiveness • diversity and inclusion progress • employee wellbeing and impact of COVID-19 Approval of: • risk appetite statement, robust assessment of emerging and principal risks and their management or mitigation • changes in the structure and composition of the Board committees to establish a separate ESG Committee • Group policies, including Board Charter and committees’ terms of reference Consideration of: • external evaluation of Board and committees • external appointments and conﬂicts of interest • cybersecurity preparedness • legal, regulatory and governance updates and compliance Review of: • eectiveness of risk management processes and material internal controls Consideration of: • share register analysis • investor feedback from meetings and quarterly QuantiFire reports • investor feedback and voting at the 2021 AGM • feedback from investor consultations on remuneration matters CORPORATE GOVERNANCE STATEMENT CONTINUED TABLE 2: BOARD’S FOCUS AREAS Strategy Performance Leadership and people Governance and risk Investor engagement MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT114 PURPOSE AND CULTURE The Group’s purpose, to enhance the quality of life, was approved by the Board in February 2019 and sits at the core of the Group’s strategy and all decisions made by the Board. The Board is responsible for promoting, assessing and monitoring the Group’s culture and ensuring it is aligned with the Group’s purpose, values and strategy. The Group’s Code of Business Conduct and Ethics, which applies to all directors and employees and is reviewed and approved annually by the Board, encourages an organisational culture that is client centred, trusting and respectful, patient safety focused, performance driven and team orientated. The Board fully endorses these values and the behaviours they seek to promote, and ensures they are reﬂected in its discussions and decision-making. The Board monitors workforce culture with the assistance of its committees in a number of ways, including through: • reports on medical practitioner and client experience surveys; • direct feedback from employees and reports on workforce engagement, as described in the ‘Workforce engagement’ section alongside; • clinical performance reports; • reports on internal audits, compliance, ethics and fraud; and • non-ﬁnancial information dashboards presented at each Board meeting. The quantitative and qualitative information received allows the Board to ensure that the Group’s culture reﬂects its stated values and is aligned with its purpose. WORKFORCE ENGAGEMENT Employee wellbeing continued to be of the utmost importance to the Group and at the forefront of every decision made by the Board as employees had to deal with COVID-19 for a second year. Listening and responding to employee needs through eective communication and sound relations are important components in being regarded as the employer of choice among existing and prospective employees, and vital to maintaining an engaged and loyal workforce that will help deliver the Group’s strategic goals. The negative impact of COVID-19 continues to magnify the workforce-related risks for the Group, as discussed in the Risk management report on page 96. Workforce engagement is conducted through various methods, including virtual leadership conferences, annual employee engagement surveys and other methods outlined in our report on stakeholder engagement on pages 26–29. Danie Meintjes is the designated non- executive director responsible for workforce engagement. As the former Group CEO and with his prior experience as divisional Human Resources Executive, he was closely involved with the Company’s approach to engaging with, investing in and rewarding employees. Given his knowledge and experience gained over 30 years in dierent capacities at Mediclinic, the Board considers him well positioned to oversee engagement eorts and relay the voice of the workforce. His responsibilities in this regard include: • reviewing and assessing the existing workforce engagement programmes; • understanding and interpreting the views of the workforce; • providing feedback to the Board on the impact and eectiveness of the Group’s various workforce engagement initiatives; • conveying feedback from the Group’s workforce (as consolidated via multiple channels) to the Board and investors; • providing feedback to the workforce through existing (or, if appropriate, new) communication channels on how their input was communicated to and considered by the Board; and • providing a formal report on workforce engagement once a year to the ESG Committee and to the Board. Danie works closely with the Group Chief Strategy and Human Resources Ocer and his team in accordance with a work plan designed to support him in the fulﬁlment of this role. The regular dashboards presented to the Board, reports from the Group CEO and an annual detailed report from Danie enable the Board to assess and monitor the themes arising from the employee engagement programmes. The creation of a separate ESG Committee in September 2021 has increased the opportunity for more in-depth discussion of employee engagement, and diversity and inclusion outcomes. The Board reviewed the existing and planned workforce engagement channels, with due consideration for recommendations by the designated non-executive director, and was satisﬁed that these provide an eective means of collecting feedback from and providing feedback to the workforce. It is recognised that the programme of engagement activities and reports to the ESG Committee and the Board will continue to evolve in the coming year in response to directors’ feedback and as the Board resumes in-person meetings and annual site visits. See the Sustainable development overview on pages 34–46 for more Employee wellbeing continued to be of the utmost importance to the Group and at the forefront of every decision made by the Board as employees had to deal with COVID-19 for a second year. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 115 SHAREHOLDER ENGAGEMENT The Board seeks to maintain open and regular communication and engagement with shareholders throughout the year on a range of matters and values their opinions and the time they make available to engage with the Company. The Group CEO, Group CFO and Head of Investor Relations have primary responsibility for managing eective, regular and transparent communications with institutional investors on matters such as operational and ﬁnancial performance, regulatory changes, governance and strategy. They do so through an annual programme of meetings and conferences, which remained mostly virtual during FY22 in view of the diculties with international travel due to COVID-19. The Chair and the SID also engage regularly with major investors and Board committee chairs are available upon request to meet with investors. The Chair ensures that the Board as a whole has a clear understanding of investors’ views and the Board considers that appropriate and proportionate mechanisms exist to acquire a good understanding of major investors’ key focus areas. These include direct feedback from investors to management and the Investor Relations function, which is then shared through the investor relations reports at every Board meeting, and quarterly reports prepared by QuantiFire, a service provider that collects feedback and conﬁdence measures from investors. CORPORATE GOVERNANCE STATEMENT CONTINUED  Geographical breakdown of shareholders Africa 76% North America 7% Remgro 45% Other 4% Rest of Africa 31% UK 13% AGM The Board values the AGM as a valuable opportunity to engage with shareholders, including retail investors, and meet them informally in person after the main business of the meeting. All directors will generally attend the AGM, in particular the Chair, the Group CEO and Group CFO, and the committee chairs. It was therefore disappointing that the Company’s 2021 AGM was again disrupted by COVID-19 travel restrictions and public health guidelines. However, the Board held an online shareholder event ahead of the AGM’s proxy voting deadline, allowing shareholders to ask questions in writing in advance or at the event and reﬂect the responses received in their proxy votes. A recording of the event, including the responses from the Board to questions received, was published on the Company’s website shortly afterwards. Shareholders were also invited to submit questions ahead of the AGM. Over 90% of the issued share capital of the Company was voted at the 2021 AGM. The Company’s 2022 AGM will take place on 28 July 2022 in London and (subject to no change in circumstances) shareholders are encouraged to attend in person. The speciﬁc arrangements for the meeting are outlined in the separate Notice of AGM accompanying this document. In addition, for shareholders unable to attend the meeting, the Board is again holding an online event on 14 July 2022. The Board looks forward to engaging with a broad range of the Company’s shareholders at these two events. Typical investor relations programme FY22 • Management and the Head of Investor Relations participated in 19 roadshows, investor conferences and ad hoc capital market events • The Chair and the SID held one-to-one meetings with 10 major international and South African investors • The Head of Investor Relations conducted private client broker meetings in the UK • Meetings with more than 129 unique ﬁnancial institutions • Initiation of dedicated ESG engagement • AGM and pre-AGM shareholder event • Material published on the Group website and divisional social media channels and websites Continuous physical and virtual engagement with capital markets, including: • one-to-one and group meetings; • investor conferences; • roadshows; • results presentations; • site visits; and • ad hoc events with investors, sell-side analysts and sales teams.  19 ROADSHOWS AND OTHER EVENTS 129 MEETINGS WITH UNIQUE FINANCIAL INSTITUTIONS 10 ONE-TO-ONE MEETINGS WITH MAJOR INVESTORS MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT116 SHAREHOLDER ENGAGEMENT FOLLOWING THE 2021 AGM At the Company’s 2021 AGM, the resolution to authorise the directors to allot ordinary shares (Resolution 18) received 79.60% support. In accordance with the Code, the Company sought to engage with key investors after the AGM to ensure it fully understood the reasons behind the result and published an update on the Group’s website on 25 January 2022. As noted in the update, the voting outcome reﬂects the diering market practice between the UK and South Africa, where investors in the latter jurisdiction usually approve more restricted levels of authority to issue shares and prefer to vote on the proposed allotments of shares on a case-by-case basis. Most South African investors acknowledge that they operate under policies that do not permit them to support the UK standard level of authority to allot shares, although a number do understand the Company’s position. ASSESSING THE BOARD’S EFFECTIVENESS The Board is committed to monitoring and improving its performance and eectiveness. This is achieved primarily through a formal annual evaluation of the Board, its committees and individual directors (including the Chair), and ensuring the feedback received is acted upon. The Board conducts an in-depth, externally facilitated evaluation every three years and an internally facilitated, questionnaire-based evaluation during the other two years. The Chair also meets regularly with the SID and other non-executive directors, individually and as a whole, and with the Company Secretary and members of management after each meeting. These sessions provide opportunities to exchange feedback on the functioning of the Board and identify opportunities for improvement, supplementing the formal evaluation process. As Mediclinic is a UK premium-listed company, the Board considers it appropriate to seek authorities in line with the UK’s Investment Association’s Share Capital Management Guidelines to respond to market developments and ﬁnance business opportunities as they arise. The Board will continue to engage with investors on this topic; however, as the voting outcome reﬂects the diculty in balancing the expectations of dierent markets, it is possible this outcome will continue. ENGAGEMENT IN RELATION TO THE NEW DIRECTORS’ REMUNERATION POLICY During FY22, the Remuneration Committee also engaged with major institutional shareholders and investor-representative bodies on various aspects of the new Directors’ Remuneration Policy being proposed at the Company’s 2022 AGM, with feedback being largely positive. See the Directors’ Remuneration Policy on pages 148–156 for more OTHER STAKEHOLDER ENGAGEMENT The Group Executive Committee is responsible for the day-to-day relationships with the Group’s key stakeholders and reports on these activities are provided to the Board at each meeting. The Board, directly or through its committees, engages or oversees engagement with the Group’s key stakeholders through a number of mechanisms. The Board last reviewed and approved the Group’s stakeholders in November 2021. In addition to employees and investors, the following groups of signiﬁcant stakeholders were agreed: clients, communities, alumni and potential applicants, ﬁnancial institutions, governments and authorities, healthcare insurers, industry associations, industry partners, media, medical practitioners, professional societies, and suppliers. The Board also reviewed the Group’s mechanisms for engagement with each group of stakeholders and is satisﬁed that they remain eective. See Stakeholder engagement on pages 26–29 for more The Board is committed to monitoring and improving its performance and eectiveness. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 117 TABLE 3: STATUS OF KEY ACTIONS IDENTIFIED IN THE FY21 BOARD EVALUATION KEY ACTIONS IDENTIFIED STATUS Increase visibility of succession planning at Board level • A detailed report on succession planning and development plans for the Group Executive Committee and the divisional executive committees was presented to the Board • The group of senior leaders invited to present on relevant topics at Board meetings has been broadened to increase visibility over the talent pipeline Increase opportunities for reporting on Group and divisional competitors to the Board • The Board now receives a biannual detailed analysis of the Group’s competitive landscape as well as updates on key developments in the Group CEO’s report at every Board meeting • An external expert brieﬁng session on the topic has been arranged for FY23 Continue to identify and introduce new methods for the Board to access external expertise and insights into digital business transformation and other pertinent matters • A number of expert brieﬁng sessions have been arranged for the Board on a range of relevant matters, as noted in the Audit and Risk and the Nomination committees’ reports • Further sessions are being arranged Increase opportunities for discussion on the Company’s risk appetite at Board level The risk appetite statement is presented to the Board for discussion and approval twice a year, following a detailed review by the Audit and Risk Committee Maintain focus on continuous improvement in the quality of information provided to the Board by way of management information dashboards Dashboards have been developed to support the Board in monitoring and assessing the culture of the business; these continue to evolve and mature with use and input from the Board FY22 EVALUATION The Board was due to undertake an external evaluation in FY21; however, due to the relatively recent appointment of the Chair and the disruption and uncertainty caused by COVID-19, it was agreed that an externally facilitated but questionnaire-only evaluation would be conducted instead, with a full external evaluation being delayed until FY22. In accordance with that commitment, Lintstock was appointed to undertake an in-depth review with interviews of the Board, its committees and the individual directors (including the Chair), as described below. Lintstock had conducted the Board evaluation in FY18 and FY21, but otherwise had no other connections to the Company or individual directors. TABLE 4: FY22 EVALUATION PROCESS APPOINTMENT EVALUATION DESIGN Following the Board’s approval of the scope and process of the FY22 Board evaluation, the Chair, the SID designate and the Group CEO reviewed the proposals presented by three providers and selected Lintstock. Their choice reﬂected in part the opportunity to beneﬁt from continuity from the previous year’s review, while acknowledging that the next external review should be conducted by another evaluator, in line with good practice. Lintstock developed questionnaires in consultation with the Company Secretary, the Chair of the Board and the committee chairs, the committees and individual directors. The questions reﬂected matters that were important to the Board as well as best practice set out in the Code and other guidance. It was agreed that the performance of the ESG Committee would not be evaluated as it had been established only in September 2021. EVALUATION REPORT AND DISCUSSION Lintstock issued the questionnaires to Board members and other regular attendees a few weeks ahead of the interviews. Participants in the evaluation of the Audit and Risk Committee included the lead external audit partner. Responses to the questions informed the discussions during the one-to-one interviews, which took place virtually. The anonymity of all feedback was guaranteed throughout the process to promote candid feedback. The feedback from the evaluations was captured in separate reports for the Board, each committee and individual directors, including the Chair. The relevant report was presented to the corresponding committee for discussion between February and March 2022, and subsequently shared with the Board. Lintstock attended the Board meeting held at the end of March 2022 to present the ﬁndings of the Board’s evaluation and answer questions. Following these meetings, action plans were agreed with each committee’s Chair to implement and monitor the agreed opportunities for improvement. PROGRESS ON ADDRESSING THE FY21 BOARD EVALUATION FINDINGS CORPORATE GOVERNANCE STATEMENT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT118 Board committees: The evaluation of the Board committees conﬁrmed that each committee continued to provide eective support to the Board. Further information on the committees’ evaluations can be found in their respective reports. Chair of the Board: All directors were asked to provide feedback on the performance of the Chair, following the process outlined above. The SID also discussed the Chair’s performance in one-to-one conversations with each of the directors. Lintstock’s report was discussed by the SID and the Chair, and the SID provided feedback to the other non- executive directors in the absence of the Chair after the May 2022 Board meeting. Other directors: The individual performance of the other directors was also assessed and the corresponding report was shared privately with the Chair by Lintstock. The Chair held one-to-one meetings with each director to reﬂect on any personal development needs and any other matters they wished to raise. The ﬁndings from this exercise formed a key part of the basis for the Board’s recommendation that all current directors should be elected/re-elected at the Company’s 2022 AGM ( see page 111). The FY22 evaluation was structured around core aspects of eective Board oversight, namely: • Board composition and dynamics; • support and meetings; • strategic oversight; • risk management and internal control; • culture and stakeholder engagement; and • people oversight. In addition, the review addressed lessons that the Board could learn from the COVID-19 pandemic, and the Board’s priorities for re-engaging with the business following the prolonged period of virtual meetings. The results of the evaluation showed a high degree of satisfaction with the Board’s overall performance and eectiveness, and identiﬁed some areas for increased focus or improvement. TABLE 5: AREAS OF ASSESSMENT AND FINDINGS KEY PRIORITY/IES FOR FY23 Board composition and dynamics Focus on strengthening social capital between Board members as well as between Board members and management – particularly for new directors Board support and meetings Continue to arrange regular external expert brieﬁngs on topical subjects Strategic oversight Develop a deeper understanding of opportunities and risks relating to digitalisation and data Risk management and internal control • Monitor arrangements to attract and retain doctors and nurses, and to promote their wellbeing and development • As the Group expands along the continuum of care, ensure development and appropriate oversight of relevant performance measures, eectiveness of new or enhanced functions, and identiﬁcation, monitoring and mitigation of new risks Culture and stakeholder engagement Identify means of increasing the ‘voice of the client’ in the boardroom and ways of determining clients’ perspectives as the Group expands along the continuum of care People oversight Continue to support management on development of robust succession plans for key senior leadership positions, as well as investment in developing a strong and diverse internal talent pipeline Lessons learned from the pandemic Continue to foster collaboration between divisions, joint problem-solving, and introduction of minimum levels of standardisation across the Group, while making allowance for the necessary cultural and regulatory dierences KEY PRIORITY/IES FOR FY23 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 119 OTHER GOVERNANCE MATTERS FRAUD, CORRUPTION, ETHICS AND COMPLIANCE Conducting business in an honest, fair and legal manner is one of Mediclinic’s fundamental guiding principles. The Group has zero tolerance for unethical business conduct, in particular fraud and corruption. Mediclinic’s commitment to high standards of business conduct and ethics is set out in the Code of Business Conduct and Ethics, and the Anti-Bribery Policy, which all directors, agency sta and contract workers across the Group are required to promote and enforce. Both policies are actively endorsed by the Board and management and communicated to new directors and employees as part of their onboarding. See the ‘Governance’ section of the Company’s website at www.mediclinic.com An anti-bribery and ethics line awareness campaign aimed at onboarding suppliers was rolled out during the period. The Audit and Risk, the ESG and the Clinical Performance committees receive regular reports on fraud and ethics matters (including instances of whistleblowing) and regular updates are provided to the Board. The Audit and Risk Committee reviews and reports to the Board annually on the eectiveness of the ethics lines, which employees and external parties can use to report issues of concern, anonymously if preferred. Compliance with relevant legislation, regulations and accepted standards/codes is integral to the Group’s risk management process and is monitored in accordance with the Group’s Regulatory Compliance Policy. ICT GOVERNANCE Mediclinic has an extensive ICT environment that acts as an enabler of business strategies and operations. ICT governance is done in the context of the Group’s overall governance, in general, and of the Group’s risk management structures and processes, speciﬁcally. The Group’s risk management system is used to capture and track all ICT risks, audit ﬁndings, mitigating actions and responsibilities. Information security and data protection policies and controls are in place throughout the Group regulating, among others, the processing, use and protection of own, personal and third- party information. The ﬂow of personal data across country borders is managed in accordance with country-speciﬁc legislation. There were no material information security incidents during the year under review. CORPORATE GOVERNANCE STATEMENT CONTINUED 120 AUDIT AND RISK COMMITTEE REPORT We maintained a strong focus on ensuring the integrity of the Group’s corporate reporting and ﬁnancial statements. Tom Singer Chair of the Audit and Risk Committee I am pleased to present my ﬁrst report on the activities of the Audit and Risk Committee (the ‘Committee’) during FY22 and up to the Last Practicable Date. I would like to begin by welcoming Natalia Barsegiyan to the Committee and thanking Committee members, management and the externl nd internl uditors for their hrd work and support during the year. Particular thanks go to my predecessor, Alan Grieve, for his leadership as Committee Chair and his supportive handover when I assumed the role in September 2021, and to Trevor Petersen, who served dutifully on this Committee for ﬁve years. During another year disrupted by COVID-19, the Committee continued to play a key role in the Group’s corporate governance framework by supporting the Board on matters relating to ﬁnancial reporting, risk management and internal controls. We maintained a strong focus on ensuring the integrity of the Group’s corporate reporting and ﬁnancial statements, and dedicated considerable time towards reviewing and challenging the underlying work associated with the Group’s ﬁnancial results. This included the methodology, assumptions and judgements relating to the goodwill impairment testing, going concern and viability assessments. As part of this workstream, we held a session with Wüest Partner AG, the property consulting group, and received an update on the Swiss property market. We entered into a detailed discussion on their valuation of the property portfolio in Switzerland, which underpins some of the signiﬁcant estimates and key judgements made in respect of the Group’s annual ﬁnancial statements. Another key focus area was ensuring that the Group’s climate- related ﬁnancial disclosures align with TCFD recommendations and reviewing related carbon metrics reporting. Furthermore, following review of our 2021 Annual Report by the FRC, we have enhanced certain disclosures in our annual report and annual ﬁnancial statements. Concerning our work on risk management and internal controls, the Committee scrutinised and challenged the Group’s risk appetite statement and review of the emerging and principal risks, taking into account the impact of the ongoing COVID-19 pandemic, key trends in the healthcare sector and the Group’s strategy, prior to recommending them for Board approval. We received a presentation from an external expert on the ever-evolving cyber threat landscape, together with regular updates from management on countermeasures to protect Mediclinic from such risks and respond to potential and actual breaches. We also reviewed the Group’s internal controls and risk management systems and were satisﬁed that they continued to be eective. Following the publication of the UK Government’s consultation on ‘Restoring trust in audit and corporate governance’ (the ‘BEIS Consultation’), we had an expert brieﬁng session to explore particular aspects and potential impacts of the consultation in detail. We also encouraged management to identify the practical implications for Mediclinic and begin early preparations for expected changes to ensure the Group was well placed to respond when the ﬁnal outcome became known. The outcomes of these and other Committee actions can be found in the rest of this report or through the cross references to other elements of the Annual Report. The Committee has also commenced the process to tender the external audit contract in line with UK statutory requirements and good practice. This report contains a summary of the timelines, and details of the process will be included in next year’s report. Tom Singer Chair of the Audit and Risk Committee 24 May 2022 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 121 AUDIT AND RISK COMMITTEE REPORT CONTINUED COMMITTEE ROLE AND RESPONSIBILITIES The Committee’s key responsibilities include: • monitoring and reviewing the quality and integrity of the Group’s annual ﬁnancial statements, narrative disclosures, related announcements and other ﬁnancial information published by the Group; • monitoring and reviewing the adequacy and eectiveness of the Group’s risk management and internal control systems, including the work and eectiveness of the Internal Audit function (in conjunction with the Clinical Performance and the ESG committees, as appropriate); and • monitoring and reviewing the eectiveness of the external audit and making recommendations to the Board regarding the reappointment of the external auditors and tender of the external audit contract. See the Committee’s terms of reference, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com, for further details COMMITTEE MEMBERSHIP AND ATTENDANCE The Committee membership comprises three independent non-executive directors, all of whom have recent and relevant ﬁnancial experience due to the senior positions they hold or have held in other listed companies and/or similar large organisations. In addition, the Committee as a whole has competence relevant to the sector through Tom’s previous role at BUPA and Steve’s role as a non-executive director of two leading NHS Foundation trusts. See page 113 for full details of the Committee membership and attendance records, and pages 104–107 for Committee members’ skills The Group CEO, Group CFO, Group Chief Governance Ocer and Company Secretary attend all meetings. The Chair of the Board, Pieter Uys (alternate to Jannie Durand) and the external and internal auditors are invited to all meetings. Other executives and senior managers from across the business also attend meetings during the year, either as regular attendees or to discuss particular items of business. This direct Board-level engagement with senior leadership and managers augments the Committee’s understanding of the issues facing the business. It also helps to support the Board’s oversight of succession planning for key leadership roles and develop the talent pipeline within the Group. MEETINGS AND PRINCIPAL AREAS OF FOCUS IN FY22 The Committee normally holds four meetings during the ﬁnancial year, with one of these meetings dedicated primarily to an extensive review of risk-related matters. Three additional ad hoc meetings were held during FY22 to discuss underlying work relating to the 2021 Annual Report, the evaluation of the Internal Audit function, and the Company’s response to the FRC’s letter following its review of the 2021 Annual Report. One scheduled meeting was held between the Company’s ﬁnancial year end and the Last Practicable Date to approve this Annual Report as well as accounts and related matters. The Committee holds private meetings at least once a year with the external auditors, the Group General Manager: Internal Audit and other regular management attendees (including the Group CEO and Group CFO), respectively, allowing each party to speak candidly and raise any issues of concern. TABLE 1: AT A GLANCE – FOCUS AREAS IN FY22 The Chair of the Committee meets separately with the Group CFO, Group General Manager: Internal Audit and the external auditors during the ﬁnancial year to ensure that the work of the Committee is focused on key and emerging issues. Natalia and Steve took advantage of their induction site visit to the Middle East (delayed until January 2022 due to the COVID-19 pandemic) to meet the divisional ﬁnance team and discuss the particular challenges facing the division. ACTIONS CROSS REFERENCE BUSINESS AS USUAL FY21 and FY22 ﬁnancial reporting • Reviewed and discussed the FY22 interim results, the FY21 and FY22 preliminary statement of annual results and Annual Report, and the supporting reports prepared by the ﬁnancial reporting team • Considered the accounting policies applied, management’s signiﬁcant estimates, and accounting judgements and related disclosures • Considered the external auditors’ report on their review of the interim results and audit report regarding the annual ﬁnancial statements and other elements of the Annual Report See pages 122–127 See pages 172–179 • Reviewed the basis of preparation of the ﬁnancial statements as a going concern • Reviewed the methodology and assumptions underpinning the viability statement proposed by management, including the ﬁve-year period adopted, the stress-testing scenarios applied and their sensitivity to changes in key assumptions See pages 89 and 101 • Considered whether the interim results, preliminary statement of annual results and Annual Report were fair, balanced and understandable (‘FBU’), as well as the use of alternative performance measures (‘APMs’) See page 126 The Committee membership comprises three independent non-executive directors, all of whom have recent ﬁnancial experience. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT122 Internal audit • Reviewed the implementation of the FY22 internal audit plan, ﬁndings from speciﬁc audits and management’s implementation of any resulting actions recommended by the Internal Audit function • Reviewed and approved the annual internal audit plan and focus areas for FY23 • Assessed the eectiveness of the Internal Audit function See page 127 Risk management and internal controls • Reviewed the Group’s risk appetite statement • Assessed the Group’s emerging and principal risks and how they were being managed or mitigated • Reviewed the eectiveness of the risk management and internal control systems • Reviewed the implications of COVID-19 on the ﬁnancial reporting and internal control environment See pages 128–129 See pages 118, 121 and 128 External audit • Reviewed the FY22 audit plan, including the level of materiality applied in conducting the audit, and areas of audit focus • Assessed the eectiveness of the FY21 and FY22 audits • Reviewed the non-audit services provided by the auditors and related fees in FY21 and FY22, the policy on the provision of non-audit services by the auditors, and the auditors’ independence See pages 129–130 Other • Reviewed the Group Treasury Policy and monitored compliance with its provisions • Reviewed the Group Tax Strategy ACTIONS CROSS REFERENCE BUSINESS AS USUAL CONTINUED ACTIONS CROSS REFERENCE ADDITIONAL TOPICS IN FY22 • Received deep-dive reports on ﬁnancial reporting, risk and internal control-related matters • Reviewed the governance processes and monitored the implementation of the project to update the operating model and technology architecture of the Finance function See page 121 • Reviewed progress on aligning the Group’s reporting with the TCFD reporting recommendations and the corresponding TCFD report included in the Annual Report, and considered management’s assessment of the impacts of climate change on the ﬁnancial statements • Reviewed the assurance processes supporting certain aspects of the Group’s TCFD reporting See pages 47–56 • Assessed the proposals set out in the BEIS Consultation and management’s plans for addressing the likely outcomes • Assessed the impact of the OECD’s Pillar 2 proposals on the tax proﬁle of the Group • Preparation for and launch of the external audit tender process See page 130 • External evaluation of the Committee and key priorities for FY23 See page 131 OTHER REGULAR REPORTS • Group tax positions covering adjusted underlying tax rate, areas of potential tax exposure and provisioning • Fraud and ethics (including whistleblowing) reports and investigations • Litigation reports • UK accounting and corporate governance developments likely to aect the work of the Committee TABLE 1: AT A GLANCE – FOCUS AREAS IN FY22 CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 123 AUDIT AND RISK COMMITTEE REPORT CONTINUED FY22 FINANCIAL REPORTING SIGNIFICANT FINANCIAL REPORTING MATTERS Table 2 sets out the signiﬁcant reporting matters and areas of judgement considered by the Committee, together with details of how these items were addressed. The Committee received detailed reports from management and the external auditors on these issues at the time of their review of the FY22 interim ﬁnancial statements and again at the conclusion of the audit of the FY22 annual ﬁnancial statements. The Committee discussed with both parties the range of possible treatments for each item, focusing speciﬁcally on key assumptions, sensitivity analyses and areas where judgement was applied, to satisfy itself that the conclusions drawn were reasonable and supportable based on available information at the time, and that the corresponding disclosures in the Group’s reports were appropriate. For all matters described alongside, the Committee concluded that the treatment adopted in the Group ﬁnancial statements was appropriate. TABLE 2: SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS SIGNIFICANT ISSUE HOW IT WAS ADDRESSED BY THE COMMITTEE Impairment reviews (1) The Group carries signiﬁcant goodwill and non-ﬁnancial assets on the Statement of Financial Position. The key issues considered were: • the impairment assessment and test of the Middle East and Switzerland goodwill; and • whether any indication existed that non-ﬁnancial assets at an individual cash-generating unit (‘CGU’) level per division may be impaired. The Committee evaluated the divisions’ ﬁve-year business plans on which the impairment calculations were based. The Committee reviewed the assumptions used in the impairment tests, including free cash ﬂows (from the business plans described above), long-term growth rates and discount rates. Long-term growth rates for periods not covered by the forecast periods were challenged to ensure they were appropriate in the countries relevant to the divisions. The Committee noted the judgements and assumptions applied in business plans and was satisﬁed that management had developed its forecasts based on the best available evidence at this time. The Committee also considered reasonably possible changes to assumptions and associated sensitivities, the impacts of climate change and the related disclosures required by IAS 36 ‘Impairment of Assets’ and IAS 1 ‘Presentation of Financial Statements’. The Committee reviewed reporting from the external auditors and discussed their feedback and considered its conclusion regarding the impairment assessments, including Wüest Partner AG’s valuation of the property portfolio in Switzerland. Outcome: The goodwill impairment assessment of the Middle East and Switzerland is no longer labelled as a key estimate in the ﬁnancial statement disclosure. Sensitivity disclosure for the Middle East goodwill has been retained given the impairment recognised in FY20. Midstream, South Africa MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT124 SIGNIFICANT ISSUE HOW IT WAS ADDRESSED BY THE COMMITTEE Impairment reviews (2) The key issue considered was: • the carrying value of the equity investment in Spire at year end and whether a reversal of previously recognised impairment losses should be recognised. The Group’s equity investment in Spire was subjected to impairment charges during FY20 and the two preceding years. The Committee noted that Spire’s share price was trading in excess of the carrying value of the equity investment, and that this investment was equity accounted and not carried at fair value. The Committee challenged the assumptions underlying management’s valuation of Spire. In particular, it considered whether the equity investment’s business revenue growth forecasts and EBITDA margins diered materially from the valuation assumptions applied in the prior years when the impairments were booked. Outcome: The Committee was satisﬁed that an impairment reversal should not be recognised. Swiss pension fund The key issue considered was: • the carrying value of the Swiss pension fund. The Committee reviewed the main assumptions underlying the valuation of the pension obligations, as determined by the external actuaries. These assumptions, such as discount rates, mortality and inﬂation rate, were discussed with management and the external auditors in the light of prevailing economic indicators in Switzerland. Outcomes: • The Committee was satisﬁed with the carrying value of the Swiss pension fund and the associated disclosures. • The Committee was satisﬁed that an asset ceiling was applied for the main Swiss pension fund. Recoverability of the Middle East receivables The key issue considered was: • recoverability of the Middle East trade receivables and if sucient impairment for credit losses has been recognised. The Committee obtained an understanding of the year-on-year increase in the outstanding receivable balances and evaluated the provision for expected credit losses and disallowances. The Committee took note of the improvement in cash conversion compared with the half year and of the collections received after the year end. Outcome: The Committee concluded that the Middle East receivables were adequately provided for. SIGNIFICANT ISSUE HOW IT WAS ADDRESSED BY THE COMMITTEE The assessment of the Group’s going concern and viability assumption The key issues considered were: • the Group’s long-term viability assessment; and • the going concern status of the Group for a period of at least 12 months from the date of this report. The Committee reviewed the viability assessment and sought support from management for the scenarios selected and the key underlying assumptions. The Committee examined the reverse stress testing that was applied per division. It considered the external auditors’ views on the methodology and assumptions adopted by management and the outcome of the external auditors’ conclusions. As part of the year-end process, management performed a monthly liquidity analysis per division extending to September 2023 that included a base and downside case scenario per division. The Committee evaluated the key assumptions used in preparing these scenarios, including risk scenarios and expected impact of further COVID-19 waves on the business. The Committee reviewed and challenged future forecasts and the risks to those forecasts. The Committee noted that, in all scenarios, the Group had sucient liquidity and sucient headroom against covenant requirements. Outcomes: • The Committee was satisﬁed with the stress testing performed and the severe but plausible scenario modelling. • The Committee was satisﬁed with the actions the Group has taken to protect liquidity. • The Committee was satisﬁed that the Group was a going concern, given the assessment of the Group’s viability and the associated disclosures. TABLE 2: SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 125 SIGNIFICANT ISSUE HOW IT WAS ADDRESSED BY THE COMMITTEE Classiﬁcation and presentation of adjusting items The adjusting items for FY22 amounted to £16m after taking related tax and deferred tax into account (£20m before tax), of which £19m related to accelerated depreciation and £11m related to past service. See the Group Chief Financial Ocer’s Report starting on page 72 for more The key issue considered was: • the Group’s use of non-IFRS measures and the judgement applied to determine whether the items were adjusting items. The Committee reviewed the adjusting items for FY22 and discussed these with management and the external auditors. Particular consideration was given to the types of income and expenses adjusted by management in arriving at the Group’s adjusted earnings measure. The Committee received conﬁrmation from management and the external auditors that the adjusting items and adjusted measures had been evaluated, classiﬁed and presented in line with the Group’s policy and guidance from the FRC, and that management’s application of the Group’s policy was consistent with previous accounting periods. It also examined whether the disclosures within the Group Chief Financial Ocer’s Report and the interim and preliminary results announcements provided sucient details to understand the nature of these items. Outcomes: • The Committee was satisﬁed that the amounts classiﬁed as adjusting items were reasonable, and the related disclosure of these items in the Group Chief Financial Ocer’s Report and results announcements was appropriate. • The Committee was satisﬁed that all adjusted measures were appropriately labelled and reconciled to the equivalent statutory measures, and the related disclosures were clear and transparent. • The Committee was satisﬁed that there was consistent application in determining the adjusting items. • The Committee was satisﬁed that a comparable statutory measure had been shown for each non-IFRS measure. FBU REPORTING AND USE OF APMS The Committee adopted the following process in assessing whether the Group’s 2022 Annual Report was FBU and provided the information necessary for shareholders to assess the Group’s position: • Factual content was veriﬁed by management, and members of senior management undertook a comprehensive review of the document to consider messaging and balance. • The Committee reviewed a report from management on the process adopted for the preparation of the Annual Report to support the FBU assessment. • The Committee received a full draft of the Annual Report in sucient time to review and comment on the document and consider the overall balance and consistency prior to its circulation to the Board. In carrying out its review, the Committee had regard to whether: - there was consistency between the key messages in the document and the Group’s position, performance and strategy, and between the narrative sections and the ﬁnancial statements; - all key events, both positive and negative, reported to the Board and its committees during the year were adequately reﬂected; - the signiﬁcant issues considered as a Committee were consistent with those identiﬁed by the external auditors in their report, and any material inconsistencies reported by the external auditors were addressed in the Annual Report; and - the APMs used in the Annual Report were appropriate, had been clearly explained, and had not been given greater prominence than the corresponding statutory measures, as described above. • Particular issues considered for the 2022 Annual Report included whether: - the policy for non-IFRS adjusted measures has been disclosed and applied consistently; - all non-IFRS adjusted measures have been labelled and reconciled suciently; and - non-IFRS adjusted measures have not been displayed with more prominence as the reported measures. Committee feedback on areas that would beneﬁt from further clarity was incorporated into the document before circulating it to the Board with the recommendation that the Annual Report – taken as a whole – was FBU and provided the information necessary for shareholders to understand the Group’s business model, strategy, position and performance. The same process was adopted for the Committee’s review of the Group’s FY22 interim results and preliminary statement of annual results announcements. FINANCIAL REPORTING COUNCIL In January 2022, the Group received a letter from the FRC’s Corporate Reporting Review Team following its review of the Company’s 2021 Annual Report. The letter requested further information on three principal areas of disclosure in the 2021 Annual Report: (1) the recognition of a deﬁned beneﬁt pension surplus in Switzerland; (2) tari risk provisions and variable consideration accruals; and (3) the use of APMs. In addition, the Group was encouraged to consider making improvements in response to a number of other observations made by the FRC, if material and relevant. TABLE 2: SIGNIFICANT ISSUES CONSIDERED IN RELATION TO THE FINANCIAL STATEMENTS CONTINUED AUDIT AND RISK COMMITTEE REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT126 The Committee discussed the FRC’s ﬁndings with PwC and in March 2022, following our response to these queries, the FRC Corporate Reporting Review Team conﬁrmed that they had closed all of their enquiries. The suggested improvements have been incorporated into the relevant notes to the ﬁnancial statements and the explanation of the APMs used in this Annual Report set out on pages 80–86 where material and relevant. The FRC’s letter states that their review is based on the 2021 Annual Report and provides no assurance that the 2021 Annual Report is correct in all material respects, noting that the FRC’s role is not to verify the information but to consider compliance with reporting requirements. The FRC had last reviewed and corresponded with the Group in relation to its annual report for the year ended 31 March 2016. INTERNAL AUDIT The Internal Audit function is a key element of the Group’s internal control environment. Its role is to provide assurance that the Group’s risk management and internal control systems are well designed and operate eectively and that any corrective action is taken in a timely manner. Its audits cover internal controls and risk management processes relating to the ﬁnancial, operational and clinical performance, as well as IT and compliance activities of the Group. The function’s responsibilities also include providing independent appraisal and assurance to the Committee on the eectiveness of the Group’s risk management processes and internal control system. Strong reliance is placed on the Group’s Combined Assurance Model, which uses control self-assessment techniques to assure on key risk areas. The purpose, scope and authority of the Internal Audit function is deﬁned within its charter, which is reviewed and approved annually by the Committee. The Group General Manager: Internal Audit reports functionally to the Committee and administratively to the Group Chief Governance Ocer. The team supplements its in-house capacity by contracting in specialist services as required to ensure the optimisation of resources. The internal audit plan is set on a three-year rolling basis. Focus areas are determined and updated annually using a risk-based approach and ensuring the work is appropriately aligned to and coordinated with the activities of other relevant assurance providers. The Internal Audit function works closely with the Risk Management function and engages with the external auditors on at least a quarterly basis. An internal audit update is provided to the Committee at each meeting, covering progress against the internal audit plan, an overview of audits completed during the period, actions arising from those audits and tracking of the implementation of corrective actions. During FY22, the Committee reviewed and provided feedback on the internal audit plan to ensure that key risk areas identiﬁed by the Group’s ERM processes would be audited with appropriate frequency and depth. The Committee also monitored progress on the closure of corrective actions and noted the Internal Audit function’s assurance that management prioritised closing such actions timeously. The Committee requested that additional details be included in the internal audit reports in this respect. INTERNAL AUDIT EFFECTIVENESS REVIEW During the year, the Committee conducted its annual assessment of the eectiveness of the Internal Audit function. A questionnaire was prepared based on guidance outlined by the Chartered Institute of Internal Auditors’ Internal Audit Code and the FRC’s Guidance on Audit Committees. The questionnaire was approved by the Committee prior to its circulation to Committee members. Responses were collected by the Company Secretariat and reported on an anonymised basis to encourage open and honest feedback. Based on the ﬁndings of the assessment, the Committee was satisﬁed with the eectiveness, resourcing, independence and standing of the Internal Audit function in terms of delivering its current mandate. The Committee noted the steps being taken in response to the changes anticipated to emerge from the BEIS Consultation. Stellenbosch, South Africa STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 127 AUDIT AND RISK COMMITTEE REPORT CONTINUED FIGURE 1: GROUP RISK MANAGEMENT GOVERNANCE STRUCTURE BOARD Responsible for corporate governance, strategy, risk management and ﬁnancial performance AUDIT AND RISK COMMITTEE Responsible for review and approval of adequacy and eectiveness of risk management and internal controls GROUP EXECUTIVE COMMITTEE Supports Group CEO in managing business activities DIVISIONS Responsible for identiﬁcation, assessment and management of divisional risks RESPONSIBILITY FOR ACCOUNTABILITY FOR RISK MANAGEMENT AND INTERNAL CONTROLS The Board retains overall responsibility for determining the risk appetite of the Group, assessing the Group’s principal and emerging risks, and overseeing its risk management processes and internal controls, including those relating to the ﬁnancial reporting process. At the request of the Board, the Committee plays an important function in assisting the Board to meet these responsibilities (together with the Clinical Performance and the ESG committees, in respect of clinical and ESG risks, respectively). The Committee reviews the Group’s emerging and principal risks twice a year: prior to the publication of the interim results, to assess whether there have been any changes since the publication of the previous annual report, and a more in-depth, detailed review prior to the publication of the following annual report. This includes a review of the Group’s ERM Policy, framework and processes, the Group’s risk appetite statement, any changes in the emerging and principal risks facing the Group, and action plans designed to mitigate these risks in line with the Group’s risk appetite. During the past year, the Committee focused speciﬁcally on the following categories of risk: cybersecurity threats, ICT resilience risks, the implementation of major IT projects, ﬁnancing and interest rate risks, liquidity risk, and availability of medical practitioners. Detailed oversight of other principal risks was allocated to the Board, and the Clinical Performance and ESG committees, with deep dives into each risk taking place at least annually. Feedback and valuable insights ﬂow back to the Committee through the carefully planned overlap in membership. The outcome of the assessment of principal risks and uncertainties facing the Group, the procedures in place to identify emerging risks and how these risks are being managed or mitigated, as reviewed by the Committee and approved by the Board in May 2022, are described on pages 91–100 of this Annual Report. The Committee considers the eectiveness of these arrangements during its discussions at every meeting. It also receives regular reports from management on issues requested by the Committee, or identiﬁed from the Company’s risk management, internal audit or compliance processes or reports on fraud and ethical matters (including any instances of whistleblowing). These are supplemented by feedback on the internal control environment provided by the external auditors as part of their half-year review and in their formal report on the full-year audit. Additionally, where appropriate, the Group seeks assurance from external experts. Recommendations arising from the above processes are communicated to the relevant business areas by the Risk Management or Internal Audit functions, as appropriate, and the Committee receives regular progress reports on implementation and further requirements identiﬁed. Once a year, prior to the publication of the annual report, the Committee conducts a formal in-depth review of the eectiveness of the Group’s risk management and internal control system. This review covers all material ﬁnancial, operational and regulatory compliance controls (including climate-related and clinical controls, subject to the separation of responsibilities agreed upon with the Clinical Performance and the ESG committees) in accordance with the FRC’s Guidance on Risk Management, Internal Control and related Financial and Business Reporting. As part of this process, the Committee considers reports from the Risk Management, Internal Audit and Compliance functions, which reﬂect the outcomes of various peer reviews, control self-assessments, the delivery of the ERM and internal audit plans, and the status of any corrective actions taken by management in response to their ﬁndings. The Committee’s review is also informed by the feedback and recommendations from the external auditors and other external assurances commissioned, as well as its own observations throughout the year under review. Following the review of the eectiveness of the Group’s risk management and internal control system concluded at its May 2022 meeting, the Committee noted the thoroughness of the processes followed to identify, and the key controls designed to mitigate, key risks, and the various levels of internal and external assurance received to conﬁrm their eectiveness. It further noted that no signiﬁcant failings or weaknesses had been identiﬁed and plans were in place to address the minor issues ﬂagged for improvement. The Board considered the work of the Committee in these areas as part of its annual robust assessment of the Group’s principal and emerging risks and the eectiveness of its risk management and internal controls. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT128 their reports as well as during Committee discussions, particularly on issues such as: the goodwill impairment assessments of the Middle East and Switzerland; the carrying value of the equity investment in Spire at year end; the recoverability of receivables in the Middle East and adequacy of provisions for credit losses and disallowances; and the going concern assessment. The Committee also took note of the FRC’s Audit Quality Practice Aid for Audit Committees, published in December 2019, and the Audit Quality Inspection report for PwC, published by the FRC’s Audit Quality Review team in July 2021. It was noted that the ﬁrm had taken steps to address the key ﬁndings of the FRC’s previous review and the overall quality of its audits had improved year on year. The main recurring ﬁndings ﬂagged by the FRC were also considered. The matters raised in the FRC’s report and the background to the questions raised in the FRC’s letter regarding the Company’s 2021 Annual Report were discussed with PwC. Following this review, the Committee was satisﬁed that the statutory audit process and services provided by PwC were satisfactory and eective. Areas for further improving the quality and eectiveness of the audit were discussed with management and the lead audit partner and his team. management’s judgements and the quality of disclosures as well as PwC’s analysis and work to develop a clear understanding of any contentious issues. PwC also met regularly with management during the audit process. PwC provided an update on the audit at the March 2022 meeting, allowing the Committee to monitor progress against the agreed scope and plan, raise questions and challenge both PwC and management on the matters covered. As the FY22 external audit neared ﬁnalisation, the Committee organised a formal evaluation of the external auditors’ performance. Committee members, senior management and others who had regular contact with PwC during the course of the audit were asked to complete a questionnaire which focused on four key areas: (1) the robustness of the audit process; (2) the quality of delivery; (3) the quality of reporting; and (4) the quality of people and service. The feedback was collated and considered by the Committee at the meeting held in May 2022, together with the feedback from separate meetings with the external auditors and management, and its own observations and interactions. Matters discussed included: areas of discussion between the external auditors, management and the Committee; the external auditors’ robust but constructive challenge to management’s assertions and areas of signiﬁcant judgement; and the overall thoroughness of their work. A key aspect considered by the Committee was evidence of the external auditors’ professional scepticism and challenge in Following this assessment, the Board approved the disclosures in the Annual Report about the Group’s emerging and principal risks, and their management or mitigation, and conﬁrmed that it was satisﬁed that throughout the year under review and up to the Last Practicable Date, the Group’s risk management and internal control environment continued to be eective. Risk management and internal controls relating to ﬁnancial reporting A description of the Group’s risk management processes can be found in the Risk management report on pages 91–92. Key features of the Group’s ﬁnancial reporting internal controls include: • clearly deﬁned delegations of authority and lines of accountability; • policies and procedures governing ﬁnancial resource management, ﬁnancial reporting, key ICT projects and security; • annual self-assessments of the eectiveness of controls by the relevant management teams; • assurance on key processes and IT audits as part of the internal audit coverage; • an annual IT general control assessment conducted by the external auditors on the business applications which support the ﬁnancial close process; and • a detailed review by the Group Executive Committee, the Committee and the Board of the ﬁnancial statements and disclosures within the annual, interim and other price-sensitive reports. EXTERNAL AUDIT PwC was appointed as the Company’s external auditors in February 2016, as approved by the Company’s shareholders in December 2015. Neil Grimes became the current lead audit engagement partner from June 2020. QUALITY AND EFFECTIVENESS OF THE EXTERNAL AUDIT The Committee, on behalf of the Board, is responsible for ensuring that the Group receives a high-quality and eective statutory audit. The Committee monitored the quality of the external auditors’ work on a regular basis throughout the year and conducted a formal assessment towards the end of the audit. PwC presented the strategy and scope of the FY22 external audit at the Committee meeting held in November 2021, highlighting any areas of increased focus. The Committee satisﬁed itself that its key areas of interest would be appropriately addressed and provided clear guidance to PwC on its expectations in relation to the audit. Throughout the year, management presented their current view of various key accounting issues and judgements to the Committee and PwC provided their professional view on whether the approach proposed or adopted by management is appropriate. A number of these issues manifested themselves as the signiﬁcant issues considered by the Committee in relation to the interim and annual ﬁnancial statements, set out on pages 124–126. The Committee held open discussions on these matters with management and PwC during Committee meetings and with each group privately, after meetings. This allowed Committee members to scrutinise and challenge STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 129 AUDIT AND RISK COMMITTEE REPORT CONTINUED EXTERNAL AUDITORS’ INDEPENDENCE The fees paid to PwC for non-audit services represent a key component of the Committee’s annual assessment of the independence and objectivity of the audit. In line with best practice, the provision of non-audit services by PwC to the Group is governed by Mediclinic’s Non-audit Services Policy. The policy incorporates the restrictions on non-audit services introduced by the FRC’s Revised Ethical Standard 2019, designed to ensure that the external auditors’ independence and objectivity are not impaired or perceived to be impaired. Consequently, PwC is permitted to provide Mediclinic only with certain non-audit services; these are closely linked to the audit itself or required by law or regulation, and the aggregate fees for such services may not exceed 70% of the average audit fee for the previous three ﬁnancial years. The Committee reviews the policy at least annually and recommends it to the Board for approval. The policy was last approved by the Board in March 2022. Under the policy, at the beginning of each ﬁnancial year, the Committee determines the pre-approved monetary thresholds for each category of non-audit services that may be provided by the external auditors. Any individual assignment with a fee exceeding £50 000 requires the Committee’s prior approval. The nature of the services, the individual fee levels for each category and the aggregate fee relative to the external audit fee are taken into account in determining these thresholds. PwC is engaged to provide non-audit services only when it can be clearly demonstrated that the ﬁrm is best placed to perform the services in a cost-eective and ecient manner because it has the necessary expertise and capabilities, and can leverage its existing detailed knowledge of Mediclinic’s business and understanding of the sector and jurisdiction. The Committee receives regular reports on the non-audit services fees paid to PwC. In FY22, the fees paid to PwC in respect of non-audit services amounted to approximately £0.7m or 27.6% of the statutory audit fees. All non-audit services provided were in line with the Non-audit Services Policy. Approximately £0.2m of the non-audit service fees was in respect of reviews conducted in relation to the ﬁnancial statements for the six months ended 30 September 2021. Therefore, excluding the half-year reviews, non-audit service fees as a percentage of statutory audit fees amounted to 8.9%. In addition, an amount of approximately £0.3 m or 11% of the statutory audit fees was paid for Swiss billing code audits. These audits are required by Swiss law to ensure that the codes used for the bills issued by our Swiss division on invoices for inpatient hospital services are entered in accordance with the Swiss diagnostic- related grouping taris. See note 8 to the Group annual ﬁnancial statements on page 194 for more information on the fees paid for audit and non-audit services during the year under review The Committee also reviews the assurances provided in PwC’s external audit report, in accordance with the FRC’s Revised Ethical Standard for Auditors. The Committee noted the letter included in PwC’s FY22 external audit report, conﬁrming that PwC’s integrity, objectivity and independence were not compromised, together with the information supporting this assessment. The Committee also noted that the quality review partner, who reviews the judgements of the audit team, rotates every seven years; the lead partner and key audit partners at each division rotate every ﬁve years. Based on the above arrangements and conﬁrmations, feedback from management and Committee members’ own observations of the external auditors’ conduct and judgement, the Committee was satisﬁed that PwC continues to be independent and free from any conﬂicting interest with the Group. REAPPOINTMENT OF THE EXTERNAL AUDITORS AND EXTERNAL AUDIT TENDER As described above, the Committee concluded that the external audit services provided by PwC were of a high quality, that the external audit process in respect of FY22 was eective, and that the auditors remained objective and independent. Accordingly, the Committee recommended to the Board that the reappointment of PwC as the Company’s external auditors be proposed to shareholders at the Company’s 2022 AGM. The Committee complied with the provisions of the Statutory Audit Services for Large Companies Market Investigation (Mandatory Use of Competitive Tender Processes and Audit Committee Responsibilities) Order 2014 during FY22. The Company must also comply with UK Competition and Market Authority (‘CMA’) rules, which require the external audit contract to be put out to tender at least every 10 years, with the proviso that no single ﬁrm may serve as the Company’s external auditors for a period exceeding 20 years. The planning for this retendering has already commenced. The intention is for the tender process to be completed during the 2022 calendar year, with the Board making the corresponding recommendation to shareholders at the Company’s 2023 AGM. This will allow the external auditors selected from the process to conduct the audit for the ﬁnancial year commencing 1 April 2023, 10 years after the Company’s initial listing. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT130 PROGRESS ON KEY FY22 PRIORITIES PRIORITIES STATUS Monitoring and reviewing the eectiveness of the Group’s risk management framework Clear plan being implemented for the detailed oversight of the Group’s principal risks and their mitigation, with responsibility for each risk allocated to the Board or a Board committee. Feedback and insights ﬂow back to the Committee through planned overlaps in committee membership. Further improvements in the quality of reporting to the Committee, including focus on the impact of COVID-19. See page 128 Continuing to monitor the impact of COVID-19 on accounting, audit, risk management and internal control matters Monitoring the quality of reporting on climate-related and other ESG matters Reviewed the planned reporting arrangements and levels of assurance being obtained. Received feedback regarding the ESG Committee’s review of the proposed TCFD reporting. See pages 121 and 123 Reviewing and preparing to address the relevant reforms that emerge from the UK Government’s white paper on restoring trust in audit and corporate governance Expert brieﬁng session on the BEIS Consultation to explore particular aspects and potential impacts in detail. Reviewed management’s plans to start preparing for the expected changes. Introducing further regular expert training on developments in accounting, audit and reporting matters Received expert brieﬁng on the BEIS Consultation and the valuation of the property portfolio in Switzerland. Other expert brieﬁngs received as part of Board- wide sessions. Further brieﬁngs are planned on an ongoing basis. See page 121 COMMITTEE EVALUATION The table alongside sets out the progress made in relation to the key priorities identiﬁed from the Committee’s previous evaluation, concluded in March 2021. In March 2022, the Committee considered the outcome of the external evaluation of its performance, conducted as part of the annual evaluation process described on pages 117–119 of the Corporate Governance Statement. The composition and performance of the Committee were highly rated and no signiﬁcant issues requiring improvement had been identiﬁed. FY23 PRIORITIES The Committee’s main priorities for FY23 are: • conduct of the external audit tender process in line with statutory requirements and good practice; • continue to monitor the implementation of any changes required in the Finance, Risk Management and Internal Audit functions, processes and reporting to the Committee and the Board in response to the outcomes from the BEIS Consultation; • continue to monitor the implementation of climate change-related reporting requirements and best practice; • continue to monitor the eciency of the reporting process, information ﬂows and assurance; and • continue to meet with members of the divisional ﬁnance teams. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 131 CLINICAL PERFORMANCE COMMITTEE REPORT I am pleased to present the report on the activities of the Clinical Performance Committee (the ‘Committee’) during FY22. The Committee’s focus was strengthened in September 2021 through the creation of a separate ESG Committee, which assumed our responsibilities for overseeing sustainable development matters. Dr Anja Oswald’s appointment as an additional Committee member has strengthened the breadth of our expertise, while Professor Wim de Villiers’s appointment as an expert clinical adviser to the Committee will provide valuable independent external insights. Although COVID-19 continued to be a clinical priority for the Group and the Committee, we were also able to make important progress in other areas such as patient safety culture, the adoption of new technology, improvement of clinical performance and embedding of clinical governance. The Committee continues to be extremely grateful to the Clinical Services teams and all employees across the Group for their diligence and dedication during the pandemic. Dr Felicity Harvey Chair of the Clinical Performance Committee 24 May 2022 Although COVID-19 continued to be a clinical priority, we were also able to make progress in other areas such as patient safety culture and embedding of clinical governance. Dr Felicity Harvey Chair of the Clinical Performance Committee See the ESG Committee Report on pages 135–136 for details of our activities relating to sustainable development matters prior to September 2021 COMMITTEE ROLE AND RESPONSIBILITIES The Committee’s key responsibilities include promoting a culture of excellence in patient safety, quality of care and client experience by, among other things, monitoring the clinical performance of the Group. See the Committee’s terms of reference, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com, for further details COMMITTEE MEMBERSHIP AND ATTENDANCE The Committee membership comprises the SID (who chairs the Committee), three other independent non-executive directors and the Group CEO. All members have current or past clinical and/or public healthcare experience. See page 113 for details of Committee membership and attendance and pages 104–107 for members’ biographies Professor Wim de Villiers is invited to attend all meetings. Under the Ward-to-Board accountability framework, the Group and divisional chief clinical ocers and the Group General Manager: Clinical Services also attend all meetings. Other relevant members of management are invited to attend meetings as required. MEETINGS AND PRINCIPAL AREAS OF FOCUS IN FY22 The Committee held ﬁve meetings during the year under review, one of which was dedicated to discussions on the Group’s clinical strategy. One scheduled meeting was held between the Company’s ﬁnancial year end and the Last Practicable Date to approve this report, the Clinical services overview and the standalone 2022 Clinical Services Report. The Committee also holds private meetings twice a year with the external expert advisers appointed to the divisional clinical performance committees, the Group CEO and the Group Chief Clinical Ocer, for an open and transparent discussion of the culture, clinical performance and key issues observed during their interactions with the clinical teams. 132 CLINICAL PERFORMANCE The Group’s clinical management model is based on a clinical performance framework consisting of four components: patient safety, clinical eectiveness, clinical cost eciency and value-based care. During the year, the Committee received regular reports on the clinical services and performance of each division. The GOVERNANCE The Committee supports and oversees the operation of the Group-wide Ward-to-Board accountability framework, which includes the following elements: • hospital-level clinical performance committees chaired by independent doctors and including hospital management; • divisional clinical performance committees led by the Group Chief Clinical Ocer (independent expert advisers to each committee provide an objective view on the clinical performance of the division and an expert opinion on clinical matters when required); • the Group Chief Clinical Ocer; • the Committee; and • the Board. This accountability framework is integral to the Group’s Patients First approach, the achievement of its Group strategic goal to improve the value proposition signiﬁcantly and, ultimately, to creating value for shareholders by: • aligning the interests of clients and care providers; • strengthening the culture of performance reporting and accountability; • ensuring eective information ﬂows up and down the organisation; FIGURE 1: MEDICLINIC CLINICAL GOVERNANCE FRAMEWORK ACCOUNTABILITY • Ethical principles • Ward-to-Board accountability • Accreditation of facilities, services and healthcare practitioners LEADERSHIP • Culture • Credentialing and privileging of healthcare practitioners • Clinical risk management and clinical internal audit STAFF, EDUCATION AND TRAINING • Quality of sta and stang levels • Academic aliations and teaching of sta and independent healthcare practitioners • Continuous professional development training for sta and independent healthcare practitioners BUILDINGS, EQUIPMENT AND MATERIALS • Procurement and maintenance of equipment • Procurement and proper use of materials • Safe, operationally ecient and environmentally sustainable facility design dashboards reviewed by the Committee continued to mature, providing a clear indication of positive and negative outliers for key indices, trends, potential areas of concern that should be investigated and opportunities to share knowledge across the Group. Further areas of reﬁnement identiﬁed included client experience and unﬁlled vacancy indicators. The Committee encouraged management to continue to evolve its reporting and the clinical performance indicators tracked as the Group expands into new areas across the continuum of care. Progress on digitalisation projects, the implementation of new medical technology and further opportunities in these areas were key focal points during the Committee’s annual clinical strategy meeting. The Committee monitored progress on these initiatives, including, among others: • the implementation of The Patient Safety Company software across the Group, which will strengthen the management of safety events and uniformity of reporting; • the roll-out of EHRs, which is nearing completion in the Middle East and Switzerland, and options more appropriate to the Southern Africa operations being progressed; and • new digital healthcare and virtual care services for the Group’s clients and healthcare professionals. The Committee also provided guidance and support with regard to other patient safety initiatives such as the obstetrics framework and safe surgery and procedures framework that will be introduced across the Group. These frameworks address two of the Group’s top ﬁve clinical risks by setting minimum standards for Group-wide application, with deviations permitted only if dictated by local requirements. This accountability framework is integral to the Group’s Patients First approach. • driving improvements in clinical quality and eciency; and • facilitating Group-wide alignment and collaboration. The application of the framework has continued to mature during FY22, resulting in further improvements in the quality and consistency of clinical performance reporting, and the understanding and management of adverse events. It has also facilitated collaboration across the Group, through the sharing of lessons learned and the development of joint solutions to problems aecting all divisions. See the 2022 Clinical Services Report at annualreport.mediclinic.com STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 133 Other topical reports discussed by the Committee with the clinical leadership teams included: • COVID-19 vaccination levels among employees and aliated doctors; • lessons learned from particular developments and application of those learnings in other parts of the Group; and • the development of patient-reported outcome measures to evaluate improvements in their quality-of-life post-treatment, as well as the response rate and scores from patient surveys. See the Clinical services overview starting on page 58 for more information on our clinical performance CLINICAL RISK MANAGEMENT AND CONTROLS The Committee’s responsibilities include oversight of the Group’s clinical risks and related controls, and liaising with the Audit and Risk Committee on these matters. During FY22, the Committee received a detailed report on the Group’s top ﬁve clinical risks, comprising: • adverse obstetric outcomes; • medication management; • multidrug-resistant organisms; • surgical and procedural adverse events; and • clinical care processes. The Committee discussed the assessment of these risks and the adequacy of the mitigating actions being taken to ensure their management within the Board’s low risk appetite and tolerance limits for clinical risks. COMMITTEE EVALUATION The table below sets out the progress made in relation to the key priorities identiﬁed from the Committee’s previous evaluation, concluded in March 2021. PROGRESS ON KEY FY22 PRIORITIES PRIORITIES STATUS Continuing to improve the comparability of reporting within and across all three divisions The Committee and the independent expert advisers commended management for the improvements made in the comparability of reporting across the Group. Continuing to provide appropriate patient safety training to senior management and the Board, together with other relevant training on health measures and global trends Discussions on patient safety and challenges were included in the induction programme for new directors and for the clinical expert adviser. Board and senior management training was deferred to FY23, when travel to divisions could resume. Monitoring progress on the implementation of a software solution for the management of clinical adverse events See the ‘Clinical performance’ section Monitoring progress on the implementation of EHRs in Switzerland, Southern Africa and the Middle East Monitoring progress on the clinical internal audits See ‘Clinical risk management and controls’ section Monitoring the Group’s response to COVID-19 Monitoring of COVID-19’s impact on clinical services, performance and employees was embedded into the regular clinical performance reports discussed at Committee meetings. The directors also continued to receive daily reports on COVID-19 levels across the Group. In March 2022, the Committee considered the outcome of the external evaluation of its performance, conducted as part of the annual evaluation process described on pages 117–119 of the Corporate Governance Statement. The composition and performance of the Committee were highly rated and no signiﬁcant issues requiring improvement had been identiﬁed. FY23 PRIORITIES Reﬂecting on the feedback from its evaluation, the Committee’s main priorities for FY23 are: • continuing to support management with the optimisation of reports and information presented to the Committee and the Board; • ensuring clinical performance measures and audits continue to evolve as the Group expands across new areas in the continuum of care; • increasing focus on the clinical care aspects of clients’ experience; and • ensuring continued collaboration and joint problem-solving across the Group. CLINICAL PERFORMANCE COMMITTEE REPORT CONTINUED The Committee also received regular reports from the Group’s Internal Audit function on the ﬁndings from hospital and other clinical audits conducted. Despite the disruption caused by COVID-19, the majority of the clinical audits planned for FY22 were completed and showed compliance with most controls for high-risk areas. Action plans to correct any non-compliance had been formulated, with the divisional clinical performance committees ensuring their implementation and completion. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT134 The Committee has taken on the well-established processes developed by the Clinical Performance and Sustainability and the Nomination committees. Dame Inga Beale Chair of the ESG Committee See the Sustainable development overview starting on page 34 for sustainable development progress See the 2022 Sustainable Development Report at annualreport.mediclinic.com for further details COMMITTEE ROLE AND RESPONSIBILITIES The Committee’s key responsibilities include: • overseeing the Group’s conduct with regard to its sustainable development obligations as a responsible corporate citizen; • reviewing and approving the Group’s Sustainable Development Strategy and corresponding implementation plans and measures; and • monitoring the sustainable development performance of the Group and progress on the implementation of its Sustainable Development Strategy. See the Committee’s terms of reference, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com, for further details COMMITTEE MEMBERSHIP AND ATTENDANCE The Committee membership comprises the Chair of the Board (who is also Chair of the Committee), two other independent non-executive directors, the designated non-executive director responsible for workforce engagement and the Group CEO. See page 113 for details of Committee membership and attendance and pages 104–107 for members’ biographies The Group Chief Governance Ocer, responsible for coordinating sustainable development activities across the Group, attends all Committee meetings. Other I am pleased to present the ﬁrst report on the activities of our new ESG Committee (the ‘Committee’) during FY22. Consideration of ESG matters is embedded into the Group’s business and the Clinical Performance and Sustainability and the Nomination committees previously provided Board-level oversight. However, recognising the signiﬁcance of these matters, the Board considered it important to establish a dedicated forum for providing oversight of the Group’s Sustainable Development Strategy and corporate governance framework, and supporting other Board committees in areas of overlapping interests. The Committee has taken on the well-established processes developed by the Clinical Performance and Sustainability and the Nomination committees, and is building upon them to respond to internal developments and the evolution of external reporting frameworks and regulatory requirements, as set out in this report. Dame Inga Beale Chair of the ESG Committee 24 May 2022 relevant members of management are invited to attend meetings as required. MEETINGS AND PRINCIPAL AREAS OF FOCUS IN FY22 The Committee normally holds two scheduled meetings during a ﬁnancial year. During FY22, it held one additional meeting to review and approve a ﬁrst draft of the TCFD report included in this Annual Report for the ﬁrst time, Southern Africa’s roadmap to send zero waste to landﬁll by 2030, and various Group policies that fall within its remit. The key activities covered by the Committee (or, prior to 1 September 2021, the Clinical Performance and Sustainability Committee) are set out below. SUSTAINABLE DEVELOPMENT The Committee conducted a biannual review of the Group’s signiﬁcant stakeholders and for each group, the methods of engagement, their key areas of concern and Mediclinic’s response, noting the minor adjustments proposed to reﬂect feedback from the business and stakeholders. The Committee (and subsequently the Board) approved the list of signiﬁcant stakeholders and conﬁrmed that the methods of engagement with clients, workforce, shareholders and other key stakeholders continued to be eective in terms of enabling the ﬂow of information from stakeholders to management and the Board, and the Group’s response back to stakeholders. ESG COMMITTEE REPORT STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 135 The Committee also discussed and approved the Group’s material sustainability priorities, including the principles adopted for determining materiality and the resulting priorities proposed for 2022, which remained consistent with those identiﬁed for the prior year. The Group’s Sustainable Development Strategy was a key focus area for the Committee. It examined the progress made on achieving the objectives for the year and was pleased to note that these were either completed or progressing well, although in a few cases, some adjustments to deadlines for completion were required due to resource constraints. A number of new objectives were proposed to build on existing achievements and ensure the strategy remained relevant and continued to address the Group’s ESG priorities. The Committee also received detailed reports on: • diversity and inclusion across the wider workforce and the talent pipeline leading up to the Group Executive Committee’s direct reports; • labour relations, working conditions, and employee training and skills development; • the Southern Africa operations’ standing in terms of the goals and purposes of the B-BBEE programme and compliance with the Employment Equity Act, No. 55 of 1998, and the UAE’s plans for Emiratisation (increasing the number of roles fulﬁlled by UAE nationals); • feasibility studies being conducted with Johnson & Johnson MedTech across the Group’s operations to reduce waste through the introduction of circular economies, speciﬁcally in relation to consumables such as single-use medical devices and packaging not currently captured by any recycling initiatives; • the Southern Africa operations’ roadmap to achieving carbon neutrality and sending zero waste to landﬁll by 2030, and related capital expenditures required to deliver the initiatives identiﬁed to date; and • the results of Mediclinic’s participation in various sustainability indices and assessments. ESG REPORTING The Committee supports the Audit and Risk Committee and the Board in the review of existing and emerging ESG-related risks and reporting. As part of this, the Committee: • considered and provided guidance on ESG-related risks and their mitigation during its meetings; • reviewed and approved the climate-related risks set out in the TCFD report and, going forward, will be conducting regular deep dives into environmental, climate-related and other sustainability risks; • conducted a review of the internal and external assurance processes supporting the Group’s assessment of material sustainable development issues and non-ﬁnancial information reporting, and the outcomes of the ISO 14001 gap audits completed and corresponding certiﬁcations obtained; • considered and approved the Group’s TCFD report and Sustainable development overview included in this Annual Report, this report by the Committee and the standalone 2022 Sustainable Development Report; and • conducted its annual review of the Group’s Modern Slavery and Human Tracking Statement prepared in accordance with the UK’s Modern Slavery Act 2015, and recommended it to the Board for approval. The Group’s Modern Slavery and Human Tracking Statement can be found on the home page of the Company’s website at www.mediclinic.com GOVERNANCE MATTERS The Committee discussed reports received on: • directors’ external appointments and time commitments, conﬂicts of interest and independence, following which it made the corresponding recommendations to the Board (see sections in the Corporate Governance Statement on ‘External appointments and conﬂicts of interest’ and ‘Directors’ independence’ on pages 110–111); • fraud and ethics matters; • compliance, including the governance of advertising and compliance with consumer protection legislation; and • charitable sponsorship and donations. The Committee also reviewed and approved the Group’s Sustainable Development Policy and Group Environmental Policy, ensuring their continued alignment with the Group Sustainable Development Strategy, and reviewed and recommended to the Board for approval the Group’s Code of Business Conduct and Ethics and the Committee’s terms of reference. SA COMPANIES ACT REQUIREMENTS The Committee performs the statutory functions of a social and ethics committee in respect of certain South African subsidiaries of the Company, in accordance with the South African Companies Act, No. 71 of 2008, as amended. These include the requirement to report to shareholders at a company’s AGM on matters within its mandate. The Committee fulﬁls this responsibility by referring shareholders at the Company’s 2022 AGM to this report, which should be read in conjunction with the 2022 Sustainable Development Report, available at annualreport.mediclinic.com. Any questions for the Committee may be sent to the Company Secretary prior to the 2022 shareholder engagement event or AGM. COMMITTEE EVALUATION The Committee was established in September 2021 only; it was therefore decided that the ﬁrst evaluation of its performance would take place in FY23. The table below sets out the progress made in relation to the key priorities regarding sustainability matters that the Clinical Performance and Sustainability Committee had set itself for FY22, which the ESG Committee assumed after it was established. PROGRESS ON KEY FY22 PRIORITIES PRIORITIES STATUS Monitoring the wellbeing of employees See the Sustainable development overview starting on page 34 Monitoring progress on the implementation of the Group’s Sustainable Development Strategy See the section on ‘Sustainable development’ ESG COMMITTEE REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT136 We focused on the appointment of two new directors, amending the structure of the Board committees and formalising our Board gender and ethnicity diversity targets. Dame Inga Beale Chair of the Nomination Committee NOMINATION COMMITTEE REPORT I am pleased to report on the activities of the Nomination Committee (the ‘Committee’) for FY22, together with its priorities for FY23. The past year has been busy as we focused on the appointment of two new directors, amending the structure of the Board committees and formalising our Board gender and ethnicity diversity targets. We also supported management in restructuring the Group Executive Committee, including appointing two new members, and further developing plans for senior leadership succession and development. I look forward to further progress in the period to come. Dame Inga Beale Chair of the Nomination Committee 24 May 2022 COMMITTEE ROLE AND RESPONSIBILITIES The Committee’s key responsibilities include: • formulating succession plans for the Board and the Group Executive Committee and overseeing the development of a diverse talent pipeline; • reviewing the structure, size and composition of the Board and the Group Executive Committee; • identifying and nominating potential candidates to ﬁll vacancies on the Board and its committees as required; and • monitoring progress on increasing diversity at Board and Group Executive Committee level and in the talent pipeline. See the Committee’s terms of reference, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com, for further details COMMITTEE MEMBERSHIP AND ATTENDANCE The Committee membership comprises the Chair of the Board (who is also Chair of the Committee), two other independent non-executive directors and one non-executive director. See page 113 for details of Committee membership and attendance and pages 104–107 for members’ biographies The Group CEO, the Group Chief Strategy and Human Resources Ocer and the Group General Manager: Talent Management also attend Committee meetings regularly, upon invitation. MEETINGS AND PRINCIPAL AREAS OF FOCUS IN FY22 The Committee normally holds two scheduled meetings during a ﬁnancial year. During FY22, it held three additional ad hoc meetings to consider non-executive director appointments and the restructuring of the Board committees. NEW APPOINTMENTS The Committee progressed its plans to ﬁll the vacancies created by the planned retirement of Alan Grieve and Trevor Petersen as directors. The executive search ﬁrm Odgers Berndtson Limited was appointed to conduct an extensive search for suitably qualiﬁed individuals. The ﬁrm had no connection with the Company or any of the individual directors other than the provision of search services for these roles and is a signatory to the Voluntary Code of Conduct for Executive Search Firms. Based on a thorough and robust process, the Committee was pleased to recommend the appointment of Natalia Barsegiyan and Zarina Bassa to the Board. The Board subsequently appointed Natalia and Zarina as directors with eect 1 September 2021 and 1 February 2022, respectively. See the Section 172 statement on pages 30–33 for more information on the appointment of Natalia and Zarina, one of the principal decisions considered by the Board during the period STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 137 Following these changes, Mediclinic has: • a gender-balanced Board; • a female Chair of the Board and the Committee, and a female SID and Chair of the Clinical Performance Committee; • two non-executive directors that meet the ethnic diversity criteria set by the Parker Review and the Company; • a good mix of skills, knowledge, professional background and tenure; • good coverage of the Board committees without placing undue demands on any one director; and • Board-level representation in the main jurisdictions in which we operate. DIRECTORS’ INDUCTION AND ONGOING DEVELOPMENT Directors receive a comprehensive and tailored induction that takes account of their existing expertise and Board committee roles, and incorporates feedback from recent appointees. The programme is designed to ensure they are fully equipped to meet their statutory duties, understand our business and strategic priorities, and establish relationships with the senior leadership team. It is normally structured as a series of formal meetings in the ﬁrst month after appointment, with site visits to each geography spaced out over the next 12–18 months. Subsequent follow-up sessions are arranged on request. The induction programmes for Natalia and Zarina were also tailored to their place of residence as well as restrictions and preferences regarding international travel at the time of their appointment in light of COVID-19. A substantial part of Natalia’s programme was delivered virtually, whereas Zarina, appointed six months later and being a resident of South Africa, was able to attend more meetings in person. Their site visits were adjusted accordingly and to allow Dame Inga Beale and Steve Weiner to join them to continue their own inductions, which had also been aected by the pandemic. The Company Secretary and the Company’s external advisers monitor legal, regulatory and governance developments and inform the Board and relevant committees accordingly. The development needs of the Board and its committees are periodically discussed at meetings and expert brieﬁng sessions arranged accordingly. During FY22, the Board received expert brieﬁng sessions on patient safety, political developments in the Middle East and the increased focus on ESG, as well as an update session on directors’ duties and other corporate governance-related matters. Directors appointed to new committees are oered training tailored to their new responsibilities and other development requirements are considered at meetings between individual directors and the Chair regarding the annual evaluation of their performance. BOARD COMMITTEES With management’s increasing focus on ESG matters and growing scrutiny from investors and regulators, the Committee considered dierent options for ensuring appropriate Board-level oversight and support, and recommended to the Board the establishment of a separate ESG Committee to take over and build upon the sustainability responsibilities previously undertaken by the Clinical Performance and Sustainability Committee. As part of this restructuring, certain responsibilities previously allocated to the Nomination Committee were transferred to the ESG Committee. These included the monitoring of the outcomes of the Group’s Diversity and Inclusion Policy below the Group Executive Committee level, and the Southern Africa operations’ standing in terms of the goals and purposes of the B-BBEE programme and compliance with the Employment Equity Act, No. 55 of 1998. The Committee also took the opportunity to review and recommend changes to the membership of all Board committees, to accommodate the changes in its composition and to ensure appropriate links were created between committees with common interests and shared responsibilities through overlaps in membership or, where not possible, regular guest attendees. Following the Board’s approval of the Committee’s recommendations, the following changes were implemented: COMMITTEE CHANGES EFFECTIVE DATE Audit and Risk • Alan Grieve retired as Chair and member; Tom Singer (existing member) appointed as Chair • Natalia Barsegiyan appointed as member • Zarina Bassa to be appointed as member 13 September 2021 1 August 2021 1 January 2023 Clinical Performance and Sustainability Refocused as Clinical Performance Committee (no changes in membership) 1 September 2021 ESG Established as new committee with Dame Inga Beale as Chair and Natalia Barsegiyan, Dr Felicity Harvey, Danie Meintjes and Dr Ronnie van der Merwe as members 1 September 2021 Investment Tom Singer appointed as member 13 September 2021 Nomination Alan Grieve retired as member 13 September 2021 Remuneration • Trevor Petersen retired as Chair and member; Steve Weiner (existing member) appointed as Chair • Dr Muhadditha Al Hashimi appointed as member • Zarina Bassa appointed as member 13 September 2021 13 September 2021 1 February 2022 TABLE 1: BOARD COMMITTEE CHANGES DURING FY22 NOMINATION COMMITEE REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT138 BOARD COMPOSITION AND SUCCESSION PLANNING The Committee reviews the composition of the Board and its committees against the current and future requirements of the business: • before starting a search for a new director; • before recommending the extension of the appointment of any existing directors; and • annually, when considering Board short-, mid- and long-term succession planning and the election or re-election of directors. The Committee’s reviews are based on a comprehensive report which includes a Board skills matrix reﬂecting the current and future needs of the business and an analysis of various diversity factors such as gender, ethnicity, geographical background, age and tenure. It also takes into account the directors’ independence and other external time commitments, as well as feedback from the latest Board evaluation. This process informed the candidate briefs prepared for the appointment of two new directors described earlier in this report. Following its FY22 review of the Board’s composition and succession plans, and taking into account the recent changes to the Board and its committees in response to the ﬁndings from the FY21 Board evaluation, the Committee concluded that their composition was adequate for the short to medium term and there was merit in providing a period of stability to allow the newly appointed directors to settle and bring their experience to bear. Nevertheless, the Committee would continue to keep the matter under close review. The terms and conditions of appointment of the non-executive directors, which include their expected time commitment, are available for inspection at the Company’s registered oce and at the 2022 AGM. BOARD DIVERSITY POLICY The Board ﬁrmly supports the principle of diversity and inclusion in general and takes the need for boardroom diversity seriously, believing that a diverse and inclusive Board will result in better debates and decisions, to the beneﬁt of the Company, its shareholders, other key stakeholders and society at large. Accordingly, the Committee recommended the adoption of an updated diversity policy that sets out this position more explicitly and introduces speciﬁc gender and ethnic diversity targets for the Board. The gender target is consistent with that set for middle, senior and executive management in the Group Diversity and Inclusion Policy. Recognising that the geographical spread of the Group’s operations means that an ethnic minority in one jurisdiction may not be a minority in another, the Board has adapted the Parker Review deﬁnition and set itself a higher ethnic diversity target. The revised policy, adopted by the Board in March 2022, states that: • diversity encompasses a range of factors including gender and ethnicity, nationality, social and educational background, skills, industry and geographical experience, age and tenure, cognitive strengths and a variety of other personal attributes that are less readily visible but no less valuable; • inclusion means all Board members, regardless of background, are valued and respected and have the opportunity to contribute to the Board’s discussions and decision-making; • appointments to the Board will be made on merit and based on objective criteria, taking into account the composition of the Board and its committees in terms of the required mix of skills, experience, knowledge and tenure and, within this context, the beneﬁts of promoting diversity in its broadest sense; • the Board will instruct any search consultant engaged to advise on new appointments to review candidates from a variety of backgrounds and perspectives; and • the Board will engage only executive search consultants who have signed up to the Executive Search Voluntary Code of Conduct. The Board is committed to the following objectives: • maintaining a balance of at least 40% female directors and at least 40% male directors, and at least two directors from an African, Asian, Middle Eastern, Central and South American background or from other historically disadvantaged ethnic groups (while recognising that during changes in the composition of the Board, there may be temporary periods when this balance is not achieved); • in reviewing the composition of the Board, considering the diversity of the directors’ skills, knowledge, experience, gender, ethnicity and other diversity factors set out in the policy, non-executive directors’ length of service, the balance of independence on the Board and the Group’s future requirements; • in identifying suitable candidates for appointment to the Board, considering candidates from a variety of backgrounds and perspectives, and assessing all candidates on merit against objective criteria, with due regard to the beneﬁts of Board diversity; • annually assessing and making any necessary amendments to the Board’s diversity objectives; and • supporting and monitoring management’s actions to develop an internal pipeline of diverse, high-calibre candidates for senior leadership roles within the Group, in line with Group and divisional diversity and inclusion policies, practices and initiatives. The Board Diversity Policy applies to the Board only, but sits alongside Mediclinic’s Group Diversity and Inclusion Policy and other Group and divisional policies, which, as a whole, set out Mediclinic’s commitment to diversity and inclusion throughout the business. The Board is committed to ensuring the development of a diverse internal pipeline qualiﬁed and capable of taking up senior leadership positions, including at Board and Group Executive Committee level. The Board takes the need for boardroom diversity seriously, believing that a diverse and inclusive Board will result in better debates and decisions. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 139 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION The Committee is pleased to note that the composition of the Board already exceeds the diversity targets set by the FCA in the changes to the Listing Rules announced in April 2022 and will work with management and the ESG Committee to address the other requirements and recommendations set out in the new rules and related guidance. The table below sets out the progress made against the objectives outlined in the previous Board Diversity Policy, which applied during FY22. PROGRESS AGAINST OBJECTIVES OBJECTIVE STATUS The Board will remain committed to achieving a diverse Board and executive management including aspects such as age, gender, ethnicity, education and professional background. See sections on ‘New director appointments’ and ‘Group Executive Committee and talent management’ The Committee will annually consider and make recommendations, if applicable, to the Board on its diversity objectives. Refreshed Board Diversity Policy with speciﬁc gender and ethnic diversity targets, as described in this ‘Board Diversity Policy’ section In reviewing the composition of the Board and executive management, the Committee will consider diversity, in addition to considering the balance of skills, experience, independence and knowledge. See sections on ‘Board composition and succession planning’ and ‘Group Executive Committee and talent management’ In identifying suitable candidates for appointment to the Board, the Committee will assess candidates on merit against objective criteria and with due regard to the beneﬁts of a diverse Board. See the Section 172 statement on pages 30–33 for a description of the process adopted for the appointment of Natalia and Zarina NOMINATION COMMITEE REPORT CONTINUED See the Board Diversity Policy, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT140 TABLE 2: RACE, GENDER AND AGE REPRESENTATION ON GOVERNANCE BODIES TABLE 3: RACE, GENDER AND AGE REPRESENTATION OF DIRECT REPORTS TO GOVERNANCE BODIES RACE (ONLY IN RESPECT OF SOUTHERN AFRICA) GENDER AGE (YEARS) AT 31/03/2022 BLACK 2 WHITE MALE FEMALE 30–50 > 50 TOTAL NO OF DIRECT REPORTS 1 NO % NO % NO % NO % NO % NO % Group Executive Committee 32 n/a 18 56% 14 44% 19 59% 13 41% Swiss Executive Committee 81 n/a 40 49% 41 51% 51 63% 30 37% Southern Africa Executive Committee 68 21 31% 2 47 69% 30 44% 38 56% 28 41% 40 59% Middle East Executive Committee 65 n/a 20 31% 45 69% 50 77% 15 23% Notes 1 Total membership shown at 31 March 2022. 2 In the South African context, the term ‘black people’ is a generic term which means African, Coloureds and Indians who: (a) are citizens of the Republic of South Africa by birth or descent; or (b) became citizens by naturalisation before 27 April 1994 or on or after 27 April 1994 and who would have been entitled to acquire citizenship by naturalisation prior to that date. 3 Diverse ethnicity refers to individuals with evident heritage from African, Asian, Middle Eastern, Central and South American regions, or from another diverse ethnic group, as deﬁned by the Parker Review. FIGURE 1: GENDER REPRESENTATION – GROUP EMPLOYEES AND SENIOR MANAGERS Group employees (%) Senior managers (%) Female 22 769 Female 464 Male 7 901 Male 797 26%74% 63%37% Note 1 Senior managers are employees who are responsible for planning, directing or controlling the activities of the Group or a strategically signiﬁcant part of the Group and direct undertakings included in the Group consolidation (excluding the executive directors of the Company). RACE (ONLY IN RESPECT OF SOUTHERN AFRICA) GENDER AGE (YEARS) AT 31/03/2022 BLACK 2 WHITE MALE FEMALE 30–50 > 50 TOTAL MEMBERS 1 NO % NO % NO % NO % NO % NO % Group Board 12 2 Board members of diverse ethnicity (17%) 3 6 50% 6 50% 1 8% 11 92% Group Executive Committee 10 n/a 9 90% 1 10% 4 40% 6 60% Swiss Executive Committee 7 n/a 6 86% 1 14% 3 43% 4 57% Southern Africa Executive Committee 10 3 30% 2 7 70% 8 80% 2 20% 1 10% 9 90% Middle East Executive Committee 10 n/a 9 90% 1 10% 6 60% 4 40% ORGANISATIONAL DIVERSITY Details of race, gender and age representation on the Group’s governance bodies, including the Board, the Group Executive Committee, the divisional executive committees and senior managers, can be found below. See page 110 for more details on other diversity aspects for the Board STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 141 PROGRESS ON KEY FY22 PRIORITIES PRIORITIES STATUS Continuing the development of succession plans and the talent pipeline towards key Group and divisional roles See section on ‘Group Executive Committee and talent management’ Continuing the review of the composition of the Board and its committees in respect of skills, diversity, tenure and commitments See sections on ‘New director appointments’, ‘Board committees’ and ‘Board composition and succession planning’ Continuing the implementation of the Group Diversity and Inclusion Strategy See sections on ‘Board Diversity Policy’ and ‘Group Executive Committee and talent management’ COMMITTEE EVALUATION The table below sets out the progress made in relation to the key priorities identiﬁed from the Committee’s previous evaluation, concluded in March 2021. In March 2022, the Committee considered the outcome of the external evaluation of its performance, conducted as part of the annual evaluation process described on pages 117–119 of the Corporate Governance Statement. The composition and performance of the Committee were highly rated and no signiﬁcant issues requiring improvement had been identiﬁed. FY23 PRIORITIES Reﬂecting on the feedback from its evaluation, the Committee’s main priorities for FY23 are: • monitoring progress of the Group Executive Committee’s restructuring and its impact on the business; • monitoring progress of the implementation of strategies and interventions to strengthen executive management succession plans and the talent pipeline, and to increase diversity; and • continuing to consider the Group’s likely future leadership needs and how new requirements might be addressed. The Board and executive management remain committed to making appointments based on merit. NOMINATION COMMITEE REPORT CONTINUED GROUP EXECUTIVE COMMITTEE AND TALENT MANAGEMENT Another key leadership change supported by the Committee during FY22 was the restructuring of the Group Executive Committee to ensure it better reﬂected the operational and strategic needs of the business. The Committee reviewed and discussed the proposals with the Group CEO and the Group Chief Strategy and Human Resources Ocer, oering its guidance and support and recommending the proposals to the Board. The Chair of the Committee was also actively involved in the process for appointing a Group Chief Operating Ocer and his successor as CEO of Southern Africa. See the Section 172 statement on pages 30–33 for a description of the process adopted for the restructuring of the Group Executive Committee The Committee conducts an annual review of succession and development plans for the Group Executive Committee as well as the strength and diversity of the talent pipeline leading up to it. Areas of concern identiﬁed in the FY22 review were discussed in detail with management and subsequently with the Board, together with the proactive strategies and interventions being implemented or planned to address them. There was some progress made on increasing gender and ethnic diversity at the Group Executive Committee and direct reports level in FY22 due to limited or no sta turnover; however, changes in the structure of the Group Executive Committee have brought about some subsequent changes. In addition, there were small improvements in the senior and middle management levels below, supported by interventions implemented during recent years such as: • applying data analytics in human resources to provide valuable insights, such as patterns in appointments and resignations; • introducing focused conversations and initiatives with key employee stakeholder groups; • introducing town hall meetings featuring direct conversation with executive leadership at Group and divisional level; • producing and sharing employee experience videos; • sharing employee success stories in social media, showing the beneﬁt of joining a diverse workforce; • supporting accelerated growth of diverse talent in pipelines; • improving the B-BBEE standing of Mediclinic and its subsidiaries in Southern Africa; • promoting Emiratisation in the UAE; • ensuring the candidate brief for any vacancy to be ﬁlled through internal promotion or external recruitment considers diversity; • testing workforce perceptions on diversity and inclusion and benchmarking against Gallup®; • introducing an ESG index to the annual employee engagement survey to test workforce perceptions on the progress of the organisation’s ESG goals; • establishing diversity and inclusion standards for all talent processes in the employee lifecycle to ensure the elimination of any potential barriers; and • continuing diversity and inclusion training. The Board and executive management remain committed to making appointments based on merit, measured against objective criteria, and with regard to the aims and targets set out in the Group Diversity and Inclusion Policy. Further interventions are planned in FY23 in support of this commitment, bearing in mind the recommendations of the FTSE Women Leaders Review. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT142 REMUNERATION COMMITTEE REPORT We remain committed to a responsible approach to executive pay, as I trust this report demonstrates. Steve Weiner Chair of the Remuneration Committee LETTER FROM THE CHAIR This is my ﬁrst report since becoming Chair of the Remuneration Committee (the ‘Committee’). I would like to thank my predecessor, Trevor Petersen, for his service, and welcome Dr Muhadditha Al Hashimi and Zarina Bassa, who joined the Committee during the period. I also wish to thank the shareholders I met since taking on this role and look forward to future engagement on this important matter. This report contains: • the revised directors’ remuneration policy (the ‘Policy’), which will be put to a binding shareholder vote at the 2022 AGM ( see pages 148–156); and • the Chair’s letter and the Annual Remuneration Report ( see pages 157–167), which describe how the current remuneration policy was applied during FY22 and how we intend to apply the Policy in FY23, both of which will be put to an advisory shareholder vote at the 2022 AGM. FY21 STI UPDATE As previously reported, the FY21 STI vested in full last year with the Group delivering a robust performance during an extremely challenging and uncertain COVID-19- impacted period. Given the signiﬁcant impact of the COVID-19 pandemic on clinical quality and client experience assessments, the FY21 STI was based on Group adjusted operating proﬁt performance targets only. The Committee then reviewed the overall performance of the business, including underlying ﬁnancial performance, clinical quality and client experience (with input from the Clinical Performance and Sustainability Committee), and employee engagement. The Committee determined that the cash proportion of the STI (50%) be deferred until the Group dividend had been reinstated. That condition was met when the Board proposed a ﬁnal dividend of 3.00 pence in line with the dividend policy. Therefore, the cash proportion of the STI will be released with the remaining 50% of the STI deferred into shares vesting after two years subject to continued employment. FY22 PERFORMANCE CONTEXT The Group delivered a strong operational and ﬁnancial performance this year, in line with the improved outlook we indicated at the half-year results, driven by increased client activity. This resulted in revenue and earnings in all three divisions exceeding pre-pandemic FY20 levels. Group revenue was up 8%, adjusted EBITDA increased by 22%, adjusted EBITDA margin improved to 16.1% (FY21: 14.2%) and adjusted operating proﬁt was up 41% compared with FY21. Compared with pre-pandemic FY20 levels and in constant currency terms, Group revenue was up 9%, adjusted EBITDA was up 1% and adjusted operating proﬁt was ﬂat. Recovery in proﬁtability and strong cash conversion at 127% (FY21: 77%) signiﬁcantly reduced the Group’s leverage ratio to 3.9x (FY21: 5.1x), below pre-pandemic levels (FY20: 4.3x). PERFORMANCE OUTCOMES IN FY22 The FY22 STI was based on Group adjusted operating proﬁt and subject to adjustments based on performance against ﬁnancial and non-ﬁnancial subset indicators for each of the three divisions. The Group achieved adjusted operating proﬁt of £312m for FY22, which was above stretch performance levels. This resulted in an initial STI outcome percentage of 100% of the maximum. While the Group exhibited strong ﬁnancial performance, the STI outcome percentage was reduced by 12.2% taking into account performance against the subset indicators, resulting in an STI outcome of 87.8% of maximum. Note 1 The Company has chosen to adopt the term operating proﬁt as opposed to earnings before interest and taxes (‘EBIT’); they are, however, the same measures. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 143 REMUNERATION COMMITTEE REPORT CONTINUED SHORT-TERM INCENTIVE Current • Based on Group adjusted operating proﬁt performance and subject to adjustments based on performance against ﬁnancial and non-ﬁnancial subset indicators per division Proposed • More conventional approach, whereby STI outcome is determined by a combination of ﬁnancial and strategic measures • Adjusted operating proﬁt retained as principal ﬁnancial metric; ﬁnancial measures taken together make up no less than 75% of performance measures • Remainder based on non-ﬁnancial strategic and/or personal measures that reﬂect Group core priorities and KPIs Application for FY23 MEASURE WEIGHTING RATIONALE Adjusted operating proﬁt 70% Widely used internal and external measure provides a clear indicator of annual growth Cash conversion 10% Liquidity management is key in the Group’s ability to invest in strategy delivery NPS® 10% Client satisfaction and clinical performance are considered fundamental to the Group’s long-term sustainability and form part of the Group’s ESG measures Clinical performance/ functional KPIs 10% A summary of the proposed reﬁnements and application for FY23 is set out below: The Committee reviewed the formulaic outcome of the STI against broader perspectives – including overall business performance and the experience of shareholders, employees and clients – and, taking these into account, considers the formulaic outcome fair. See pages 158–160 for more The June 2019 LTI was based on EPS performance (60% of the award) and relative TSR performance (40% of the award). The Group’s TSR performance was positioned above the median of the TSR comparator group, resulting in a vesting outcome of 30.2% of the TSR element. The EPS threshold performance target was not met, largely due to the impact of the pandemic, which unfolded after the targets were set, and the EPS element therefore lapsed in full. The Committee is satisﬁed that appropriate ROIC has been achieved, recovering towards pre-pandemic levels despite the ongoing impact COVID-19 had on the Group in FY22, and that underlying operational and economic performance has been satisfactory over the performance period to support the vesting outcome. Reﬂecting the level of performance delivered, 12.1% of the LTI will vest, the ﬁrst vesting under the scheme since inception in 2016. See page 160 for more REMUNERATION POLICY AND INCENTIVE REVIEW During FY22, the Committee reviewed the remuneration policy and incentive framework for the executive directors and senior management, ahead of the schedule Policy renewal time frames, to ensure that: • these employees are appropriately incentivised to deliver on the Group’s strategy and create long-term shareholder value; • the incentive framework is appropriately aligned with the Group’s strategic goals and ﬁnancial KPIs; • the arrangements are market competitive in line with the Group’s size, geographical diversity and operational complexity; and • the policy continues to align with UK corporate governance best practice. In its review, the Committee considered a range of incentive frameworks and concluded that the current approach comprising an STI and LTI was appropriate to drive delivery of the Group’s strategic priorities. Reﬁnements have been proposed to the performance measures in order to simplify the current structure, provide closer alignment with the Group’s strategic priorities, and ensure better visibility. After consulting with 20 shareholders (representing approximately 77% of the Group’s issued share capital) and four proxy voting agencies, we are pleased with the level of support received. We value the feedback, which was considered carefully in ﬁnalising the proposed weightings of the STI and LTI performance measures. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT144 LONG-TERM INCENTIVE Current • FY21 and FY22 LTI awards subject to EPS (40%), relative TSR (25%), ROIC (25%) and client experience (10%) Proposed Reﬂecting on the Group’s strategic priorities and to create sustainable long-term value and pursue the Group’s purpose to enhance the quality of life, the Committee has proposed a new balance of LTI metrics. The Committee considers that the introduction of a revenue growth metric alongside EPS and ROIC incentivises the delivery of long-term proﬁtable growth and market share gains across the continuum of care within the Group’s divisions. The introduction of ESG metrics is especially important and rewards delivery aligned with the Group’s purpose, vision, values and sustainable development strategy. See page 147 for proposed targets in respect of the FY23 awards MEASURE 1 WEIGHTING RATIONALE EPS 30% Ensures strategy delivers proﬁtable growth ROIC 30% Rewards ecient use of capital Revenue 20% Rewards delivery of long-term sustainable growth Strategic priorities 20% Rewards delivery of wider strategic non-ﬁnancial priorities, including ESG commitments Note 1 The Committee will adjust for the ﬁnancial impact resulting from signiﬁcant mergers and acquisitions during the performance period. REMUNERATION OPPORTUNITY FOR THE GROUP CEO AND GROUP CFO As part of the policy review, the Committee reviewed the remuneration levels of the Group CEO and Group CFO for market competitiveness. The Group CEO will receive a salary increase of 4.7%, below that of the wider workforce within South Africa (where the average increase was 5.2%). The Committee is mindful that the Group CEO continues to grow in calibre and experience and will therefore keep his salary under review over the three-year policy period, taking into account the performance of both the Group and the Group CEO, the Group CEO’s salary and total compensation positioning against the market, and the wider economic environment. The Group CFO has grown in experience and performed exceptionally well since his appointment in 2016 and the Committee is conscious that, together with the Group CEO, the Group CFO will be instrumental in executing the Group’s long-term strategy. The Group CFO’s incentive opportunity (STI of 133% of salary and LTI of 150% of salary) has not been reviewed since his appointment. As part of the policy review, benchmarking against similar-sized FTSE 250 companies showed that the Group CFO’s overall remuneration opportunity had fallen behind the market, driven by the overall incentive opportunity. The Committee, therefore, considers it appropriate to marginally increase the Group CFO’s LTI opportunity to 175% of salary with eect from FY23. The increase means that the STI and LTI ratio for the Group CFO (1:1.32) is similar to that of the Group CEO (1:1.33). It also transitions the Group CFO’s overall remuneration opportunity from the lower end of the market when compared with peers towards the median. The Group CFO will receive a salary increase of 4.4%. CONCLUSION We remain committed to a responsible approach to executive pay, as I trust this report demonstrates. The Committee believes that the remuneration policy operated as intended during FY22, and it considers that the remuneration received by executive directors was appropriate in terms of Group and personal performance, and the experience of shareholders, employees and clients. On behalf of the Committee, I would like to thank our shareholders for their engagement and hope that the Group continues to receive your support on all remuneration- related resolutions at the 2022 AGM. Steve Weiner Chair of the Remuneration Committee 24 May 2022 As the current LTI plan rules are due to expire, new plan rules are being proposed for shareholder approval at the 2022 AGM. The proposed rules, further details of which are set out in the Notice of AGM, have been drafted with sucient ﬂexibility to ensure that they can be operated for a 10-year period, including allowing for dierent types of awards (both deferred bonuses and LTI awards). While ﬂexibility has been introduced, any awards for executive directors will continue to be subject to the terms of the shareholder-approved remuneration policy in place at the time. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 145 REMUNERATION COMMITTEE REPORT CONTINUED FIXED PAY VARIABLE PAY SALARY & FEES £’000 BENEFITS £’000 PENSION £’000 SUBTOTAL £’000 STI 1 £’000 LTI £’000 2 SUBTOTAL £’000 TOTAL £’000 EXECUTIVE DIRECTORS Dr Ronnie van der Merwe FY22 569 2 46 617 750 152 902 1 519 FY21 497 7 39 543 742 0 742 1285 Jurgens Myburgh FY22 407 4 31 442 476 84 560 1 002 FY21 369 6 27 402 488 0 488 890 TABLE 1: SINGLE TOTAL FIGURES OF DIRECTORS’ REMUNERATION Notes 1 The formulaic outcome of the FY21 STI was 100% of the maximum, however, the Committee determined that the cash proportion of the STI (50%) be deferred until the Group dividend had been reinstated. That condition was met when the Board proposed a ﬁnal dividend of 3.00 pence in line with the dividend policy. Therefore, the cash proportion of the STI will be released with the remaining 50% of the STI deferred into shares vesting after two years subject to continued employment. 2 The value of the vesting awards is based on the average share price over the last three months of FY22, being £3.34. FY22 PERFORMANCE OUTCOMES STI: The Group CEO and Group CFO earned 87.8% of a maximum bonus based on performance against adjusted operating proﬁt targets and ﬁnancial and non-ﬁnancial subset indicators for each of the three divisions. This is equivalent to 132% and 117% of base compensation, respectively. Of the amount earned, 50% will be deferred into Company shares for two years subject to continued employment. THRESHOLD TARGET MAXIMUM ACTUAL AMOUNT EARNED (% MAXIMUM) Adjusted operating proﬁt (£’m) 246 276 297 312 100% Reduction based on performance against ﬁnancial and non-ﬁnancial subset indicators (12.2)% GROUP ACHIEVEMENT (GROUP ADJUSTED OPERATING PROFIT LESS SUBSET OUTCOME): 87. 8% TABLE 2: STI FY22 PERFORMANCE OUTCOMES The Committee reviewed the formulaic outcome of the STI against broader perspectives – including overall business performance and aordability, and the experience of shareholders, employees and clients – and, taking these into account, considers the formulaic outcome fair. LTI: The June 2019 LTI was based on EPS performance (60% of the award) and relative TSR performance (40% of the award). The Group’s TSR performance was positioned above the median of the TSR comparator group, resulting in a vesting outcome of 30.2% of the TSR element. The EPS threshold performance target was not met, largely due to the impact of the pandemic, which unfolded after the targets were set, and the EPS element therefore lapsed in full. The Committee is satisﬁed that appropriate ROIC has been achieved, recovering towards pre-pandemic levels despite the ongoing impact COVID-19 had on the Group in FY22, and that underlying operational and economic performance has been satisfactory over the performance period to support the vesting outcome. Reﬂecting the level of performance delivered, 12.1% of the LTI will vest, the ﬁrst vesting under the scheme since inception in 2016. See page 160 for more AT A GLANCE Throughout this section, South African rand remuneration was translated into sterling at a rate of £1:ZAR19.23 at 31 March 2022 and £1:ZAR21.30 at 31 March 2021. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT146 IMPLEMENTATION OF POLICY FOR FY23 As noted on pages 144–145, reﬁnements have been proposed to the performance measures in order to simplify the current structure, provide closer alignment with the Group’s strategic priorities, and ensure better visibility. GROUP CEO GROUP CFO Base salary (April 2022) £595 788 (+4.7%) £424 704 (+4.4%) Pension 1 9.0% 9.0% Beneﬁts Private medical insurance, life insurance of between 5–7 times annual base salary, as selected STI 2 150% of salary 133% of salary Performance measures for FY23 awards: The underlying targets are considered commercially sensitive and will be disclosed on a retrospective basis in the FY23 Directors’ Remuneration Report. GROUP CEO GROUP CFO LTI 2 200% of salary 175% of salary Performance measures and targets for FY23 awards: MEASURE 1 WEIGHT Adjusted operating proﬁt 70% Cash conversion 10% NPS® 10% Clinical performance/functional KPIs 10% MEASURE 1 WEIGHT THRESHOLD TARGET MAXIMUM EPS (p) 30% 29 36 43 ROIC 2 (%) 30% 5.0 5.5 6.5 Revenue (£’bn) 20% 3.45 3.6 3.75 Carbon emission reduction (tCO 2 e) 3 10% 192 446 (15% reduction) 181 417 (20% reduction) 169 805 (25% reduction) Female representation (%) 4 10% 39 40 41 Notes 1 The Committee will adjust for the ﬁnancial impact resulting from signiﬁcant mergers and acquisitions during the performance period and use adjusted income statement measures. 2 Cash conversion deﬁned as ‘cash from operations/adjusted EBITDA x 100’. Notes 1 The Committee will adjust for the ﬁnancial impact resulting from signiﬁcant mergers and acquisitions during the performance period and use FY25 adjusted income statement measures. 2 ROIC deﬁned as ‘net operating proﬁt less adjusted tax expressed as a percentage of average invested capital’. 3 Carbon emission reduction will be measured at the end of the 2024 calendar year. 4 Measures the percentage of females in senior management positions. Notes 1 Base salary, excluding Board fee, in line with the pension contribution levels provided across the Southern Africa operations. 2 The Committee retains the discretion to adjust STI and LTI award outcomes at the end of the performance period to ensure that the outcome is fair in the context of overall performance and the experience of key stakeholders. Share ownership guideline 225% of salary 200% of salary STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 147 REMUNERATION COMMITTEE REPORT CONTINUED Notes 1 The ESG Committee was established on 1 September 2021. 2 The ESG and Nomination committees are currently chaired by the Board Chair, who receives an all-inclusive fee. Should this change, the fee would be £10 000 for chairing each of the committees. NON-EXECUTIVE DIRECTOR FEE INCREASES Fees for the Chair of the Board are determined by the Committee, with the Chair of the Board exempting herself from the decision. The other non-executive directors’ fees are determined by the Chair of the Board and executive directors. In setting the fees, advice is sought from external remuneration advisors on the appropriate level of fees, taking into account the responsibilities of non-executive directors in dealing with the complexity and global nature of the Company and the level of fees paid to non-executive directors in comparable companies. No changes are proposed to the remuneration policy for non-executive directors. TABLE 3: NON-EXECUTIVE DIRECTORS’ FEES IN FY23 BASE FEES FROM 1 APRIL 2021 FROM 1 APRIL 2022 INCREASE Chair of the Board £280 000 £280 000 0% Base Board fee £63 000 £63 000 0% COMMITTEE CHAIR/SENIOR INDEPENDENT DIRECTOR FEES Audit and Risk Committee £16 000 £16 000 0% Clinical Performance Committee £12 000 £12 000 0% ESG Committee 1 n/a 1 n/a 2 0% Investment Committee £10 000 £10 000 0% Nomination Committee 2 n/a 2 n/a 2 0% Remuneration Committee £16 000 £16 000 0% Senior Independent Director £11 000 £11 000 0% COMMITTEE MEMBER FEES Audit and Risk Committee £10 000 £10 000 0% Clinical Performance Committee £8 000 £8 000 0% ESG Committee n/a 1 £7 000 0% Investment Committee £7 000 £7 000 0% Nomination Committee £7 000 £7 000 0% Remuneration Committee £10 000 £10 000 0% DIRECTORS’ REMUNERATION POLICY INTRODUCTION This section of the report sets out the revised Policy on the remuneration of executive and non-executive directors, which is subject to shareholder approval at the 2022 AGM. If approved, the Policy will be binding and take eect from this date and will operate for up to three years. Directors do not participate in discussions or deliberations involving their own remuneration. The key changes to the current remuneration policy are outlined in Table 4. In determining the Policy, the Committee followed a robust decision-making process, taking into account the views of our major shareholders and proxy voting agencies, UK corporate governance best practice, the Group’s core reward principles, the factors in Provision 40 of the Code (see end of this section), and the views of management and the Committee’s independent advisors. THE GROUP’S CORE REWARD PRINCIPLES Simple and transparent Participants and shareholders understand remuneration arrangements and these can be readily cascaded to the wider workforce Line of sight Executives and senior management have appropriate line of sight and genuine ability to impact performance against targets Alignment to annual and long-term priorities Performance metrics are appropriately aligned with ﬁnancial, operational, clinical, client and ESG objectives Stewardship and alignment with shareholders A signiﬁcant element of the total package should be delivered through shares to encourage long-term share ownership Fairness and equity Market-competitive base salaries and total compensation should reﬂect the size and complexity of the business, and calibre and experience of individuals, while incentive arrangements should be valued by participants and serve to attract, retain and motivate key talent MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT148 TABLE 4: REMUNERATION POLICY FOR EXECUTIVE DIRECTORS ELEMENT OF PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE CRITERIA Base compensation To attract, retain and motivate key talent • Normally reviewed annually or with change in individual’s position or responsibilities • Typically eective from 1 April • Set to reﬂect experience and capabilities of individual and scope and scale of role • Increases reﬂect individual performance, and pay and conditions of wider workforce • No prescribed maximum annual increase • Committee takes into account remuneration levels in comparable organisations in geographies in which the Company operates and in which it competes for talent • Ordinarily, annual salary increases would be no more than average annual increase of workforce in same geographical location in which executive director is based • In exceptional circumstances, a higher increase may be awarded (e.g. assumed additional responsibility; or, an increase in the scale or scope of the role; or, in the case of a new executive director, a move towards desired rate over a period of time where salary was initially set below intended positioning) n/a Pension/retirement beneﬁts To provide employees with long-term savings via pension provisions • Participation in a deﬁned contribution pension scheme • In appropriate circumstances, cash allowances may be paid in lieu of contribution to pension scheme A Company contribution (or cash allowance in lieu of a contribution) in line with maximum contribution level available for majority of employees across Southern Africa (currently at 9% of base salary) n/a Beneﬁts To provide market-competitive beneﬁts to ensure wellbeing • May include, but are not limited to, private medical insurance, and death and disability insurance • Other ancillary beneﬁts, including relocation and allowance towards reasonable fees for professional services such as legal, tax and ﬁnancial advice • Reasonable business expenses (e.g. travel, accommodation and subsistence) will be reimbursed and, in some instances, associated tax borne by the Company Actual value of beneﬁts provided n/a STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 149 REMUNERATION COMMITTEE REPORT CONTINUED ELEMENT OF PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE CRITERIA Annual STI • To encourage and reward delivery of the Group’s annual ﬁnancial and operational objectives • To encourage share ownership and align with shareholder risk and reward • Performance targets, normally set annually by the Committee, are linked to ﬁnancial and strategic goals • Proportion of bonus earned (normally no less than half) is deferred into shares for two years, subject to continued employment • Deferred awards are ordinarily settled in shares • Dividends that accrue on deferred awards are paid in shares or cash at the time of vesting • Awards subject to malus and clawback provisions (see below) • Discretion retained to adjust award outcomes at end of performance period to ensure fair outcome in context of overall performance and experience of key stakeholders Maximum opportunity of 150% of base compensation in respect of any ﬁnancial year • Outcome determined based on combination of ﬁnancial and non-ﬁnancial measures • At least 75% will be based on Group ﬁnancial measures, with remainder based on non-ﬁnancial strategic and/or personal measures that reﬂect Group core priorities and KPIs • For each performance measure, performance below threshold target results in zero vesting; vesting then increases from 0% to 100% of maximum opportunity for performance between threshold and maximum targets • FY23 STI awards expected to be based on adjusted operating proﬁt (70%), cash conversion (10%), NPS® (10%) and clinical/functional targets (10%) KEY CHANGES TO THE POLICY – STI • More conventional approach, whereby STI outcome is determined by a combination of ﬁnancial and strategic measures • Adjusted operating proﬁt retained as principal ﬁnancial metric; ﬁnancial measures taken together make up no less than 75% of performance measures • Remainder based on non-ﬁnancial strategic and/or personal measures that reﬂect Group core priorities and KPIs TABLE 4: REMUNERATION POLICY FOR EXECUTIVE DIRECTORS CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT150 ELEMENT OF PAY PURPOSE AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY PERFORMANCE CRITERIA LTI • To balance performance pay between achieving ﬁnancial and strategic performance objectives and delivering sustainable outperformance • To encourage share ownership and align with shareholders’ interests • Annual awards denominated in shares with vesting dependent on the achievement of performance conditions normally measured over three-year period • Executive directors normally required to hold vested awards for two years following end of performance period • Awards ordinarily settled in shares • Performance targets normally set annually by the Committee according to prevalent economic outlook and risk factors, ensuring such targets remain challenging and realistic enough to motivate and incentivise • Dividends that accrue during vesting and holding periods paid in shares or cash, to extent that awards have vested • Awards subject to malus and clawback provisions (see below) • Discretion retained to adjust award outcomes at end of performance period to ensure fair outcome in context of overall performance and experience of key stakeholders Maximum opportunity of 200% of base compensation in respect of any ﬁnancial year • Performance measures set by Committee and linked to appropriate mix of capital eciency, proﬁtable growth, and strategic milestones including ESG targets (which will account for not more than 20% of the award) • For each performance measure, no more than 25% will vest for achieving threshold target, increasing to full vesting for achieving maximum performance target • FY23 LTI awards expected to be based on adjusted EPS (30%), ROIC (30%), revenue (20%) and strategic/ ESG targets (20%) KEY CHANGES TO THE POLICY – LTI Reﬂecting on the Group’s strategic priorities and to create sustainable long-term value and pursue the Group’s purpose to enhance the quality of life, the Committee has proposed a new balance of LTI metrics. The Committee considers that the introduction of a revenue growth metric alongside EPS and ROIC incentivises the delivery of long-term proﬁtable growth and market share gains across the continuum of care within the Group’s divisions. The introduction of ESG metrics is especially important and rewards delivery aligned with the Group’s purpose, vision, values and sustainable development strategy. Shareholding guidelines To align executive directors’ interests with those of shareholders Within employment • Group CEO and Group CFO expected to build up and maintain a Company shareholding equal to 225% and 200% of salary, respectively Post-employment • Executive directors required to hold Company shares equal to: (1) 100% of their within-employment requirement (or their actual shareholding at the point of departure, if lower) for ﬁrst 12 months post-employment; and (2) 50% of the above level for the subsequent 12 months TABLE 4: REMUNERATION POLICY FOR EXECUTIVE DIRECTORS CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 151 REMUNERATION COMMITTEE REPORT CONTINUED COMMITTEE DISCRETION IN RELATION TO EXISTING COMMITMENTS The Committee reserves the right to make any remuneration payment and payment for loss of oce, notwithstanding that they are not in line with the Policy set out in this report, where the terms were agreed: • before the Policy set out in this report comes into eect; • at a time when a previous remuneration policy approved by shareholders was in place, provided that the payment is in line with the terms of that policy; or • at a time when the individual was not a director of the Company and the payment was not in consideration of them becoming a director of the Company. This includes awards granted prior to the introduction of the revised Policy that are still to vest i.e. the FY21 and FY22 LTI, and the FY20, FY21 and FY22 STI. INCENTIVE DISCRETIONS The Committee operates the STI and the LTI in accordance with their respective rules, the Listing Rules and the rules of relevant tax authorities, where relevant. The Committee, consistent with market practice, retains discretion over a number of areas relating to the operation and administration of the plans. These include (but are not limited to): • participants in the plans; • timing of the grant and/or vesting of award; • size of an award (up to plan and Policy limits) and/or vesting; • choice of performance measures, weightings and targets; • ability, in exceptional circumstances, to settle share-based awards in cash (e.g. where share settlement is not feasible due to regulatory restrictions); • discretion to review the level of vesting in the context of overall performance and the experience of stakeholders; • discretion relating to the measurement of performance and/or adjustments to awards required in certain circumstances (e.g. rights issues, corporate restructuring and special dividends); • ability to adjust existing performance conditions for exceptional events to fulﬁl their original purpose; and • whether (and to what extent) malus/ clawback provisions shall apply to an award (see recovery provisions below). RECOVERY PROVISIONS At the discretion of the Committee, awards may be adjusted before delivery (malus) or reclaimed after delivery (clawback) if an adjustment event occurs. Such events may include a material misstatement of the Group’s audited ﬁnancial results; a material miscalculation of any relevant performance measure; a material failure of risk management or regulatory compliance by a relevant entity; material reputational damage to the Group; corporate failure; or the participant’s material misconduct. CHOICE OF PERFORMANCE MEASURES AND APPROACH TO SETTING TARGETS The performance measures used for the STI and LTI awards reﬂect the Group’s annual and long-term ﬁnancial and strategic priorities. The STI is focused predominantly on the Group’s ﬁnancial KPIs to reﬂect the Group’s success in managing its operations. Balance is provided through the use of non-ﬁnancial strategic and clinical performance measures. Stretching targets are set on sliding scales annually, taking into account multiple internal and external reference points, including internal budgets and market expectations. Modest rewards are available for achieving threshold performance with maximum rewards requiring substantial outperformance of challenging strategic plans. TABLE 5: STI AND LTI RECOVERY PROVISIONS MALUS CLAWBACK STI (cash) To such time as payment is made Up to two years following payment STI (deferred share award) To such time as award vests n/a LTI To such time as award vests Up to two years following vesting CONSIDERATION OF SHAREHOLDER VIEWS The Company is committed to maintaining an open and transparent dialogue with its shareholders and the Committee engages regularly in a process of investor consultation . As part of the development of the Policy, the Committee sought input from major shareholders and proxy voting agencies, and reviewed their feedback. Shareholders were supportive of the Policy in principle. Reﬂecting on feedback received, the Committee adjusted the weightings of the LTI metrics to increase the proportion of the ROIC metric over revenue growth. The Committee considers the AGM to be an opportunity to engage further with shareholders, giving them the opportunity to provide feedback in advance on the way in which the Policy operates and the way in which it is implemented. In addition, the Committee will continue to engage directly with major shareholders and their representative bodies should any material changes be made to the Policy or its implementation in the future. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT152 FIGURE 1: EXECUTIVE DIRECTORS’ REMUNERATION SCENARIOS FOR FY23 The basis of calculation for these scenarios is as follows: FIXED PAY Salary from 1 April 2022 9% of salary pension contribution Value of beneﬁts as shown in the total single ﬁgure table for FY22 Remuneration is earned in sterling (GBP) and South African rand (ZAR) The ZAR portion of the remuneration package is translated into GBP at a rate of £1:ZAR20.27 MINIMUM TARGET MAXIMUM MAXIMUM WITH 50% SHARE PRICE GROWTH STI (PAYOUT AS % OF MAXIMUM) 0% 50% 100% 100% LTI (VESTING AS % OF MAXIMUM) 0% 50% 100% 100% plus 50% share price growth TABLE 6: REMUNERATION POLICY FOR NON-EXECUTIVE DIRECTORS ELEMENTS AND LINK TO STRATEGY OPERATION MAXIMUM OPPORTUNITY Set to attract, retain and motivate talented individuals through the provision of market- competitive fees • Board Chair receives an all-inclusive fee • Other non-executive director roles receive Board fee with additional fees for: (1) chairing a committee; (2) SID role; and (3) committee membership, taking into account additional responsibilities and time commitments of these roles • Additional fees may be introduced where deemed appropriate to reﬂect additional responsibilities and time commitments • In consultation with executive directors, the Board Chair (or in the case of the Board Chair’s fee, the Remuneration Committee) will review fees periodically or in the event of a change in an individual’s position or responsibilities (as appropriate) • Fee levels are set at market rates, taking into consideration responsibility and time commitments, and pay and conditions in the workplace • Fees are paid in cash; the Board retains the discretion to pay a proportion in shares where appropriate • Reasonable business expenses (e.g. travel, accommodation and subsistence) will be reimbursed and, in some instances, associated tax borne by the Company • Beneﬁts may be provided as appropriate to the role • Aggregate Board fees are subject to maximum cap as stated in Group’s Articles • No prescribed maximum annual increase for non-executive directors – changes are guided by general increase for broader workforce Fixed pay STI LTI Share price growth Minimum On-target Maximum Maximum wth 50% share price increase Minimum Maximum Maximum with 50% share price increase On-target 100% 35% 24% 41% 24% 32% 44% 19% 27% 36% 18% 100% 38% 38%24% 26% 32% 42% 22% 26% 35% 17% £646K £1 838K £2 731K £3 327K £461K £1 208K £1 769K £2 140K REMUNERATION SCENARIOS FOR THE EXECUTIVE DIRECTORS The total remuneration for each executive director that could result from the Policy in FY23 is shown below under four dierent performance scenarios. The chart highlights how the performance-related elements of the package comprise a signiﬁcant portion of total remuneration at on-target and maximum performance. Group CEO Group CFO STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 153 REMUNERATION COMMITTEE REPORT CONTINUED DIRECTORS’ RECRUITMENT AND PROMOTIONS The policy on the recruitment or promotion of an executive director takes into account the need to attract, retain and motivate the best person for each position, while ensuring close alignment between the interests of shareholders and management. If a new executive director is appointed, the Committee will align the remuneration package with the Policy approved by shareholders. Outlined in the table below are all components that would be considered for inclusion in the remuneration package for a new executive director appointment. TABLE 7: DIRECTORS’ RECRUITMENT AND PROMOTIONS COMPONENT APPROACH Fixed pay • Base salary will reﬂect individual’s role, calibre and experience, and will be set in context of market practice • Future increases up to market rate may be agreed, in line with increased experience and/or responsibilities, subject to strong performance, where considered appropriate • Pension contribution (or cash allowance) will be no more than maximum contribution available to majority of workforce across the geographical location in which individual is based Beneﬁts • Provided in line with the Policy • The Committee may agree that the Company will meet certain relocation and incidental expenses as appropriate STI and LTI • New appointments will be eligible to be considered for incentive awards consisting of anSTI and/or LTI award (or any other element which the Committee considers appropriate given the particular circumstances but not exceeding the maximum level of variable remuneration set out below) • In line with the limits as set out in the Policy, the maximum level of variable pay for a new executive director is 350% of salary (excluding buy-out awards) Buy-out awards • To facilitate recruitment, the Committee may make an award to buy out remuneration terms forfeited on leaving a previous employer • The Committee will look to replicate arrangements being forfeited as closely as possible and, in doing so, will take account of relevant factors including the nature of the remuneration being forfeited; any performance conditions; and the time over which they would have vested or been paid • Where appropriate, the Committee retains the discretion to utilise the Listing Rules exemption (Listing Rule 9.4.2) to facilitate the recruitment of an executive director Other elements of remuneration May be included in the following circumstances: • An interim appointment being made to ﬁll an executive director role on a short-term basis • If exceptional circumstances require that the Chair or a non-executive director takes on an executive function on a short-term basis COMPONENT APPROACH For an internal appointment, any incentive amount awarded in respect of a prior role may be allowed to vest on its original terms or be adjusted as relevant to take into account the appointment. Any other ongoing remuneration obligations existing prior to appointment may continue. For the appointment of a new Chair or non-executive director, the fee arrangement will be set in accordance with the Policy approved by shareholders. DIRECTORS’ SERVICE AGREEMENTS AND LETTERS OF APPOINTMENT The Committee seeks to ensure that contractual terms of the executive directors’ service agreements reﬂect best practice. It is the Company’s policy that all executive directors have rolling contracts that can be terminated by the employee in line with his/her service agreement. Executive directors’ service agreements are terminable on six months’ notice on either side. Executive directors may, on nomination from the Company, take on outside appointments; however, all fees will normally be retained by Mediclinic. EXECUTIVE DIRECTOR COMMENCEMENT DATE OF SERVICE AGREEMENT Dr Ronnie van der Merwe 1 June 2018 (joined Mediclinic on 1 July 1999) Jurgens Myburgh 1 August 2016 TABLE 8: EXECUTIVE DIRECTORS’ SERVICE CONTRACT COMMENCEMENT DATES MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT154 TABLE 9: NON-EXECUTIVE DIRECTORS’ APPOINTMENT DATE AND EXPIRY OF CURRENT TERM NON-EXECUTIVE DIRECTOR DATE OF APPOINTMENT EXPIRY OF CURRENT TERM Dame Inga Beale 26 March 2020 25 March 2023 Dr Felicity Harvey 3 October 2017 2 October 2023 Dr Muhadditha Al Hashimi 1 November 2017 30 October 2023 Natalia Barsegiyan 1 August 2021 30 September 2024 Zarina Bassa 1 February 2022 31 January 2025 Jannie Durand 15 February 2016 10 February 2025 Danie Meintjes 15 February 2016 14 February 2025 Dr Anja Oswald 25 July 2018 31 July 2024 Tom Singer 24 July 2019 31 July 2025 Steve Weiner 22 July 2020 21 July 2023 In accordance with the Code, all directors are subject to annual election or re-election by shareholders at the Company’s AGM. PAYMENT FOR LOSS OF OFFICE In circumstances of termination on notice, the Committee will determine an equitable compensation package, having regard to the particular circumstances of the case. The Committee may require notice to be worked, or to make payment in lieu of notice, or to place the director on garden leave for the notice period. Such a decision is made to protect the Company’s and shareholders’ interests. In case of payment in lieu of notice or garden leave, the salary, beneﬁts and pension will be paid for the period of notice served on garden leave or paid in lieu of notice. If the Committee feels it would be in shareholders’ interests, payments will be made in phased instalments. In the case of payment in lieu of notice, payments will be subject to mitigation. Subject to the circumstances on cessation of employment, an STI may be payable in respect of the period of the incentive year worked by the executive director. There is no TABLE 10: STI AND LTI LEAVER’S ARRANGEMENTS AWARD GOOD LEAVER DEFINITION GOOD LEAVER TREATMENT BAD LEAVER TREATMENT STI (deferred share award) • Death • Retirement with agreement of Company • Injury or disability • Employing entity ceasing to be a member of the Group • Any other reason as decided by the Committee • Awards normally vest on normal vesting date • The Committee retains discretion to allow awards to vest on date of cessation Award lapses on date of cessation Unvested LTI award • Upon death, award will normally vest and be released on the date of cessation subject to the achievement of performance measures at that date • Award will normally vest on the normal vesting date, subject to performance achieved over performance period and time proration as a proportion of vesting period served; any vested awards will then normally be released following two-year holding period • The Committee retains discretion to allow awards to vest on the date of cessation and/or waive holding period and/or disapply time prorating Vested LTI award subject to holding period • Any circumstance other than cessation due to dismissal or misconduct • Award is released following two-year holding period • The Committee retains discretion to waive holding period Non-executive directors have letters of appointment setting out the terms under which they provide their services to the Company. Non-executive directors are normally appointed for an initial period of three years that, subject to review, may be subsequently extended for further such terms. Non-executive directors’ appointment is terminable by three months’ notice on either side. The dates of the non-executive directors’ original appointment and expiry of their current three-year term are shown below. provision for an amount in lieu of any STI to be payable for any part of the notice period not worked. Such payout would, unless the Committee determines otherwise, be scaled back pro rata for the period of the incentive year worked by the director, and would vest at the normal date and be subject to performance. Awards held under the deferred STI and LTI arrangements are subject to the rules containing provisions setting out the treatment of awards where a participant leaves. The table below sets out the relevant provisions for each award. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 155 REMUNERATION COMMITTEE REPORT CONTINUED The Committee may make any other payments determined by a court of law in respect of the termination of a director’s service agreement or may pay any statutory entitlements or any sums to settle or compromise claims in connection with the termination (including, at the discretion of the Committee, reimbursement for legal advice and provision of outplacement services) as necessary. In the event of a change of control, STI awards will be payable to participants subject to the extent to which the performance conditions have been achieved at that time (taking into account any factors considered appropriate by the Committee). Unvested awards under the deferred STI and LTI arrangements will normally vest, taking into account the extent that any performance conditions attached to the relevant awards have been achieved. Unless the Committee determines otherwise, LTI awards will be scaled back pro rata for the period of the performance period worked by the director. CONSIDERATION OF EMPLOYEE PAY AND CONDITIONS Pay and employment conditions are considered when setting remuneration for executive directors. Given the size and scale of the Group’s operations, which include multiple jurisdictions, the Committee currently does not formally consult with employees in respect of the design of the Policy and its implementation. However, the Committee receives information on workforce pay and employment conditions as part of the annual Committee calendar and oversees the operation of share plans across the Group. While not speciﬁcally consulted on executive remuneration, feedback from employees is gathered through a wide range of electronic and in-person channels, including the annual Gallup® employee engagement survey, focus groups, performance reviews, leadership video conferences, internal campaigns and employee wellness programmes. In FY22, the Board received and discussed biannual reports from the designated non-executive director for workforce engagement, outlining the outcomes from the annual employee engagement survey and feedback and insight from all levels within the Group, supplemented by feedback from management. When determining executive director remuneration arrangements, including base compensation increases, the Committee takes account of appropriate information on the approach to such issues within the wider workforce to permit informed comparison of relevant metrics. The structure of the executive directors’ pay policy on the STI is generally in line with the policy for remuneration of management within the Group. The performance measures that apply to management are based on the respective division’s ﬁnancial performance and division-speciﬁc operational targets, including measures of clinical excellence. A proportion of the award for all senior management roles is based on Group-wide performance indicators. Similarly, the structure of the executive directors’ pay policy on the LTI is in line with the policy for remuneration of key senior management within the Group, with awards for all participants subject to the achievement of the same performance conditions over a three-year period. CONSIDERATION OF PROVISION 40 OF THE CODE In developing the Remuneration Policy set out above, the Committee was mindful of the following factors set out in the Code: Clarity Incentive arrangements are based on clearly deﬁned ﬁnancial and non-ﬁnancial metrics which are aligned with Mediclinic’s strategy. Simplicity • Remuneration arrangements have been simpliﬁed and now comprise: - Fixed pay: base salary, beneﬁts and pension. - STI: simpliﬁed structure based on ﬁnancial and non-ﬁnancial KPIs (subset indicators removed). A proportion of the bonus is delivered in cash, with the balance deferred into shares. - LTI: drives performance over a three-year period, promoting sustainable value creation. Awards are subject to a two-year holding period. Risk • The Committee considers that the structure of incentive arrangements does not encourage inappropriate risk-taking. • Under the incentive arrangements, discretion may be applied to ensure formulaic outturns are fair in context of the overall performance and experience of key stakeholders. Predictability The remuneration scenario charts, set out on page 153, provide estimates on the potential future reward opportunity in a range of scenarios – including below threshold, on target and maximum performance – and with share price appreciation included. Proportionality • The incentive arrangements are directly aligned to Mediclinic’s strategic priorities (which have been further developed as part of the policy review undertaken this year), and payments are calibrated to ensure that payments are only made where strong performance is delivered. • As set out above, all incentive arrangements are subject to discretion to ensure formulaic outturns are fair in context of the overall performance and experience of key stakeholders. Culture • The remuneration policy at Mediclinic has been set to be appropriate for the nature, size and complexity of the Group and is designed to drive delivery of its strategic priorities. • This is recognised through alignment of the remuneration policy with the wider workforce whenever possible. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT156 ANNUAL REMUNERATION REPORT This section includes the implementation of the Policy for FY23. See pages 147–148 Throughout the Annual Remuneration Report, South African rand remuneration was translated into sterling at a rate of £ 1:Z AR19.23 at 31 March 2022 and £ 1:Z AR21.30 at 31 March 2021. TABLE 11: SINGLE TOTAL FIGURES OF DIRECTORS’ REMUNERATION (AUDITED) FIXED PAY VARIABLE PAY SALARY & FEES £’000 BENEFITS £’000 PENSION £’000 SUBTOTAL £’000 STI 1 £’000 LTI £’000 2 SUBTOTAL £’000 TOTAL £’000 EXECUTIVE DIRECTORS Dr Ronnie van der Merwe FY22 569 2 46 617 750 152 902 1 519 FY21 497 7 39 543 742 0 742 1285 Jurgens Myburgh FY22 407 4 31 442 476 84 560 1 002 FY21 369 6 27 402 488 0 488 890 FIXED PAY FEES £’000 BENEFITS 3 £’000 TOTAL £’000 NON-EXECUTIVE CHAIR Dame Inga Beale FY22 280 0 280 FY21 219 0 219 NON-EXECUTIVE DIRECTORS Dr Muhadditha Al Hashimi FY22 77 0 77 FY21 70 1 71 Natalia Barsegiyan 4 FY22 53 0 53 FY21 n/a n/a n/a Zarina Bassa 5 FY22 12 0 12 FY21 n/a n/a n/a Jannie Durand 6 FY22 80 0 80 FY21 79 3 82 Alan Grieve 7 FY22 80 0 80 FY21 118 0 118 Notes 1 The formulaic outcome of the FY21 STI was 100% of maximum, however, the Committee determined that the cash proportion of the STI (50%) be deferred until the Group dividend had been reinstated. That condition was met when the Board proposed a ﬁnal dividend of 3.00 pence in line with the dividend policy. Therefore, the cash proportion of the STI will be released with the remaining 50% of the STI deferred into shares vesting after two years subject to continued employment. 2 The value of the vesting awards is based on the average share price over the last three months of FY22, being £3.34. 3 Beneﬁts to non-executive directors include reimbursement of reasonable travel, accommodation and subsistence expenses plus the associated tax. 4 Natalia Barsegiyan was appointed as a non-executive director of the Company on 1 August 2021. 5 Zarina Bassa was appointed as a non-executive director of the Company on 1 February 2022. 6 Jannie Durand’s fees are paid to Remgro and include services rendered by him or his alternate, Pieter Uys. 7 Alan Grieve and Trevor Petersen resigned from all committee responsibilities and Alan Grieve resigned as SID on 13 September 2021; both contin ued to serve the Board in a non-independent capacity from 13 September 2021 until 14 February 2022. 8 Dr Felicity Harvey succeeded Alan Grieve as SID of the Company on 13 September 2021. 9 T om Singer succeeded Alan Grieve as Chair of the Audit and Risk Committee on 13 September 2021. 10 Steve Weiner succeeded Trevor Petersen as Chair of the Remuneration Committee on 13 September 2021. Dr Felicity Harvey 8 FY22 92 0 92 FY21 80 0 80 Danie Meintjes FY22 74 0 74 FY21 70 2 72 Dr Anja Oswald FY22 78 0 78 FY21 80 2 82 Trevor Petersen 7 FY22 67 0 67 FY21 89 3 92 Tom Singer 9 FY22 90 0 90 FY21 83 0 83 Steve Weiner 10 FY22 94 0 94 FY21 60 0 60 FIXED PAY FEES £’000 BENEFITS 3 £’000 TOTAL £’000 NON-EXECUTIVE DIRECTORS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 157 TABLE 13: FY22 STI AWARDS SWITZERLAND SOUTHERN AFRICA THE MIDDLE EAST FINANCIAL PERFORMANCE INDICATORS Debtors’ days n/a n/a Threshold: > 110 days Maximum: <= 100 days Achievement: 110 days Reduction: (7% / 10%) Cash conversion Threshold: 85% Maximum: 95% Achievement: 128.6% Reduction: (0% / 10%) n/a n/a REMUNERATION COMMITTEE REPORT CONTINUED Notes 1 Subject to employment conditions only and settled in Company shares. 2 Number of shares granted, and face value, was based on the ﬁve-day average middle market quotation prior to grant of an LSE share (£3.35) and converted from sterling to ZAR64.41 using the spot exchange rate on 4 June 2021 (£1:ZAR19.23). BENEFITS AND PENSION (AUDITED) The beneﬁts that form part of Dr Ronnie van der Merwe and Jurgens Myburgh’s remuneration include private medical insurance, life insurance and reimbursements for reasonable business-related expenses (e.g. travel, accommodation subsistence, including, where appropriate, any associated taxes). The executive directors participated in the Southern Africa-deﬁned contribution fund and received a company pension contribution equal to 9% of base salary in line with the rate allocated to all Southern Africa and Group Services employees. PRIOR YEAR AWARDS (AUDITED) FY21 STI AWARDS Given the signiﬁcant impact of the COVID-19 pandemic on clinical quality and client experience assessments, the FY21 STI was based on Group adjusted operating proﬁt performance targets only. The Committee then reviewed the overall performance of the business, including underlying ﬁnancial performance, clinical quality and client experience (with input from the Clinical Performance and Sustainability Committee), and employee engagement. Further details of performance achieved are set out in the 2021 Annual Report. As explained in the 2021 Annual Report, release of the FY21 STI was conditional on the resumption of the Group’s dividend. That condition was met when the Board proposed a ﬁnal dividend of 3.00 pence in line with the dividend policy. Therefore, the cash proportion of the STI will be released with the remaining 50% of the STI deferred into shares vesting after two years subject to continued employement. TABLE 12: FY21 STI AWARDS EXECUTIVE DIRECTORS ACTUAL BONUS (£) ACTUAL BONUS AS A % OF ANNUAL BASE COMPENSATION MAXIMUM BONUS OPPORTUNITY AS A % OF ANNUAL BASE COMPENSATION Dr Ronnie van der Merwe 741 596 150 150 Jurgens Myburgh 487 821 133 133 EXECUTIVE DIRECTOR DATE OF GRANT NATURE OF AWARD NUMBER OF SHARES 2 FACE VALUE (£) Dr Ronnie van der Merwe 04/06/2021 Conditional Share Awards 122 614 410 757 Jurgens Myburgh 80 655 270194 FY22 STI (AUDITED) The FY22 STI was based on Group adjusted operating proﬁt performance and ﬁnancial and strategic subset performance indicators for each division. Whereas adjusted operating proﬁt performance determines the initial STI outcome percentage, any non-achievement of subset performance indicators results in a reduction to the initial STI outcome percentage. FIGURE 2: SUMMARY OF THE PERFORMANCE CONDITIONS AND ACHIEVEMENT AGAINST TARGETS For the purposes of the STI, Group adjusted operating proﬁt, based on budgeted foreign exchange rates, was £312m. In line with the targets set, this excludes bonus accruals (£27m) and was adjusted for one-o items in the year (less £10m impact on adjusted operating proﬁt used for the purpose of the bonus). Group achieved adjusted operation proﬁt (£’m) Maximum adjusted operation proﬁt (£’m) Threshold adjusted operation proﬁt (£’m) 312 297 246 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT158 Diversity and inclusion n/a Diversity appointments (skilled/qualiﬁed job levels and above) Target >= 50% diverse appointments Achievement: 53% Reduction: (0% / 2.5%) n/a Reduction (10.0)% (12.5)% (15.3)% Weighting of division 37.2% 40.9% 21.9% Weighted reduction (3.7)% (5.1)% (3.4)% Total reduction (12.2)% GROUP ACHIEVEMENT (GROUP ADJUSTED OPERATING PROFIT LESS SUBSET OUTCOME): 87.8% TABLE 13: FY22 STI AWARDS CONTINUED SWITZERLAND SOUTHERN AFRICA THE MIDDLE EAST OPERATIONAL, CLINICAL AND PATIENT QUALITY PERFORMANCE INDICATORS Clinical care quality 1 Partial achievement – see note 2 Reduction: (10% / 15%) Partial achievement against mortality index targets Threshold performance not achieved against never events and aggregated antimicrobial index value indicators Reduction: (12.5% / 15%) Partial achievement Maximum performance delivered on surgical site infection and medication errors Threshold performance not achieved on never events Reduction: (3.3% / 10%) Employee engagement n/a Measures Gallup® Employee Engagement Accountability Index Threshold: < 3.75 Maximum: >= 3.79 Achievement: 3.79 Reduction: (0% / 2.5%} n/a Client experience n/a Measures overall mean Press Ganey® client experience indicator score Threshold: < 82.7 Maximum: >= 82.9 Achievement: 83.1 Reduction: (0% / 2.5%) Measures Press Ganey® client experience indicator score Inpatient: Threshold: < 85.8 Maximum: >= 86.8 Achievement: 84.8 Outpatient: Threshold: < 82.1 Maximum: >= 83.1 Achievement: 81.1 Reduction: (5% / 5%) SWITZERLAND SOUTHERN AFRICA THE MIDDLE EAST OPERATIONAL, CLINICAL AND PATIENT QUALITY PERFORMANCE INDICATORS CONTINUED Notes 1 Disclosure of clinical care quality measures and weightings only, because we regard the target and maximum as commercially sensitive. Over the performance period, COVID-19 continued to have a signiﬁcant impact on the business and distorts clinical quality and client experience assessments versus pre-pandemic baseline data. The business continues to take each of these areas seriously given their importance to long-term sustainable performance and, as such, Mediclinic sets exceptionally high clinical targets to maintain the current standards we deliver and expect to deliver in the future, regardless of the eects of a pandemic. 2 As in FY21, COVID-19 impacted availability of data on clinical performance in Switzerland in FY22. In assessing performance, the Committee considered partial vesting (with a negative adjustment of 10% out of 15% applied) to be reﬂective of performance delivered in the year. This is based on: (i) the mortality rate of patients admitted to intensive care units, with the Simpliﬁed Acute Physiology Score (SAPS)II of 0.37 being within the Swiss benchmark of 0.40; (ii) a low inpatient mortality rate of 1% having been maintained despite the COVID-19 pandemic; (iii) safe surgical checklist performance; and (iv) the unadjusted readmission rate across the division remaining low at 2.3%. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 159 REMUNERATION COMMITTEE REPORT CONTINUED Notes 1 The value of the vesting awards is based on the average share price over the last three months of FY22, being £3.34. 2 The Company’s share price has increased by £0.33 from grant (£3.01) and average share price over the last three months of FY22 (£3.34). The proportion of the value attributable to share price growth is therefore 9.8%, equivalent to £14 748 for Dr Ronnie van der Merwe and £8 154 for Jurgens Myburgh. The Committee did not consider it necessary to exercise discretion inrespect of share price ﬂuctuations since grant. The Committee reviewed the formulaic outcome of the STI against broader perspectives, including overall business performance and aordability, and the experience of shareholders, employees and clients. The Committee considers that the formulaic outcome is fair taking into account these broader perspectives. TABLE 14: FY22 STI AWARDS EXECUTIVE DIRECTOR ACTUAL BONUS (£) ACTUAL BONUS AS % OF ANNUAL BASE COMPENSATION MAXIMUM BONUS OPPORTUNITY AS % OF ANNUAL BASE COMPENSATION Dr Ronnie van der Merwe 749 713 132 150 Jurgens Myburgh 476 488 117 133 In line with the Policy, 50% of the amount earned will be deferred into Company shares for two years subject to continued employment. LTI AWARDS VESTED TO EXECUTIVE DIRECTORS (AUDITED) In June 2019, an LTI award equal to 200% and 150% of base compensation was granted to Dr Ronnie van der Merwe and Jurgens Myburgh, respectively. The awards were based on adjusted EPS performance (60% of award) and relative TSR performance versus the FTSE 250 (excluding Financial Services and Extraction companies) (40% of award) over the three ﬁnancial years to 31 March 2022. Reﬂecting the level of performance delivered, 12.1% of the LTI will vest, the ﬁrst vesting under the scheme since inception in 2016. The Committee is satisﬁed that appropriate ROIC has been achieved, recovering towards pre-pandemic levels despite the ongoing impact COVID-19 had on the Group in FY22, and that underlying operational and economic performance has been satisfactory over the performance period to support the vesting outcome. TABLE 15: FY20 LTI PERFORMANCE TARGETS, ACTUAL PERFORMANCE AND LTI VESTING PERFORMANCE CONDITION WEIGHTING THRESHOLD TARGET (25% VESTING) MAXIMUM TARGET (100% VESTING) ACTUAL PERFORMANCE VESTING (% OF MAXIMUM) Adjusted EPS growth 60% 4% per annum compounded 11% per annum compounded (5.6)% per annum 0 TSR ranked relative to constituents of the FTSE 250 (excluding Financial Services and Extraction companies) 40% Median of peers (50 th percentile) Upper quartile of peers (75 th percentile) 52 nd percentile 30.2 Overall award 12.1% EXECUTIVE DIRECTOR NUMBER OF SHARES GRANTED NUMBER OF SHARES VESTING BASED ON PERFORMANCE (12.1%) ESTIMATED VALUE OF SHARES ON VESTING £ ESTIMATED VALUE OF DIVIDEND EQUIVALENTS £ TOTAL ESTIMATED VALUE OF AWARD ON VESTING £ VALUE ON VESTING ATTRIBUTABLE TO SHARE PRICE GROWTH Dr Ronnie van der Merwe 373 437 45 185 150 918 1 446 152 364 14 748 Jurgens Myburgh 206 456 24 981 83 437 799 84 236 8 154 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT160 LTI AWARDS GRANTED TO EXECUTIVE DIRECTORS (AUDITED) An FY22 LTI award equal to 200% and 150% of base compensation was granted to Dr Ronnie van der Merwe and Jurgens Myburgh, respectively. When determining vesting, the Committee will consider whether there have been any ‘windfall gains’ in line with the framework set out last year. TABLE 16: FY22 LTI AWARDS GRANTED TO EXECUTIVE DIRECTORS EXECUTIVE DIRECTOR DATE OF GRANT NATURE OF AWARD NUMBER OF SHARES FACE VALUE £ FACE VALUE AS A % OF ANNUAL BASE COMPENSATION END OF PERFORMANCE PERIOD Dr Ronnie van der Merwe 04/06/2021 Conditional Share Awards 356 181 1 193 206 200 31/03/2024 Jurgens Myburgh 190 569 638 406 150 Notes 1 Number of shares granted, and face value, based on the ﬁve-day average middle market quotation prior to grant of an LSE share (£3.35) and translat ed into sterling at a rate of £1:ZAR19.23 on 3 June 2021. 2 Annual base salary translated into sterling at a rate of £1:ZAR19.23 on 3 June 2021. TABLE 17: FY22 LTI PERFORMANCE CONDITIONS PERFORMANCE CONDITION WEIGHTING THRESHOLD (25% VESTING) TARGET (62.5% VESTING) MAXIMUM (100% VESTING) Adjusted EPS for FY24 (measured on a constant currency basis) (p) 40% 28 35 42 TSR ranked relative to constituents of the FTSE 250 (excluding Financial Services and Extraction companies) (measured over the three ﬁnancial years to 31 March 2024) 25% Median (50 th percentile) (62.5 th percentile) Upper quartile (75 th percentile) ROIC for FY24 (%) 25% 5.0 5.5 6.25 Group patient experience index (measured over the three ﬁnancial years to 31 March 2024) (%) 10% 82.85 85.85 88.85 The awards are subject to clawback and malus provisions. Awards are subject to a two-year holding period after vesting, thus settled only at the end of a ﬁve-year period from the grant date. PAYMENTS TO PAST DIRECTORS AND PAYMENTS FOR LOSS OF OFFICE (AUDITED) No payments that have not been reported previously or in this report were made to past directors, and no loss of oce payments were made during FY22. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 161 REMUNERATION COMMITTEE REPORT CONTINUED TABLE 18: DIRECTORS’ SHAREHOLDINGS AND SHARE INTERESTS EXECUTIVE DIRECTOR SHAREHOLDING GUIDELINES AS A % OF ANNUAL BASE COMPENSATION SHARES HELD AT 31 MARCH 2021 SHARES HELD AT 31 MARCH 2022 DEFERRED STI SHARES OUTSTANDING UNVESTED LTI AWARDS WITHOUT PERFORMANCE CONDITIONS % OF ANNUAL BASE COMPENSATION 2 OUTSTANDING UNVESTED LTI AWARDS WITH PERFORMANCE CONDITIONS SHAREHOLDING REQUIREMENT MET Dr Ronnie van der Merwe 225 51 630 61 630 143 005 45 185 103 746 842 Progress being made Jurgens Myburgh 200 90 500 94 500 94 038 24 981 140 406 980 Progress being made Notes 1 As noted on page 160, the 2019 LTI awards will vest at 12.1% of maximum based on the achievement against performance targets. This equates to 45 185 and 24 981 shares for Dr Ronnie van der Merwe and Jurgens Myburgh, respectively. 2 In calculating if an executive director has met the minimum shareholding requirement, the following values are included: shares held at 31 March 2022 and the estimated after-tax value (not subject to performance conditions) of deferred STI and LTI awards. Dr Ronnie van der Merwe and Jurgens Myburgh will use 50% of the net of tax value of any cash-settled share awards paid to them under the LTI, deferred bonus plan or other awards, to purchase shares in the Company until they meet their shareholding guideline. TABLE 19: NON-EXECUTIVE DIRECTORS’ SHAREHOLDINGS NON-EXECUTIVE DIRECTOR AT 31 MARCH 2021 AT 31 MARCH 2022 Dame Inga Beale - - Dr Felicity Harvey - - Dr Muhadditha Al Hashimi - - Natalia Barsegiyan 2 n/a - Zarina Bassa 3 n/a - Jannie Durand - - Alan Grieve 5 7 500 7 500 Danie Meintjes 123 900 123 900 Dr Anja Oswald - - Trevor Petersen 5 - - Tom Singer - - Pieter Uys 6 417 417 Steve Weiner - - Notes 1 Or, if earlier, the date of retirement as a non-executive director of the Company.  Natalia Barsegiyan was appointed as a non-executive director of the Company on 1 August 2021.  Zarina Bassa was appointed as a non-executive director of the Company on 1 February 2022.  Jannie Durand is the CEO/Executive Director of Remgro Ltd and board representative of Remgro, which holds 44.56% interest in the Company.  Alan Grieve and Trevor Petersen resigned from all committee responsibilities and Alan Grieve resigned as SID on 13 September 2021; both continued to serve the Board in a non-independent capacity from 13 September 2021 until 14 February 2022.  Pieter Uys is the alternate to Jannie Durand. There were no changes in the directors’ shareholdings between the ﬁnancial year end and the Last Practicable Date. The Company’s Register of Directors’ Interests, which is open for inspection at the Company’s registered oce during business hours, contains full details of the directors’ shareholdings and share allocations. SHARE DILUTION LIMITS The Company is committed to protecting investors’ interests and ensuring that the dilution of shares remains within a reasonable limit. In line with guidelines by the Investment Association, the Company limits equity-based awards under its employee share plans to 10% of the Company’s issued share capital over a 10-year calendar period and equity-based awards under executive share plans to 5% of issued share capital over the same period. DIRECTORS’ SHAREHOLDING AND SHARE INTERESTS (AUDITED) Executive directors are required to build and maintain a minimum shareholding in Mediclinic linked to their base compensation. Shares are valued for these purposes at the year-end price, which was £3.56 per share at 31 March 2022. Until the shareholding guideline is achieved, Dr Ronnie van der Merwe and Jurgens Myburgh are normally required to retain at least 50% of the net of tax shares from vested LTI, deferred bonus plan or other share awards. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT162 Notes 1 As previously reported, the FY21 annual salary increases, ordinarily eective 1 April, were delayed and only implemented 1 October 2020, excluding back-pay for the period April–September 2020. As such, the percentage increase is overinﬂated. The monthly change equates to 7.1% for Dr Ronnie van der Merwe and 3.6% for Jurgens Myburgh. Percentage change between the executive directors’ base compensation, beneﬁts and STI between FY20 to FY21 and FY21 to FY22 paid in ZAR. 2 Beneﬁts include private medical insurance, life insurance and reimbursements for reasonable business-related expenses. Large percentage variance as travel was restricted due to COVID-19 and, as such, business-related expenses were not incurred. 3 Dame Inga Beale was appointed as non-executive director and Chair Designate of the Company on 26 March 2020, and Chair on 22 July 2020. 4 Dr Muhadditha Al Hashimi joined the Committee on 13 September 2021. 5 Dr Felicity Harvey succeeded Alan Grieve as SID of the Company on 13 September 2021. Dr Felicity Harvey joined the ESG Committee on 1 September 2021. 6 Natalia Barsegiyan was appointed as a non-executive director of the Company on 1 August 2021. 7 Zarina Bassa was appointed as a non-executive director of the Company on 1 February 2022. 8 J annie Durand’s fees are paid to Remgro and include services rendered by him or his alternate, Pieter Uys. 9 Alan Grieve and Trevor Petersen resigned from all committee responsibilities and Alan Grieve resigned as SID on 13 September 2021; both continued to serve the Board in a non-independent capacity from 13 September 2021 until 14 February 2022. 10 Danie Meintjes joined the ESG Committee on 1 September 2021. 11 Tom Singer succeeded Alan Grieve as Chair of the Audit and Risk Committee on 13 September 2021. 12 Steve Weiner was appointed as non-executive director of the Company on 22 July 2020. He succeeded Trevor Petersen as Chair of the Committee on 13 September 2021. TABLE 20: COMPARATIVE PERCENTAGE CHANGE IN REMUNERATION: EXECUTIVE DIRECTORS AND EMPLOYEES FY21 TO FY22 FY20 TO FY21 SALARY AND FEES BENEFITS STI SALARY AND FEES BENEFITS STI EXECUTIVE DIRECTORS Dr Ronnie van der Merwe 9.6% 1 (70.1)% 2 (3.8)% 2.4% (49. 2)% 2 508.4% Jurgens Myburgh 5.9% 1 (45.0)% 2 (7.0)% 2.3% (41.7)% 2 509.8% NON-EXECUTIVE CHAIR Dame Inga Beale 3 27.7% 0.0% - n/a n/a - NON-EXECUTIVE DIRECTORS Dr Muhadditha Al Hashimi 4 9.3% (100.0)% - 0.0% (69.7)% - Dr Felicity Harvey 5 14.9% 0.0% - 0.0% 0.0% - Natalia Barsegiyan 6 n/a n/a - n/a n/a - Zarina Bassa 7 n/a n/a - n/a n/a - Jannie Durand 8 1.6% (100.0)% - 2.3% (52.7)% - Alan Grieve 9 (32.6)% (100.0)% - 11.3% (61.3)% - Danie Meintjes 10 5.8% (100.0)% - 0.0% (64.9)% - Dr Anja Oswald (2.2)% (100.0)% - (0.3)% (47.2)% - Trevor Petersen 9 (25.4)% (100.0)% - (7.1)% (55.1)% - Tom Singer 11 8.7% 0.0% - 0.0% 0.0% - Steve Weiner 12 58.0% 0.0% - n/a n/a - AVERAGE INCREASE PER EMPLOYEE 3.8% 3.9% - 5.5% 3.9% 118% CHANGE IN REMUNERATION LEVELS The table below shows the average percentage change in remuneration from FY20 to FY21, and FY21 to FY22 for each of the directors compared with that of the Southern Africa workforce. Given that both the executive directors reside in South Africa, the Southern Africa workforce has been used as a comparator group (currently, there is only one employee employed by Mediclinic International plc based in the UK). STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 163 REMUNERATION COMMITTEE REPORT CONTINUED CEO-PAY RATIO While the Company has fewer than 250 UK-based employees and therefore is not required to disclose a ratio, the Committee felt that it was appropriate to voluntarily disclose the CEO-to-all-employee-pay ratio, given the Company’s commitment to high standards of transparency and good governance. TABLE 21: FY22 CEO-PAY RATIO AND RESTATED FY21 CEO-PAY RATIO CEO 25 TH PERCENTILE 50 TH PERCENTILE 75 TH PERCENTILE FY22 Ratio 65:1 37:1 24:1 Total pay and beneﬁts £1 518 970 £23 357 £40 941 £63 325 Salary £569 149 £10 099 £20 447 £57 495 FY21 Ratio 67:1 37:1 21:1 Total pay and beneﬁts £1283 532 £19 201 £34 341 £62 509 Salary £497157 £9 577 £20 665 £59 298 The Company chose to adopt Option A methodology in calculating the ratio on the basis that it is a robust approach and is preferred by investors and proxy voting agencies. The Group CEO’s single ﬁgure of remuneration for the relevant ﬁnancial year was used for the calculation ratio. All employees’ pay (excluding the Group CEO, non-executive directors, interns and students) was annualised for the relevant ﬁnancial year and translated into sterling (at a rate of £1:ZAR19.23, AED4.82 and CHF1.21 at 31 March 2022, in respect of employees’ pay for FY22). The Committee anticipates that there are likely to be changes in the ratio in future years and disclosures as the Group CEO’s total remuneration has a greater portion of pay delivered as variable remuneration, which is consistent with the Company’s remuneration principles. PERFORMANCE AND PAY PERFORMANCE The ﬁgure below shows the value at 31 March 2022 of £100 invested in the Company upon inception on 21 June 2013, compared with the value of £100 invested in the FTSE 100 Index and FTSE 250 Index on the same date. The intervening points are the ﬁnancial year ends prior to the date of the combination with Al Noor Hospitals Group plc on 15 February 2016 and the ﬁnancial year ends since. The FTSE 100 and FTSE 250 were used as comparators as the Company has been a member of each of these indices during the relevant period. FIGURE 3: MEDICLINIC TSR COMPARED WITH FTSE 100 AND FTSE 250 Mediclinic FTSE 100 FTSE 250 Jun 19 Jun 13 Dec 19 Dec 13 Jun 20 Jun 14 Dec 20 Dec 14 Jun 21 Jun 15 Dec 21 Dec 15 Jun 16 Dec 16 Jun 17 Dec 17 Jun 18 Dec 18 50 100 150 200 250 Note 1 The FY21 CEO-pay ratio has been updated to remove ﬁxed-term contractors and students from the all-employee population. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT164 The table below shows the remuneration for the Group CEO over the past 10 years. TABLE 22: TOTAL GROUP CEO REMUNERATION SINCE INCEPTION YEAR ENDED 31 DECEMBER YEAR ENDED 31 MARCH 2013 2014 2014 2015 1 Jan– 15 Feb 2016 15 Feb– 31 Mar 2016 2017 2018 1 Apr– 31 May 2018 1 Jun 2018– 31 Mar 2019 2020 2021 2022 GROUP CEO Kassem Alom Ronald Lavater Danie Meintjes 1 Dr Ronnie van der Merwe 2 Total remuneration £’000 361 290 170 702 2 165 79 1 029 1 126 138 600 739 1 285 1 519 STI outturn (% of maximum) n/a n/a 11.8 20.0 n/a 79.7 55.9 61.4 16.5 16.5 17.0 100.0 3 87. 8 Deferred STI portion (%) n/a n/a 100.0 n/a n/a n/a 50.0 50.0 n/a n/a 50.0 50.0 50.0 LTI vesting (% of maximum) n/a n/a 65.4 69.9 n/a 0.0 0.0 0.0 0.0 0.0 0.0 0.0 12.1 Notes 1 Danie Meintjes retired as Group CEO on 31 May 2018. 2 Dr Ronnie van der Merwe was appointed as Group CEO on 1 June 2018. 3 The Board reinstated the Group dividend during FY23, therefore, the cash proportion of the STI will be released, with the remaining 50% of the STI deferred into shares vesting after two years subject to continued employment. Consistent with the calculation methodology for the single ﬁgure for total remuneration, the total remuneration ﬁgure includes the total STI award based on that year’s performance and the LTI award based on the three-year performance period ending in the relevant year. TABLE 23: RELATIVE IMPORTANCE OF SPEND ON PAY FY22 £’M FY21 £’M CHANGE % Employee costs 1 448 1 381 4.9 Dividends paid - - 0 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 165 REMUNERATION COMMITTEE REPORT CONTINUED INVESTOR VOTING The Directors’ Remuneration Report for FY21 was approved by investors at the Company’s 2021 AGM with 97.18% of votes cast in favour. The Directors’ Remuneration Policy was approved by investors at the Company’s 2020 AGM with 97.31% of votes cast in favour. TABLE 24: INVESTOR VOTING FOR % AGAINST % WITHHELD TOTAL SHARES VOTED % OF ISSUED SHARES VOTED FY21 Directors’ Remuneration Report 649 003 589 97.18 18 826 482 2.82 234 674 667 830 071 90.58 Directors’ Remuneration Policy 633 886 281 97.31 17 494 687 2.69 414 198 651 380 968 88.35 COMMITTEE ROLE AND RESPONSIBILITIES The Committee’s key responsibilities include to assist the Board in: • determining the Group’s remuneration strategy and policy, having regard to the alignment of incentives and rewards with the Group’s culture; • reviewing remuneration and related policies for the workforce across the Group, taking these into account when setting the remuneration policy for directors; • establishing the operation of appropriate parameters for the Group’s performance- related pay schemes; and • determining the total remuneration package for the Chair of the Board and each element of the total individual remuneration package for each executive director, other members of the Group Executive Committee and certain other executives (including the Group Company Secretary), and ensuring these support and are linked to the Group strategy, and promote its long-term success. See the Committee’s terms of reference, available on the ‘Governance’ section of the Company’s website at www.mediclinic.com, for further details COMMITTEE MEMBERSHIP AND ATTENDANCE The Committee is chaired by an independent non-executive director and its members comprise three other independent non-executive directors (including the Chair of the Board) who have no involvement with the Company at an operational level or any personal ﬁnancial interest in the matters considered at meetings. The Committee recommends the compensation of the Chair of the Board, but the Chair of the Board, in consultation with the executive directors, determines the non-executive directors’ fees. See page 113 for details of Committee membership and attendance and pages 104–107 for members’ biographies Jannie Durand and/or his alternate, Pieter Uys, attend meetings by invitation but are not voting members. Other attendees, also by invitation only, include the Group CEO, the Group Chief Strategy and Human Resources Ocer, the Group Executive: Reward, the Group Manager: Reward and representatives from Deloitte LLP, all of whom provide signiﬁcant support to the Committee. None of the aforementioned attend as a right, nor do they attend when their own remuneration is under discussion. MEETINGS AND PRINCIPAL AREAS OF FOCUS IN FY22 The Committee held ﬁve scheduled meetings during the ﬁnancial year and one scheduled meeting after the year end, in line with its usual schedule. Including routine monitoring and approval activities, the material issues discussed by the Committee during the year under review and between the ﬁnancial year end and the Last Practicable Date are summarised on pages 143–145. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT166 COMMITTEE EVALUATION In March 2022, the Committee considered the outcome of the external evaluation of its performance, conducted as part of the annual evaluation process described on pages 117–119 of the Corporate Governance Statement. The composition and performance of the Committee were highly rated and no signiﬁcant issues requiring improvement had been identiﬁed. FY23 PRIORITIES Reﬂecting the feedback from its evaluation, the Committee’s main priorities for FY23 are: • continuing to drive strategically based targets and ensure a strong link between executive remuneration and shareholders’ experience; and • ensuring all members receive regular training on remuneration developments and trends. EXTERNAL ADVISER TO THE COMMITTEE During the year under review, the Committee and the Company retained an independent external adviser to assist with various aspects of the Company’s remuneration. ADVISER APPOINTED/ SELECTED BY SERVICES PROVIDED TO THE COMMITTEE DURING THE REPORTING PERIOD FEES PAID BY THE COMPANY FOR THESE SERVICES OTHER SERVICES PROVIDED TO THE COMPANY IN THE REPORTING PERIOD Deloitte LLP Founding member of Remuneration Consultants Group and adheres to Voluntary Code of Conduct in relation to executive remuneration consulting in UK Appointed by Committee following robust selection process and reviewed annually by Committee • Support with review of directors’ remuneration policy and incentive framework • General advice on remuneration matters • Advice on UK market practice and UK investor perspectives £126 050 based on time charges for work completed Tax advisory, share plan advisory and share-based payment valuation support TABLE 26: EXTERNAL ADVISER TO THE COMMITTEE The Committee reviewed the independence and objectivity of Deloitte LLP, taking into consideration its experience and management’s feedback, together with the assurances provided by Deloitte LLP that it has eective internal processes to ensure it is able to provide remuneration consultancy services that meet these two critical requirements. Following this review, the Committee is satisﬁed that Deloitte LLP has maintained independence and objectivity and has no conﬂicts of interest with the Company that may impact on such. This report has been prepared on behalf of the Board by the Committee, in accordance with the Code, the Listing Rules, the Act, and Schedule 8 of the Large and Medium-sized Companies and Groups (Accounts and Reports) Regulations 2008 (as amended). Signed on behalf of the Committee. Steve Weiner Chair of the Remuneration Committee 24 May 2022 TABLE 25: MATERIAL ISSUES DISCUSSED BY THE COMMITTEE AREA DISCUSSIONS Policy • Reviewed and approved the revised directors’ remuneration policy and incentive framework • Consulted extensively with shareholders on proposals Awards • Considered and approved STI payment for FY21 • Considered and approved the quantum, performance metrics and targets for FY22 STI and LTI awards Remuneration levels • Considered and approved FY23 salary increases for executive directors and Group Executive Committee • Reviewed and approved overall FY23 salary increases of all employee groups of each division • Reviewed and approved FY23 fee of Board Chair Regulatory and governance review • Reviewed regulatory and corporate governance developments, and reviewed and recommended to Board for approval ensuing changes to its terms of reference • Reviewed and conﬁrmed the independence and objectivity of its remuneration consultant, Deloitte LLP STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 167 ARTICLES OF ASSOCIATION The Company’s Articles may be amended by way of a special resolution of the shareholders. See the ‘Governance’ section of the Company’s website at www.mediclinic.com for the current Articles, approved by shareholders at the Company’s AGM held on 22 July 2020 DIRECTORS’ APPOINTMENT AND REMOVAL The rules relating to the appointment and removal of directors are set out in the Company’s Articles. Non-executive directors are appointed for a term of three years, subject to earlier termination, including provision for early termination by either the Company or the non-executive director on three months’ notice. All non-executive directors serve on the basis of letters of appointment, which are available for inspection at the Company’s registered oce and at the AGM. The letters of appointment set out the time commitment expected of non-executive directors who, on appointment, undertake that they will have sucient time to meet their responsibilities. DIRECTORS’ POWERS The general powers of the directors are contained within relevant UK legislation and the Company’s Articles. The directors are entitled to exercise all powers of the Company, subject to any limitations imposed by the Articles or applicable legislation. DIRECTORS’ INDEMNIFICATION The Company has entered into a deed of indemnity with each director who served during the reporting period under identical terms. These qualifying third-party indemnity provisions (as deﬁned in the Act) were in force for the beneﬁt of all directors who held oce during FY22 and up to the approval of the Annual Report. The deeds indemnify the directors in accordance with the applicable laws of England against liability incurred as a director or employee of the Group. In addition, the Company has provided directors and ocers with indemnity insurance and insurance in connection with their duties and responsibilities. COMPENSATION FOR LOSS OF OFFICE There are no agreements in place with any director or employee for compensation for loss of oce or employment resulting from a takeover, except that provisions of the Company’s share plans may cause options and awards granted under such plans to vest on a takeover. SIGNIFICANT AGREEMENTS The following facilities and ﬁnance agreements are considered signiﬁcant in terms of their potential impact on the business of the Group as a whole and could alter or terminate on the change of control of the Company: • South African senior secured borrowings totalling ZAR7 950m and ZAR500m revolving credit facility (‘RCF’), bearing interest at three-month Johannesburg Interbank Average Rate (‘JIBAR’) plus a margin of 1.54% and 1.60% respectively, expiring in September 2026. The achievement of pre-agreed sustainability performance targets will reduce the facility margin through an incentive- based pricing mechanism. OTHER DISCLOSURES 168 PRINCIPAL SHAREHOLDER AND RELATIONSHIP AGREEMENT Due to Remgro (through subsidiary undertakings) holding 44.56% of the issued ordinary shares of the Company and consequently being regarded as a controlling shareholder of the Company for the purposes of the Listing Rules, Mediclinic entered into a Relationship Agreement with Remgro on 14 October 2015 with an eective date of 15 February 2016. This agreement does not include a change of control provision but does terminate if: (a) the Company’s ordinary shares cease to be listed on the premium segment of the Ocial List and admitted to trading on the LSE’s main market for listed securities; or (b) Remgro and its subsidiary undertakings , taken together, cease to hold a minimum interest of 10% of the Company’s issued ordinary share capital (or 10% of the aggregate voting rights in the Company from time to time). Under the Relationship Agreement, in accordance with the Listing Rules, Remgro undertakes to comply with the following provisions to safeguard Mediclinic’s independence: • Transactions and arrangements between the Company and Remgro (and/or its associates) will be conducted at arm’s length and on normal commercial terms. • Neither Remgro nor any of its associates will take any action that would have the eect of preventing the Company from complying with its obligations under the Listing Rules. • Neither Remgro nor any of its associates will propose or procure the proposal of a shareholder resolution which is intended or appears to be intended to circumvent the proper application of the Listing Rules. The Relationship Agreement also provides that, for every 10% of the issued ordinary share capital of the Company (or an interest which carries 10% or more of the aggregate voting rights in the Company from time to time) held, Remgro is entitled to appoint one director to the Board, up to a maximum of three directors, provided that the right to appoint a third director is subject to the requirement that the Board will, following such appointment, comprise a majority of independent non-executive directors. The ordinary shares owned by Remgro rank pari passu with the other ordinary shares in all respects. The Board conﬁrms that during the period under review: (a) the Company has complied with the provisions set out in the Relationship Agreement and with the rules on the election and re-election of independent directors set out in the Listing Rules; and (b) so far as the Company is aware, Remgro and its associates have also complied with the terms of the Relationship Agreement. Note 1 Correction notice: In the 2021 Annual Report, we stated CHF3 000 was allocated for political donations, but no payments made. We, however, conﬁrm that the CHF3 000 was allocated and paid during FY21. POLITICAL DONATIONS Political donations are generally prohibited in terms of the Company’s Code of Business Conduct and Ethics and Anti-bribery Policy, unless pre-approved by the executive committee of the division and reported to the Group Executive Committee. It is not the policy of the Company to make political donations as contemplated in the Act. The Group made no such payments during FY22 and has no intention of doing so during FY23. However, as a result of broad deﬁnitions used in the Act, normal business activities of the Company, which might not be considered political donations or expenditure in the usual sense, may possibly be construed as political expenditure or as a donation to a political party or other political organisation and fall within the restrictions of the Act. This could include sponsorships, subscriptions, payment of expenses, paid leave for employees fulﬁlling public duties and support for bodies representing the business community in policy review or reform. The Board has therefore resolved to propose a resolution for shareholder consideration at the AGM, as in previous years and in line with best practice, to authorise the Company to make political payments up to an aggregate amount of £100 000. As is customary in Switzerland, our Swiss division maintains a proper and constructive dialogue with political decision-makers and stakeholders to represent its perspective and support informed decision-making that contributes to improving patient outcomes and the long-term sustainability of the business. Under the Swiss political system, citizens are active in political bodies at federal, cantonal and municipal levels in addition to their regular occupations. Parliamentarians are not professional politicians in this system and the parties do not receive state support. Therefore, in line with common and ocial practice in Switzerland, we have traditionally supported the country’s political system by making third-party contributions to a number of political parties, institutions and associations involved in campaigns which are of interest to the business. Payments of this nature made by our Swiss division during FY22 amounted to CHF21 000 (FY21: CHF3 000). Annual ﬂuctuations in spend are mostly due to the timing of national and cantonal renewal elections. These contributions are not considered political payments as contemplated in Part 14 of the Act, as they are not made to the political parties within the scope of the Act. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 169 For and on behalf of the Board. Dame Inga Beale Non-executive Chair 24 May 2022 GOING CONCERN The directors conﬁrm that they considered it appropriate to adopt the going concern basis of accounting in preparing the Company’s consolidated and parent company ﬁnancial statements. See the Group Chief Financial Ocer’s Report and the Audit and Risk Committee Report on pages 89 and 126, respectively, as well as note 2.7 to the Group annual ﬁnancial statements on pages 186–187 OVERSEAS BRANCHES The Company has no overseas branches. LISTING RULES REQUIREMENTS Information required to be disclosed in terms of Listing Rule 9.8.4R, as applicable, is referenced below. There are no other disclosures to be made under that rule. DIRECTORS’ REPORT Pages 102–171 of this Annual Report constitute the Directors’ Report of the Company for FY22, as contemplated in the Act. The Company has chosen, in accordance with the Act, to include certain information in the Strategic Report that would otherwise be required to be included in this Directors’ Report, as follows: Other information incorporated by reference into the Directors’ Report can be located as follows: DETAIL LOCATION IN ANNUAL REPORT Relationship agreement with a controlling shareholder and compliance with independence provisions and independent directors’ election/re-election See ‘Principal shareholder and relationship agreement’ on page 169 Contracts of signiﬁcance with a controlling shareholder None other than the relationship agreement referred to above Provision of services by a controlling shareholder See note 37 to the Group annual ﬁnancial statements on page 243 Capitalised interest See notes 10 and 14 to the Group annual ﬁnancial statements on pages 194 and 197 DETAIL LOCATION IN ANNUAL REPORT Dividend recommendation Page 89 Likely future developments in the business Pages 14–22 Research and development activities Pages 58–71 GHG emissions and energy consumption and eciency Pages 47–56 DETAIL LOCATION IN ANNUAL REPORT Stakeholder engagement by the Board Pages 26–29 Financial risk management objectives and policies Note 32 to the Group annual ﬁnancial statements on pages 235–237 Events after the reporting date Note 38 to the Group annual ﬁnancial statements on page 244 Share capital, voting rights and signiﬁcant shareholders Page 263 OTHER DISCLOSURES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT170 The directors are responsible for preparing the Annual Report and the ﬁnancial statements in accordance with applicable law and regulation. Company law requires the directors to prepare ﬁnancial statements for each ﬁnancial year. Under that law the directors have prepared the Group and the Company ﬁnancial statements in accordance with UK-adopted international accounting standards. Under company law, directors must not approve the ﬁnancial statements unless they are satisﬁed that they give a true and fair view of the state of aairs of the Group and Company and of the proﬁt or loss of the Group and Company for that period. In preparing the ﬁnancial statements, the directors are required to: • select suitable accounting policies and then apply them consistently; • state whether applicable UK-adopted international accounting standards have been followed, subject to any material departures disclosed and explained in the ﬁnancial statements; • make judgements and accounting estimates that are reasonable and prudent; and • prepare the ﬁnancial statements on the going concern basis unless it is inappropriate to presume that the Group and Company will continue in business. The directors are responsible for safeguarding the assets of the Group and Company and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The directors are also responsible for keeping adequate accounting records that are sucient to show and explain the Group’s and Company’s transactions and disclose with reasonable accuracy at any time the ﬁnancial position of the Group and Company and enable them to ensure that the ﬁnancial statements and the Directors’ Remuneration Report comply with the Companies Act 2006. The directors are responsible for the maintenance and integrity of the Company’s website. Legislation in the UK governing the preparation and dissemination of ﬁnancial statements may dier from legislation in other jurisdictions.  DIRECTORS’ CONFIRMATIONS The directors consider that the Annual Report and accounts, taken as a whole, is FBU and provides the information necessary for shareholders to assess the Group’s and Company’s position and performance, business model and strategy. Each of the directors, whose names and functions are listed on pages 104–107 of this Annual Report, conﬁrm that, to the best of their knowledge: • the Group and Company ﬁnancial statements, which have been prepared in accordance with UK-adopted international accounting standards, give a true and fair view of the assets, liabilities and ﬁnancial position of the Group and Company, and of the proﬁt of the Group; and • the Directors’ Report includes a fair review of the development and performance of the business and the position of the Group and Company, together with a description of the principal risks and uncertainties that it faces. In the case of each director in oce at the date the Directors’ Report is approved: • so far as the director is aware, there is no relevant audit information of which the Group’s and Company’s auditors are unaware; and • they have taken all the steps that they ought to have taken as a director in order to make themselves aware of any relevant audit information and to establish that the Group’s and Company’s auditors are aware of that information. Dr Ronnie van der Merwe Group Chief Executive Ocer 24 May 2022 Jurgens Myburgh Group Chief Financial Ocer 24 May 2022 STATEMENT OF DIRECTORS’ RESPONSIBILITIES IN RESPECT OF THE FINANCIAL STATEMENTS STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 171 CONTENTS 172 Independent Auditors’ Report GROUP ANNUAL FINANCIAL STATEMENTS 180 Consolidated income statement 181 Consolidated statement of comprehensive income 182 Consolidated statement of ﬁnancial position 183 Consolidated statement of changes in equity 184 Consolidated statement of cash ﬂows 185 Notes to the Group annual ﬁnancial statements COMPANY ANNUAL FINANCIAL STATEMENTS 258 Company statement of ﬁnancial position 258 Company statement of changes in equity 259 Company statement of cash ﬂows 259 Notes to the Company annual ﬁnancial statements INDEPENDENT AUDITORS’ REPORT TO THE MEMBERS OF MEDICLINIC INTERNATIONAL PLC REPORT ON THE AUDIT OF THE FINANCIAL STATEMENTS OPINION In our opinion, Mediclinic International plc’s group ﬁnancial statements and company ﬁnancial statements (the “ﬁnancial statements”): • give a true and fair view of the state of the group’s and of the company’s aairs as at 31March2022 and of the group’s proﬁt and the group’s and company’s cash ﬂows for the year then ended; • have been properly prepared in accordance with UK-adopted international accounting standards; and • have been prepared in accordance with the requirements of the Companies Act 2006. We have audited the ﬁnancial statements, included within the Annual Report, which comprise: the consolidated and company statements of ﬁnancial position as at 31March2022; the consolidated income statement, the consolidated statement of comprehensive income, the consolidated and company statements of changes in equity and the consolidated and company statements of cash ﬂows for the year then ended; and the notes to the ﬁnancial statements, which include a description of the signiﬁcant accounting policies. Our opinion is consistent with our reporting to the Audit and Risk Committee. BASIS FOR OPINION We conducted our audit in accordance with International Standards on Auditing (UK) (“ISAs (UK)”) and applicable law. Our responsibilities under ISAs (UK) are further described in the Auditors’ responsibilities for the audit of the ﬁnancial statements section of our report. We believe that the audit evidence we have obtained is sucient and appropriate to provide a basis for our opinion. INDEPENDENCE We remained independent of the group in accordance with the ethical requirements that are relevant to our audit of the ﬁnancial statements in the UK, which includes the FRC’s Ethical Standard, as applicable to listed public interest entities, and we have fulﬁlled our other ethical responsibilities in accordance with these requirements. To the best of our knowledge and belief, we declare that non-audit services prohibited by the FRC’s Ethical Standard were not provided. Other than those disclosed in note 8, we have provided no non-audit services to the company or its controlled undertakings in the period under audit. 172 OUR AUDIT APPROACH OVERVIEW AUDIT SCOPE • Our Group audit included full scope audits at three reporting units. We performed centralised audit procedures on the equity accounted results of Spire Healthcare Group plc (‘Spire’) based on its audited ﬁnancial statements at 31 December 2021. We have also audited the ﬁnancial statement line items Cash and cash equivalents, Share Capital and Share premium of the Company to support the Group audit. • The above procedures accounted for 94% of consolidated revenue, 93% of consolidated proﬁt before tax and 93% of consolidated adjusted proﬁt before tax. • For the purposes of the Company audit, we performed a full scope audit in the UK of all material ﬁnancial statement line items. KEY AUDIT MATTERS • Impairment of goodwill and non-current assets (group) • Carrying value of associate investment in Spire (group) • Impairment assessment of the Company’s investment in subsidiaries (company) MATERIALITY • Overall group materiality: £11.5 million (2021: £10.8 million) based on 5% of the consolidated adjusted proﬁt before tax (2021: 5% of the average three year consolidated adjusted proﬁt before tax). • Overall company materiality: £33.8 million (2021: £33.0 million) based on 1% of total assets. • Performance materiality: £8.6 million (2021: £8.1 million) (group) and £25.3 million (2021: £24.7 million) (company). THE SCOPE OF OUR AUDIT As part of designing our audit, we determined materiality and assessed the risks of material misstatement in the ﬁnancial statements. KEY AUDIT MATTERS Key audit matters are those matters that, in the auditors’ professional judgement, were of most signiﬁcance in the audit of the ﬁnancial statements of the current period and include the most signiﬁcant assessed risks of material misstatement (whether or not due to fraud) identiﬁed by the auditors, including those which had the greatest eect on: the overall audit strategy; the allocation of resources in the audit; and directing the eorts of the engagement team. These matters, and any comments we make on the results of our procedures thereon, were addressed in the context of our audit of the ﬁnancial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. This is not a complete list of all risks identiﬁed by our audit. Carrying value of associate investment in Spire (group) is a new key audit matter this year. Going concern assessment in response to the economic uncertainties from COVID-19 (group), and impact of COVID-19 (group and company), which were key audit matters last year, are no longer included because of the market recovery from the impact of COVID-19 resulting in the Group’s improved trading performance during 2022. Where relevant, the ongoing impact of COVID-19 has been assessed as part of our audit in 2022. Otherwise, the key audit matters below are consistent with last year. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 173 KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER Impairment of goodwill and non-current assets (group) The Group has £1 126 million (2021: £1 061 million) of intangible assets. This balance consists mainly of goodwill relating to the Mediclinic Middle East operations amounting to £887 million (2021: £834 million). The Group is required to perform annual impairment tests on goodwill. These impairment tests are generally undertaken at the operating division level being the level at which management monitors goodwill for impairment. The Group also performed separate impairment assessments, where appropriate, of individual CGUs which form part of these operating divisions. Goodwill is generally assessed for impairment at the operating division level on the basis that the commercial rationale for the transactions giving rise to goodwill is to realise synergies across the entire operating division and not just within the acquired business. The two exceptions are the acquisition of Les Grangettes completed in 2018 whose goodwill is assessed for impairment at the CGU level given the existence of a signiﬁcant non-controlling interest and discrete acquisitions at Mediclinic Southern Africa in which case the goodwill is allocated to that CGU. Other assets subject to impairment assessment at the CGU level primarily comprise land and buildings. In the current year, an impairment loss of £7 million was recorded to partially impair property and equipment at Hirslanden due to a ﬁre that caused signiﬁcant damage to one of the building wings at Klinik Hirslanden Zurich. We focused on the impairment assessments of goodwill at Mediclinic Middle East and Hirslanden and non-ﬁnancial assets at two CGUs of Hirslanden as the impairment reviews carried out by the Group contain a number of signiﬁcant judgements, including the level at which goodwill is monitored for impairment, and estimates, including future cash ﬂow projections, growth rates and discount rates. Changes in these assumptions might lead to a signiﬁcant change in the recoverable values of the related assets and therefore to impairment losses recognised. We used our valuation experts to assist us in our assessment of management’s impairment calculations and we tested the reasonableness of key assumptions, including cash ﬂow forecasts and the determination of growth rates and discount rates. We challenged management to substantiate its assumptions, including comparing relevant assumptions to industry benchmarks and economic forecasts. We substantively tested the integrity of supporting calculations and we corroborated certain information with third party sources. We agreed the underlying cash ﬂows to approved budgets and we assessed growth rates and discount rates by comparison to third party growth forecasts, the Group’s cost of capital and relevant risk factors. Future cash ﬂow assumptions were evaluated in the context of current trading performance against budget and forecasts, considering the historical accuracy of budgeting and forecasting and understanding the reasons for the growth proﬁles used. We validated the carrying amounts of the net assets subject to impairment testing to the underlying accounting records, making sure that there was appropriate consistency between the assets and liabilities that were included in management’s assessment and the related cash ﬂows. In addition, we performed independent sensitivity analyses to ascertain the impact of reasonably possible changes to key assumptions on the available headroom or the level of impairment required. We evaluated management’s judgement regarding the levels at which goodwill arising from the Swiss and Middle East acquisitions are monitored for impairment review purposes. We tested management’s estimate of disposal costs for each division and we evaluated management’s assessment of whether market participant adjustments were required to be made to the valuations. We assessed the appropriateness of management’s disclosures about sensitivities in note 14 and 15 of the consolidated ﬁnancial statements in relation to the Swiss and Middle East operations. Based on the procedures performed, we noted no material issues arising from our work. INDEPENDENT AUDITORS’ REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT174 Carrying value of associate investment in Spire (group) In previous years, signiﬁcant impairment losses were recognised against the Group’s associate investment in Spire. However, at 31 March 2022, the listed market value exceeded the carrying value of the investment. Management therefore considered whether any of the previously recognised impairment losses should be reversed, but concluded that no reversal was justiﬁed. We focused on this area because of the magnitude of the dierence between the carrying value and the listed market value of the investment and the judgement involved in determining whether there were signiﬁcant favourable changes to the circumstances that resulted in the initial impairment charge. We obtained management’s updated impairment assessment and with the assistance of our valuation experts, we tested the reasonableness of key assumptions underpinning management’s value-in-use valuation of the Group’s investment, including cash ﬂow forecasts and the selection of growth rates and discount rates. We compared the result of the valuation at 31 March 2022 with the valuation performed at 31 March 2020 when the last impairment charge was recognised and noted that the values were broadly aligned. We compared Spire’s actual trading for the year ended 31 December 2021 to the estimates included in the Group’s impairment assessment performed at 31 March 2020 and noted that the actual results were broadly in line with these estimates. We considered other factors such as Spire’s recent history of losses and market developments in the UK health sector. We assessed the appropriateness of management’s disclosures about the judgement in note 16.1 of the consolidated ﬁnancial statements. Based on the procedures performed, we noted no material issues arising from our work. Impairment assessment of the Company’s investment in subsidiaries (company) Investments in subsidiaries are accounted for at cost less impairment in the Company balance sheet. At 31 March 2022, the Company held investments in subsidiaries with a carrying value of £3,311 million. In the current ﬁnancial year, while no speciﬁc impairment triggers were identiﬁed for any of the investments, the market capitalisation of the Group is below the carrying value of the investments in subsidiaries. Management therefore performed an impairment assessment of these investments. The impairment assessment performed by management was considered a key audit matter given the size of the underlying investment carrying values and the application of management judgement in determining the key valuation assumptions for each investment. Management’s analysis resulted in no further impairment charges. We independently evaluated management’s assessment whether any indicators of impairment existed by comparing the Company’s carrying value of investments in subsidiaries to the Group’s market capitalisation at 31 March 2022 and to the valuations implied by other models, including valuation models prepared for impairment review purposes at divisions which were subject to audit procedures as part of our Group audit. The key assumptions used in the impairment models were consistent with those used for impairment testing as described in the key audit matter “Impairment of goodwill and non-current assets (group)”. We evaluated management’s sensitivity analyses to ascertain the impact of reasonably possible changes to key assumptions on the level of impairment required. We separately evaluated the dierence between the investment carrying values and the Group’s market capitalisation. We considered the appropriateness of the related disclosures in the Company ﬁnancial statements. Based on the procedures performed, we noted no material issues arising from our work. KEY AUDIT MATTER HOW OUR AUDIT ADDRESSED THE KEY AUDIT MATTER STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 175 HOW WE TAILORED THE AUDIT SCOPE We tailored the scope of our audit to ensure that we performed enough work to be able to give an opinion on the ﬁnancial statements as a whole, taking into account the structure of the group and the company, the accounting processes and controls, and the industry in which they operate. The Group ﬁnancial statements involve a consolidation of 16 reporting units, certain of which are sub-consolidations of the operations in each of the Group’s key markets. The sub-consolidations were deemed to be components for our audit and comprise the Group’s three main divisions: Southern Africa, Switzerland and the Middle East. These components required an audit of their complete ﬁnancial information due to their size. In establishing the overall approach to the Group audit, we determined the type of work that needed to be performed at the reporting units by us, as the Group audit team, or by component auditors from other PwC network ﬁrms. Where the work was performed by component auditors, we determined the level of involvement we needed to have in the audit work at those components to be able to conclude whether sucient appropriate audit evidence had been obtained as a basis for our opinion on the Group ﬁnancial statements as a whole. We instructed, supervised and reviewed the audit work of each of our component audit teams in South Africa, Switzerland and the Middle East, which included audit work paper reviews, participation in key audit discussions and in-person site visits with local management and participation in audit clearance meetings at each component. We also maintained regular dialogue with our component audit teams at each key reporting unit. Further speciﬁc audit procedures over the Group consolidation, selected ﬁnancial statement line items reported by the Company and over the Group’s associate interest in Spire, and procedures over the Annual Report and audit of the ﬁnancial statement disclosures were directly led by the Group audit team. Taken together, the component audit work, together with work performed at the Group level, accounted for 94% of consolidated revenue, 93% of consolidated proﬁt before tax and 93% of consolidated adjusted proﬁt before tax calculated on an absolute basis. As part of the audit, we inquired of management to understand and evaluate the Group’s risk assessment process in relation to climate change. We used our knowledge of the Group, and we engaged with our divisional component teams and our climate change experts to support our evaluation of the risk assessment performed by management. We further challenged management on how they considered the Group’s 2030 carbon neutrality and zero waste to landﬁll commitments in their assessment. We assessed that the key ﬁnancial statement line items and estimates which are more likely to be materially impacted by climate change are those areas that are based on future cash ﬂows. As a result, we particularly considered how climate change risks and the impact of climate commitments made by the Group would impact the assumptions made in the forecasts prepared by management that are used in the Company’s impairment analysis. Our procedures did not identify any material impacts on our key audit matters for the year ended 31 March 2022. We also reviewed the disclosures included in the TCFD Report of the Annual Report and we considered the consistency of these disclosures with the relevant ﬁnancial statement disclosures, including in note 14, and with our understanding of the business. MATERIALITY The scope of our audit was inﬂuenced by our application of materiality. We set certain quantitative thresholds for FINANCIAL STATEMENTS - GROUP FINANCIAL STATEMENTS - COMPANY Overall materiality £11.5 million (2021: £10.8 million). £33.8 million (2021: £33.0 million). How we determined it 5% of the consolidated adjusted proﬁt before tax (2021: 5% of the average three year consolidated adjusted proﬁt before tax) 1% of total assets Rationale for benchmark applied We believe that adjusted proﬁt before tax is the primary measure used by the shareholders in assessing the performance of the Group. The adjusted proﬁt before tax measure removes the impact of signiﬁcant items which do not recur from year to year or which otherwise signiﬁcantly aect the underlying trend of performance from continuing operations. This is the metric against which the performance of the Group is most commonly assessed by management and reported to shareholders. We chose 5%, which is consistent with the quantitative materiality thresholds used for proﬁt- oriented companies in this sector. Mediclinic International plc is the ultimate parent company which holds the Group’s investments. Therefore, the entity is not in itself proﬁt oriented. The strength of the balance sheet is the key measure of ﬁnancial health that is important to shareholders, since the primary concern for the Company is the payment of dividends. Using a benchmark of total assets is therefore most appropriate. For 2022 and 2021, selected ﬁnancial statement line items related to cash and equity of the Company are included in the scope of the Group audit and were audited to a lower capped materiality of £10.3 million (2021: £9.7 million). However, we determined that the Company did not require a full scope audit of its complete ﬁnancial information for the purposes of the Group audit. INDEPENDENT AUDITORS’ REPORT CONTINUED materiality. These, together with qualitative considerations, helped us to determine the scope of our audit and the nature, timing and extent of our audit procedures on the individual ﬁnancial statement line items and disclosures and in evaluating the eect of misstatements, both individually and in aggregate on the ﬁnancial statements as a whole. Based on our professional judgement, we determined materiality for the ﬁnancial statements as a whole as follows: MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT176 For each component in the scope of our group audit, we allocated a materiality that is less than our overall group materiality. The range of materiality allocated across components was between £6.5 million and £10.3 million. Certain components were audited to a local statutory audit materiality that was also less than our overall group materiality. We use performance materiality to reduce to an appropriately low level the probability that the aggregate of uncorrected and undetected misstatements exceeds overall materiality. Speciﬁcally, we use performance materiality in determining the scope of our audit and the nature and extent of our testing of account balances, classes of transactions and disclosures, for example in determining sample sizes. Our performance materiality was 75% (2021: 75%) of overall materiality, amounting to £8.6 million (2021: £8.1 million) for the group ﬁnancial statements and £25.3 million (2021: £24.7 million) for the company ﬁnancial statements. In determining the performance materiality, we considered a number of factors - the history of misstatements, risk assessment and aggregation risk and the eectiveness of controls - and concluded that an amount at the upper end of our normal range was appropriate. We agreed with the Audit and Risk Committee that we would report to them misstatements identiﬁed during our audit above £1.0 million (group audit) (2021: £1.0 million) and £1.0 million (company audit) (2021: £1.0 million) as well as misstatements below those amounts that, in our view, warranted reporting for qualitative reasons. CONCLUSIONS RELATING TO GOING CONCERN Our evaluation of the directors’ assessment of the group’s and the company’s ability to continue to adopt the going concern basis of accounting included: • We assessed the appropriateness of the cash ﬂow forecasts in the context of the group’s 2022 ﬁnancial results and evaluated the directors’ downside sensitivities against these forecasts; • We considered the key assumptions made in preparing the forecasts and considered whether these were supported by the audit evidence we obtained; • We examined the headroom under the base case cash ﬂow forecasts, as well as the directors’ and our own severe but plausible downside sensitised cases, and evaluated whether the directors’ conclusion that headroom remained in all events was supported by the evidence we obtained; • We obtained the group’s covenant calculations (which are separately managed at three divisions) and re-performed the calculation including applying sensitivities to assess the potential impact of downside sensitivities on covenant compliance; and • We also reviewed the disclosures provided relating to the going concern basis of preparation and found that these provided an explanation of the directors’ assessment that was consistent with the audit evidence we obtained. Based on the work we have performed, we have not identiﬁed any material uncertainties relating to events or conditions that, individually or collectively, may cast signiﬁcant doubt on the group’s and the company’s ability to continue as a going concern for a period of at least twelve months from when the ﬁnancial statements are authorised for issue. In auditing the ﬁnancial statements, we have concluded that the directors’ use of the going concern basis of accounting in the preparation of the ﬁnancial statements is appropriate. However, because not all future events or conditions can be predicted, this conclusion is not a guarantee as to the group’s and the company’s ability to continue as a going concern. In relation to the directors’ reporting on how they have applied the UK Corporate Governance Code, we have nothing material to add or draw attention to in relation to the directors’ statement in the ﬁnancial statements about whether the directors considered it appropriate to adopt the going concern basis of accounting. Our responsibilities and the responsibilities of the directors with respect to going concern are described in the relevant sections of this report. REPORTING ON OTHER INFORMATION The other information comprises all of the information in the Annual Report other than the ﬁnancial statements and our auditors’ report thereon. The directors are responsible for the other information, which includes reporting based on the Task Force on Climate-related Financial Disclosures (TCFD) recommendations. Our opinion on the ﬁnancial statements does not cover the other information and, accordingly, we do not express an audit opinion or, except to the extent otherwise explicitly stated in this report, any form of assurance thereon. In connection with our audit of the ﬁnancial statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the ﬁnancial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated. If we identify an apparent material inconsistency or material misstatement, we are required to perform procedures to conclude whether there is a material misstatement of the ﬁnancial statements or a material misstatement of the other information. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report based on these responsibilities. With respect to the Strategic Report and Directors’ Report, we also considered whether the disclosures required by the UK Companies Act 2006 have been included. Based on our work undertaken in the course of the audit, the Companies Act 2006 requires us also to report certain opinions and matters as described below. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 177 STRATEGIC REPORT AND DIRECTORS’ REPORT In our opinion, based on the work undertaken in the course of the audit, the information given in the Strategic Report and Directors’ Report for the year ended 31March2022 is consistent with the ﬁnancial statements and has been prepared in accordance with applicable legal requirements. In light of the knowledge and understanding of the group and company and their environment obtained in the course of the audit, we did not identify any material misstatements in the Strategic Report and Directors’ Report. DIRECTORS’ REMUNERATION In our opinion, the part of the Remuneration Committee Report to be audited has been properly prepared in accordance with the Companies Act 2006. CORPORATE GOVERNANCE STATEMENT The Listing Rules require us to review the directors’ statements in relation to going concern, longer-term viability and that part of the corporate governance statement relating to the company’s compliance with the provisions of the UK Corporate Governance Code speciﬁed for our review. Our additional responsibilities with respect to the corporate governance statement as other information are described in the Reporting on other information section of this report. Based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the ﬁnancial statements and our knowledge obtained during the audit, and we have nothing material to add or draw attention to in relation to: • The directors’ conﬁrmation that they have carried out a robust assessment of the emerging and principal risks; • The disclosures in the Annual Report that describe those principal risks, what procedures are in place to identify emerging risks and an explanation of how these are being managed or mitigated; • The directors’ statement in the ﬁnancial statements about whether they considered it appropriate to adopt the going concern basis of accounting in preparing them, and their identiﬁcation of any material uncertainties to the group’s and company’s ability to continue to do so over a period of at least twelve months from the date of approval of the ﬁnancial statements; • The directors’ explanation as to their assessment of the group’s and company’s prospects, the period this assessment covers and why the period is appropriate; and • The directors’ statement as to whether they have a reasonable expectation that the company will be able to continue in operation and meet its liabilities as they fall due over the period of its assessment, including any related disclosures drawing attention to any necessary qualiﬁcations or assumptions. Our review of the directors’ statement regarding the longer-term viability of the group was substantially less in scope than an audit and only consisted of making inquiries and considering the directors’ process supporting their statement; checking that the statement is in alignment with the relevant provisions of the UK Corporate Governance Code; and considering whether the statement is consistent with the ﬁnancial statements and our knowledge and understanding of the group and company and their environment obtained in the course of the audit. In addition, based on the work undertaken as part of our audit, we have concluded that each of the following elements of the corporate governance statement is materially consistent with the ﬁnancial statements and our knowledge obtained during the audit: • The directors’ statement that they consider the Annual Report, taken as a whole, is fair, balanced and understandable, and provides the information necessary for the members to assess the group’s and company’s position, performance, business model and strategy; • The section of the Annual Report that describes the review of eectiveness of risk management and internal control systems; and • The section of the Annual Report describing the work of the Audit and Risk Committee. We have nothing to report in respect of our responsibility to report when the directors’ statement relating to the company’s compliance with the Code does not properly disclose a departure from a relevant provision of the Code speciﬁed under the Listing Rules for review by the auditors. RESPONSIBILITIES FOR THE FINANCIAL STATEMENTS AND THE AUDIT RESPONSIBILITIES OF THE DIRECTORS FOR THE FINANCIAL STATEMENTS As explained more fully in the Statement of directors’ responsibilities, the directors are responsible for the preparation of the ﬁnancial statements in accordance with the applicable framework and for being satisﬁed that they give a true and fair view. The directors are also responsible for such internal control as they determine is necessary to enable the preparation of ﬁnancial statements that are free from material misstatement, whether due to fraud or error. In preparing the ﬁnancial statements, the directors are responsible for assessing the group’s and the company’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless the directors either intend to liquidate the group or the company or to cease operations, or have no realistic alternative but to do so. AUDITORS’ RESPONSIBILITIES FOR THE AUDIT OF THE FINANCIAL STATEMENTS Our objectives are to obtain reasonable assurance about whether the ﬁnancial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with ISAs (UK) will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to inﬂuence the economic decisions of users taken on the basis of these ﬁnancial statements. INDEPENDENT AUDITORS’ REPORT CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT178 Irregularities, including fraud, are instances of non-compliance with laws and regulations. We design procedures in line with our responsibilities, outlined above, to detect material misstatements in respect of irregularities, including fraud. The extent to which our procedures are capable of detecting irregularities, including fraud, is detailed below. Based on our understanding of the group and industry, we identiﬁed that the principal risks of non-compliance with laws and regulations related to healthcare regulations in the Group’s markets, and UK and international tax regulations, and we considered the extent to which non- compliance might have a material eect on the ﬁnancial statements. We also considered those laws and regulations that have a direct impact on the ﬁnancial statements such as the Companies Act 2006. We evaluated management’s incentives and opportunities for fraudulent manipulation of the ﬁnancial statements (including the risk of override of controls) and determined that the principal risks were related to posting inappropriate journal entries to increase revenue or reduce expenditure, accounting for large or unusual transactions outside the normal course of business and management bias in key accounting estimates. The group engagement team shared this risk assessment with the component auditors so that they could include appropriate audit procedures in response to such risks in their work. Audit procedures performed by the group engagement team and/or component auditors included: • Enquires with ﬁnance and non-ﬁnance management, internal audit and the Audit and Risk Committee including consideration of known or suspected instances of non-compliance with laws and regulation and fraud; • Review of internal audit reports; • Inspection of reporting from the Group’s whistleblowing Helpline and, if applicable, the results of management’s further investigations; • Challenging assumptions and judgements made by management in relation to the Group’s accounting estimates; • Identifying and testing journal entries based on our risk assessment; and • Instruction, supervision and review of related work performed by component auditors, including the responses to risks related to management override of controls and to fraud in revenue recognition. There are inherent limitations in the audit procedures described above. We are less likely to become aware of instances of non-compliance with laws and regulations that are not closely related to events and transactions reﬂected in the ﬁnancial statements. Also, the risk of not detecting a material misstatement due to fraud is higher than the risk of not detecting one resulting from error, as fraud may involve deliberate concealment by, for example, forgery or intentional misrepresentations, or through collusion. Our audit testing might include testing complete populations of certain transactions and balances, possibly using data auditing techniques. However, it typically involves selecting a limited number of items for testing, rather than testing complete populations. We will often seek to target particular items for testing based on their size or risk characteristics. In other cases, we will use audit sampling to enable us to draw a conclusion about the population from which the sample is selected. A further description of our responsibilities for the audit of the ﬁnancial statements is located on the FRC’s website at: www.frc.org.uk/auditorsresponsibilities. This description forms part of our auditors’ report. USE OF THIS REPORT This report, including the opinions, has been prepared for and only for the company’s members as a body in accordance with Chapter 3 of Part 16 of the Companies Act 2006 and for no other purpose. We do not, in giving these opinions, accept or assume responsibility for any other purpose or to any other person to whom this report is shown or into whose hands it may come save where expressly agreed by our prior consent in writing. OTHER REQUIRED REPORTING COMPANIES ACT 2006 EXCEPTION REPORTING Under the Companies Act 2006 we are required to report to you if, in our opinion: • we have not obtained all the information and explanations we require for our audit; or • adequate accounting records have not been kept by the company, or returns adequate for our audit have not been received from branches not visited by us; or • certain disclosures of directors’ remuneration speciﬁed by law are not made; or • the company ﬁnancial statements and the part of the Remuneration Committee Report to be audited are not in agreement with the accounting records and returns. We have no exceptions to report arising from this responsibility. APPOINTMENT Following the recommendation of the Audit and Risk Committee, we were appointed by the members on 18March2016 to audit the ﬁnancial statements for the year ended 31March2016 and subsequent ﬁnancial periods. The period of total uninterrupted engagement is seven years, covering the years ended 31March2016 to 31March2022. OTHER MATTER As required by the Financial Conduct Authority Disclosure Guidance and Transparency Rule 4.1.14R, these ﬁnancial statements form part of the ESEF-prepared annual ﬁnancial report ﬁled on the National Storage Mechanism of the Financial Conduct Authority in accordance with the ESEF Regulatory Technical Standard (‘ESEF RTS’). This auditors’ report provides no assurance over whether the annual ﬁnancial report has been prepared using the single electronic format speciﬁed in the ESEF RTS.  Neil Grimes (Senior Statutory Auditor) for and on behalf of PricewaterhouseCoopers LLP Chartered Accountants and Statutory Auditors London 24May2022 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 179 CONSOLIDATED INCOME STATEMENT FOR THE YEAR ENDED 31 MARCH 2022 2022 2021 Notes £’m £’m Revenue 4 3 233 2 995 Other income 5 25 13 Employee beneﬁt and contractor costs 6 (1 522) (1 448) Consumables and supplies 19 (770) (719) Care-related costs (146) (145) Infrastructure-related costs 7 (121) (110) Service costs (169) (147) Provision for expected credit losses 20 (12) (11) Depreciation and amortisation 14 & 15 (228) (217) Impairment of property, equipment and vehicles 14 (7) (3) Impairment of intangible assets 15 – (1) Other gains and losses 9 (3) 2 Operating proﬁt 280 209 Finance income 6 4 Finance cost 10 (7 4) (99) Share of net loss of equity-accounted investments 16 (1) (70) Reversal of impairment of equity-accounted investments 16 – 60 Proﬁt before tax 211 104 Income tax expense 11 (41) (25) Proﬁt for the year 170 79 The notes on pages 185–257 form an integral part of these ﬁnancial statements. Attributable to: Equity holders of the Company 151 68 Non-controlling interests 23 19 11 170 79 Proﬁt per ordinary share attributable to the equity holders of the Company – pence Basic 12 20.5 9.2 Diluted 12 20.5 9.2 2022 2021 (Continued) Notes £’m £’m MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT180 2022 2021 (Continued) Notes £’m £’m CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 MARCH 2022 (Re-presented) 1 2022 2021 Notes £’m £’m Proﬁt for the year 170 79 Other comprehensive income/(loss) Items that may be reclassiﬁed to the income statement in future periods 188 (235) Currency translation dierences 22 182 (235) Fair value adjustment on cash ﬂow hedges – gross 22 1 (2) Cash ﬂow hedges reclassiﬁed to proﬁt or loss – gross 22 6 2 Tax on items relating to cash ﬂow hedges 22 (2) – Share of other comprehsive income of equity-accounted investments 22 1 – Items that may not be reclassiﬁed to the income statement in future periods (70) 127 Remeasurements of retirement beneﬁt obligations – gross (90) 153 Tax on remeasurement of retirement beneﬁt obligations 16 (26) Changes in the fair value of equity investments at fair value through other comprehensive income – gross 22 4 – Other comprehensive income/(loss), net of tax 118 (108) Total comprehensive income/(loss) for the year 288 (29) The notes on pages 185–257 form an integral part of these ﬁnancial statements. Attributable to: Equity holders of the Company 258 (45) Non-controlling interests 23 30 16 288 (29) Note 1 Comparatives have been re-presented to present other comprehensive income on a gross basis, with the tax impact presented separately. In the previously reported ﬁnancial statements for the year ended 31 March 2021, this information was presented in a separate note. (Re-presented) 1 2022 2021 (Continued) Notes £’m £’m STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 181 LIABILITIES Non-current liabilities 3 138 3 021 Borrowings 25 1 688 1 686 Lease liabilities 26 73 0 621 Deferred income tax liabilities 18 432 425 Retirement beneﬁt obligations 27 119 127 Provisions 28 37 37 Derivative ﬁnancial instruments 29 128 124 Cash-settled share-based payment liabilities 24 4 1 Current liabilities 823 684 Trade and other payables 30 586 49 8 Borrowings 25 115 91 Lease liabilities 26 56 55 Provisions 28 38 19 Retirement beneﬁt obligations 27 20 14 Derivative ﬁnancial instruments 29 1 2 Current income tax liabilities 7 5 Total liabilities 3 961 3 705 Total equity and liabilities 7 207 6 672 2022 2021 (Continued) Notes £’m £’m CONSOLIDATED STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2022 2022 2021 Notes £’m £’m ASSETS Non-current assets 5 733 5 440 Property, equipment and vehicles 14 4 385 4 052 Intangible assets 15 1 126 1 061 Equity-accounted investments 16 165 171 Retirement beneﬁt asset 27 1 110 Other investments and loans 17 24 12 Deferred income tax assets 18 32 34 Current assets 1 474 1 232 Inventories 19 97 109 Trade and other receivables 20 834 826 Other investments and loans 17 6 2 Current income tax assets 3 1 Cash and cash equivalents 33.7 534 294 Total assets 7 207 6 672 EQUITY Capital and reserves Share capital 21 74 74 Share premium reserve 21 690 69 0 Retained earnings 4 597 4 523 Other reserves 22 (2 254) (2 438) Attributable to equity holders of the Company 3 107 2 849 Non-controlling interests 23 139 118 Total equity 3 246 2 967 These ﬁnancial statements and the accompanying notes as set out on pages 180–257 were approved for issue by the Board of Directors on 24 May 2022 and were signed on its behalf by: Ronnie van der Merwe Jurgens Myburgh Group Chief Executive Ocer Group Chief Financial Ocer Mediclinic International plc (Company no 08338604) The notes on pages 185–257 form an integral part of these ﬁnancial statements. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT182 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2022 The notes on pages 185–257 form an integral part of these ﬁnancial statements. Notes 1 Fair value through other comprehensive income. 2 Less than £0.5m for the year ended 31 March 2021. Proﬁt for the year – – – – – – – 151 151 19 170 Other comprehensive income/(loss) for the year – – – – 4 1 74 6 (77) 107 11 118 Total comprehensive income/(loss) for the year – – – – 4 1 74 6 74 258 30 288 Equity-settled share-based payment – – – – – – – 1 1 – 1 Transactions with non-controlling shareholders – – – – – – – (1) (1) 3 2 Dividends paid – – – – – – – – – (12) (12) Balance at 31 March 2022 74 6 690 (3 014) 4 752 (2) 4 597 3 107 139 3 246 Balance at 1 April 2020 74 6 690 (3 014) – 815 (8) 4 327 2 890 113 3 003 Proﬁt for the year – – – – – – – 68 68 11 79 Other comprehensive income/(loss) for the year – – – – – (237) – 1 24 (113) 5 (108) Total comprehensive income/(loss) for the year – – – – – (237) – 192 (45) 16 (29) Equity-settled share-based payment – – – – – – – – – – – Transactions with non-controlling shareholders – – – – – – – 4 4 (3) 1 Dividends paid – – – – – – – – – (8) (8) Balance at 31 March 2021 74 6 690 (3 014) – 578 (8) 4 523 2 849 118 2 967 Share capital (note 21) £’m Capital redemption reserve (note 22) £’m Share premium reserve (note 21) £’m Reverse acquisition reserve (note 22) £’m Financial assets at FVOCI reserve (note 22) £’m Foreign currency translation reserve (note 22) £’m Hedging reserve (note 22) £’m Retained earnings £’m Attributable to equity holders of the Company £’m Non- controlling interests (note 23) £’m Total equity £’m STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 183 CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2022 2022 2021 £’m £’m Notes Inﬂow/(outﬂow) Inﬂow/(outﬂow) CASH FLOW FROM OPERATING ACTIVITIES Cash generated from operations 33.1 663 330 Interest received 6 4 Interest paid 33.2 (69) (70) Tax paid 33.3 (46) (29) Net cash generated from operating activities 554 235 CASH FLOW FROM INVESTMENT ACTIVITIES (189) (137) Capital expenditure to maintain operations 33.4 (96) (56) Capital expenditure to expand operations 33.5 (83) (80) Acquisition of subsidiaries 34 (7) (2) Disposal of subsidiaries 35 – 4 Acquisition of investment in associate 16 – (1) Dividends received from equity-accounted investment 16 2 – Proceeds from other investments and loans 3 1 Acquisition of investments 17 (12) (4) Loans granted (3) – Proceeds from insurance claim 6 1 Proceeds on disposal of property, equipment and vehicles 1 – Net cash generated before ﬁnancing activities 365 98 The notes on pages 185–257 form an integral part of these ﬁnancial statements. CASH FLOW FROM FINANCING ACTIVITIES (14 9) (130) Distributions to non-controlling interests 23 (12) (8) Distributions to shareholders 13 – – Transaction with non-controlling interest 23 2 1 Proceeds from borrowings 33.6 89 115 Repayment of borrowings 33.6 (183) (196) Reﬁnancing transaction costs 33.6 (3) (3) Repayment of lease liabilities 33.6 (42) (39) Net increase/(decrease) in cash and cash equivalents 216 (32) Opening balance of cash and cash equivalents 294 329 Exchange rate movements on foreign cash 24 (3) Closing balance of cash and cash equivalents 33.7 534 294 2022 2021 £’m £’m (Continued) Notes Inﬂow/(outﬂow) Inﬂow/(outﬂow) MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT184 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 1. GENERAL INFORMATION These ﬁnancial statements are consolidated ﬁnancial statements for Mediclinic International plc (the ‘Company’ or ‘Mediclinic’) and its subsidiaries, associates and joint ventures (collectively, the ‘Group’). A list of subsidiaries, associates and joint ventures is included in note 39. Mediclinic is a public limited company, with a primary listing on the London Stock Exchange (‘LSE’), and incorporated and domiciled in England and Wales. Its registered address is 6 th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom. The Company has secondary listings on the JSE and the Namibian Stock Exchange (‘NSX’). A wholly owned subsidiary, Hirslanden AG, issued bonds listed on the SIX Swiss Exchange. 2. ACCOUNTING INFORMATION AND POLICIES 2.1. Basis of preparation The Group annual ﬁnancial statements have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. There are no dierences for the Group in applying IFRS as issued by the IASB and UK-adopted IFRS. For the year ended 31 March 2022, the Group annual ﬁnancial statements have been prepared in accordance with IFRS as adopted by the UK Endorsement Board, as required by UK company law for the purposes of ﬁnancial reporting as a result of the UK’s exit from the EU on 31 January 2020 and the cessation of the transition period on 31 December 2020. This change does not constitute a change in accounting policy but rather a change in framework which is required to ground the use of IFRS in company law. There is no impact on recognition, measurement or disclosure between the two frameworks for the year ended 31 March 2022. The ﬁnancial statements are prepared on a going concern basis on the historical cost convention, except for the following items, which are carried at fair value or valued using another measurement basis: • Derivative ﬁnancial assets and liabilities, ﬁnancial instruments measured at fair value through proﬁt or loss (‘FVPL’) and ﬁnancial instruments measured at fair value through other comprehensive income (‘FVOCI’) are measured at fair value; • Retirement beneﬁt obligations calculated in terms of the projected unit credit method and corresponding plan assets are measured at fair value; and • Liabilities for cash-settled share-based payments are measured at fair value. Critical accounting estimates and judgements The preparation of ﬁnancial statements requires the use of accounting estimates, which, by deﬁnition, will seldom equal the actual results. Management also needs to exercise certain judgements in applying the Group’s accounting policies. This note provides an overview of the areas that involved a higher degree of judgement or estimates that are more likely to be materially adjusted in the next 12 months where assumptions vary. Detailed information about each of these estimates and judgements is included in the notes as listed below. Critical accounting judgements • Level at which management monitors goodwill for impairment testing (see note 15) • Impairment/impairment reversals of equity-accounted investments (see note 16) • Determination of lease term (see note 26) Key estimates • Impairment of non-ﬁnancial assets, excluding goodwill (see note 14) • Impairment/impairment reversals of equity-accounted investments (see note 16) • Measurement of retirement beneﬁt obligations (see note 27) • Remeasurement of redemption liability (written put option) (see note 29) 2.2. Accounting policies Accounting policies are included in the relevant notes to the Group ﬁnancial statements. Unless otherwise disclosed, the accounting policies adopted are the same as those which were applied for the previous ﬁnancial year. The accounting policies below are applied throughout the ﬁnancial statements.  2.3. Functional and presentation currency The consolidated ﬁnancial statements and ﬁnancial information are presented in sterling (the presentation currency), rounded to the nearest million. The functional currencies of the majority of the Group's entities, and the currencies of the primary economic environments in which they operate, are the Swiss franc, South African rand and UAE dirham. The UAE dirham is pegged against the United States (‘US’) dollar at a rate of 3.6725 per US dollar. 2.4. Exchange rates The Group uses the average of exchange rates prevailing during the year to translate the results and cash ﬂows of foreign subsidiaries and equity-accounted investments into sterling and year-end rates to translate the net assets of those undertakings. The following exchange rates were applicable for the year: STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 185 2. ACCOUNTING INFORMATION AND POLICIES CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 2.5. Foreign currency transactions Transactions and balances Foreign currency transactions are translated into the respective Group entities’ functional currencies at exchange rates prevailing at the date of the transactions. Foreign exchange gains and losses resulting from the settlement of such transactions and from the translation of monetary assets and liabilities denominated in foreign currencies at year-end exchange rates are recognised in the income statement (except when recognised in other comprehensive income as part of qualifying cash ﬂow hedges). Non-monetary assets and liabilities denominated in foreign currencies that are measured at historical cost are translated using the exchange rate at the transaction date, and those measured at fair value are translated at the exchange rate at the date that the fair value was determined. Exchange rate dierences on non-monetary items are accounted for based on the classiﬁcation of the underlying items. Translation dierences on non-monetary ﬁnancial assets measured at FVOCI are included in other comprehensive income. Foreign exchange gains and losses are presented in the income statement in other gains and losses. 2.4. Exchange rates continued 2022 2021 Average rates with reference to sterling Swiss franc 1.25 1.21 South African rand 20.27 21.30 UAE dirham 5.02 4.80 Year-end rates with reference to sterling Swiss franc 1.21 1.30 South African rand 19.23 20.37 UAE dirham 4.82 5.07 Group entities The results and ﬁnancial position of all foreign operations that have a functional currency dierent from the Group’s presentation currency are translated into the presentation currency as follows: • Assets and liabilities are translated at the closing rate at the reporting date; • Income and expenses for each income statement are translated at average exchange rates during the year; and • All resulting exchange dierences are recognised in other comprehensive income. On consolidation, exchange dierences arising from the translation of net investments in foreign operations are taken directly to other comprehensive income. Goodwill and fair value adjustments arising on the acquisition of foreign operations are treated as assets and liabilities of the foreign operation and translated at closing rates at the reporting date.  2.6. Basis of consolidation Subsidiaries are all entities (including structured entities) over which the Group has control. The Group controls an entity when the Group is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to aect those returns through its power over the entity. The results of subsidiaries are included in the Group ﬁnancial statements from the eective date of acquisition until control is relinquished. Adjustments to the ﬁnancial statements of subsidiaries are made when necessary to bring their accounting policies in line with those of the Group. All intra-company transactions, balances, income and expenses are eliminated in full on consolidation. Non-controlling interests (‘NCI’) in the net assets of consolidated subsidiaries are identiﬁed and recognised separately from the Group’s interest therein, and are recognised within equity. Losses of subsidiaries attributable to NCI are allocated to the NCI even if this results in a debit balance being recognised. 2.7. Going concern For the purposes of assessing liquidity speciﬁcally and going concern broadly at 31 March 2022, the Group modelled a combination of severe but plausible downside scenarios on a month-by-month basis and also applied appropriate mitigation actions which would be within the Group’s control. The eect of the downside scenarios was informed by knowledge and insight gained during the COVID-19 pandemic. Due to the mostly ﬁxed employee cost base across the business, lower revenue due to either a reduction in taris or volumes will most likely have the most pronounced impact on EBITDA. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT186 Compared with the business plan, in modelling the severe but plausible scenarios, the combined adverse eect of reduction of taris and volumes after mitigation amounts to an aggregate decline of 18% of EBITDA over the 18-month period to 30 September 2023 compared with the base case. On a monthly basis, the EBITDA eect ranges from 12% to 29% compared with the base case. Based on the assumptions applied and the eect of mitigating actions, most within the control of the Group, the analyses demonstrate that the divisions will continue to be able to meet their obligations for the 18-month period to 30 September 2023. While recognising that there remains risk to the Group’s ﬁnancial performance for at least the next 12 months, the directors have a reasonable expectation that the Group will be able to continue in operation and meet its liabilities as they fall due for a period of at least 12 months from the date of approving the ﬁnancial statements. 2.8. Operating expenses presentation The Group presents its operating expenses in the Consolidated Income Statement by nature. The expense categories are described in the table below: Category Employee beneﬁt and contractor costs Consumables and supplies Care-related costs Infrastructure-related costs Service costs Provision for expected credit losses Depreciation and amortisation 2. ACCOUNTING INFORMATION AND POLICIES CONTINUED 2.7. Going concern continued Description Includes employee beneﬁt expenses for all sta, contractor costs and other employee-related costs. Includes the cost of all inventories, including obsolete stock, which have been expensed during the year. Includes costs closely linked to providing a service or care to patients and enhancing patient experience, and includes catering, laundry, cleaning, security services and other patient-related costs. Includes repairs and maintenance, rates and taxes, utilities, rent expensed in terms of IFRS 16 and other infrastructure-related costs. Includes all other administrative and operating expenses and non-speciﬁc service costs rendered, including, but not limited to, consulting, marketing, travel and audits. Consists of the movement in the allowance for expected credit losses recognised in terms of IFRS 9. Includes depreciation on property, equipment and vehicles and right-of-use assets, as well as amortisation of intangible assets. 2.9. Standards, interpretations and amendments Published standards, amendments and interpretations eective for the 31 March 2022 ﬁnancial period: The following published amendment is mandatory for the accounting period beginning on or after 1 April 2021, but was early adopted for the 31 March 2021 ﬁnancial period: • COVID-19-related Rent Concessions – Amendments to IFRS 16 (1 April 2021) The following published standards, amendments and interpretations are mandatory for the accounting period beginning on or after 1 April 2021 and have been adopted: • Interest Rate Benchmark Reform Phase 2 – Amendments to IFRS 9, IAS 39, IFRS 7, IFRS 4 and IFRS 16 (1 January 2021). See note 25 for a description of the impact of the implementation of this amendment. The implementation of these standards and amendments had no material ﬁnancial impact on the reported results or ﬁnancial position of the Group. Published standards, amendments and interpretations not yet eective and not early adopted: The following new accounting standards, interpretations and amendments will have no material impact on the ﬁnancial statements: • Annual improvements 2018–2020 cycle – Amendments and clariﬁcations to existing IFRS standards (1 January 2022) • IAS 16 Property, Plant and Equipment: Proceeds before Intended Use amendments (1 January 2022) • IAS 37 Onerous Contracts – Cost of Fulﬁlling a Contract amendments (1 January 2022) • Reference to the Conceptual Framework – Amendments to IFRS 3 (1 January 2022) • IAS 1 Classiﬁcation of Liabilities as Current or Non-current amendments (1 January 2023) • IFRS 17 Insurance Contracts (1 January 2023) • Disclosure of Accounting Policies – Amendments to IAS 1 and IFRS Practice Statement 2 (1 January 2023) • Deﬁnition of Accounting Estimates – Amendments to IAS 8 (1 January 2023) • Deferred Tax related to Assets and Liabilities arising from a Single Transaction – Amendments to IAS 12 (1 January 2023) STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 187 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 3. SEGMENTAL REPORT Consistent with internal reporting, the Group’s reportable segments are identiﬁed as the three geographical operating segments in Switzerland, Southern Africa and the Middle East. United Kingdom and Corporate are not reportable operating segments, as they are not separately included in the reports provided to the chief operating decision-maker. The ‘United Kingdom’ column includes results from the equity-accounted investment in Spire Healthcare Group plc (‘Spire’). The ‘Corporate’ column includes head oce and group services. The chief operating decision- maker, who is responsible for allocating resources and assessing performance of the segments, has been identiﬁed as the Group Executive Committee. The Group Executive Committee comprises the executive directors and senior management as disclosed in the Annual Report on pages 104 and 108. Intersegment transactions are eliminated and shown separately in the segmental report. Reportable operating segments Other Year ended 31 March 2022 Total £’m Switzerland £’m Southern Africa £’m Middle East £’m United Kingdom £’m Corporate £’m Revenue 3 233 1 503 909 820 – 1 Inpatient 2 037 1 094 747 196 – – Day cases 250 82 71 97 – – Outpatient 804 225 62 517 – – Rental income 34 22 12 – – – Other 108 80 17 10 – 1 EBITDA 518 234 170 121 – (7) EBITDA before management fee 518 241 177 125 – (25) Group Services fees included in EBITDA 2 – (7) (7) (4) – 18 Other gains and losses (3) – – (2) – (1) Depreciation and amortisation (228) (134) (39) (54) – (1) Impairment of property, equipment and vehicles (7) (7) – – – – Operating proﬁt/(loss) 280 93 131 65 – (9) Operating proﬁt/(loss) 280 93 131 65 – (9) Loss from associate (1) 2 – – (3) – Finance income 6 – 5 – – 1 Finance cost (excluding intersegment loan interest ) (74) (30) (27) (17) – – Total ﬁnance cost (74) (47) (27) (17) – 17 Elimination of intersegment loan interest – 17 – – – (17) Taxation (41) (11) (30) – – – Segment result 170 54 79 48 (3) (8) At 31 March 2022 Investments in associates 161 2 3 – 156 – Investments in joint ventures 4 – 4 – – – Capital expenditure for the year 3 178 103 47 28 – – Total segment assets 7 207 4 164 860 1 896 156 131 Total segment liabilities (excluding intersegment loan) 3 961 2 586 640 718 – 17 Total liabilities from reportable segment 4 976 3 601 640 718 – 17 Elimination of intersegment loan (1 015) (1 015) – – – – (Continued) Reportable operating segments Other Year ended 31 March 2022 Total £’m Switzerland £’m Southern Africa £’m Middle East £’m United Kingdom £’m Corporate £’m Notes 1 The Middle East segment refers to our UAE operations. 2 Intersegment transactions’ pricing is determined on an arm’s length basis. 3 Relates to additions to non-current assets other than ﬁnancial instruments, deferred tax assets and net deﬁned beneﬁt assets. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT188 Operating proﬁt/(loss) 209 97 69 51 – (8) Loss from associate (70) – – – (70) – Reversal of impairment of associate 60 – – – 60 – Finance income 4 – 3 – – 1 Finance cost (excluding intersegment loan interest) (99) (54) (29) (16) – – Total ﬁnance cost (99) (72) (29) (16) – 18 Elimination of intersegment loan interest – 18 – – – (18) Taxation (25) (11) (14) – – – Segment result 79 32 29 35 (10) (7) At 31 March 2021 Investments in associates 167 3 2 5 157 – Investments in joint ventures 4 – 4 – – – Capital expenditure for the year 126 67 33 26 – – Total segment assets 6 672 3 972 740 1 701 157 102 Total segment liabilities (excluding intersegment loan) 3 705 2 470 602 624 – 9 Total liabilities from reportable segment 4 635 3 400 602 624 – 9 Elimination of intersegment loan (930) (930) – – – – 3. SEGMENTAL REPORT CONTINUED Reportable operating segments Other Year ended 31 March 2021 Total £’m Switzerland £’m Southern Africa £’m Middle East £’m United Kingdom £’m Corporate £’m Revenue 2 995 1 478 734 781 – 2 Inpatient 1 926 1 102 618 206 – – Day cases 220 85 50 85 – – Outpatient 732 216 43 473 – – Rental income 31 21 9 1 – – Other 86 54 14 16 – 2 EBITDA 428 225 108 102 – (7) EBITDA before management fee 428 231 114 105 – (22) Group Services fees included in EBITDA 1 – (6) (6) (3) – 15 Other gains and losses 2 – 1 1 – – Depreciation and amortisation (217) (128) (36) (52) – (1) Impairment of property, equipment and vehicles (3) – (3) – – – Impairment of intangible assets (1) – (1) – – – Operating proﬁt/(loss) 209 97 69 51 – (8) (Continued) Reportable operating segments Other Year ended 31 March 2022 Total £’m Switzerland £’m Southern Africa £’m Middle East £’m United Kingdom £’m Corporate £’m (Continued) Reportable operating segments Other Year ended 31 March 2021 Total £’m Switzerland £’m Southern Africa £’m Middle East £’m United Kingdom £’m Corporate £’m Notes 1 Intersegment transactions’ pricing is determined on an arm’s length basis. 2 Relates to additions to non-current assets other than ﬁnancial instruments, deferred tax assets and net deﬁned beneﬁt assets. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 189 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED A performance obligation is a promise to transfer distinct goods and services to a customer. Hospital services provided to patients are regarded as a bundle of services which comprises accommodation, meals, theatre time, use of equipment, pharmacy stock and nursing services. This is considered to be a single performance obligation as the medical procedures cannot be performed without one of the above elements. Revenue is recorded during the period in which the hospital service is provided and is based on the amounts due from patients and/or medical funding entities. Unbilled revenue is accrued at period ends based on the number of days that the patient has been admitted for and received services. Other revenue comprises non-medical services rendered to patients and third parties, including the rendering of restaurant services at the hospitals, provisioning of agency sta, corporate and site-based emergency service contracts and other third-party revenues, including retail pharmacy sales. Other revenue is recognised when performance obligations are satisﬁed and the control of goods or services is transferred. Rental income is recognised on a straight-line basis over the term of the lease. The Group does not expect to have any contracts where the period between the transfer of the promised service to the patient and the payment by the patient exceeds one year. Consequently, the Group does not adjust any of the transaction prices for time value of money. Disaggregation of revenue 3. SEGMENTAL REPORT CONTINUED 2022 2021 £’m £’m The total non-current assets, excluding ﬁnancial instruments and deferred tax assets, per geographical location are: Switzerland 3 424 3 330 Southern Africa 559 518 Middle East 1 538 1 389 United Kingdom 156 157 ENTITY-WIDE DISCLOSURES Revenue From UK – – From foreign countries 3 233 2 995 2022 2021 £’m £’m Major service lines Inpatient 2 037 1 926 Day cases 250 220 Outpatient 804 732 Other 108 86 Revenue from contracts with customers 3 199 2 964 Rental income 34 31 Total revenue 3 233 2 995 4. REVENUE Revenue primarily comprises fees charged for inpatient, day case and outpatient medical services. Services include charges for accommodation, theatre, medical professional services, equipment, radiology, laboratory and pharmaceutical goods used. Inpatient and day case revenue is recognised as services are provided to patients. These services are typically provided over a short time frame. Outpatient cases do not involve surgical procedures and revenue is recognised on an individual component basis when performance obligations are satisﬁed. Revenues are measured at the transaction price which is the amount of consideration that the Group expects to be entitled to in exchange for the services provided. Fees charged for medical services are calculated and billed based on various tari agreements with funders. In determining the transaction price, variable consideration in terms of IFRS 15 exists in the form of discounts, tari adjustments and claims disallowances. Refer to the sections related to the revenue of Southern Africa and Middle East for the treatment of discounts. Refer to the section related to the revenue of Switzerland for the treatment of tari adjustments. Refer to the section related to the revenue of Middle East for the treatment of disallowances. Revenues from external customers are primarily from hospital services. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT190 4. REVENUE CONTINUED Switzerland healthcare services revenue In Switzerland, the cost of treating inpatients with basic health insurance is ﬁxed by the government. The pricing model is based on Swiss diagnostic-related groups (‘DRGs’) for inpatients and can be seen as a ﬁxed-fee arrangement. Invoicing occurs when the patient is discharged. Revenue is recognised over the length of stay of the patient. In some cases, the pricing model for DRGs is based on provisional taris as delays occur in the agreement of the taris between the healthcare providers and the funders. Revenue is then billed to the funders based on provisional taris and recognised to the extent that it is highly probable that the revenue will not be reversed. If the provisional taris are disputed by the funders, tari provisions are recognised for the dierence between the provisional taris and the estimated ﬁnal taris. Once the taris are ﬁnalised, the dierence between the agreed taris and the provisional taris is settled between the healthcare providers and the funders. Tari provisions represent refund liabilities in terms of IFRS 15 and result in a reduction in revenue with a corresponding entry to provisions in the statement of ﬁnancial position. These tari provisions are not recorded within trade and other receivables but presented as provisions as the original invoices are settled before the ﬁnalisation of the taris and balances due to funders are not settled on a net basis. The tari provisions are calculated based on historical experience of outcomes to negotiations between healthcare providers and funders. This is regularly reassessed based on the actual outcome of tari negotiations. Tari provisions are also recognised for other in- and outpatient treatments. Swiss private and semi-private patients enter into supplementary insurance contracts for costs not covered by basic health insurance. The pricing model is based on fee-for-service principles and the contract with the Swiss division includes technical medical services (such as the nursing and infrastructure). The medical practitioner fees are agreed directly between the insurer and the relevant medical practitioner. The revenue is recognised as the services are rendered over the period of stay of the patient. For inpatient cases open over year end, revenue is accrued by taking into account the average case mix index (‘CMI’) of the respective medical ﬁeld, the base rate according to the respective category (accident, illness, inner-cantonal, external, self-payer, etc.) as well as the pro rata length of stay. The complexity of procedures during the open period plays a role in determining the average CMI. For outpatient cases, the pricing model is based on TARMED rates. The applicable TARMED rate varies depending on the canton, procedure and patient and is calculated based on tax points for the dierent outpatient treatments which are multiplied with an individual tax point value. Speciﬁc medicaments and other material are added to determine the hospital fee. Invoicing occurs directly after treatment when the patient is discharged and revenue is recognised at the same time. The Group’s hospitals have aliated doctors who are partners cooperating with the Swiss division on a contractual agreement. The contracts with these aliated doctors allow them to use the division’s infrastructure, nurses, theatre etc. The doctors are responsible for the treatment of the patient and the division is responsible for the technical services such as the medical equipment, nursing care etc. Swiss regulatory requirements compel the division to provide statistics to the government based on all the costs incurred for patient procedures, including doctors’ fees. It therefore invoices its own technical services together with the doctors’ fees to the insurer and subsequently refunds the amount of the doctors’ services to the aliated doctors. The division acts as an agent for those aliated doctors based on the following considerations: • The aliated doctors are responsible for fulﬁlling the contract of treating the patient. Every aliated doctor needs their own liability insurance for any claim against any human error of the doctor. The hospital is responsible for any process failures at the hospital. • The Group does not have discretion in establishing prices, this is determined by contracts in place between the doctor and the insurer or the relevant percentage of the total revenue for DRG procedures. • An administrative cost contribution (a form of commission) is deducted from the doctors’ fees before the transfer of these fees to the doctors. • Credit risk is considered to be insigniﬁcant, but if the insurer does not accept an invoice after the amount has been refunded to the doctor, the doctor is contractually obliged to repay the amount to the hospital. As a result, the refund paid to the doctor is deducted from revenue and thus revenue is shown on a net basis. For DRG procedures, the refund is calculated using a contractually agreed-upon percentage for doctors’ services and deducted from revenue. Revenue from other sources is based on a ﬁxed-fee arrangement and recognised when the control of goods and services is transferred. Southern Africa healthcare services revenue In Southern Africa, a fee-for-service model is predominantly used with funders. Mediclinic invoices funders for technical medical services (such as nursing, infrastructure, pharmaceutical goods, etc.). The revenue is recognised as the services are rendered over the length of the stay of the patient. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 191 4. REVENUE CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED For certain procedures, a ﬁxed-fee contract model is used. In these scenarios, the transaction price is ﬁxed and no adjustments can be made to the amount invoiced to the funder. Invoicing occurs when the patient is discharged. Revenue is recognised over the length of stay of the patient. Excess costs or savings are not charged to the funder and are absorbed by the division. Services rendered by aliated doctors are excluded from revenue. Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain admission levels. These volume discounts are negotiated with funders on an annual basis. The retrospective volume discounts give rise to variable consideration. Variable consideration is recognised as revenue to the extent that it is highly probable it will not reverse. Discounts are accrued over the course of the year based on the estimates of the level of business expected. This is adjusted at the end of the year to reﬂect actual volumes. Volume discounts are determined according to the most likely amount method in terms of IFRS 15 and are recorded as a reduction in revenue with a corresponding entry against refund liabilities (included in trade and other payables). Volume discounts are not settled on a net basis with funders. Middle East healthcare services revenue In Dubai, a fee-for-service model is used with funders. Mediclinic invoices the funders for technical medical services (such as nursing, infrastructure, pharmaceutical goods, etc.). The revenue is recognised as the services are rendered over the period of stay of the patient. From September 2020, the ﬁxed-fee contract model is used with funders for inpatient procedures and will be extended to day case procedures in the next ﬁnancial year. For certain procedures in Abu Dhabi, the ﬁxed-fee contract model is used with funders. In these scenarios, the transaction price is ﬁxed and no adjustments can be made to the amount invoiced to the funder. Invoicing occurs when the patient is discharged. Revenue is recognised over the length of stay of the patient. Excess costs or savings are not charged to the funder and are absorbed by the division. Middle East acts as a principal in respect of tari negotiations and takes the risk for disallowances and bad debts related to doctors’ services. As a result, services rendered by employed doctors and independent doctors are included in revenue. Discounts comprise retrospective volume discounts granted to certain funders on attainment of certain admission levels. These volume discounts are negotiated with funders on an annual basis. The retrospective volume discounts give rise to variable Southern Africa healthcare services revenue continued consideration. Variable consideration is recognised as revenue to the extent that it is highly probable it will not reverse. Discounts are accrued over the course of the year based on the estimates of the level of business expected. This is adjusted at the end of the year to reﬂect actual volumes. Volume discounts are determined according to the most likely amount method in terms of IFRS 15 and are recorded as a reduction in revenue with a corresponding entry against refund liabilities (included in trade and other payables). Volume discounts are not settled on a net basis with funders. In the Middle East, the business practice with insurers includes claims rejected for various technical or medical reasons. Accordingly, Middle East expects an amount of consideration that is less than what was originally invoiced. These write-os constitute variable consideration under IFRS 15. Variable consideration is recognised as revenue to the extent that it is highly probable that a reversal of revenue will not occur. The disallowed claims are calculated based on historical experience of outcomes to negotiations with insurers. This is regularly reassessed based on the actual outcome of negotiations. In terms of IFRS 15, these rejected claims are recognised as a reduction of revenue with a corresponding entry against trade receivables. For the year ended 31 March 2022, disallowed claims recognised as a reduction of revenue relating to performance obligations that were satisﬁed in previous periods amounted to £11m (2021: £3m). The increase in the disallowed claims for the year ended 31 March 2022 compared with the prior year mainly relates to a settlement with an insurer for claims covering three years, partly impacted by disruptions caused by COVID-19, as typically this is an annual settlement process. Based on experience from recent negotiations with insurers, the increased amount recognised in the current year as a reduction in revenue relating to prior periods is not expected to reoccur to the same extent in the next ﬁnancial period. Rental income The rental income received from external parties during the year from the letting of consulting rooms, parking, etc. was £34m (2021: £31m). Rental income is based on a high number of individual lease agreements with outstanding committed terms of between one and three years and standard pricing linked to inﬂation. 5. OTHER INCOME Other income is recognised on the following basis: • Government grants are recognised in proﬁt or loss when they become receivable; • Insurance proceeds are recognised at fair value when it is virtually certain that the proceeds will be received from the insurer; and • Other other income is recognised in proﬁt or loss when it becomes receivable. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT192 Government grants Hirslanden engaged extensively with Swiss cantonal authorities in planning for and navigating the pandemic and, as part of this, provided hospital bed and sta capacity. In recognition and reimbursement of the support and capacity provided, several Swiss cantonal authorities introduced appropriate ﬁnancial contributions for hospitals to oset certain costs and disruptions to operations. As a result, total government grants of £16m (2021: £10m) were recognised as other income. Insurance proceeds During the year ended 31 March 2022, insurance proceeds of £7m were received for the damage of buildings and equipment and £1m for business interruption due to a ﬁre at Klinik Hirslanden. In addition, Southern Africa and Middle East received insurance proceeds of £1m for business interruption as a result of the COVID-19 pandemic. During the prior year ended 31 March 2021, insurance proceeds of £2m were received for the damage of equipment due to a ﬁre at one of the facilities in South Africa. 6. EMPLOYEE BENEFIT AND CONTRACTOR COSTS Retirement beneﬁt costs The Group provides deﬁned beneﬁt and deﬁned contribution plans for the beneﬁt of employees, the assets of which are held in separate trustee-administered funds. These plans are funded by payments from the employees and the Group, taking into account recommendations of independent qualiﬁed actuaries. A deﬁned contribution plan is a pension plan under which the Group pays ﬁxed contributions into a separate entity. Each member’s fund value is directly linked to the contributions and the related investment returns. The Group has no legal or constructive obligations to make further contributions if the fund does not hold sucient assets to pay all employees the beneﬁts relating to employee service in the current and prior period/(s). The contributions are recognised as employee beneﬁt expenses when they are due. 5. OTHER INCOME CONTINUED Deﬁned beneﬁt plans and post-retirement medical beneﬁts Note 27 provides further information on how the Group accounts for deﬁned beneﬁt plans and post-retirement medical beneﬁts. Proﬁt sharing and bonus plans Note 30 provides further information on how the Group accounts for proﬁt sharing and bonus plans. Share-based payment compensation Note 24 provides further information on how the Group accounts for share-based payment compensation. 2022 2021 £’m £’m Government grants 16 10 Insurance proceeds 9 2 Other – 1 25 13 2022 2021 £’m £’m Wages and salaries 1 1 293 1 242 Swiss social security costs 71 71 Retirement beneﬁt costs – deﬁned contribution plans 15 14 Retirement beneﬁt costs – deﬁned beneﬁt obligations (see note 27) 65 54 Share-based payment expense (see note 24) 4 – Aliated and independent doctor costs 56 53 Other sta-related costs 18 14 1 522 1 448 Average number of employees 34 278 32 865 Notes 1 In the prior year, the Swiss government introduced a wage subsidy programme in response to the COVID-19 pandemic. The Group was entitled to a wage subsidy of £6m from the Swiss Unemployment Insurance because it had to stop elective procedures until 27 April 2020. The wage subsidy was recognised as a credit against employee beneﬁt and contractor costs. No wage subsidies were received during the year ended 31 March 2022. 2 The comparative has been re-presented to reﬂect the average number of employees. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 193 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 7. INFRASTRUCTURE-RELATED COSTS 9. OTHER GAINS AND LOSSES 2022 2021 £’m £’m Maintenance costs 66 61 Short-term leases and leases of low-value assets 9 8 Other 1 46 41 121 110 2022 2021 £’m £’m Foreign exchange dierences (1) – Other losses (1) – Fair value adjustment on remeasurement of investment in associate (see note 16) (1) – Remission of debt – 1 COVID-19-related rent concessions – 1 (3) 2 2022 2021 £’m £’m Interest expense on ﬁnancial liabilities not at FVPL 41 42 Interest on lease liabilities 21 20 Interest rate swaps 6 7 Amortisation of capitalised ﬁnancing costs 3 3 Remeasurement of redemption liability (written put option) 1 23 Unwinding of discount on redemption liability 1 1 Preference share dividend 2 4 Less: amounts included in cost of qualifying assets (1) (1) 74 99 2022 2021 £’m £’m Fees paid to the Group's auditors for the following services: Audit of the Company and consolidated ﬁnancial statements 0.8 0.7 Audit of Company subsidiaries 1.8 2.4 Audit services 2.6 3.1 Audit-related services 1 0.3 0.4 Other assurance services 1 0.3 0.2 3.2 3.7 Note 1 Other infrastructure-related costs include costs incurred for utilities, including water, electricity and waste removal, and property rates and taxes. Note 1 A description of the non-audit services is included in the Audit and Risk Committee Report. 8. AUDITORS’ REMUNERATION Auditors’ remuneration, which is presented as part of Service cost in the income statement, included the following fees paid to the Group’s auditors: 10. FINANCE COST Capitalised borrowing costs The capitalisation rate used to determine the amount of borrowing costs to be capitalised is the weighted average interest rate applicable to the entity’s general borrowings during the year, in this case between 5.7% and 6.4% (2021: between 4.8% and 8.0%). MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT194 11. INCOME TAX EXPENSE The Group is subject to taxes in the countries where the Group and its subsidiaries operate and generate taxable income. Taxes and ﬁscal risks recognised reﬂect the Group’s best estimate of the outcome based on the facts known at the balance sheet date in each individual country. These facts may include but are not limited to change in tax laws and interpretation thereof in the jurisdictions where the Group operates. They may have an impact on the income tax as well as the resulting assets and liabilities. Any dierences between tax estimates and ﬁnal tax assessments are charged to the income statement in the period in which they are incurred, unless anticipated. Taxes include current and deferred taxes on proﬁt and tax adjustments relating to prior years. Income tax is recognised in the income statement, except to the extent that it relates to items directly taken to equity or other comprehensive income, in which case it is recognised against equity or other comprehensive income. For more information on the calculation of the deferred tax charge/(credit), see note 18. Reconciliation of taxation per income statement: 2022 2021 £’m £’m Current tax Current year 46 31 Deferred tax credit (see note 18) (5) (6) Taxation per income statement 41 25 Composition UK tax – – Foreign tax 41 25 41 25 2022 (Re-presented) 1 2021 £’m £’m Expected tax expense at weighted average applicable tax rate 2 37 13 Adjusted for: Non-taxable income (1) (1) Share of net proﬁt of equity-accounted investments 3 – 1 Non-deductible expenses 4 4 9 Non-controlling interests' share of proﬁt before tax 3 – (1) Eect of dierent tax rates 5 (4) (2) Income tax rate changes 1 (1) Non-recognition of tax losses in current year 6 7 Recognition of tax losses relating to prior years (1) (1) Previous year adjustment (1) 1 Income tax expense 41 25 Eective tax rate 6 19.5% 24.4% Notes 1 The basis for calculating the applicable tax rate has been changed from using the UK statutory rate of taxation to the weighted average tax rate (see note 2 below) as this provides the most meaningful information. As a result, the comparatives have been re-presented. 2 The weighted average applicable tax rate is the result from applying the domestic statutory tax rates to proﬁts before taxes of each entity in the country where it operates. For the Group, the weighted average applicable tax rate varies from one year to the next depending on the relative weight of the proﬁt of each individual entity in the Group’s proﬁt as well as the changes in the statutory tax rates. The weighted average applicable tax rate for the year ended 31 March 2022 was 17.3% (2021: 12.9%). 3 Less than £0.5m for the year ended 31 March 2022. 4 Non-deductible expenses reﬂect the tax eect of items which, in management’s judgement, are potentially disallowable for the purposes of determining local taxable proﬁts. This includes the tax eect of non-tax deductible remeasurement of the redemption liability of £1m (2021: £4m). 5 The eect of dierent tax rates arises because of the eect of proﬁts of the Group being subject to tax at rates dierent from the weighted average applicable rate. 6 If adjusting items and their related tax eect, as explained in the Group Chief Financial Ocer’s Report, are excluded from the eective tax rate calculation, the adjusted eective tax rate would be 19.5% (2021: 19.3%). STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 195 11. INCOME TAX EXPENSE CONTINUED Note 1 Headline earnings and the related adjustments are presented net of related tax and NCI. NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Expected amendments to tax legislation During 2021, agreement was reached between a number of countries for a two-pillar approach to international tax reform. This includes a proposal to apply a global minimum eective tax rate of 15% and is likely to result in changes in corporate tax rates in a number of countries in the next few years. Once amendments to the laws in any jurisdiction in which the Group operates are enacted or substantively enacted, the Group may be subject to additional tax charges. The impact of changes in corporate tax rates on the measurement of tax assets and liabilities will depend on the nature and timing of the legislative amendments in each country but is expected to result in additional tax charges on proﬁts generated in Jersey and the UAE. For the year ended 31 March 2022, the tax impact cannot be measured reliably. An assessment of the potential impact will be performed once the legislative amendments have been substantively enacted. Tax rate changes In South Africa, the corporate income tax rate has been reduced from 28% to 27% for years of assessments starting on or after 1 April 2022. For the year ended 31 March 2022, the rate change has been substantively enacted and, as a result, deferred tax has been provided at 27%. The rate change resulted in an increase in the Group’s net deferred tax liability of £1m. The rate change had no impact on current tax. The increase in the UK tax rate from 19% to 25%, which is eective from April 2023, had no impact on the Group’s current or deferred tax. Uncertain tax positions The Group is subject to income taxes in numerous jurisdictions. Due to this, there is an inherent risk that tax authorities may interpret legislation dierently and therefore judgement is required in determining the estimates in relation to the worldwide provision for income taxes. At 31 March 2022, no signiﬁcant uncertain tax positions had been identiﬁed and, as a result, no provision was raised. 12. EARNINGS PER ORDINARY SHARE 2022 2021 Earnings per share (in pence) for year ended 31 March 2022 were as follows: Basic earnings per share 20.5 9.2 Diluted earnings per share 20.5 9.2 Headline earnings per share 19.0 9.6 Diluted headline earnings per share 19.0 9.6 2022 2021 Earnings reconciliation £’m £’m Proﬁt attributable to equity holders of the Company 151 68 Earnings for basic and diluted EPS 151 68 Adjusted for: Insurance proceeds, net of tax (6) (1) Impairment of property, equipment and vehicles, net of tax 6 3 Impairment of intangible assets, net of tax – 1 Fair value adjustment on remeasurement of investment in associate 1 – Associate's impairment of goodwill – 60 Reversal of impairment of equity-accounted investment – (60) Associate's gain on sale and leaseback transaction (7) – Associate's tax impact of gain on sale and leaseback transaction (5) – Headline earnings used for headline EPS 1 140 71 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT196 Headline earnings per ordinary share The Group is required to calculate headline earnings per share (‘HEPS’) in accordance with the JSE Listings Requirements, determined by reference to the South African Institute of Chartered Accountants’ circular 01/2021 (Revised) Headline Earnings. The table above sets out a reconciliation of basic EPS and HEPS in accordance with that circular. Disclosure of HEPS is not a requirement of IFRS, but it is a commonly used measure of earnings in South Africa. Number of ordinary shares At 31 March 2022, the weighted average number of ordinary shares in issue was 737 243 810 (2021: 737 243 810). Equity-settled LTI awards Equity-settled LTI awards granted to employees are considered to be potential ordinary shares. They have been included in the determination of diluted earnings per share where the required performance conditions have been met at the reporting date, and to the extent to which they are dilutive. The awards have not been included in the determination of basic earnings per share. Details relating to the LTI awards are set out in note 24. The 546 750 awards granted in June 2021 have been included in the calculation of diluted earnings per share for the year ended 31 March 2022. The 607 072 awards granted in December 2020 are not included in the calculation of diluted earnings per share because the required performance conditions were not met for the year ended 31 March 2022. These options could potentially dilute basic earnings per share in the future. 12. EARNINGS PER ORDINARY SHARE CONTINUED 13. DIVIDENDS Final dividends are recorded in the Group’s ﬁnancial statements in the period in which they are approved by the Company’s shareholders. Interim dividends are recorded in the period in which they are approved by the directors and paid. As part of the Group’s response to maintain its liquidity position through the COVID-19 pandemic, the Board took the decision to suspend dividend payments and, as a result, no dividends were declared during the years ended 31 March 2021 and 2022. On 24 May 2022, after the balance sheet date, a ﬁnal dividend of 3.00 pence per share was proposed by the directors in respect of the year ended 31 March 2022. This results in a total ﬁnal proposed dividend of £22m. Subject to shareholders’ approval at the annual general meeting, the dividend will be paid on 26 August 2022 to the shareholders on the register at 2 August 2022. The proposed ﬁnal dividend has not been included as a liability at 31 March 2022. 14. PROPERTY, EQUIPMENT AND VEHICLES Land and buildings comprise mainly hospitals and oces. All property, equipment and vehicles are shown at cost less accumulated depreciation and impairment, except for land, which is shown at cost less impairment. Cost includes expenditure that is directly attributable to the acquisition of the items. Subsequent costs to enhance an asset are included in the asset’s carrying amount or recognised as a separate asset, as appropriate, only when it is probable that future economic beneﬁts associated with the item will ﬂow to the Group and the cost of the item can be measured reliably. All other repairs and maintenance costs are charged to the income statement during the ﬁnancial period in which they are incurred. See note 26 for the accounting treatment of right-of-use assets. Land and capital expenditure in progress are not depreciated. Depreciation on the other assets is calculated using the straight-line method to allocate the cost less its residual value over its estimated useful life as follows: • Buildings 10–100 years • Equipment 3–10 years • Furniture and vehicles 3–8 years The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, at each statement of ﬁnancial position date. When commissioned, capital expenditure in progress is transferred to the relevant category of property and equipment and depreciated in accordance with the Group’s policies. Weighted average number of ordinary shares in issue for diluted earnings per share 2022 Number of shares 2021 Number of shares Weighted average number of ordinary shares in issue used for the purpose of basic earnings per share 737 243 810 737 243 810 Eect of dilutive potential ordinary shares Equity-settled LTI awards 44 075 – 737 287 885 737 243 810 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 197 14. PROPERTY, EQUIPMENT AND VEHICLES CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Property, equipment and vehicles are tested for impairment whenever events or changes in circumstances indicate a potential impairment. An impairment loss is recognised for the amount by which the asset’s carrying value exceeds its recoverable amount. The recoverable amount is the higher of an asset’s fair-value-less-cost-of-disposal (‘FVLCOD’) and value-in-use. The recoverable amount is calculated by estimating future cash beneﬁts that will result from each asset and discounting those cash beneﬁts at an appropriate discount rate. For the purposes of assessing impairment, assets are grouped at the lowest levels for which there are separately identiﬁable and independent cash ﬂows – cash-generating units (‘CGUs’). Assets that suered an impairment are reviewed for possible reversal of the impairment at each reporting date. An asset is derecognised on disposal or when no future economic beneﬁts are expected from its use. Proﬁt or loss on disposals is determined by comparing fair value of proceeds with carrying amounts. These are included in the income statement. Land and buildings £’m Capital expenditure in progress £’m Right- of-use assets £’m Equipment £’m Furniture and vehicles £’m Total £’m Net book value at 1 April 2021 3 067 85 625 237 38 4 052 Additions 22 63 119 61 11 276 Disposals (1) – (5) – (1) (7) Depreciation (69) – (49) (71) (14) (203) Business combinations 1 – – 1 – 2 Prior-year capital expenditure completed 45 (68) – 20 3 – Impairment (7) – – – – (7) Borrowing cost capitalised 1 – – – – 1 Lease remeasurements – – (9) – – (9) Exchange dierences 214 5 43 15 3 280 Net book value at 31 March 2022 3 273 85 724 263 40 4 385 Cost 4 066 85 885 1 059 236 6 331 Accumulated depreciation and impairment (793) – (161) (796) (196) (1 946) Net book value at 1 April 2020 3 295 81 675 264 43 4 358 Additions 13 49 59 35 8 164 Disposals – – (1) – – (1) Depreciation (60) – (49) (72) (15) (196) Transfer between asset classes 4 – (12) 7 1 – Prior-year capital expenditure completed 34 (44) – 9 1 – Impairment (3) – – – – (3) Borrowing cost capitalised 1 – – – – 1 Lease remeasurements – – 8 – – 8 Exchange dierences (217) (1) (55) (6) – (279) Net book value at 31 March 2021 3 067 85 625 237 38 4 052 Cost 3 731 85 739 931 213 5 699 Accumulated depreciation and impairment (664) – (114) (694) (175) (1 647) (Continued) Land and buildings £’m Capital expenditure in progress £’m Right- of-use assets £’m Equipment £’m Furniture and vehicles £’m Total £’m MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT198 Property, equipment and vehicles with a book value of £2 886m (2021: £2 696m) are encumbered as security for borrowings (see note 25). On 10 May 2021, a ﬁre broke out at Klinik Hirslanden, Zurich, and caused signiﬁcant damage to one of the building wings. The property damage covered by the insurance was impaired accordingly (£7m). For income from insurance proceeds, see note 5. Determination of CGUs for impairment testing Property, equipment and vehicles are considered for impairment if impairment indicators are identiﬁed at an individual CGU level. A CGU is the smallest identiﬁable group of assets that generates cash inﬂows that are largely independent of the cash inﬂows from other assets or groups of assets. The Group deﬁnes CGUs as combined inter-dependent hospitals and/or clinics or as individual hospitals depending on the geographical location or the degree of integration. In Switzerland, inter-dependent hospitals are considered to have centralised organisational structures and operations and are divided into dierent geographical care regions, each of which forms a network of central hospitals, basic care hospitals, specialist hospitals and outpatient centres. In Southern Africa, CGUs are deﬁned as individual hospitals, except where a group of hospitals are located within close proximity of each other, they have the same management teams and similar shareholders. In the Middle East, each city in which the division operates hospitals, day care centres and clinics across the emirates of Dubai and Abu Dhabi has been identiﬁed as a CGU. The impairment assessment is performed at CGU level and any impairment charge that arises would be allocated to the CGU’s goodwill ﬁrst, followed by other assets (such as property, equipment and vehicles, and other intangible assets). Key accounting estimates Impairment assessment The Group performed an analysis to determine if impairment indicators exist at individual CGU level. 14. PROPERTY, EQUIPMENT AND VEHICLES CONTINUED Impairment indicators were identiﬁed at two CGUs in Switzerland. The recoverable amounts of these CGUs were based on FVLCOD calculations. In determining the FVLCOD, the cash ﬂows were discounted at rates between 4.9% and 5.2% (2021: 4.9% and 5.2%). Beyond ﬁve years a growth rate of 1.6% (2021: 1.6%) was used. The carrying value of CGUs where indicators were identiﬁed was determined to be lower than its recoverable amount of £1 767m and, as a result, no impairment charge was recognised in the income statement relating to property, equipment and vehicles. Two CGUs have limited headroom and remain sensitive to reasonably possible changes in the discount rate and the terminal growth rate in the FVLCOD calculations, which could give rise to material impairment charges in future periods. For the ﬁrst CGU, an increase in the discount rate by 0.2% would reduce the headroom to £nil. A decrease in the terminal growth rate by 0.4% would reduce the headroom to £nil. A decrease in forecast cash ﬂows by 2.1% would also reduce headroom to £nil. For the other CGU, an increase in the discount rate by 0.7% would reduce the headroom to £nil. A decrease in the terminal growth rate by 2.1% would reduce the headroom to £nil. A decrease in forecast cash ﬂows by 7.2% would also reduce headroom to £nil. Impairment indicators were identiﬁed at two CGUs in Southern Africa. The recoverable amounts of these CGUs were based on FVLCOD calculations. In determining the FVLCOD, the cash ﬂows were discounted at a rate of 12.8% (2021: 12.7%). Beyond ﬁve years a growth rate of 4.5% (2021: 4.5%) was used. The carrying value of CGUs where indicators were identiﬁed was determined to be lower than its recoverable amount of £9m and, as a result, no impairment charge was recognised in the income statement relating to property, equipment and vehicles. In the prior year, the recoverable amounts of three CGUs in the Southern Africa segment were determined to be lower than their individual carrying values and, as a result, an impairment charge of £3m was recognised in the income statement relating to property, equipment and vehicles. No impairment indicators were identiﬁed for the Middle East CGUs on 31 March 2022. Climate change Climate-related regulations, technological advances, changes in the market and potential reputational damage were considered when assessing the validity of the useful lives and residual values of assets. There is currently no known objective evidence that suggests that the assets will be utilised in a shorter period or become obsolete and therefore no adjustments were made to the useful lives or the residual value of assets. 2022 2021 £’m £’m Total additions (excluding additions on right-of-use assets) 157 105 To maintain operations 84 46 To expand operations 73 59 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 199 14. PROPERTY, EQUIPMENT AND VEHICLES CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Change in accounting estimate During the prior year, an expansion project, which includes the construction of new hospital wings at a hospital in Switzerland, was approved. The existing hospital wings will be dismantled at the end of the ﬁnancial year ending 31 March 2023 and will be replaced by a new construction as part of the expansion project. As a result, the estimated useful life of the existing hospital wings has been reduced and the depreciation of these assets’ carrying value accelerated. For the year ended 31 March 2022, the accelerated depreciation included in the depreciation charge amounts to £19m. The accelerated depreciation for the ﬁnancial year ending 31 March 2023 will amount to £19m. 15. INTANGIBLE ASSETS Goodwill Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus NCI, less the fair value of the identiﬁable assets and liabilities of the acquiree. Goodwill on acquisition of subsidiaries is included in intangible assets. Goodwill on acquisition of associates and joint ventures is included in investments in associates and joint ventures. Goodwill is tested annually for impairment or more frequently if events or changes in circumstances indicate a potential impairment. Goodwill is carried at cost less accumulated impairment. Impairments on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to CGUs for the purpose of impairment testing. The allocation is made to those CGUs or groups of CGUs that are expected to beneﬁt from business combinations in which goodwill arose. Management monitors goodwill for impairment at a CGU level, except for the Middle East goodwill, which is monitored at an operating segment level. Any impairment losses that are recognised are allocated ﬁrst to reduce the carrying amount of any goodwill allocated to the CGU and then to reduce the carrying amount of other assets in the CGU where the carrying amount is greater than the recoverable amount. Trade names Trade names have been recognised by the Group as part of business combinations. No value is placed on internally developed trade names. Trade names are capitalised at the cost to the Group and amortised on a straight-line basis over their estimated useful lives of 2–25 years. Trade names are carried at cost less accumulated amortisation and accumulated impairment. Expenditure to maintain trade names is accounted for against income as incurred. Computer software Acquired computer software licences, conﬁguration and implementation costs are capitalised on the basis of the costs incurred to acquire and bring to use the speciﬁc software. These costs are amortised over their estimated useful lives of 2–10 years using the straight-line method. Conﬁguration costs for cloud-based business applications are capitalised where it is probable that economic beneﬁts that are attributable to the asset will ﬂow to the Group and it has the power to control access to those beneﬁts. Any cloud-solution costs incurred as part of a service agreement are expensed when incurred. Costs associated with maintaining computer software are expensed as incurred. Goodwill £’m Trade names £’m Computer software £’m Total £’m Net book value at 1 April 2021 946 45 70 1 061 Additions – – 21 21 Amortisation – (4) (21) (25) Business combinations 10 1 – 11 Exchange dierences 51 3 4 58 Net book value at 31 March 2022 1 007 45 74 1 126 Cost 1 794 453 193 2 440 Accumulated amortisation and impairment (787) (408) (119) (1 314) Goodwill £’m Trade names £’m Computer software £’m Total £’m Net book value at 1 April 2020 1 047 54 70 1 171 Additions – – 21 21 Amortisation – (4) (17) (21) Business combinations 3 – – 3 Impairment (1) – – (1) Exchange dierences (103) (5) (4) (112) Net book value at 31 March 2021 946 45 70 1 061 Cost 1 689 424 162 2 275 Accumulated amortisation and impairment (743) (379) (92) (1 214) MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT200 Critical accounting judgement Level at which management monitors goodwill for impairment testing The Group tests annually whether goodwill, resulting from acquisitions, has suered any impairment. The recoverable amounts of CGUs have been determined based on FVLCOD calculations. These calculations require the use of estimates in respect of cash ﬂow projections and long-term growth and discount rates, and assume a stable regulatory environment. Regulatory environments are subject to uncertainties that can have an impact on goodwill and the intangible assets’ carrying value. IFRS requires the impairment assessment to be performed at the level at which goodwill and trade names are monitored for impairment by management, provided that this level cannot be bigger than an operating segment. Management assesses goodwill at a CGU level, except for the Middle East goodwill, which is monitored at an operating segment level. This means that for the Middle East division, recoverability of goodwill is assessed by reference to the aggregated cash ﬂows of the legacy Middle East and Al Noor businesses. The Middle East goodwill originated mainly from the Al Noor business combination with a portion originating from other UAE business combinations. The initial commercial rationale for the acquisition of Al Noor included expected synergies from integrating the legacy Al Noor business with the legacy Middle East business that would be realised across the combined Middle East division. In accordance with IFRS, goodwill shall be allocated to all CGUs, or groups of CGUs, that are expected to beneﬁt from the expected synergies.  Impairment testing of signiﬁcant goodwill balances The Group tests goodwill for impairment on an annual basis or more frequently if there are indications that these assets may be impaired. The annual impairment assessment is performed at year end when the annual ﬁnancial planning process is ﬁnalised. The Group’s impairment assessment compares the carrying value of the group of CGUs with its recoverable amount. 15. INTANGIBLE ASSETS CONTINUED Computer software continued The recoverable amount of a group of CGUs is determined by its FVLCOD, regarded as the more appropriate reﬂection of the value of the business, which is derived from discounted cash ﬂow calculations. The key inputs to its calculations are described below: As part of the annual ﬁnancial planning process, the Group’s divisions are required to submit budgets for the next ﬁnancial year and forecasts for the following four years, which are approved by the Board. Future earnings in the FVLCOD calculation are based on these budgets and forecasts that are calculated on a per hospital basis and consider both internal and external market information. These budgets and forecasts represent management’s best view of future revenues and cash ﬂows and encompass a best estimate of the short- and long-term impact of the COVID-19 pandemic. The cash ﬂow forecast includes the purchase of environmentally friendly equipment. Growth rates are determined from budgeted and forecast revenue. Terminal year growth rates are country speciﬁc and determined based on the forecast market growth rates and considering long- term medical inﬂation. The regulatory environment and impact on taris are considered. Growth rates have been benchmarked against external data for the relevant markets. The weighted average cost of capital (‘WACC’) was determined by considering the respective debt and equity costs and ratios. The discount rate is based on the risk-free rate for government bonds adjusted for a risk premium to reﬂect the increased risk of investing in equities. Discount rates are lower for the divisions which operate in more mature markets with low inﬂation and higher for those operating in markets with a higher inﬂation. Discount rates reﬂect the time value and the risks associated with the segmental or divisional cash ﬂows. The long-term data inputs used in the calculation of the discount rate are benchmarked to externally available data. Impairment testing of Middle East goodwill The Middle East goodwill with a carrying amount of £887m (2021: £834m) originated mainly from the Al Noor business combination, with a portion originating from other UAE business combinations. Key assumptions used for the FVLCOD calculations for the annual impairment testing were as follows: Forecasts Growth rates Discount rates 2022 2021 £’m £’m Total additions 21 21 To maintain operations 10 8 To expand operations 11 13 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 201 15. INTANGIBLE ASSETS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED The discount rate applied to cash ﬂow projections is 8.5% for the ﬁrst year and thereafter 8.1% (2021: 8.7%). The terminal growth rate beyond ﬁve years is 3.0% (2021: 3.0%). Represents management’s best view of future revenues and cash ﬂows over a ﬁve-year period and is comparable with the forecast used in the prior year. Due to international tax reform and expected amendments to tax legislation (note 11), income tax has been included from April 2023 at a rate of 15%. Cash ﬂows after the discrete period (ﬁve years) were adjusted to reﬂect increased direct cost (utility costs) caused by climate change which may not be compensated by funders. The recoverable amount was determined to be higher than the carrying value and, consequently, no impairment was recognised against goodwill during the year under review. Sensitivity analysis An increase in the discount rate by 1% combined with a decrease in the terminal growth rate by 0.9% would reduce the headroom to £nil. A decrease in forecast cash ﬂows by 16% would also reduce headroom to £nil. These changes are not considered reasonably possible to occur within the next 12 months. However, these key assumptions have the potential to vary over time. Impairment testing of goodwill and trade names in Switzerland Switzerland goodwill with a carrying amount of £107m (2021: £100m) that originated from the business combinations of OPERA Zumikon AG and Clinique des Grangettes in previous years has been tested for impairment. The recoverable amount has been determined based on FVLCOD discounted cash ﬂow calculations. The discount rate applied to cash ﬂow projections is 5.1% (2021: 5.1%). The terminal growth rate beyond ﬁve years is 1.6% (2021: 1.6%). Impairment testing of Middle East goodwill continued Represents management’s best view of future revenues and cash ﬂows over a ﬁve-year period and is comparable with the forecast used in the prior year. The recoverable amount was determined to be higher than the carrying value and, as a result, no impairment charge was recognised. The recoverable amount is not sensitive to reasonably possible changes in the discount rate and the terminal growth rate. Impairment testing of Southern Africa goodwill Southern Africa goodwill with a carrying amount of £13m (2021: £12m) has been tested for impairment. The recoverable amount has been determined based on FVLCOD discounted cash ﬂow calculations by applying a discount rate of 12.8% (2021: 12.7%) and a terminal year growth rate beyond ﬁve years of 4.5% (2021: 4.5%). The recoverable amount was determined to be higher than the carrying value and, as a result, no impairment charge was recognised. The recoverable amount is not sensitive to reasonably possible changes in the discount rate and the terminal growth rate. In the prior year, the carrying amount of the goodwill of ﬁve CGUs was determined to be higher than its recoverable amount, resulting in the recognition of an impairment charge of £1m against goodwill. 16. EQUITY-ACCOUNTED INVESTMENTS Investments accounted for using the equity method consist of associates (entities in which the Group has signiﬁcant inﬂuence, but not control; normally accompanying a shareholding of between 20% and 50% of voting rights in the investment) and joint ventures (entities or arrangements over which the Group has joint control stemming from contractual rights). Under the equity method, the equity-accounted investments are initially recognised at cost and adjusted thereafter to recognise the Group’s share of the post-acquisition proﬁts or losses and movements in other comprehensive income. Dividends received or receivable from equity-accounted investments are recognised as a reduction in the carrying amount of the investment. The Group’s investments in associates and joint ventures include goodwill identiﬁed on acquisition. When the Group’s share of losses in an associate or joint venture equals or exceeds its interests in the investment (which includes any long-term interests that, in substance, form part of the Group’s net investment), the Group does not recognise further losses, unless it has incurred obligations or made payments on behalf of the entity. Discount rates Growth rates Forecasts Discount rates Growth rates Forecasts MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT202 Unrealised gains on transactions between the Group and its equity-accounted investments are eliminated to the extent of the Group’s interest in these investments. Unrealised losses are eliminated unless the transaction provides evidence of an impairment of the asset transferred. Accounting policies of the equity-accounted investments have been changed where necessary to ensure consistency with the policies adopted by the Group. If the ownership interest in an equity-accounted investment is reduced but signiﬁcant inﬂuence or joint control is retained, only a proportionate share of the amounts previously recognised in other comprehensive income is reclassiﬁed to proﬁt or loss where appropriate. The Group’s share of post-acquisition proﬁt or loss is recognised in the income statement, and its share of post-acquisition movements in other comprehensive income is recognised in other comprehensive income with a corresponding adjustment to the carrying amount of the investment. The Group determines at each reporting date whether there is any objective evidence that the equity-accounted investment is impaired. If this is the case, the Group calculates the amount of impairment as the dierence between the recoverable amount of the investment and its carrying value and recognises the amount adjacent to share of proﬁt or loss of the investment in the income statement. The recoverable amount is the higher of an asset’s FVLCOD and value-in-use. The value-in-use is calculated by estimating future cash beneﬁts that will result from the investment and discounting those cash beneﬁts at an appropriate discount rate. 16. EQUITY-ACCOUNTED INVESTMENTS CONTINUED Note 1 During the year, the Group acquired a controlling interest in Bourn Hall International MENA Limited (‘Bourn Hall’), which was previously accounted for as an investment in an associate. The investment in Bourn Hall was accounted for using the equity-accounting basis until the acquisition date of the transaction, being 11 November 2021. From that date onwards, it is treated as an investment in subsidiary and is subject to consolidation. The acquisition of the controlling interest resulted in the recognition of a loss on the remeasurement of the existing interest in the associate of £1m, which has been included in ‘Other gains and losses’ (see note 9), and the recognition of an investment in subsidiary of £3m, being the fair value of the investment at that date. The details of the acquisition are disclosed in note 34. 2022 2021 £’m £’m Investment in associates 161 167 Investment in joint venture 4 4 165 171 2022 2021 £’m £’m Listed investment 156 157 Unlisted investments 5 10 161 167 16.1. Investment in associates Country of incorporation and place of business % ownership Spire Healthcare Group plc (Spire) United Kingdom 29.9 Set out below are details of the associate material to the Group: Reconciliation of carrying value at the beginning and end of the year Opening balance 167 177 Additional investment in unlisted associate – 1 Share of net loss of associated companies (1) (70) Reversal of impairment of listed associate – 60 Share of other comprehensive income of associated companies 1 – Dividends received from associated companies (2) – Remeasurement of investment at fair value (1) – Derecognition on undertaking of business combination 1 (3) – Exchange dierences – (1) 161 167 2022 2021 (Continued) £’m £’m Spire is listed on the LSE. It does not issue publicly available quarterly ﬁnancial information at a detailed level and has a December year end. The investment in associate was equity accounted for the 12 months to 31 December 2021 (2021: 31 December 2020). No signiﬁcant events occurred between 1 January 2022 and the reporting date. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 203 16. EQUITY-ACCOUNTED INVESTMENTS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Summarised ﬁnancial information in respect of the Group’s material associate is set out below: 16.1. Investment in associates continued Key accounting estimates and critical accounting judgement Impairment/(reversal of impairment) of equity-accounted investments The Group assesses whether any indicators of impairment reversals are identiﬁed. At 31 March 2022, an indicator of impairment reversal was identiﬁed as the market value of the investment in Spire was £293m, which exceeded the carrying value of £156m. Management updated the internal value-in-use projections, which resulted in a recoverable amount that is broadly in line with the value determined at 31 March 2020 when the last impairment charge against the investment was recognised. The internal value-in-use projections are supported by the fact that Spire’s actual results were in line with the estimates used in the 31 March 2020 value-in-use calculation and that Spire was still making a loss during 2021. Consequently, no impairment reversal has been recognised. A key driver of the valuation would be the realisation of signiﬁcant and sustained revenue growth and cost savings after the COVID-19 pandemic. If Spire’s share price at 31 March 2022 was used as the equity investment’s fair value, then the impairment reversal would amount to £137m. If the average closing share price for the period between 16 to 20 May 2022 was used, the impairment reversal would amount to £96m. In the prior year, Spire’s loss included a goodwill impairment charge of £200m. The equity-accounted portion of this impairment amounts to £60m. Accumulated impairment charges recognised by the Group in prior periods amount to £283m. Following Spire’s goodwill impairment charge, the Group’s interest in the net asset value of Spire was higher than the carrying value of the equity investment at 30 September 2020. As a result, an impairment reversal equal to the Group’s share of the goodwill impairment of £60m was recognised. 16.2. Investment in joint venture At 31 Dec 2021 At 31 Dec 2020 £’m £’m Summarised statement of ﬁnancial position Non-current assets 2 033 1 992 Current assets 347 250 Total assets 2 380 2 242 Non-current liabilities (1 372) (1 295) Current liabilities (302) (254) Net assets 706 693 Mediclinic's eective interest 29.9% 29.9% Mediclinic's eective interest in net assets 211 207 Dierence in accounting treatment on adoption of IFRS 16 (1) 4 Accumulated impairment of listed associate (54) (54) Total carrying value of equity investment 156 157 Market value of listed investment at 31 March 293 201 Summarised statement of comprehensive income Revenue 1 106 920 Proﬁt from continuing operations (16) (237) Other comprehensive income 3 (1) Total comprehensive income (13) (238) Dividends received from associate – – See note 39 for further details of investments in associates. 2022 2021 £’m £’m Reconciliation of carrying value at the beginning and end of the year Opening balance 4 4 4 4 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT204 The Group has a 49.9% interest in Wits University Donald Gordon Medical Centre (Pty) Ltd. The unlisted joint venture is accounted for by using its ﬁnancial information for the 12 months ended 31 December 2021 (2021: 31 December 2020) since it has a dierent year end. Details of the joint venture appear in note 39. 17. OTHER INVESTMENTS AND LOANS 16. EQUITY-ACCOUNTED INVESTMENTS CONTINUED 16.2. Investment in joint venture continued Loans receivable inherently expose the Company to credit risk, being the risk that the Company will incur ﬁnancial loss if counterparties fail to make payments as they fall due. For the accounting policy of other investments and loans, see note 31 ‘Financial Instruments’. Unlisted equity instruments Unlisted equity instruments at FVOCI comprise securities which are not held for trading and which the Group has irrevocably elected at initial recognition to recognise in this category. These are strategic investments and the Group considers this classiﬁcation to be more relevant. On disposal of these equity investments, any related balance within the FVOCI reserve is reclassiﬁed to retained earnings. The fair value of unlisted equity instruments at FVOCI is not based on observable market data and, as a result, these ﬁnancial assets are grouped as level 3. The following table presents the changes in these level 3 instruments for the period ended 31 March 2022: 2022 2021 £’m £’m Debt instruments at amortised cost 9 9 Equity instruments at FVOCI (listed shares) 1 1 Equity instruments at FVOCI (unlisted shares) 14 2 Investments in money market funds at FVPL 6 2 30 14 Non-current 24 12 Current 6 2 Total other investments and loans 30 14 Other investments and loans are held in the following currencies: Swiss franc 14 5 South African rand 10 5 UAE dirham – 2 US dollar 6 2 30 14 2022 2021 Unlisted equity instruments at FVOCI £’m £’m Opening balance 2 2 Acquisitions 8 – Gains recognised in other comprehensive income 4 – 14 2 Debt instruments at amortised cost Debt instruments at amortised cost include loans receivable from doctors and other parties. For details on loans to related parties, see note 37. Credit losses of less than £0.5m were recognised on the loans receivable (2021: nil). Information about the methods and assumptions used to determine the fair value of unlisted equity instruments, and the sensitivity of the assets to price, is provided in note 31. 18. DEFERRED TAX Deferred income tax is recognised, using the liability method, on temporary dierences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated ﬁnancial statements. However, deferred tax liabilities are not recognised if they arise from the initial recognition of goodwill. Deferred income tax is determined using tax rates (and legislation) that have been enacted or substantially enacted by the reporting date and are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled. Deferred income tax assets are recognised only to the extent that it is probable that future taxable proﬁt will be available against which the temporary dierences can be utilised. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 205 18. DEFERRED TAX CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Deferred income tax is provided on temporary dierences arising on investments in subsidiaries and associates, except for deferred income tax liabilities where the timing of the reversal of the temporary dierence is controlled by the Group and it is probable that the temporary dierence will not reverse in the foreseeable future. Deferred income tax assets and liabilities are oset when there is a legally enforceable right to oset current tax assets against current tax liabilities, and when the deferred income tax assets and liabilities relate to income taxes levied by the same taxation authority on either the same taxable entity or dierent taxable entities where there is an intention to settle the balances on a net basis. 2022 2021 £’m £’m Opening balance 391 405 Income statement credit for the year (6) (6) Eect of change in tax rate on income statement 1 – (Credited)/charged to other comprehensive income (14) 26 Exchange dierences 28 (34) Balance at year end 400 391 Deferred income tax assets (32) (34) Deferred income tax liabilities 432 425 400 391 The movement on the deferred tax account is as follows: The deferred tax relating to current assets and current liabilities contains temporary dierences that are likely to be realised in the next 12 months. The deferred tax balance comprises temporary dierences arising in separate legal entities. Osetting has been applied on a legal entity basis. The table below shows the deferred tax balances and movements in the various categories before osetting was applied: Tangible assets £’m Intangible assets £’m Current assets £’m Provisions and other £’m Financial assets and retirement beneﬁt asset £'m Total £’m Deferred tax liabilities At 1 April 2020 407 13 7 19 – 446 Charged to the income statement 3 – 1 – 1 5 Charged to other comprehensive income – – – – 20 20 Exchange dierences (29) (1) – (2) (1) (33) At 31 March 2021 381 12 8 17 20 438 Set-o of deferred tax liabilities pursuant to set-o provisions (13) Net deferred tax liabilities at year end 425 At 1 April 2021 381 12 8 17 20 438 Credited to the income statement (3) – (1) – (1) (5) Credited to other comprehensive income – – – – (20) (20) Eect of change in tax rate on income statement (1) – – – – (1) Exchange dierences 28 1 1 2 1 33 At 31 March 2022 405 13 8 19 – 445 Set-o of deferred tax liabilities pursuant to set-o provisions (13) Net deferred tax liabilities at year end 432 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT206 18. DEFERRED TAX CONTINUED At 31 March 2022, the Group had unutilised tax losses of approximately £204m (2021: £172m) potentially available for oset against future proﬁts. A deferred tax asset of £12m (2021: £12m) has been recognised in respect of tax losses in some of the underlying subsidiaries. The Group has concluded that the deferred assets will be recoverable using the estimated future taxable income based on the approved business plans and budgets of the underlying subsidiaries. Tax losses that resulted in the recognition of deferred tax assets of £7m can be carried forward indeﬁnitely and have no expiry date. Tax losses that resulted in the recognition of deferred tax assets of £5m expire between one and seven years. No deferred tax asset has Current liabilities £’m Provisions and other £’m Retirement beneﬁt obligations £’m Derivatives £’m Leases £’m Tangible assets £'m Tax losses carried forward £’m Total £’m Deferred tax assets At 1 April 2020 (2) (7) (20) (3) (2) – (7) (41) Credited to the income statement – (2) (1) – – (3) (5) (11) Charged to other comprehensive income – – 6 – – – – 6 Exchange dierences – (1) – 1 (1) – – (1) At 31 March 2021 (2) (10) (15) (2) (3) (3) (12) (47) Set-o of deferred tax assets pursuant to set-o provisions 13 Net deferred tax assets at year end (34) At 1 April 2021 (2) (10) (15) (2) (3) (3) (12) (47) (Credited)/charged to the income statement – (1) (2) – – 1 1 (1) Charged to other comprehensive income – – 4 2 – – – 6 Eect of change in tax rate on income statement – 1 1 – – – – 2 Exchange dierences – (1) (2) – – (1) (1) (5) At 31 March 2022 (2) (11) (14) – (3) (3) (12) (45) Set-o of deferred tax assets pursuant to set-o provisions 13 Net deferred tax assets at year end (32) been recognised in respect of the remaining losses due to the unpredictability and availability of future proﬁt streams in the relevant jurisdictions. The majority of the unrecognised losses, which relate to Mediclinic International plc in the United Kingdom, have no expiry, and the remainder, which relate to Switzerland, expire after seven years. Their utilisation is dependent on the proﬁtability of the related entities. The ﬁnancial projections used in assessing the future proﬁtability are consistent with those used in assessing the carrying value of goodwill as set out in note 15. The rate of utilisation of these losses will depend on the incidence and timing of proﬁts within each entity, which consequently aect their recognition as deferred tax assets. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 207 18. DEFERRED TAX CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Unused tax losses not recognised as deferred tax assets for the Group are as follows: 19. INVENTORIES Inventories are measured at the lower of cost, determined on the weighted average method, or net realisable value. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses. Consumables and supplies consist of the cost of inventories, including obsolete stock, which have been expensed during the year. Rebates received from suppliers are recognised when all the conditions agreed with the suppliers are met, the amount of cost of supplies can be measured reliably and it is probable that the economic beneﬁts associated with the transaction will ﬂow to the entity. Deferred tax on unremitted earnings The Group recognised a deferred tax liability of £1m (2021: £1m) in respect of temporary dierences relating to unremitted earnings. This liability relates to non-resident shareholder tax of the Group’s Namibian subsidiaries and the amount is included in the ‘Provisions and other’ category of deferred tax liabilities. No deferred tax liability has been recognised for the other foreign subsidiaries and equity-accounted investments of the Group where the Group is able to control the timing of any distributions and it is not probable that any distributions will be made in the foreseeable future. Similarly, tax is not provided where it is expected at the reporting date that such distributions will not give rise to a tax liability. The gross temporary dierence in this regard amounts to £1 552m (2021: £1 293m). There are no signiﬁcant expected income tax consequences of earnings being distributed from Switzerland and the UAE, as there is no dividend withholding tax applicable to earnings being distributed from these operations, neither should there be any tax liability on the receipt of these dividends. Although South African distributions to the UK are typically subject to dividend withholding taxes, distributions from South Africa are not expected to have income tax consequences in the foreseeable future as the operations in South Africa have a signiﬁcant contributed tax capital balance from which may be paid dividends free from withholding tax. In line with the South African Reserve Bank requirement, it is intended that dividends to the South African resident shareholders on the South African share register will be paid from the Dividend Access Scheme (‘DAS’). See note 21 for details on the DAS. 2022 2021 £’m £’m Unused tax losses not recognised as deferred tax assets Expiry in 1 year 2 4 Expiry in 2 years 2 – Expiry in 3–7 years 72 52 No expiry 71 54 147 110 2022 2021 £’m £’m Inventories consist of: Pharmaceutical products 86 97 Consumables 10 11 Finished goods and work in progress 1 1 97 109 The cost of inventories recognised as an expense and included in consumables and supplies amounted to £770m (2021: £719m). Write-downs of inventories to net realisable value amounted to £5m (2021: £6m). These were recognised as an expense during the year and included in consumables and supplies in the income statement. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT208 20. TRADE AND OTHER RECEIVABLES For the accounting policies of trade and other receivables, see note 31 ‘Financial Instruments’. The Group applies the simpliﬁed approach for providing for expected credit losses prescribed by IFRS 9, which permits the use of lifetime expected loss provision for all trade receivables. The loss allowance is determined as follows: Note  Loss allowance is less than £0.5m. Note  Loss allowance is less than £0.5m. 2022 2021 £’m £’m Financial instruments Trade receivables 749 740 Loss allowance (27) (22) 722 718 Other receivables 46 56 768 774 Non-ﬁnancial instruments Prepayments and deposits 59 47 Other receivables 7 5 66 52 Total trade and other receivables 834 826 2022 2021 £’m £’m Swiss franc 516 489 South African rand 80 81 UAE dirham 238 255 US dollar – 1 834 826 2022 2021 £’m £’m Movement in the loss allowance Opening balance 22 19 Loss allowance 13 12 Amounts written o as uncollectable (9) (8) Unused amounts reversed (1) (1) Exchange dierences 2 – Balance at year end 27 22 Trade and other receivables are categorised as debt instruments at amortised cost. The carrying amounts of the Group’s trade and other receivables are denominated in the following currencies: 2022 Current £’m 1–30 days past due £’m 31–60 days past due £’m 61–90 days past due £’m More than 90 days past due £'m Total £’m Gross carrying amount 441 66 32 28 182 749 Loss allowance (2) (1) – (1) (23) (27) Net carrying amount 439 65 32 27 159 722 Expected loss rate 0.39% 0.79% 1.05% 4.87% 12.68% 2021 Current £’m 1–30 days past due £’m 31–60 days past due £’m 61–90 days past due £’m More than 90 days past due £'m Total £’m Gross carrying amount 436 55 41 27 181 740 Loss allowance (2) – (1) (1) (18) (22) Net carrying amount 434 55 40 26 163 718 Expected loss rate 0.36% 0.95% 1.82% 4.34% 9.93% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 209 20. TRADE AND OTHER RECEIVABLES CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED A loss allowance is recognised for all receivables, in accordance with IFRS 9 Financial Instruments, and is monitored at the end of each reporting period. In addition to the loss allowance, receivables are written o when there is no reasonable expectation of recovery, for example, when a debtor has been placed under liquidation. Receivables that have been written o are not subject to enforcement activities. Other receivables include Swiss unbilled doctors’ fees and advance payments to aliated doctors, and other amounts owed by third parties. Other receivables are considered to have low credit risk, and the loss allowance provision recognised during the period was therefore limited to 12 months’ expected credit losses. Other receivables are considered to have low credit risk where they have a low risk of default and the issuer has a strong capacity to meet its contractual cash ﬂow obligations in the near term. The expected credit losses for other receivables are insigniﬁcant. Management considers the credit quality of the trade receivables that have not been credit impaired to be high in light of the nature of these trade receivables as described in note 32. Trade receivables to the value of £288m (2021: £295m) have been ceded as security for banking facilities. Movement in provision for expected credit losses recognised in proﬁt or loss During the year, the following losses/(gains) were recognised in proﬁt or loss in relation to impaired receivables: 21. SHARE CAPITAL Ordinary shares are classiﬁed as equity. Incremental costs directly attributable to the issue of new shares or options are shown in equity as a deduction from the proceeds, net of tax. 2022 2021 £’m £’m Movement in loss allowance for trade receivables 13 12 Reversal of previously recognised loss allowance (1) (1) Movement in provision for expected credit losses 12 11 2022 2021 £’m £’m Issued share capital Share capital 74 74 Share premium 690 690 764 764 Ordinary shares 2022 2021 Number of shares in issue and fully paid 737 243 810 737 243 810 Nominal value 10p 10p Dividend Access Scheme A wholly owned subsidiary of the Company, Mediclinic International (RF) (Pty) Ltd, formed a Dividend Access Trust to comply with a South African Reserve Bank requirement that dividends from a South African source due to South African shareholders on the South African share register must be paid locally to avoid an outﬂow of funds from South Africa. The beneﬁciaries of the trust are the South African shareholders of the Company who hold their shares via the South African share register on the relevant record date in respect of each distribution paid through the DAS. The Dividend Access Trust does not participate in any proﬁts. When a dividend is declared by the Company, the Dividend Access Trust would receive a dividend from Mediclinic International (RF) (Pty) Ltd, which in turn is paid over to the Company’s transfer secretaries in South Africa, who arrange for the payment of the relevant amount to the South African shareholders (the beneﬁciaries of the trust) through the usual dividend payment procedures, as if this was a dividend received from Mediclinic International plc. To the extent that dividends due to South African shareholders are not ultimately funded from Mediclinic International (RF) (Pty) Ltd, they receive those dividends as normal dividends from Mediclinic International plc. The South African shareholders’ entitlement to receive dividends declared by Mediclinic International plc is reduced by any amounts they receive via the trust. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT210 22. OTHER RESERVES Foreign currency translation reserve The foreign currency translation reserve consists of exchange rate dierences that occur when translating the foreign subsidiaries’ ﬁnancial statements from their functional currency into the Group’s presentation currency. On disposal of the net investment, the reserve for currency translation of that foreign subsidiary is recognised in the income statement. Reduction of a net investment in a foreign operation which does not result in loss of control is not treated as a disposal. Hedging reserve The hedging reserve consists of the eective portion of gains and losses on hedging instruments designated as cash ﬂow hedges. Financial assets at FVOCI reserve The Group has elected to recognise changes in the fair value of certain investments in equity securities in other comprehensive income, as explained in note 17. These changes are accumulated within the FVOCI reserve within equity. The Group transfers amounts from this reserve to retained earnings when the relevant equity securities are derecognised. Reverse acquisition reserve During February 2016, Mediclinic completed the combination between Al Noor and Mediclinic International Ltd. The combination was classiﬁed as a reverse acquisition. The reverse acquisition reserve represents the net of the following adjustments resulting from the Al Noor reverse acquisition: • adjustment of the capital structure (share capital and share premium) of the Group to that of the legal parent; • adjustment to account for the premium on shares issued to the Mediclinic International Ltd shareholders; and • the share value component of the total consideration. Capital redemption reserve The UK Companies Act 2006 provides that where shares of a company are repurchased and funded by a new issue of shares, the amount by which the company’s issued share capital is diminished on cancellation of the shares is transferred to a capital redemption reserve to maintain capital. The reduction of the company’s share capital shall be treated as if the capital redemption reserve was paid-up capital of the company. Note 1 Tax impact is less than £0.5m. Capital redemption reserve £’m Reverse acquisition reserve £’m Financial assets at FVOCI reserve £’m Foreign currency translation reserve £’m Hedging reserve £'m Total other reserves £’m At 1 April 2020 6 (3 014) – 815 (8) (2 201) Cash ﬂow hedges reclassiﬁed to proﬁt or loss – gross – – – – 2 2 Revaluation – gross – – – – (2) (2) Currency translation dierences – – – (235) – (235) Currency translation dierences attributable to NCI – – – (2) – (2) At 31 March 2021 6 (3 014) – 578 (8) (2 438) Cash ﬂow hedges reclassiﬁed to proﬁt or loss – gross – – – – 6 6 Deferred tax – – – – (2) (2) Revaluation – gross 1 – – 4 – 1 5 Share of other comprehensive income of equity-accounted investments – – – – 1 1 Currency translation dierences – – – 182 – 182 Currency translation dierences attributable to NCI – – – (8) – (8) At 31 March 2022 6 (3 014) 4 752 (2) (2 254) STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 211 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Summarised ﬁnancial information in respect of the Group’s subsidiaries that have material NCI is set out below. The summarised ﬁnancial information below represents amounts before inter-group eliminations. 2022 2021 £’m £’m Opening balance 118 113 Transactions with non-controlling shareholders 3 (3) Dividends to non-controlling shareholders (12) (8) Share of total comprehensive income 30 16 Share of proﬁt 19 11 Currency translation dierences 8 2 Share of other comprehensive income 3 3 139 118 23. NON-CONTROLLING INTERESTS Country of business 2022 2021 Curamed Holdings (Pty) Ltd (group) South Africa 26.6% 26.6% Grangettes Group Switzerland 40.0% 40.0% Mediclinic Limpopo Trust South Africa 49.1% 50.0% See note 39 for a list of investments in subsidiaries. 31 March 2022 Mediclinic Limpopo Trust £'m Curamed Holdings (Pty) Ltd (group) £'m Grangettes Group £'m Summarised balance sheet Non-current assets 11 49 348 Current assets 33 47 94 Non-current liabilities – (4) (165) Current liabilities (2) (7) (66) Net assets 42 85 211 Accumulated NCI in statement of ﬁnancial position 20 21 47 Summarised statement of comprehensive income Revenue 25 67 165 Proﬁt for the year 7 12 19 Other comprehensive income – – 7 Total comprehensive income 7 12 26 Proﬁt allocated to NCI 4 3 8 Dividends paid to NCI 2 2 5 Summarised cash ﬂows Cash ﬂows from operating activities 6 20 44 Cash ﬂows from investing activities (1) (4) (3) Cash ﬂows from ﬁnancing activities (4) (7) (31) Net increase/(decrease) in cash and cash equivalents 1 9 10 Details of the ownership interest held by material NCI are as follows: MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT212 23. NON-CONTROLLING INTERESTS CONTINUED 31 March 2021 Mediclinic Limpopo Trust £'m Curamed Holdings (Pty) Ltd (group) £'m Grangettes Group £'m Summarised balance sheet Non-current assets 11 51 337 Current assets 29 38 78 Non-current liabilities – (4) (185) Current liabilities (4) (10) (51) Net assets 36 75 179 Accumulated NCI in statement of ﬁnancial position 18 19 36 Summarised statement of comprehensive income Revenue 21 57 160 Proﬁt for the year 6 9 15 Other comprehensive income – – 8 Total comprehensive income 6 9 23 Proﬁt allocated to NCI 3 1 6 Dividends paid to NCI 2 1 5 Summarised cash ﬂows Cash ﬂows from operating activities 7 5 23 Cash ﬂows from investing activities (1) (3) (5) Cash ﬂows from ﬁnancing activities (4) (2) (34) Net increase/(decrease) in cash and cash equivalents 2 – (16) Transactions with NCI During the period under review, the Group entered into various transactions where it acquired additional interests in NCI and disposed of NCI without losing control. The eect on the equity attributable to the owners during the year is summarised as follows: 2022 2021 £’m £’m Carrying amount of NCI acquired/(disposed of) (3) 3 Consideration received from/(paid to) NCI 2 1 Increase in equity attributable to owners of the Company (1) 4 24. SHARE-BASED PAYMENTS Long-term incentive (‘LTI’) awards Under the LTI, conditional phantom shares are awarded to selected senior management (including executive directors). The LTI awards share-based payment arrangement that will be settled in cash is accounted for as a cash-settled share-based payment transaction in terms of IFRS 2 and the LTI awards that will be settled in shares will be accounted for as an equity-settled share-based payment transaction. Cash-settled share-based payment arrangements For cash-settled share-based compensation plans, the Group recognises the value of the services received (expense), and the liabilities to pay for those services, as the employees render service. The liabilities are measured, initially, and at each reporting date until settled, at the fair value appropriate to the scheme, taking into account the terms and conditions on which the rights were granted, and the extent to which the employees have rendered service to date, excluding the impact of any non-market-related vesting conditions. Non-market-related vesting conditions are included in the assumptions regarding the number of units expected to vest. These assumptions are revised at the end of each reporting period. All changes to the fair value of the liability are recognised in the income statement. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 213 2021 24. SHARE-BASED PAYMENTS CONTINUED Note 1 Less than £0.5m in the prior year. Note 1 Less than £0.5m in the prior year. Note 1 The 2019 allocation is at the end of the performance period and, as a result, was valued against the performance conditions and not in terms of the Black-Scholes option pricing model. NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Equity-settled share-based payment arrangements Under equity-settled share-based compensation plans, the entity receives services from employees as consideration for equity instruments (options) of the Company. The fair value of the employee services received in exchange for the grant of the options is recognised as an expense. The total amount to be expensed is determined by reference to the fair value of the options granted, including any market performance conditions and the impact of any non-vesting conditions, but excluding the impact of any service and non-market performance vesting conditions. At the end of each reporting period, the Group revises its estimates of the number of options that are expected to vest based on the non-market vesting conditions and service conditions. It recognises the impact of the revision to original estimates, if any, in the income statement, with a corresponding adjustment to equity. Valuation assumptions relating to the outstanding units: 2022 £’m £’m Cash-settled share-based payment liability 4 1 Equity-settled share-based payment reserve (included in retained earnings) 1 1 – Total share-based payment reserves and liabilities 5 1 Expenses arising from equity-settled share-based payment transactions 1 1 – Expenses arising from cash-settled share-based payment transactions 1 3 – Total expense (see note 6) 4 – 2022 2021 £’m £’m Opening balance 1 1 Share-based payment expense 1 3 – Closing balance 4 1 Cash-settled share-based payment arrangements The vesting of these shares is subject to continued employment, and is conditional upon achievement of performance targets, measured over a three-year period. The performance conditions for the year under review constitute a combination of absolute total shareholder return (‘TSR’) (40% weighting of the 2018 and 2019 LTI awards; 25% weighting of the 2020 LTI awards), earnings per share (60% weighting of the 2018 and 2019 LTI awards; 40% weighting of the 2020 LTI awards), return on invested capital (‘ROIC’) (25% weighting of the 2020 LTI awards) and patient experience index (10% weighting of the 2020 LTI awards). A reconciliation of the movement in the cash-settled LTI award units is detailed below: 2022 Number of units 2021 Number of units Opening balance 5 108 093 3 877 820 Granted 1 591 269 1 852 340 Lapsed (1 191 777) (622 067) Closing balance 5 507 585 5 108 093 2021 LTI allocation 2020 LTI allocation 2019 LTI allocation Grant date 4 June 2021 13 December 2020 19 June 2019 Vesting date 4 June 2024 13 December 2023 1 June 2022/2024 Outstanding units 1 579 645 1 839 127 2 088 813 Closing share price 356 356 356 Risk-free interest rate 1.23% 1.18% n/a Expected dividend yield 0.00% 0.00% n/a Volatility 34.40% 30.00% n/a MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT214 Note 1 The vesting date is the ﬁfth anniversary of the grant date, allowing for a three-year performance period plus a two-year holding period. Equity-settled share-based payment arrangements The vesting of these shares is subject to continued employment and is conditional upon achievement of four performance targets, measured over a three-year period, with an additional two-year holding period. The performance conditions for the year under review constitute a combination of TSR (25% weighting), adjusted EPS (40% weighting), ROIC (25% weighting) and the Group’s consolidated patient experience index score (10% weighting). The share-based payment expense relating to equity-settled share-based payment arrangements was £1m during the year (2021: less than £0.5m). A reconciliation of the movement in the equity-settled LTI award units is detailed below: 24. SHARE-BASED PAYMENTS CONTINUED 25. BORROWINGS Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently stated at amortised cost. Any dierence between the proceeds (net of transaction costs) and the redemption value is recognised in the income statement over the period of the borrowings using the eective interest rate method. Borrowings are classiﬁed as current liabilities unless the Group has an unconditional right to defer settlement of the liability for at least 12 months after the reporting date. Borrowing costs are expensed when incurred, except for borrowing costs directly attributable to the construction or acquisition of qualifying assets. Borrowing cost directly attributable to the construction or acquisition of qualifying assets is added to the cost of those assets, until such time as the assets are substantially ready for their intended use. A qualifying asset is an asset that necessarily takes a substantial period of time to get ready for its intended use. 2022 2021 £’m £’m Bank loans 1 609 1 507 Preference shares – 89 Listed bonds 194 181 1 803 1 777 Non-current borrowings 1 688 1 686 Current borrowings 115 91 Total borrowings 1 803 1 777 2022 Number of units 2021 Number of units Opening balance 607 072 – Granted 546 750 607 072 Closing balance 1 153 822 607 072 2021 LTI allocation 2020 LTI allocation Grant date 4 June 2021 13 December 2020 Vesting date 4 June 2026 13 December 2025 Outstanding units 546 750 607 072 Share price of Mediclinic International plc share on grant date (denominated in sterling pence) 341 270 Risk-free interest rate 0.23% (0.13)% Expected dividend yield 0% 0% Volatility 41.10% 43.80% Valuation assumptions relating to the outstanding units: STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 215 2022 2022 2021 2021 £’m £’m £’m £’m Non-current Current Non-current Current Swiss operations (denominated in Swiss franc) Secured bank loan one 1 This loan bears interest at variable rates linked to the SARON plus 1.25%. CHF50m is redeemable annually on 30 September with the ﬁnal outstanding balance redeemable on 30 September 2027. The repayment in September 2021 was suspended, to be resumed in September 2022, but management decided to make a voluntary repayment in November 2021. The non-current portion includes capitalised ﬁnancing costs of £14m (2021: £13m). 1 018 41 986 38 Secured bank loan two 2 These loans bear interest at a ﬁxed rate of 1.12%. CHF0.5m is repayable on 30 June and 31 December every year. The remaining balances are repayable during May 2023. 13 1 13 1 Secured bank loan three 2 This ﬁxed interest mortgage loan bears interest at 0.90% compounded quarterly. The loan is repayable by December 2023. 8 – 8 – Listed bonds The listed bonds consist of CHF90m at 2.00% and CHF145m at 1.25% Swiss franc bonds. The bonds are repayable on 25 February 2025 and 25 February 2026, respectively. 194 – 181 – Southern African operations (denominated in South African rand) Secured bank loan one The loan bore interest at the 3M JIBAR variable rate plus a margin of 1.49% (2021: 1.71%) compounded quarterly. The loan was extinguished on 17 September 2021 as part of the reﬁnancing arrangement. – – 126 1 Secured bank loan two The loan bore interest at the 3M JIBAR variable rate plus a margin of 1.59% (2021: 1.81%) compounded quarterly. The loan was extinguished on 17 September 2021 as part of the reﬁnancing arrangement. – – 176 1 Secured bank loan three 3 The loans bear interest at the 3M JIBAR variable rate plus a variable margin that is linked to predeﬁned sustainability measures. The sustainability measures are assessed in calendar years, starting in January 2022. At 31 March 2022, a margin of 1.54% was applied. The loans are repayable on 17 September 2026. £207m of the loan has been hedged. 414 2 – – Other secured bank loans 4 These loans bear interest at variable rates linked to the prime overdraft rate and are repayable in periods ranging between one and 12 years. 2 1 3 1 Preference shares Dividends were payable quarterly at a rate of 72% of 3M JIBAR plus a margin of 1.65% (2021: 1.77%). The outstanding balance was redeemed on 1 September 2021. – – 89 – Middle East operations (denominated in US dollar) Secured bank loan one 5 The loan bears interest at variable rates linked to the 3M LIBOR and a margin of 1.85% with ﬁve-year amortising terms, expiring in August 2023. £36m (2021: £51m) of the loan has been hedged. 39 70 104 49 1 688 115 1 686 91 25. BORROWINGS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Notes 1 The loan is secured by mortgage notes on Swiss properties and buildings to the value of £2 547m (2021: £2 382m) and Swiss bank accounts with a book value of £72m (2021: £60m). 2 These loans are secured by mortgage notes on the properties and buildings of the Linde Group. 3 Property and equipment with a book value of £325m (2021: £296m) are encumbered as security for these loans. Cash and cash equivalents of £58m (2021: £5m) and trade receivables of £60m (2021: £53m) have also been ceded as security for these borrowings. 4 Property, equipment and vehicles with a book value of £14m (2021: £18m) are encumbered as security for these loans. Net trade receivables of less than £0.5m (2021: £1m) have also been ceded as security for these loans. 5 Shares of investments in Emirates Healthcare Holdings Ltd and Emirates Healthcare Ltd are encumbered as security for these loans as well as an account pledge on receivable collection accounts. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT216 25. BORROWINGS CONTINUED Interest Rate Benchmark Reform For the period ended 31 March 2022, the Group has adopted the amendments to IFRS 9, IAS 39, IFRS 7 and IFRS 16 Interest Rate Benchmark Reform – Phase 2. Phase 2 of the amendments requires that, for ﬁnancial instruments measured using amortised cost measurement, changes to the basis for determining the contractual cash ﬂows required by interest rate benchmark reform are reﬂected by adjusting their eective interest rate. No immediate gain or loss is recognised. This expedient is applicable only to changes that are a direct consequence of interest rate benchmark reform and the new basis for determining the contractual cash ﬂows is economically equivalent to the previous basis. The Swiss bank loan one bears interest at variable rates that were previously linked to the three-month Swiss franc London Interbank Oered Rate (‘CHF LIBOR’). At 31 December 2021, the CHF LIBOR rate was replaced by Swiss Average Rate Overnight (‘SARON’) as the new reference rate. As a result of the discontinuance of the CHF LIBOR reference rate, the loan facility agreement was amended to reﬂect the change in reference rate to SARON. As the Swiss bank loans are unhedged, the change in reference rates did not have any impact on hedge relationships (including hedge designation, amounts accumulated in the cash ﬂow hedge reserve or risk components). Following the replacement of the CHF LIBOR with the SARON, the Group has applied the practical expedient provided under Interest Rate Benchmark Reform – Phase 2 to £1 073m of its borrowings. The Middle East bank loan bears interest at variable rates linked to the three-month US dollar (‘USD’) LIBOR. It is expected that the USD LIBOR will be replaced with the Secured Overnight Financing Rate (‘SOFR’) on its discontinuance. The USD LIBOR is expected to be discontinued on 30 June 2023. The replacement of the USD LIBOR with SOFR has no impact on the borrowings of the Middle East operations for the period ended 31 March 2022. The Southern African bank loan bears interest at variable rates linked to the three-month Johannesburg Interbank Average Rate (‘JIBAR’). The interest rate benchmark reform has not had any impact on the JIBAR and, as a result, has no impact on the borrowings of the Southern African operations. 26. LEASES The Group leases various buildings, equipment, vehicles and other assets. Lease terms are negotiated on an individual basis and contain a wide range of dierent terms and conditions. The lease agreements do not impose any covenants other than the security interests in the leased assets that are held by the lessor. Leases are recognised as a right-of-use asset and a corresponding liability at the date at which the leased asset is available for use by the Group. Assets and liabilities arising from a lease are initially measured on a present value basis. Lease liabilities include the net present value of the following lease payments: • ﬁxed payments (including in-substance ﬁxed payments), less any lease incentives receivable; • the exercise price of a purchase option if the Group is reasonably certain to exercise that option; • payments of penalties for terminating the lease, if the lease term reﬂects the Group exercising that option; and • lease payments to be made under reasonably certain extension options. The lease payments are discounted using the interest rate implicit in the lease. If that rate cannot be readily determined, which is generally the case for leases in the Group, the lessee’s incremental borrowing rate is used, being the rate that the individual lessee would have to pay to borrow the funds necessary to obtain an asset of similar value to the right-of-use asset in a similar economic environment with similar terms, security and conditions. The Group is exposed to potential future increases in variable lease payments based on an index or rate, which are not included in the lease liability until they take eect. When adjustments to lease payments based on an index or rate take eect, the lease liability is reassessed and adjusted against the right-of-use asset. Lease payments are allocated between principal and ﬁnance cost. The ﬁnance cost is charged to proﬁt or loss over the lease period to produce a constant periodic rate of interest on the remaining balance of the liability for each period. Right-of-use assets are measured at cost comprising the following: • the amount of the initial measurement of lease liability; • any lease payments made at or before the commencement date less any lease incentives; • any initial direct costs; and • restoration costs. Right-of-use assets are generally depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis. If the Group is reasonably certain to exercise a purchase option, the right-of-use asset is depreciated over the underlying asset’s useful life. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 217 26. LEASES CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Payments associated with short-term leases and all leases of low-value assets are recognised on a straight-line basis as an expense in proﬁt or loss. Short-term leases are leases with a lease term of 12 months or less. Low-value assets comprise small items of medical and other equipment. Low-value assets contribute an insigniﬁcant portion of the Group’s rental payments expensed in terms of IFRS 16. To determine the incremental borrowing rate, the Group uses recent third-party ﬁnancing received by the lessee as a starting point and adjusts the rate to reﬂect changes in ﬁnancing conditions since the third-party ﬁnancing was received. The Group also makes adjustments to the rate relating to the speciﬁc lease based on the term, country, currency and security. Some property leases contain variable payment terms that are linked to revenue generated from a hospital. Variable lease payments that depend on revenue are recognised in proﬁt or loss in the period in which the condition that triggers those payments occur. Extension and termination options are included in a number of leases across the Group. The majority of the extension and termination options held are exercisable only by the Group and not by the respective lessor. In determining the lease term, all facts and circumstances that create an economic incentive to exercise an extension option, or not to exercise a termination option, are considered. COVID-19-related rent concessions The Group has applied COVID-19-Related Rent Concessions – Amendment to IFRS 16. The Group applies the practical expedient allowing it not to assess whether eligible rent concessions that are a direct consequence of the COVID-19 pandemic are lease modiﬁcations. The Group applies the practical expedient consistently to contracts with similar characteristics and in similar circumstances. For rent concessions in leases to which the Group chooses not to apply the practical expedient, or that do not qualify for the practical expedient, the Group assesses whether there is a lease modiﬁcation. Rent concessions are included in other gains and losses. During the year ended 31 March 2021, the Group negotiated rent concessions with its landlords at a number of buildings in the Middle East as a result of the severe impact of the COVID-19 pandemic. The Group applied the practical expedient for COVID-19-related rent concessions consistently to eligible rent concessions. The amount of £1m recognised in proﬁt or loss in the prior period reﬂects changes in lease payments arising from rent concessions to which the Group has applied the practical expedient for COVID-19-related rent concessions. The COVID-19-related rent concessions for the year ended 31 March 2022 were less than £0.5m. Critical accounting judgement Determination of lease term In determining the lease term, management considers all facts and circumstances that create an economic incentive to exercise an extension option. Extension options are included in the lease term only if the lease is reasonably certain to be extended. For leases of hospitals, the Group considers their past practice in exercising renewal options and the cost of business disruption required to replace the leased asset. Most extension options in respect of hospitals have not been included in the lease liability due to the long duration of existing lease contracts and the low probability of exercising renewal options based on the contractual renewal terms. The lease term is reassessed if an option is actually exercised (or not exercised) or the Group becomes obliged to exercise (or not exercise) it. The assessment of reasonable certainty is revised only if a signiﬁcant event or a signiﬁcant change in circumstances occurs, which aects this assessment, and which is within the control of the lessee. Amounts recognised in the statement of ﬁnancial position The statement of ﬁnancial position shows the following amounts relating to leases: 2022 2021 £’m £’m Right-of-use assets Buildings 721 621 Equipment 3 4 724 625 Right-of-use assets per geographical market Switzerland 397 390 Southern Africa 26 27 Middle East 301 208 724 625 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT218 Amounts recognised in the income statement The income statement includes the following amounts relating to leases: 26. LEASES CONTINUED Amounts recognised in the statement of ﬁnancial position continued 27. RETIREMENT BENEFIT OBLIGATIONS Retirement beneﬁt costs The Group provides deﬁned beneﬁt and deﬁned contribution plans for the beneﬁt of employees, the assets of which are held in separate trustee-administered funds. These plans are funded by payments from the employees and the Group, taking into account recommendations of independent qualiﬁed actuaries. Deﬁned beneﬁt plans This plan deﬁnes an amount of pension beneﬁt an employee will receive on retirement, dependent on one or more factors such as age, years of service and compensation. The liability recognised in the statement of ﬁnancial position in respect of deﬁned beneﬁt pension plans is the present value of the deﬁned beneﬁt obligation at the end of the reporting period less the fair value of plan assets. The deﬁned beneﬁt obligation is calculated annually by independent actuaries using the projected unit credit method. The present value of the deﬁned beneﬁt obligation is determined by discounting the estimated future cash outﬂows using interest rates of high-quality corporate bonds that are denominated in the currency in which the beneﬁts will be paid, and that have terms to maturity approximating to the terms of the related pension obligation. Actuarial gains and losses arising from experience adjustments and changes in actuarial assumptions are charged or credited to equity in other comprehensive income in the period in which they arise. Past service costs are recognised immediately in the income statement. The annual pension costs of the Group’s beneﬁt plans are charged to the income statement. A net pension asset is recorded only to the extent that it does not exceed the present value of any economic beneﬁt available in the form of reductions in future contributions to the plan. If there is a minimum funding requirement for contributions relating to future service, the economic beneﬁt available is calculated as the amount that reduces future minimum funding requirement contributions for future service because the entity made a prepayment, and the estimated future service cost in each period, less the estimated minimum funding requirement contributions that would be required for future service in those periods if there were no prepayment. Incurred interest costs/income on the deﬁned beneﬁt obligations are recognised as wages and salaries. See note 6 for the accounting policy in respect of deﬁned contribution plans. 2022 2021 £’m £’m Lease liabilities Switzerland 417 408 Southern Africa 37 38 Middle East 332 230 786 676 Of which are: - Non-current lease liabilities 730 621 - Current lease liabilities 56 55 786 676 2022 2021 £’m £’m Depreciation charge of right-of-use assets Buildings 48 48 Equipment 1 1 49 49 Interest expense (included in ﬁnance cost) 21 20 Expense relating to short-term leases and leases of low-value assets (included in infrastructure- related costs) 9 8 COVID-19-related rent concessions (included in other gains and losses) – (1) The total cash outﬂow for leases, excluding short-term leases and leases of low-value assets, was £62m (2021: £56m). STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 219 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Post-retirement medical beneﬁts Some Group companies provide for post-retirement medical contributions in relation to current and retired employees. The expected costs of these beneﬁts are accounted for by using the projected unit credit method. Under this method, the expected costs of these beneﬁts are accumulated over the service lives of the employees. Valuation of these obligations is carried out by independent qualiﬁed actuaries. All actuarial gains and losses are charged or credited to other comprehensive income in the period in which they arise. Key accounting estimates Measurement of retirement beneﬁt (assets)/obligations The cost of deﬁned beneﬁt pension plans, post-retirement medical beneﬁt liability obligations and the Middle East end-of-service obligations is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rates, expected rates of return on assets, future salary increases, mortality rates and future pension increases. Due to the long-term nature of these plans, such estimates are subject to signiﬁcant uncertainty and can have a material impact on the valuations. Details of the key assumptions for each relevant obligation, together with the sensitivities of the carrying value of the obligations, are disclosed. The sensitivity analyses presented in each section below are based on a change in an assumption while holding all other assumptions constant. In practice, this is unlikely to occur and changes in some of the assumptions may be correlated. When calculating the sensitivity of the deﬁned beneﬁt obligation to signiﬁcant actuarial assumptions, the same method (present value of the deﬁned beneﬁt obligation calculated with the projected unit credit method at the end of the reporting period) has been applied as when calculating the deﬁned beneﬁt obligation recognised within the statement of ﬁnancial position. 2022 2021 £’m £’m Statement of ﬁnancial position for: Swiss pension beneﬁt asset (1) (110) Total retirement beneﬁt assets (1) (110) Short-term portion of retirement beneﬁt assets – – Non-current retirement beneﬁt assets (1) (110) Swiss pension beneﬁt obligation 7 27 Southern Africa post-retirement medical beneﬁt obligation 44 37 Middle East end-of-service beneﬁt obligation 88 77 139 141 Total retirement beneﬁt obligations 139 141 Short-term portion of retirement beneﬁt obligations (20) (14) Non-current retirement beneﬁt obligations 119 127 Total amount charged to the income statement: Swiss pension beneﬁt (asset)/obligation 45 38 Southern Africa post-retirement medical beneﬁt obligation 7 5 Middle East end-of-service beneﬁt obligation 13 11 65 54 Total amount charged/(credited) to other comprehensive income: Swiss pension beneﬁt obligation 92 (152) Southern Africa post-retirement medical beneﬁt obligation (2) 2 Middle East end-of-service beneﬁt obligation – (3) 90 (153) MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT220 (a) Swiss pension beneﬁt (asset)/obligation The Group’s Swiss deﬁned beneﬁt pension plans are as follows: • Pensionskasse Hirslanden • Vorsorgestiftung VSAO (Association for Swiss Assistant and Senior Doctors) • Hirslanden Clinique La Colline SA • Hirslanden Klinik Linde AG • Clinique des Grangettes SA • Hirslanden OPERA Zumikon AG At 31 March 2022, the Clinique des Grangettes SA pension plan was in surplus by £1m due to the increase in the discount rate in the current year. At 31 March 2021, Pensionskasse Hirslanden was in surplus by £110m due to the positive asset return. As the Swiss pension plans operate independently from each other, the net pension asset attributable to Pensionskasse Hirslanden was presented separately from the net pension liabilities attributable to the other pension plans. The net pension asset of Clinique des Grangettes SA at 31 March 2022 has been included with the other Swiss pension plans. The economic beneﬁt available (‘EBA’) in the form of a reduction in future contributions was calculated by deducting the present value of the employer’s future minimum funding requirements according to the rules of the pension plans from the future service cost. The increase of the discount rate used under IAS 19 from 0.20% at 31 March 2021 to 1.10% at 31 March 2022 resulted in a reduced carrying value of the gross pension fund obligation and consequently a reduction in expected future service cost. Since the expected future service cost is lower than the expected employer contributions, the EBA of the Pensionskasse Hirslanden pension plan was reduced to zero. As a result, an asset restriction was applied and £194m has been recognised in other comprehensive income for the asset restriction. The EBA of the Clinique des Grangettes SA pension plan has been limited to the employer contribution reserve. However, as the EBA was in excess of the surplus at 31 March 2022, no asset restriction was applied. 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED Statement of ﬁnancial position Amounts recognised in the statement of ﬁnancial position are as follows: Pensions- kasse Hirslanden 2022 £’m Other Swiss pension plans 2022 £’m Total 2022 £’m Pensions- kasse Hirslanden 2021 £’m Other Swiss pension plans 2021 £'m 2 Total 2021 £’m Present value of funded obligations 1 061 273 1 334 1 010 251 1 261 Fair value of plan assets (1 061) (267) (1 328) (1 120) (224) (1 344) Net pension liability – 6 6 (110) 27 (83) Presented as: Net pension asset – (1) (1) (110) – (110) Net pension liability – 7 7 – 27 27 – 6 6 (110) 27 (83) Opening balance 1 010 251 1 261 1 051 270 1 321 Current service cost 29 7 36 30 7 37 Interest cost 2 – 2 4 2 6 Employee contributions 31 8 39 31 8 39 Actuarial (gain)/loss (64) (9) (73) 11 (1) 10 Beneﬁts paid (32) (4) (36) (33) (13) (46) Business combinations – – – 2 – 2 Past service cost 9 – 9 – – – Exchange dierences 76 20 96 (86) (22) (108) Balance at year end 1 061 273 1 334 1 010 251 1 261 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 221 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Net pension (asset)/liability reconciliation The movement of the fair value of plan assets over the year is as follows: (a) Swiss pension beneﬁt (asset)/obligation continued Statement of ﬁnancial position continued Pensions- kasse Hirslanden 2022 £’m Other Swiss pension plans 2022 £’m Total 2022 £’m Pensions- kasse Hirslanden 2021 £’m Other Swiss pension plans 2021 £'m Total 2021 £’m Opening balance 1 120 224 1 344 1 036 214 1 250 Interest income on plan assets 2 1 3 4 2 6 Employer contributions 35 8 43 35 8 43 Plan participants' contributions 31 8 39 31 8 39 Return on plan assets greater than discount rate 16 13 29 141 21 162 Business combinations – – – 1 – 1 Beneﬁts paid from fund (32) (4) (36) (33) (13) (46) Administration costs (1) – (1) (1) – (1) Exchange dierences 82 17 99 – – – Balance at year end before eect of asset ceiling 1 253 267 1 520 1 214 240 1 454 Eect of asset ceiling (194) – (194) – – – Exchange dierences 2 – 2 (94) (16) (110) Balance at year end 1 061 267 1 328 1 120 224 1 344 Pensions- kasse Hirslanden 2022 £’m Other Swiss pension plans 2022 £’m Total 2022 £’m Pensions- kasse Hirslanden 2021 £’m Other Swiss pension plans 2021 £'m Total 2021 £’m Opening net (asset)/liability (110) 27 (83) 15 56 71 Expenses recognised in the income statement 39 6 45 31 7 38 Contributions paid by employer (35) (8) (43) (35) (8) (43) Actuarial (gain)/loss 114 (22) 92 (130) (22) (152) Business combinations – – – 1 – 1 Exchange dierences (8) 3 (5) 8 (6) 2 Closing net (asset)/liability – 6 6 (110) 27 (83) Pensions- kasse Hirslanden 2022 £’m Other Swiss pension plans 2022 £’m Total 2022 £’m Pensions- kasse Hirslanden 2021 £’m Other Swiss pension plans 2021 £'m Total 2021 £’m Return on plan assets greater than discount rate 16 13 29 141 21 162 Eect of asset ceiling (194) – (194) – – – Actuarial loss – experience (40) (19) (59) (19) (6) (25) Actuarial gain/(loss) due to demographic assumption changes – – – 49 18 67 Actuarial gain/(loss) due to ﬁnancial assumption changes 104 28 132 (41) (11) (52) Total other comprehensive (loss)/ income (114) 22 (92) 130 22 152 Statement of other comprehensive income Amounts recognised in other comprehensive income are as follows: MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT222 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED Income statement Amounts recognised in the income statement are as follows: (a) Swiss pension beneﬁt (asset)/obligation continued Pensions- kasse Hirslanden 2022 £’m Other Swiss pension plans 2022 £’m Total 2022 £’m Pensions- kasse Hirslanden 2021 £’m Other Swiss pension plans 2021 £'m Total 2021 £’m Current service cost 29 7 36 30 7 37 Past service cost 9 – 9 – – – Interest on liability 2 – 2 4 2 6 Interest on plan assets (2) (1) (3) (4) (2) (6) Administration cost 1 – 1 1 – 1 39 6 45 31 7 38 Actual return on plan assets, net of asset ceiling restriction (176) 14 (162) 145 23 168 Pensions- kasse Hirslanden 2022 Other Swiss pension plans 2022 Total 2022 Pensions- kasse Hirslanden 2021 Other Swiss pension plans 2021 Total 2021 Active members 8 364 1 857 10 221 8 296 1 779 10 075 Pensioners 1 150 136 1 286 1 047 124 1 171 9 514 1 993 11 507 9 343 1 903 11 246 The number of plan members are as follows: 2022 2022 2021 2021 Asset allocation £’m % £'m % Quoted investments Fixed income investments 478 31.4% 437 32.5% Equity investments 455 29.9% 418 31.1% Real estate 19 1.3% 20 1.5% Other 111 7.3% 109 8.1% 1 063 69.9% 984 73.2% Non-quoted investments Fixed income investments 35 2.3% 28 2.1% Equity investments 1 0.1% 1 0.1% Real estate 305 20.1% 237 17.6% Other 116 7.6% 94 7.0% 457 30.1% 360 26.8% 1 520 100.0% 1 344 100.0% Risk exposure Through its deﬁned beneﬁt pension plans, the Group is exposed to a number of risks, the most signiﬁcant of which are detailed below: Asset volatility The plan liabilities are calculated using a discount rate set with reference to corporate bond yields; if plan assets underperform this yield, this will create a deﬁcit. Principal actuarial assumptions on statement of ﬁnancial position (all Swiss pension plans) 2022 2021 Discount rate 1.10% 0.20% Future salary increases 1.50% 1.50% Future pension increases 0.00% 0.00% Inﬂation rate 1.00% 1.00% Interest crediting rate 1.10% 1.00% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 223 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Changes in bond yields A decrease in corporate bond yields will increase plan liabilities, although this will be partially oset by an increase in the value of the plans’ bond holdings. Inﬂation risks The pension obligations are linked to salary and pension inﬂation, and higher inﬂation will lead to higher liabilities. The majority of the plan’s assets are either unaected by (ﬁxed interest bonds) or loosely correlated with (equities) inﬂation, meaning that an increase in inﬂation will also increase the deﬁcit. Life expectancy The majority of the plans’ obligations are to provide beneﬁts for the life of the member, so increases in life expectancy will result in an increase in the plans’ liabilities. Assumptions and sensitivity analysis (a) Swiss pension beneﬁt (asset)/obligation continued Risk exposure continued The Group accounts for actuarially determined future pension beneﬁts and provides for the expected liability in the statement of ﬁnancial position. The assumptions used to calculate the expected liability are based on actuarial advice. The discount rate is based on market yields obtained on high-quality corporate bonds that have durations consistent with the term of the obligation. The methods and types of assumptions used in preparing the sensitivity analysis did not change compared with the previous year. Expected employer contributions to be paid to the pension plans for the year ending 31 March 2023 amount to £36m and it is anticipated that these contributions will remain at a similar level in the foreseeable future, subject to change in ﬁnancial conditions. The weighted average duration of the deﬁned beneﬁt obligation is 9.9 years (2021: 11.5 years). The maturity proﬁle of the deﬁned beneﬁt obligation is as follows: Impact on deﬁned beneﬁt obligation Base assumption Change in assumption % Increase/ (decrease) in obligation on increase in assumption % Increase/ (decrease) in obligation on decrease in assumption Pensionskasse Hirslanden Discount rate 1.10% 0.25% (1.9)% 2.3% Salary growth rate 1.50% 0.50% 0.6% (0.6)% Pension growth rate 0.00% 0.25% 1.5% 0.0% Other Swiss pension plans Discount rate 1.10% 0.25% (1.8)% 2.4% Salary growth rate 1.50% 0.50% 0.4% (0.3)% Pension growth rate 0.00% 0.25% 1.6% 0.0% Base assumption (BVG 2020 with CMI improvements) Change in assumption % Increase/ (decrease) in obligation on increase in assumption % Increase/ (decrease) in obligation on decrease in assumption Life expectancy for a 65-year-old male (mortality) 21.77 years 1 year in expected lifetime of plan participants 1.5% (1.9)% Life expectancy for a 65-year-old female (mortality) 23.54 years </= 1 year £’m 1–5 years £’m > 5 years £’m Total £’m At 31 March 2022 Deﬁned beneﬁt obligation 138 388 988 1 514 At 31 March 2021 Deﬁned beneﬁt obligation 119 325 848 1 292 Note 1 The Federal Law on Occupational Old-age, Survivors’ and Disability Insurance (German: BVG). MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT224 Additional information on Swiss deﬁned beneﬁt pension plans Pension plan results The following assumptions have changed since the previous valuation: • The discount rate used to value plan obligations has changed from 0.20% to 1.10%. • The interest credit rate on total account balance has changed from 1.00% to 1.10%. • The interest credit rate on the BVG shadow account balance has changed from 1.00% to 1.10%.  Pensionskasse Hirslanden For our employees in Switzerland, the Pensionskasse Hirslanden (‘PH’) Fund provides post-employment, death-in-service and disability beneﬁts in accordance with the Federal Law on Occupational Old-age, Survivors’ and Disability Insurance. The PH Fund is a foundation and an entity legally separate from the Swiss operations. The PH Fund’s governing body is composed of an equal number of employer and employee representatives. This governing body determines the level of beneﬁts and the investment strategy for the plan assets based on asset-liability analyses performed periodically. The basis for these asset-liability analyses are the statutory pension obligations as these largely determine the cash ﬂows of the PH Fund. In addition, the investment of the plan assets is based on regulations developed by the governing body in accordance with the legal investment guidelines (BVV2). The Investment Committee of the governing body is responsible for their implementation. The governing body has mandated the investment activity to Complementa Investment Controlling AG, as the global custodian. The investment strategy complies with the legal guidelines and is relatively conservative. Alternative investments and unhedged foreign currency positions are rare. The beneﬁts of the pension plan are substantially higher than the legal minimum. They are determined by the employer’s and employees’ contributions and interest granted on the plan members’ accumulated savings; the interest rate is determined annually by the governing body in accordance with the legal framework (deﬁned contribution, as deﬁned by the occupational pension law). The employees’ and the employer’s contributions are determined based on the insured salary and range from 1.25–15% of the insured salary depending on the age of the beneﬁciary. 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED The pension law requires adjusting pension annuities for inﬂation depending on the ﬁnancial condition of the pension fund. Although the pension plan is fully funded at present in accordance with the pension law, the ﬁnancial situation of the PH Fund will not allow for inﬂation adjustments. VSAO For our employed physicians in Switzerland, the VSAO Pension Fund provides post-employment, death-in-service and disability beneﬁts in accordance with the Federal Law on Occupational Old-age, Survivors’ and Disability Insurance. The VSAO Fund is a foundation and an entity legally separate from the Swiss division. The fund’s governing body is composed of an equal number of employer and employee representatives. The investment of the plan assets is in accordance with the legal investment guidelines (BVV2). The beneﬁts of the pension plan are substantially higher than the legal minimum. They are determined by the employer’s and employees’ contributions and interest granted on the plan members’ accumulated savings; the interest rate is determined by the governing body in accordance with the legal framework (deﬁned contribution, as deﬁned by the occupational pension law). The employees’ and the employer’s contributions are 14% of the insured salary. Other pension plans Other pension plans exist for the latest acquired subsidiaries (Hirslanden Clinique La Colline SA, Hirslanden Klinik Linde AG, Clinique des Grangettes and Hirslanden OPERA Zumikon AG) which are not yet integrated into PH, the main pension plan of the Swiss division. These pension funds are legally separate from the division. The investment of the plan assets is in accordance with the legal investment guidelines (BVV2). The employees’ and the employer’s contributions are determined based on the insured salary and range from 1.78–15% of the insured salary depending on the age of the beneﬁciary. General information on all pension plans If an employee leaves the division or the pension plan, respectively, before reaching retirement age, the law provides for the transfer of the vested beneﬁts to the new pension plan. These vested beneﬁts comprise the employee’s and the employer’s contributions plus interest and, the money originally brought in to the pension plan by the beneﬁciary. Upon reaching retirement age, the plan participant may decide whether to withdraw the beneﬁts in the form of an annuity or (partly) as a lump-sum payment. The pension law requires adjusting pension annuities for inﬂation depending on the ﬁnancial condition of the pension fund. (a) Swiss pension beneﬁt (asset)/obligation continued STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 225 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED The pension law in Switzerland envisages that beneﬁts provided by a pension fund are fully ﬁnanced through the annual contributions deﬁned by the regulations. If insucient investment returns or actuarial losses lead to a plan deﬁcit as deﬁned by the pension law, the governing body is legally obliged to take actions to close the funding gap within a period of 5–7 years. Besides adjustments to the level of beneﬁts, such actions could also include additional contributions from respective Group companies and the beneﬁciaries. The current ﬁnancial situation of the PH Fund does not require such restructuring actions. None of the Group companies beneﬁt from any plan surpluses. (b) Southern Africa post-retirement medical beneﬁt obligation The Group’s Southern African operations have a post-retirement medical beneﬁt obligation for employees who joined before 1 July 2012. The Southern African operations subsidise the contributions payable to the Group medical aid in respect of certain eligible retired employees. The subsidy obligations are unfunded and the beneﬁt payment obligations are met as they fall due. The Group accounts for actuarially determined future medical beneﬁts and provides for the expected liability in the statement of ﬁnancial position. The assumptions used to calculate the expected liability are based on actuarial advice. The discount rate is based on market yields obtained on high-quality corporate bonds which have durations consistent with the term of the obligation. It has been assumed that medical inﬂation will take place at a rate of 2.9% in excess of consumer price inﬂation. In the last valuation on 31 March 2022, a 9.60% (2021: 11.40%) medical inﬂation rate and an 11.80% (2021: 13.70%) discount rate were assumed. The average retirement age was set at 63 years (2021: 63 years). The assumed rates of mortality are as follows: • During employment: SA 85/90 tables of mortality • Post-employment: PA(90) tables Amounts recognised in the statement of ﬁnancial position are as follows:27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED (a) Swiss pension beneﬁt (asset)/obligation continued Additional information on Swiss deﬁned beneﬁt pension plans continued General information on all pension plans (continued) 2022 2021 £’m £’m Opening balance 37 28 Amounts recognised in the income statement 7 5 Current service cost 2 1 Interest cost 5 4 Beneﬁts paid (1) (1) Actuarial loss/(gain) recognised in other comprehensive income (2) 2 Exchange dierences 3 3 Present value of unfunded obligations 44 37 Risk exposure Through its deﬁned beneﬁt post-retirement medical beneﬁt obligation, the Group is exposed to a number of risks, the most signiﬁcant of which are detailed below: Changes in bond yields A decrease in corporate bond yields will increase medical beneﬁt obligations. Inﬂation risks The medical beneﬁt obligations are linked to medical inﬂation, and higher inﬂation will lead to higher liabilities. Assumptions and sensitivity analysis Impact on deﬁned beneﬁt obligation Base assumption Change in assumption % Increase/ (decrease) in obligation on increase in assumption % Increase/ (decrease) in obligation on decrease in assumption Discount rate 11.80% 0.50% (6.4)% 7.1% Medical inﬂation rate 9.60% 1.00% 14.9% (12.3)% The expected post-employment medical beneﬁts payable for the year ending 31 March 2023 amount to £2m. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT226 The weighted average duration of the deﬁned beneﬁt obligation is 15 years (2021: 15 years). The maturity proﬁle of the deﬁned beneﬁt obligation is as follows: Amounts recognised in the statement of ﬁnancial position are as follows: 2022 2021 Discount rate 2.40% 1.98% Future salary increases 2.00% 2.10% Average retirement age 60 years 60 years Annual turnover rate 14.14% 8.53% Impact on deﬁned beneﬁt obligation Base assumption Change in assumption % Increase/ (decrease) in obligation on increase in assumption % Increase/ (decrease) in obligation on decrease in assumption Discount rate 2.40% 1.00% (4.9)% 5.2% Future salary increases 2.00% 1.00% 5.1% (4.9)% 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED (b) Southern Africa post-retirement medical beneﬁt obligation continued Assumptions and sensitivity analysis continued </= 1 year £’m 1–5 years £’m > 5–10 years £’m Total £’m At 31 March 2022 Deﬁned beneﬁt obligation 2 10 25 37 At 31 March 2021 Deﬁned beneﬁt obligation 1 9 24 34 (c) Middle East end-of-service beneﬁt obligation In terms of UAE labour law, employees are entitled to severance pay at the end of employment. Severance pay is calculated as follows: for the ﬁrst ﬁve years of service, between seven and 30 days’ wage per year of service and thereafter 30 days per additional year. The employee beneﬁt was actuarially determined. The severance pay obligations are unfunded and the beneﬁt payment obligations are met as they fall due. The Group accounts for actuarially determined future end-of-service beneﬁts and provides for the expected liability in the statement of ﬁnancial position. The assumptions used to calculate the expected liability are based on actuarial advice. The discount rate is based on market yields obtained on high-quality corporate bonds which have durations consistent with the term of the obligation. The following are the principal actuarial assumptions: 2022 2021 £’m £’m Opening balance 77 83 Amounts recognised in the income statement 13 11 Current service cost 11 10 Interest cost 2 1 Beneﬁts paid (6) (5) Actuarial (gain)/loss recognised in other comprehensive income – (3) Exchange dierences 4 (9) Present value of unfunded obligations 88 77 Current portion of retirement beneﬁt obligations 20 14 Non-current retirement beneﬁt obligations 68 63 88 77 Assumptions and sensitivity analysis The expected employer contributions to be paid to the Middle East end-of-service beneﬁt obligation for the year ending 31 March 2023 amount to £20m. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 227 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED The weighted average duration of the deﬁned beneﬁt obligation is 7 years (2021: 7 years). The maturity proﬁle of the deﬁned beneﬁt obligation is as follows: Employee beneﬁts This provision is for beneﬁts granted to employees for long service. The provision is calculated based on the employee’s cost to the Group as well as the estimated expected utilisation of the employee beneﬁts. Legal cases and other This provision relates to payments for malpractice claims and other costs for legal claims. The recognised provision reﬂects the best estimate of the most likely outcome. Tari risks In Switzerland, the cost of treating inpatients with basic health insurance is ﬁxed by the government. The pricing model is based on Swiss DRGs for inpatients and can be seen as a ﬁxed-fee arrangement. In some cases, the pricing model for DRGs is based on provisional taris as delays occur in the agreement of the taris between the healthcare providers and the funders. Tari provisions are recognised when the pricing model for DRGs is based on provisional taris and the taris are disputed by the funders. Due to the high level of uncertainty in respect of the expected time it will take to settle the dispute, tari adjustments are classiﬁed as provisions. The tari provision is calculated based on historical experience of outcomes to negotiations between healthcare providers and funders. This is regularly reassessed based on the actual outcome of tari negotiations. See note 4 for additional information in respect of provisional taris and the impact on recognition of the tari risk provision. 27. RETIREMENT BENEFIT OBLIGATIONS CONTINUED (c) Middle East end-of-service beneﬁt obligation continued Assumptions and sensitivity analysis continued </= 1 year £’m 1–5 years £’m > 5–10 years £’m Total £’m At 31 March 2022 Deﬁned beneﬁt obligation 20 49 50 119 At 31 March 2021 Deﬁned beneﬁt obligation 14 32 47 93 Post-employment beneﬁts for key management personnel One non-executive director participates in the Southern Africa post-retirement medical beneﬁt obligation. Of the key management personnel, which comprise the Group Executive Committee, two participate in the Swiss pension beneﬁts, four in the Southern Africa post-retirement medical beneﬁt obligation and one in the Middle East end-of-service beneﬁt. 28. PROVISIONS Provisions are recognised when the Group has a present legal or constructive obligation, as a result of past events, and it is probable that an outﬂow of resources embodying economic beneﬁts will be required to settle the obligation, and a reliable estimate of the amount of the obligation can be made. Provisions are determined by discounting the expected future cash ﬂows using a pre-tax discount rate that reﬂects current market assessments of the time value of money and the risks speciﬁc to the liability. Provision for malpractice claims is made at the year end for the estimated cost of claims incurred but not settled at the end of each reporting period, including the cost of claims incurred but not yet reported to the Group. The estimated cost of claims includes expenses to be incurred in settling claims. The Group takes all reasonable steps to ensure that it has appropriate information regarding its claims exposures. The Group does not discount its liabilities for unpaid claims. Liabilities for unpaid claims are estimated using the input of assessments for individual cases reported to the Group and statistical analysis for the claims incurred but not reported. 2022 2021 £’m £’m Non-current 37 37 Employee beneﬁts 13 13 Legal cases and other 5 2 Tari risks 19 22 Current 38 19 Employee beneﬁts 3 3 Legal cases and other 9 8 Tari risks 26 8 75 56 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT228 Provisions are expected to be payable during the following ﬁnancial years: 28. PROVISIONS CONTINUED 2022 2021 £’m £’m Within one year 38 19 After one year but not more than ﬁve years 32 32 More than ﬁve years 5 5 75 56 Employee beneﬁts £’m Legal cases and other £’m Tari risks £’m Total £’m Opening balance at 1 April 2020 19 6 28 53 Charged to the income statement 2 7 10 19 Utilised during the year (3) (1) (2) (6) Unused amounts reversed (1) (1) (4) (6) Exchange dierences (1) (1) (2) (4) Closing balance at 31 March 2021 16 10 30 56 Charged to the income statement 3 9 16 28 Utilised during the year (3) (3) – (6) Unused amounts reversed – (3) (4) (7) Exchange dierences – 1 3 4 Closing balance at 31 March 2022 16 14 45 75 29. DERIVATIVE FINANCIAL INSTRUMENTS Derivative ﬁnancial instruments comprise interest rate swaps, put/call agreements and forward contracts. Derivatives are initially recognised at fair value on the date a derivative contract is entered into and are subsequently measured at fair value. The method of recognising the resulting gain or loss depends on whether the derivative is designated as a hedging instrument and, if so, the nature of the item being hedged. Hedges of a particular risk associated with a recognised liability or a highly probable forecast transaction are designated as cash ﬂow hedges. The Group uses interest rate swaps as cash ﬂow hedges. At inception of a hedge relationship, the Group formally designates and documents the hedge relationship to which it applies hedge accounting and the risk management objective and strategy for undertaking the hedge. The documentation includes the identiﬁcation of the hedging instrument; the hedged item; the nature of the risk being hedged; and how the Group will assess whether the hedging relationship meets the hedge eectiveness requirements. A hedging relationship qualiﬁes for hedge accounting if it meets all of the following eectiveness requirements: • There is an economic relationship between the hedged item and the hedging instrument. • The eect of credit risk does not dominate the value changes that result from that economic relationship. • The hedge ratio of the hedging relationship is the same as that resulting from the quantity of the hedged item that the Group actually hedges and the quantity of the hedging instrument that the Group actually uses to hedge that quantity of hedged item. Hedges that meet all the qualifying criteria for hedge accounting are accounted for, as described below under ‘Cash ﬂow hedges’. The hedging reserve in shareholders’ equity is shown in note 22. On the statement of ﬁnancial position, hedging derivatives are not classiﬁed based on whether the amount is expected to be recovered or settled within, or after, 12 months. The full fair value of a hedging derivative is classiﬁed as a non-current asset or liability when the remaining maturity of the hedge relationship is more than 12 months; it is classiﬁed as a current asset or liability when the remaining maturity of the hedge relationship is less than 12 months. Cash ﬂow hedges The eective portion of changes in the fair value of derivatives that is designated and qualiﬁes as a cash ﬂow hedge is recognised in other comprehensive income. The gain or loss relating to the ineective portion is recognised immediately in the income statement. Amounts accumulated in other comprehensive income are reclassiﬁed to the income statement in the periods when the hedged item aects proﬁt or loss (for example, when the interest expense on hedged variable rate borrowings is recognised in proﬁt or loss). STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 229 29. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED Notes 1 The fair value gain/(loss) includes the portion that has been reclassiﬁed to proﬁt or loss. 2 The Southern Africa interest rate swap agreement resets every three months on 1 June, 1 September, 1 December and 1 March with a ﬁnal reset on 1 September 2023 for £50m, 1 December 2023 for £54m, 1 June 2024 for £25m and 3 June 2024 for £78m. There is no ineective portion recognised in the proﬁt or loss that arises from the cash ﬂow hedges. 3 The Middle East interest rate swap agreement resets in August 2023. There is no ineective portion recognised in the proﬁt or loss that arises from the cash ﬂow hedges. NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED When a hedging instrument expires or is sold, or when a hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss existing in equity at that time remains in equity and is recognised when the forecast transaction is ultimately recognised in the income statement. When a forecast transaction is no longer expected to occur, the cumulative gain or loss that was reported in equity is immediately transferred to the income statement. Non-hedging derivatives Certain derivative instruments do not qualify for hedge accounting. Changes in the fair value of any derivative instrument that does not qualify for hedge accounting are recognised at fair value through proﬁt or loss. Cash ﬂow hedges continued Eective interest rate swaps In order to hedge speciﬁc exposures in the interest rate repricing proﬁle of existing borrowings, the Group uses interest rate derivatives to generate the desired interest proﬁle. At 31 March 2022, the Group had 16 (2021: 16) eective interest rate swap contracts for borrowings speciﬁcally in Southern Africa and one in Middle East. The value of borrowings hedged by the interest rate derivatives and the rates applicable to these contracts are as follows: 2022 £’m Assets 2022 £’m Liabilities 2021 £’m Assets 2021 £’m Liabilities Non-current Interest rate swaps – cash ﬂow hedges – 2 – 9 Written put option (redemption liability) – 126 – 115 – 128 – 124 Current Interest rate swaps – cash ﬂow hedges – 1 – 1 Forward contracts – – – 1 – 1 – 2 – 129 – 126 Key accounting estimate Remeasurement of redemption liability (written put option) Through the acquisition of the Grangettes Group, the Group entered into a put/call agreement over the remaining 40% interest in the combined company of Clinique des Grangettes and Clinique La Colline. The option is exercisable after four years and potentially eective no earlier than 30 June 2023, and the consideration on exercise will be determined based on the proﬁtability of Clinique des Grangettes and Clinique La Colline at that time. The exercise price is formula based. Borrowings hedged £’m Fixed interest payable Interest receivable Fair value gain/ (loss) for the year £’m As at 31 March 2022 1–3 years 2 207 5.93%– 7.00% 3 month JIBAR 5 1–2 years 3 36 3.14% 3 month LIBOR 2 As at 31 March 2021 1–3 years 2 195 6.20–7.20% 3 month JIBAR/69% of prime interest rate (2) 1–3 years 3 51 3.14% 3 month LIBOR – MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT230 Key accounting estimate continued Remeasurement of redemption liability (written put option) (continued) The amount that may become payable under the option on exercise is initially recognised at the present value of the redemption amount with a corresponding charge directly to equity and included in retained earnings. The charge to equity is recognised separately as written put options over NCI. The liability is subsequently adjusted for changes in the estimated performance and increased through ﬁnance charges up to the redemption amount that is payable at the date at which the option ﬁrst becomes exercisable. In the event that the option expires unexercised, the liability is derecognised with a corresponding adjustment to equity. The key inputs to its calculations are described below: Forecasts As part of the annual ﬁnancial planning process, Clinique des Grangettes and Clinique La Colline are required to submit budgets for the next ﬁnancial year and forecasts for the following four years. Future earnings and proﬁtability are based on these budgets and forecasts. Discount rates The discount rate of 0.78% was determined when the put/call agreement was entered into and was based on swap curve analytics. The discount rate reﬂects the time value of future expected cash ﬂows. A reasonably possible change of 10% in the projected earnings will change the liability and proﬁt before tax by £13m (2021: £12m). 29. DERIVATIVE FINANCIAL INSTRUMENTS CONTINUED 30. TRADE AND OTHER PAYABLES Trade and other payables are recognised initially at fair value and subsequently measured at amortised cost using the eective interest rate method. Accounts payable are classiﬁed as current liabilities if payment is due within one year or less (or in the normal operating cycle of the business if longer). If not, they are presented as non-current liabilities. In respect of proﬁt sharing and bonus plans, the Group recognises a liability and a corresponding expense where a contractual obligation exists for short-term incentives. The amounts payable to employees in respect of the STI schemes are determined based on annual business performance targets and are presented as part of ‘Other payables and accrued expenses’. 2022 2021 £’m £’m Movement in the redemption liability Opening balance at 1 April 115 101 Charged to the income statement Remeasurement of redemption liability 1 23 Unwinding of discount 1 1 Exchange dierences 9 (10) Closing balance at 31 March 126 115 Notes 1 The comparatives have been re-presented by presenting refund liabilities separately from other payables and accrued expenses. 2 No signiﬁcant amounts of revenue were recognised during the year ended 31 March 2022 that were included in the refund liability balance at the beginning of the period or from performance obligations satisﬁed in previous periods. 2022 2021 £’m £’m Financial instruments Trade payables 263 235 Other payables and accrued expenses 200 158 Refund liabilities 2 59 48 522 441 Non-ﬁnancial instruments Other payables and accrued expenses 5 – Social insurance and accrued leave pay 45 46 Value added tax 14 11 64 57 586 498 (Re-presented) 1 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 231 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 31. FINANCIAL INSTRUMENTS Financial assets The Group classiﬁes its ﬁnancial assets in the following measurement categories: • Financial assets measured subsequently at fair value (either through FVOCI or FVPL) • Financial assets measured at amortised cost The classiﬁcation depends on the business model for managing the ﬁnancial assets and the contractual term of the cash ﬂows. Management determines the classiﬁcation of its investment at initial recognition. For assets measured at fair value, gains and losses will either be recorded in proﬁt or loss or other comprehensive income. For investments in debt instruments, this will depend on the business model in which the investment is held. For investments in equity instruments, this will depend on whether the Group has made an irrevocable election at the time of initial recognition to account for the equity investment at FVOCI. At initial recognition, the Group measures a ﬁnancial asset at its fair value plus, in the case of a ﬁnancial asset not at fair value through proﬁt or loss, transaction costs that are directly attributable to the acquisition of the ﬁnancial asset. Transaction costs of ﬁnancial assets carried at FVPL are expensed in proﬁt or loss. Financial assets are derecognised when the rights to receive cash ﬂows from the ﬁnancial assets have expired or have been transferred and the Group has transferred substantially all risks and rewards of ownership. Equity instruments and instruments managed on a portfolio basis The Group subsequently measures all equity investments and instruments managed on a portfolio basis at fair value. Changes in the fair value of ﬁnancial assets at FVPL are recognised in other gains and losses in the income statement. Where management has elected to present fair value gains and losses on these investments in other comprehensive income, there is no subsequent reclassiﬁcation of fair value gains and losses to proﬁt and loss. Upon derecognition of these investments, any balance within the FVOCI reserve is reclassiﬁed to retained earnings. Dividends from such investments are recognised in proﬁt or loss as other gains and losses when the Group’s right to receive payments is established. Impairment losses on these investments measured at FVOCI or FVPL are not reported separately from other changes in fair value. Instruments managed on a portfolio basis (other than equity instruments) consist of highly liquid investments in money market funds that do not meet the maturity criteria of IAS 7 Statement of Cash Flows and therefore cannot be classiﬁed as cash and cash equivalents. Debt instruments Subsequent measurement of debt instruments depends on the Group’s business model for managing the asset and the cash ﬂow characteristics of the asset. There are two measurement categories into which the Group classiﬁes its debt instruments: • Amortised cost: Assets that are held for collection of contractual cash ﬂows representing solely payments of principal and interest are measured at amortised cost. Interest income from these ﬁnancial assets is included in ﬁnance income using the eective interest rate method. Trade receivables and loans receivable are classiﬁed as debt instruments measured at amortised cost. • FVPL: Assets that do not meet the criteria for amortised cost or FVOCI are measured at FVPL. A gain or loss is recognised in proﬁt or loss and presented in the income statement as part of other gains and losses in the period in which it arises. Interest income from these ﬁnancial assets is included in ﬁnance income. Interest income for credit-impaired ﬁnancial assets is measured by applying the eective interest rate method to amortised cost. For all other ﬁnancial assets, the interest income is measured by applying the eective interest rate method to the gross carrying amount. Debt instruments are included in current assets, except for maturities greater than 12 months after the reporting date, which are classiﬁed as non-current assets. Impairment The Group recognises an allowance for expected credit losses for all debt instruments not held at FVPL. Expected credit losses are based on the dierence between the contractual cash ﬂows due in accordance with the contract and all the cash ﬂows that the Group expects to receive, discounted at an approximation of the original eective interest rate. Expected credit losses are recognised in two stages. For credit exposures for which there has not been a signiﬁcant increase in credit risk since initial recognition, expected credit losses are provided for credit losses that result from default events that are possible within the next 12 months. For those credit exposures for which there has been a signiﬁcant increase in credit risk since initial recognition, a loss allowance is required for credit losses expected over the remaining life of the exposure, irrespective of the timing of the default. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT232 For trade receivables only, the Group applies the simpliﬁed approach permitted by IFRS 9, which requires lifetime expected credit losses to be recognised from initial recognition of the receivables. The Group has established a provision matrix that is based on its historical credit loss experience, adjusted for forward-looking factors speciﬁc to the debtors and the economic environment. Trade receivables have been grouped based on shared credit risk characteristics, such as the counterparty (insurer or individual, etc.) or geographical region, and the days past due. The expected loss rates are based on the payment proﬁles of debtors and the corresponding historical credit losses experienced within this period. The historical loss rates are adjusted to reﬂect current and forward-looking information on macroeconomic factors aecting the ability of the customers to settle the receivables. For debt instruments at FVOCI and debt instruments at amortised cost, the Group applies the low credit risk simpliﬁcation. At every reporting date, the Group evaluates whether the debt instrument is considered to have low credit risk using all reasonable and supportable information that is available without undue cost or eort. In addition, the Group considers that there has been a signiﬁcant increase in credit risk when contractual payments are more than 30 days past due. The Group considers a ﬁnancial asset in default when contractual payments are 90 days past due. However, in certain cases, the Group may also consider a ﬁnancial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. A ﬁnancial asset is written o when there is no reasonable expectation of recovering the contractual cash ﬂows. Osetting of ﬁnancial assets and liabilities Financial assets and liabilities are oset and the net amount reported in the statement of ﬁnancial position when there is a legally enforceable right to oset the recognised amounts; the legally enforceable right is not contingent on a future event and is enforceable in the normal course of business even in the event of default, bankruptcy or insolvency; and there is an intention to settle on a net basis or realise the asset and settle the liability simultaneously. Financial liabilities The accounting policies for ﬁnancial liabilities are provided in notes 25, 26, 29 and 30. 31. FINANCIAL INSTRUMENTS CONTINUED Impairment continued The Group holds the following ﬁnancial instruments: Notes 1 Due to the short-term nature of the majority of these ﬁnancial assets, their carrying amounts are considered to be the same as their fair value. For the non-current ﬁnancial assets, the fair values are also not signiﬁcantly dierent from their carrying amounts. The fair values were calculated based on cash ﬂows discounted using a current lending rate. They are classiﬁed as level 3 fair values in the fair value hierarchy due to the inclusion of unobservable inputs. 2 Excluding non-ﬁnancial instruments. 3 For ﬁnancial liabilities, the fair values are not signiﬁcantly dierent from their carrying amounts, since the interest payable on these liabilities is either close to current market rates or the liabilities are of a short-term nature. The value of the redemption liability (written put option) is determined based on the proﬁtability of Clinique des Grangettes and Clinique La Colline. The exercise price is formula based and the ﬁnancial liability is recognised at amortised cost at the present value of the estimated future contractual cash ﬂows of the redemption amount. 2022 2021 Notes £’m £’m Financial assets Financial assets at amortised cost 1 Other investments and loans 17 9 9 Trade and other receivables 2 20 768 774 Cash and cash equivalents 33 534 294 Financial assets at FVPL 17 6 2 Financial assets at FVOCI 17 15 3 1 332 1 082 Financial liabilities Liabilities at amortised cost 3 Borrowings 25 1 803 1 777 Lease liabilities 26 786 676 Tari risk provisions 28 45 30 Trade and other payables 2 30 522 441 Derivative ﬁnancial instruments – written put option (redemption liability) 29 126 115 Derivative ﬁnancial instruments 29 3 11 3 285 3 050 The Group’s exposure to various risks associated with the ﬁnancial instruments is discussed in note 32. The maximum exposure to credit risk at the end of the reporting period is the carrying amount of each class of ﬁnancial assets mentioned above. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 233 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Fair value measurements Financial instruments measured at fair value in the statement of ﬁnancial position are classiﬁed using a fair-value hierarchy that reﬂects the signiﬁcance of the inputs used in the valuation. The fair-value hierarchy has the following levels: • Level 1 – The fair value of ﬁnancial instruments traded in active markets (such as publicly traded equity securities and investments in money market funds) is based on quoted market prices at the end of the reporting period. The quoted market price used for ﬁnancial assets held by the Group is the current bid price. These instruments are included in level 1. • Level 2 – The fair value of ﬁnancial instruments that are not traded in an active market (e.g. interest rate swaps) is determined using valuation techniques that maximise the use of observable market data and rely as little as possible on entity-speciﬁc estimates. If all signiﬁcant inputs required to fair value an instrument are observable, the instrument is included in level 2. • Level 3 – If one or more of the signiﬁcant inputs is not based on observable market data, the instrument is included in level 3. This is the case for unlisted equity securities, put/call agreements and forward contracts.  To provide an indication about the reliability of the inputs used in determining fair value, the Group has classiﬁed its ﬁnancial instruments into the three levels as follows: 31. FINANCIAL INSTRUMENTS CONTINUED At 31 March 2022 Notes Level 1 £’m Level 2 £’m Level 3 £’m Total £’m Financial assets Financial assets at FVPL Investments in money market funds 17 6 – – 6 Financial assets at FVOCI Listed equity securities 17 1 – – 1 Unlisted equity securities 17 – – 14 14 Total ﬁnancial assets 7 – 14 21 Financial liabilities Hedging derivatives – interest rate swaps 29 – 3 – 3 Total ﬁnancial liabilities – 3 – 3 At 31 March 2021 Notes Level 1 £’m Level 2 £’m Level 3 £’m Total £’m Financial assets Financial assets at FVPL Investments in money market funds 17 2 – – 2 Financial assets at FVOCI Listed equity securities 17 1 – – 1 Unlisted equity securities 17 – – 2 2 Total ﬁnancial assets 3 – 2 5 Financial liabilities Hedging derivatives – interest rate swaps 29 – 10 – 10 Derivatives – forward contracts 29 – – 1 1 Total ﬁnancial liabilities – 10 1 11 Changes in ﬁnancial assets classiﬁed into level 3 for the periods ended 31 March 2022 and 31 March 2021 are presented in note 17. Valuation techniques, inputs and processes Speciﬁc valuation techniques used to value ﬁnancial instruments include: • the use of quoted market prices or dealer quotes for similar instruments; • for interest rate swaps – the present value of the estimated future cash ﬂows based on observable yield curves; and • for other ﬁnancial instruments – discounted cash ﬂow analysis. The fair market value of unlisted shares of £5m is based on valuations performed using the net asset value. A 10% increase/decrease in the market value of the underlying investments in collective investment schemes will increase/decrease the asset and other comprehensive income by £1m (2021: £1m), respectively. A 10% increase/decrease in the liability for outstanding claims will decrease/increase the asset and other comprehensive income by £1m (2021: £1m), respectively. The fair market value of the unlisted shares acquired during the year ended 31 March 2022 of £8m approximates the acquisition price of the investment. As a result, the investment was not revalued at 31 March 2022. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT234 The fair value of unlisted equity instruments is performed by the ﬁnance departments of the operating segments for ﬁnancial reporting purposes. Valuation processes relevant to ﬁnancial instruments with signiﬁcant fair values are discussed every six months, in line with the Group’s half-year reporting periods. Signiﬁcant valuations are also discussed with the Audit and Risk Committee. 32. FINANCIAL RISK MANAGEMENT 32.1. Financial risk factors Normal business activities expose the Group to a variety of ﬁnancial risks: market risk (including currency risk, interest rate risk and other price risk), credit risk and liquidity risk. The Group’s overall risk management programme seeks to minimise the eect of potential adverse events on the Group’s ﬁnancial performance. Market risk i) Currency risk Investments in foreign operations The Group has investments in foreign operations whose net assets are exposed to foreign currency translation risk. Changes in the sterling/Swiss franc, sterling/South African rand and sterling/UAE dirham exchange rates over a period of time result in increased/decreased earnings. Other than the Group’s earnings and payment of dividends, which are presented and declared in sterling and thus exposed to currency risk, the Group is not signiﬁcantly exposed to currency risk since the divisions predominantly operate and are funded in their local currency. In the case of corporate oshore transactions and/or cross-border business combinations, generally forward cover contracts are considered or taken out to minimise foreign currency risk. 31. FINANCIAL INSTRUMENTS CONTINUED Valuation techniques, inputs and processes continued The impact of a change in the sterling/Swiss franc, sterling/South African rand and sterling/UAE dirham exchange rates for a sustained period of one year would result in an increase/decrease in post-tax proﬁt for the period and foreign currency translation reserve as indicated in the table below: Impact on post-tax proﬁt for the period Impact on foreign currency translation reserve 2022 £’m 2021 £’m 2022 £’m 2021 £’m 10% change in the sterling/Swiss franc exchange rate 4 1 152 162 10% change in the sterling/South African rand exchange rate 8 3 21 13 10% change in the sterling/UAE dirham exchange rate 5 4 113 114 ii) Interest rate risk The Group’s interest rate risk arises from long-term borrowings as well as short-term deposits. Borrowings and short-term deposits issued at variable rates expose the Group to cash ﬂow interest rate risk. Interest rate derivatives and assets issued at ﬁxed interest rates expose the Group to fair value interest rate risk. Group policy is to maintain an appropriate mix between ﬁxed and ﬂoating rate borrowings and placings. The Group’s interest rate risk arises from bank borrowings at variable interest rates. The Group manages its interest rate risk by using ﬂoating-to-ﬁxed interest rate swaps. Such interest rate swaps have the economic eect of converting borrowings from ﬂoating rates to ﬁxed rates. Under the interest rate swaps, the Group agrees with other parties to exchange, at speciﬁed intervals, the dierence between ﬁxed contract rates and ﬂoating-rate interest amounts calculated by reference to the agreed notional amounts. The interest rate hedges entered into match key contractual terms of the borrowings to enable an economic relationship between hedged item and hedging instrument. At year end, a portion of the South African borrowings and Middle East borrowings were hedged and the Swiss borrowings were unhedged (see note 25). The unhedged borrowings are evaluated on a regular basis. With the interest rate swap agreements the Group entered into to mitigate interest rate risk, the Group did not consider there to be a signiﬁcant concentration of interest rate risk. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 235 32. FINANCIAL RISK MANAGEMENT CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Financial instruments issued at ﬁxed rates expose the Group to fair value interest rate risk. The Group’s exposure to fair value interest rate risk is not considered to be signiﬁcant due to the short-term nature of the investments. Interest rate sensitivity The sensitivity analyses below were determined based on the exposure to interest rates of net debt at the reporting date and the stipulated change taking place at the beginning of the ﬁnancial year, and held constant throughout the reporting period in the case of instruments that have ﬂoating rates. The sensitivity of interest rates can be summarised as follows: • Switzerland: At 31 March 2022, the SARON was -0.70% (2021: -0.75%). Interest rates would have to increase by 70 basis points to have an impact on post-tax proﬁt for the period with all other variables held constant. An increase in the interest rate of 25 basis points would have no impact on post-tax proﬁt for the period (2021: no impact). • Southern Africa: Post-tax proﬁt for the period would decrease/increase by £0.4m (2021: decrease/increase by £0.7m) if the interest rates had been 100 basis points higher/lower in Southern Africa with all other variables held constant; and • Middle East: Post-tax proﬁt for the period would decrease/increase by £0.1m (2021: decrease/increase by £0.4m) if the interest rates had been 50 basis points higher/lower in the Middle East with all other variables held constant. Credit risk Financial assets that potentially subject the Group to concentrations of credit risk consist principally of cash, short-term deposits, trade and other receivables and derivative ﬁnancial contracts. The Group’s cash equivalents and short-term deposits are placed with reputable ﬁnancial institutions with a high credit rating (see note 33.7). Trade receivables are represented net of the allowance for expected credit losses. Credit risk with respect to trade receivables is limited due to the large number of customers comprising the Group’s customer base, which consists mainly of medical schemes and insurance companies. The ﬁnancial condition of these customers in relation to their credit standing is evaluated on an ongoing basis. Medical schemes and insurance companies are required to maintain minimum reserve levels. The policy 32.1. Financial risk factors continued Market risk continued ii) Interest rate risk (continued) for patients that do not have a medical scheme or an insurance company paying for the Group’s service is to require a preliminary payment instead. The Group does not have any signiﬁcant exposure to any individual customer or counterparty and expected credit losses were assessed at the end of the year. The Group is exposed to credit-related losses in the event of non-performance by counterparties to hedging instruments. The counterparties to these contracts are major ﬁnancial institutions. The Group monitors its positions and limits the extent to which it enters into contracts with any one party. The gross carrying amounts of ﬁnancial assets (before credit loss allowances) included in the statement of ﬁnancial position represent the Group’s maximum exposure to credit risk in relation to these assets. At 31 March 2022 and 31 March 2021, the Group did not consider there to be a signiﬁcant concentration of credit risk. Liquidity risk The Group manages liquidity risk by monitoring cash ﬂow forecasts to ensure that it has sucient cash to meet operational needs, while maintaining sucient headroom on its undrawn borrowing facilities at all times so that the Group does not breach borrowing limits or covenants (where applicable) on any of its borrowing facilities. 2022 2021 £’m £’m The Group's unused banking and overdraft facilities 408 385 Cash and cash equivalents 534 294 Cash and available facilities 942 679 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT236 The following table details the Group’s remaining contractual maturity for its ﬁnancial liabilities. The table has been prepared based on the undiscounted cash ﬂows of ﬁnancial liabilities based on the required date of repayment. The table includes both interest and principal cash ﬂows. The analysis of derivative ﬁnancial instruments has been prepared based on undiscounted net cash inﬂows/(outﬂows) that settle on a net basis. 32. FINANCIAL RISK MANAGEMENT CONTINUED 32.1. Financial risk factors continued Liquidity risk continued Insurance risk The risk that an insured event occurs and the amount of the resulting claim is uncertain. The risks covered by the Group’s insurance policies include property damage and business interruption, malpractice claims, directors’ and ocers’ liability, commercial crime and cyber risk. The Group manages insurance risk by outsourcing claims handling to service providers who review the claims on a regular basis and by pursuing early settlement of claims to reduce its exposure to unpredictable developments. 32.2. Capital management The Group manages its capital to ensure that entities in the Group will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the debt and equity balance. The capital structure of the Group consists of debt, which includes the borrowings disclosed in note 25; cash and cash equivalents and equity attributable to equity holders of the parent, comprising issued capital, retained earnings and other reserves, and NCI, as disclosed in notes 21, 22 and 23, respectively. The Group’s Audit and Risk Committee reviews the going concern status and capital structure of the Group biannually. The Group balances its overall capital structure through the payment of dividends and new share issues, as well as the issue of new debt or the redemption of existing debt. Although a dividend suspension was in place during the reporting period, the Group’s dividend policy is to target a payout ratio of 25–35% of adjusted earnings. The Board may revise the policy at its discretion. The debt-to-capital ratios as at 31 March 2022 and 31 March 2021 were as follows: Note 1 Excluding non-ﬁnancial liabilities. Financial liabilities Carrying value £’m Contractual cash ﬂows £’m 1–12 months £’m 1–5 years £’m Beyond 5 years £’m 31 March 2022 Borrowings 1 803 2 217 174 1 060 983 Lease liabilities 786 1 057 67 246 744 Derivative ﬁnancial instruments 129 136 5 131 – Trade payables and other payables 1 522 522 522 – – 3 240 3 932 768 1 437 1 727 31 March 2021 Borrowings 1 777 2 550 147 1 549 854 Lease liabilities 676 886 59 217 610 Derivative ﬁnancial instruments 126 130 8 122 – Trade payables and other payables 441 441 441 – – 3 020 4 007 655 1 888 1 464 2022 2021 £’m £’m Borrowings 1 803 1 777 Less: cash and cash equivalents (534) (294) Net incurred debt 1 269 1 483 Lease liabilities 786 676 Net debt 2 055 2 159 Total equity 3 246 2 967 Debt-to-equity capital ratio 63.3% 72.8% STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 237 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 33. CASH FLOW INFORMATION Cash and cash equivalents consist of balances with banks and cash-on-hand and are classiﬁed as debt instruments measured at amortised cost. Cash at banks comprises cash that can readily be converted into cash. Bank overdrafts are classiﬁed as ﬁnancial liabilities at amortised cost and are disclosed as part of borrowings in current liabilities in the statement of ﬁnancial position. Cash ﬂows in currencies other than the functional currency are translated at the average exchange rate for the period in question. The cash ﬂow statement is prepared by the indirect method based on consolidated proﬁt before income tax, and shows cash ﬂows from operating, investing and ﬁnancing activities as well as the Group’s cash at banks at opening and closing. Cash ﬂow from operating activities is speciﬁed as the proﬁt before income tax for the year adjusted for non-cash operating items, changes in the working capital, and corporation tax paid. Cash ﬂow from investing activities includes the purchase and sale of property, equipment and vehicles and intangible assets, as well as the acquisition and disposal of investments in subsidiaries and associates. Cash ﬂow from ﬁnancing activities includes the raising and repaying of long-term liabilities, short-term bank loans and the payment of dividends. 2022 2021 £’m £’m 33.1. Reconciliation of proﬁt before taxation to cash generated from operations Proﬁt before taxation 211 104 Adjustments for: Finance cost – net 68 95 Share of net proﬁt of equity-accounted investments 1 10 Share-based payments 4 – Depreciation and amortisation 228 217 Loss allowance of trade receivables 12 11 Movement in provisions 21 12 Movement in retirement beneﬁt obligations 16 6 Impairment of properties and intangible assets 7 3 Impairment of equity-accounted investment – 1 Foreign exchange dierences 1 – Insurance proceeds (6) (2) Other non-cash items 1 (2) Operating income before changes in working capital 564 455 Working capital changes 99 (125) Decrease/(increase) in inventories 15 (10) Decrease/(increase) in trade and other receivables 35 (129) Increase in trade and other payables 49 14 663 330 33.2. Interest paid Finance cost per income statement 74 99 Non-cash items Amortisation of capitalised ﬁnancing fees (3) (3) Borrowing costs capitalised 1 1 Remeasurement of redemption liability (1) (23) Unwinding of discount of redemption liability (1) (1) Accrued interest on lease liability (1) (3) 69 70 33.3. Tax paid Liability at the beginning of the year 4 2 Provision for the year 46 31 50 33 Liability at year end (4) (4) 46 29 2022 2021 (Continued) £’m £’m MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT238 33.4. Capital expenditure to maintain operations Property, equipment and vehicles purchased 84 46 Intangible assets purchased 10 8 Movement in capital expenditure payables 2 2 96 56 33.5. Capital expenditure to expand operations Property, equipment and vehicles purchased 73 59 Intangible assets purchased 11 13 Movement in capital expenditure payables (1) 8 83 80 33. CASH FLOW INFORMATION CONTINUED 2022 2021 (Continued) £’m £’m 33.6. Changes in liabilities arising from ﬁnancing activities Total borrowings Net derivative ﬁnancial instruments held to hedge borrowings Total lease liabilities Total £’m £’m £’m £’m Year ended 31 March 2022 Opening balance 1 777 10 676 2 463 Cash ﬂow movements Proceeds from borrowings 89 – – 89 Repayment of borrowings (183) – – (183) Repayment of lease liabilities – – (42) (42) Reﬁnancing transaction cost (3) – – (3) Interest payments (presented as cash ﬂows from operating activities) (43) (6) (20) (69) Non-cash items Amortisation of capitalised ﬁnancing fees 3 – – 3 Cash ﬂow hedges reclassiﬁed to proﬁt and loss – (6) – (6) Fair value adjustment on cash ﬂow hedges – (1) – (1) New lease commitments entered into during the year – – 109 109 Lease commitments terminated during the year – – (5) (5) Accrued interest 43 6 21 70 Exchange rate dierences 120 – 47 167 Closing balance 1 803 3 786 2 592 2022 2021 £’m £’m STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 239 Year ended 31 March 2021 (Re-presented) Opening balance 1 951 10 703 2 664 Cash ﬂow movements Proceeds from borrowings 115 – – 115 Repayment of borrowings (196) – – (196) Repayment of lease liabilities – – (39) (39) Reﬁnancing transaction cost (3) – – (3) Interest payments (presented as cash ﬂows from operating activities) (46) (7) (17) (70) Non-cash items Amortisation of capitalised ﬁnancing fees 3 – – 3 Cash ﬂow hedges reclassiﬁed to proﬁt and loss – (2) – (2) Fair value adjustment on cash ﬂow hedges – 2 – 2 New lease commitments entered into during the year – – 59 59 Lease commitments terminated during the year – – (1) (1) Remeasurement of lease liabilities – – 8 8 Accrued interest 46 7 20 73 Exchange rate dierences (93) – (57) (150) Closing balance 1 777 10 676 2 463 33. CASH FLOW INFORMATION CONTINUED Note 1 The comparatives have been re-presented to present interest payments (as cash ﬂow movements) and accrued interest (as non-cash items) on a gross basis. Previously, interest payments were included as part of accrued interest as non-cash items. Notes 1 The facility agreement of the Swiss subsidiary restricts the distribution of cash. Bank balances to the value of £65m (2021: £15m) are held with counterparties who have a minimum A1 credit rating by Moody’s and £96m (2021: £73m) are held with counterparties who have a minimum Aa2 credit rating by Moody’s. 2 The counterparties have a minimum Ba2 credit rating by Moody’s. 3 The counterparties have a minimum A1 credit rating by Moody’s. NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED 33.6. Changes in liabilities arising from ﬁnancing activities continued Total borrowings Net derivative ﬁnancial instruments held to hedge borrowings Total lease liabilities Total £’m £’m £’m £’m 2022 2021 £’m £’m 33.7. Cash and cash equivalents For the purposes of the statement of cash ﬂows, cash, cash equivalents and bank overdrafts include: Cash and cash equivalents 534 294 Cash, cash equivalents and bank overdrafts are denominated in the following currencies: Swiss franc 1 161 88 South African rand 2 190 112 UAE dirham 3 95 31 Sterling 3 74 56 US dollar 3 14 7 534 294 Exchange controls in South Africa may restrict the use of certain cash balances at the Group’s Southern African operations. These restrictions are not expected to have any material eect on the Group’s ability to meet its ongoing obligations. Cash and cash equivalents denominated in Swiss franc amounting to £72m (2021: £60m) and South African bank accounts denominated in South African rand amounting to £58m (2021: £5m) have been ceded as security for borrowings (see note 25). MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT240 34. BUSINESS COMBINATIONS The Group accounts for business combinations using the acquisition method of accounting. The cost of the business combination is measured as the aggregate of the fair values of assets obtained and liabilities incurred or assumed. Costs directly attributable to the business combination are expensed as incurred, except the costs to issue debt or incur borrowings, which are amortised as part of the eective interest, and costs to issue equity, which are included in equity. The acquiree’s identiﬁable assets, liabilities and contingent liabilities that meet the recognition conditions of IFRS 3 Business Combinations are recognised at their fair values at acquisition date, except for non-current assets (or disposal companies) that are classiﬁed as held-for-sale in accordance with IFRS 5 Non-current Assets Held-for-sale and Discontinued Operations, which are recognised at fair value less costs to sell. Contingent liabilities are included in the identiﬁable assets and liabilities of the acquiree only where there is a present obligation at acquisition date. On acquisition, the Group assesses the classiﬁcation of the acquiree’s assets and liabilities and reclassiﬁes them where the classiﬁcation is inappropriate for Group purposes. This excludes lease agreements and insurance contracts, whose classiﬁcation remains as per their inception date. NCI arising from a business combination, which are present ownership interests and entitle their holders to a proportionate share of the entity’s net assets in the event of liquidation, are measured either at the present ownership interests’ proportionate share in the recognised amounts of the acquiree’s identiﬁable net assets or at fair value. The treatment is not an accounting policy choice but is selected for each individual business combination and disclosed in the note for business combinations. All other components of NCI are measured at their acquisition date fair values, unless another measurement basis is required by IFRS. In cases where the Group held a non-controlling shareholding in the acquiree prior to obtaining control, that interest is measured to fair value at acquisition date. The measurement to fair value is included in proﬁt or loss for the year. Amounts arising from interests in the acquiree prior to the acquisition date that have previously been recognised in other comprehensive income are reclassiﬁed to proﬁt or loss, where such treatment would be appropriate if that interest were disposed of. Goodwill is determined as the consideration paid, plus the fair value of any shareholding held prior to obtaining control, plus NCI, less the fair value of the identiﬁable assets and liabilities of the acquiree. If the total of consideration transferred, NCI recognised and previously held interest measured is less than the fair value of the net assets of the subsidiary acquired, the dierence is recognised directly in the income statement. Goodwill is not amortised but is tested on an annual basis for impairment or more frequently if events or changes in circumstances indicate a potential impairment. If goodwill is assessed to be impaired, that impairment is not subsequently reversed. Goodwill arising on acquisition of foreign entities is considered an asset of the foreign entity. In such cases, the goodwill is translated to the functional currency of the Company at the end of each reporting period with the adjustment recognised in equity through other comprehensive income. The following business combinations occurred during the current and prior years: 2022 2021 £’m £’m Cash ﬂow on acquisition: OPERA Zumikon – (2) Bourn Hall International MENA Limited (3) – Ayadi Home Health Care LLC (4) – (7) (2) Bourn Hall International MENA Limited Eective on 11 November 2021, Emirates Healthcare Limited, which forms part of the Middle East segment, acquired the remaining 70% shares in Bourn Hall for £4m. Bourn Hall specialises in IVF treatments. The goodwill of £7m arising from the acquisition is attributable to the acquired workforce and future cash ﬂow from operations. Revenue and proﬁt contribution The acquired business contributed revenues of £4m and net proﬁt of less than £0.5m to the Group for the period from 11 November 2021 to 31 March 2022. If the acquisition had occurred on 1 April 2021, consolidated pro-forma revenue and net proﬁt for the year ended 31 March 2022 would have been £7m and less than £0.5m, respectively. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 241 34. BUSINESS COMBINATIONS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Ayadi Home Health Care LLC Eective on 27 December 2021, Mediclinic Hospitals LLC, which forms part of the Middle East segment, acquired 100% of the shares in the accredited Al Ain-based home healthcare services business, Ayadi Home Health Care LLC (‘Ayadi Home Healthcare’), for £4m. The goodwill of £3m arising from the acquisition is attributable to the acquired workforce and future cash ﬂow from operations. Revenue and proﬁt contribution The acquired business contributed revenues of £1m and net proﬁt of less than £0.5m to the Group for the period from 27 December 2021 to 31 March 2022. If the acquisition had occurred on 1 April 2021, consolidated pro-forma revenue and net loss for the year ended 31 March 2022 would have been £3m and £1m, respectively. The following table summarises the provisional fair value of assets acquired and liabilities assumed at the respective acquisition dates: 35. DISPOSAL OF SUBSIDIARIES During the prior year, the Group disposed of a number of outpatient clinics which were part of the Swiss division and Mediclinic Howick, which was part of the Southern African division. The total net assets disposed of had a carrying value of £4m and were disposed of for a total consideration of £4m. The transactions resulted in a net loss on disposal of subsidiary of less than £0.5m. After considering the cash and cash equivalents disposed of, the net cash ﬂow on disposal was £4m. 36. COMMITMENTS 2022 2022 2022 £’m £’m £’m Bourn Hall Ayadi Home Healthcare Total Recognised amounts of identiﬁable assets acquired and liabilities assumed Total assets 5 1 6 Total liabilities 5 – 5 Total identiﬁable net assets at fair value – 1 1 Goodwill 7 3 10 Consideration transferred for the business 7 4 11 Fair value of the Group's existing portion (3) – (3) Cash ﬂow on acquisition 4 4 8 Cash ﬂow on acquisition Net cash acquired with subsidiary 1 – 1 Cash paid (4) (4) (8) Net cash ﬂow upon acquisition (3) (4) (7) 2022 2021 £’m £’m Capital commitments Incomplete capital expenditure contracts 161 190 Switzerland 114 125 Southern Africa 31 55 Middle East 16 10 Capital expenses authorised by the Board of Directors but not yet contracted 109 77 Switzerland 13 12 Southern Africa 74 39 Middle East 22 26 270 267 These commitments will be ﬁnanced from Group cash ﬂow and borrowed funds. Income guarantees As part of the expansion of network of specialist institutes in Switzerland and centres of expertise, the Group has agreed to guarantee a minimum net income to these specialists for a start-up period of 3–5 years. Payments under such guarantees become due if the net income from the collaboration does not meet the amounts guaranteed. There were no payments under the aforementioned income guarantees in the reporting period as the net income individually generated met or exceeded the amounts guaranteed. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT242 36. COMMITMENTS CONTINUED Income guarantees continued Note 1 Amount is less than £0.5m in the prior year. Notes 1 Details of directors’ remuneration are contained in the Remuneration Committee Report on pages 143–167. 2 Amount is less than £0.1m. 2022 2021 £’m £’m Total of net income guaranteed: April 2021 – March 2022 – 3 April 2022 – March 2023 1 2 – April 2023 – March 2024 1 1 – 3 3 Contingent liabilities The Group is routinely subject to legal proceedings, claims, complaints and investigations arising out of the ordinary course of business. The Group cannot always accurately predict the outcome of individual legal actions, claims, complaints or investigations but a best estimate of the likelihood of such actions and claims crystallising a ﬁnancial exposure is made at each year end. Where an exposure is deemed probable and is reliably estimable, a provision is made. Except for matters where provisions have been recorded, which are described in note 28, the Group considers that no material loss to the Group is expected to result from legal proceedings, claims, complaints and investigations. 37. RELATED PARTY TRANSACTIONS Remgro Ltd owns, through various subsidiaries (Remgro Healthcare [Pty] Ltd, Remgro Health Ltd and Remgro Jersey GBP Ltd), 44.56% (2021: 44.56%) of the Company’s issued share capital. The following transactions were carried out with related parties: 2022 2021 £’m £’m i) Transactions with shareholders Remgro Management Services Ltd (subsidiary of Remgro Ltd) Managerial and administration fees 0.3 0.3 ii) Key management compensation 1 Key management includes the directors (executive and non-executive) and members of the Group Executive Committee Salaries and other short-term beneﬁts Short-term beneﬁts 9 8 iii) Transactions with associates and joint ventures Zentrallabor Zürich Purchases 10 11 Wits University Donald Gordon Medical Centre (Pty) Ltd Fees received (2) (2) Agency fees received (2) (1) Al Murjan Medical Center Fees earned (1) – Spire Healthcare Group plc Non-executive director fee 2 – – iv) Loans to related parties Wits University Donald Gordon Medical Centre (Pty) Ltd 2 2 Bourn Hall LLC – 2 v) Other receivables & payables due from/(to) related parties Wits University Donald Gordon Medical Centre (Pty) Ltd – 2 Zentrallabor Zürich ZLZ – (1) 2022 2021 (Continued) £’m £’m STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 243 37. RELATED PARTY TRANSACTIONS CONTINUED NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Terms and conditions Managerial and administration fees were bought on a cost-plus basis. All other transactions were made on normal commercial terms and conditions and at market rates. During the year ended 31 March 2022, the Southern African division entered into an agreement with Energy Exchange of Southern Africa, an associate of Remgro Ltd, to procure renewable electricity. There were no transactions for the period under review or amounts outstanding at 31 March 2022. The loan to Wits University Donald Gordon Medical Centre (Pty) Ltd is interest free and repayable on demand. The loan to Zentrallabor Zürich ZLZ is interest free and repayable in August 2022. 38. EVENTS AFTER THE REPORTING DATE The directors are not aware of any matter or circumstance arising since the end of the ﬁnancial year that would signiﬁcantly aect the operations of the Group or the results of its operations. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT244 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % Mediclinic CHF Finco Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Treasur y 100.0 100.0 Mediclinic Holdings Netherlands B.V. Schiekade 830, 3032 AL Rotterdam Netherlands Intermediary holding company 100.0 100.0 Mediclinic International (RF) (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company 100.0 100.0 Mediclinic Middle East Holdings Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Intermediary holding company 100.0 100.0 Ouroboros Solutions AG Sihlbruggstrasse 3, 6340 Baar Switzerland Intermediary holding company 100.0 - INDIRECTLY HELD THROUGH MEDICLINIC CHF FINCO LIMITED Mediclinic Jersey Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Intermediary holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC HOLDINGS NETHERLANDS B.V. Mediclinic Luxembourg S.à.r.l. 14 Rue Edward Steichen, L-2540 Luxembourg Luxembourg Intermediary holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC LUXEMBOURG S.À.R.L. Hirslanden AG Boulevard Lilienthal 2, 8152 Glattpark (Opﬁkon) Switzerland Intermediary holding company and operating company of Hirslanden 100.0 100.0 INDIRECTLY HELD THROUGH HIRSLANDEN AG AndreasKlinik AG Cham Rigistrasse 1, 6330 Cham Switzerland Healthcare services 100.0 100.0 Hirslanden Bern AG Schänzlihalde 11, 3013 Bern Switzerland Healthcare services 100.0 100.0 Hirslanden Klinik Aarau AG Schänisweg, 5000 Aarau Switzerland Healthcare services 100.0 100.0 Hirslanden Klinik Linde AG Blumenrain 105, 2503 Biel/Bienne Switzerland Healthcare services 100.0 100.0 Hirslanden Klinik Am Rosenberg AG Hasenbühlstrasse 11, 9410 Heiden Switzerland Healthcare services 100.0 100.0 Hirslanden La Colline Grangettes SA Chemin des Grangettes 7, c/o Clinique des Grangettes SA 1224 Chêne-Bougeries Switzerland Healthcare services 60.0 60.0 SUBSIDIARIES 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 245 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH HIRSLANDEN AG CONTINUED Hirslanden Lausanne SA Avenue d’Ouchy 31, 1006 Lausanne Switzerland Healthcare services 100.0 100.0 Hirslanden OPERA AG 2 Boulevard Lilienthal 2, 8152 Glattpark (Opﬁkon) Switzerland Hirslanden OPERA AG 100.0 100.0 Hirslanden Praxiszentrum am Bahnhof, Schahausen AG 2 Bleichestrasse 3, 8200 Schahausen Switzerland Healthcare services - - Hirslanden Precise AG Forchstrasse 452, 8702 Zollikon Switzerland Healthcare services 100.0 100.0 Hirslanden Venture Capital AG Boulevard Lilienthal 2, 8152 Glattpark (Opﬁkon) Switzerland Healthcare services 100.0 100.0 IMRAD SA Avenue d’Ouchy 31, Clinique Bois-Cerf c/o Hirslanden Lausanne SA, 1006 Lausanne Switzerland Healthcare services 75.0 75.0 Klinik Birshof AG Reinacherstrasse 28, 4142 Münchenstein Switzerland Healthcare services 99.9 99.9 Klinik St. Anna AG St. Anna-Strasse 32, 6006 Luzern Switzerland Healthcare services 100.0 100.0 Klinik Stephanshorn AG Brauerstrasse 95, 9016 St. Gallen Switzerland Healthcare services 100.0 100.0 Radiotherapie Hirslanden AG Rain 34, 5000 Aarau Switzerland Healthcare services 100.0 100.0 INDIRECTLY HELD THROUGH HIRSLANDEN KLINIK AM ROSENBERG AG Klinik am Rosenberg Heiden AG Hasenbühlstrasse 11, 9410 Heiden Switzerland Healthcare services 99.2 99.2 INDIRECTLY HELD THROUGH HIRSLANDEN LA COLLINE GRANGETTES SA Hirslanden Clinique La Colline SA Avenue de Beau-Séjour 6, 1206 Genève Switzerland Healthcare services 60.0 60.0 Grangettes Healthcare SA Chemin des Grangettes 7, c/o Clinique des Grangettes SA 1224 Chêne-Bougeries Switzerland Healthcare services 60.0 60.0 INDIRECTLY HELD THROUGH GRANGETTES HEALTHCARE SA Clinique des Grangettes SA Chemin des Grangettes 7, 1224 Chêne-Bougeries Switzerland Healthcare services 60.0 60.0 Dianecho SA Rue de Carouge 116, 1205 Genève Switzerland Healthcare services 43.9 43.9 INDIRECTLY HELD THROUGH HIRSLANDEN OPERA AG 2 Hirslanden OPERA Zumikon AG Morgental 35, 8126 Zumikon Switzerland Healthcare services 100.0 100.0 Hirslanden OPERA St. Gallen AG Schuppisstrasse 10, 9016 St. Gallen Switzerland Healthcare services 100.0 100.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT246 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH HIRSLANDEN OPERA AG 2 CONTINUED Hirslanden OPERA Bern AG Nordring 4, 3013 Bern Switzerland Healthcare services 100.0 - INDIRECTLY HELD THROUGH IMRAD SA Hirslanden Freiburg AG, Düdingen Bahnhofplatz 2a, 3186 Düdingen Switzerland Healthcare services 75.0 75.0 INDIRECTLY HELD THROUGH MEDICLINIC INTERNATIONAL (RF) (PTY) LTD Mediclinic Group Services (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Provision of group services within Mediclinic 100.0 100.0 Mediclinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC GROUP SERVICES (PTY) LTD Medical Innovations (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital equipment and procurement 100.0 100.00 INDIRECTLY HELD THROUGH MEDICLINIC INVESTMENTS (PTY) LTD Mediclinic Southern Africa (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC SOUTHERN AFRICA (PTY) LTD Curamed Holdings (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company 73.4 73.4 Mediclinic Denmar Mental Health Services (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Mental healthcare services 100.0 100.0 ER24 Holdings (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company 100.0 100.0 Intelimed (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Managed care organisation (dormant) 100.0 100.0 Intercare Group Hospital Holdings (Pty) Ltd (Hospitals) Glenfair Oce Block, Lynnwood & Daventry Roads, Lynnwood 0081 South Africa Healthcare services 59.2 50.1 Medical Human Resources (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Management of healthcare sta 100.0 100.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 247 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH MEDICLINIC SOUTHERN AFRICA (PTY) LTD CONTINUED Mediclinic (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intermediary holding company and operating company of Mediclinic Southern Africa 100.0 100.0 Mediclinic Brits (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 66.5 66.8 Mediclinic Finance Corporation (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Treasur y 100.0 100.0 Mediclinic Holdings (Namibia) (Pty) Ltd Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Intermediary holding company 100.0 100.0 Mediclinic Lephalale (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 93.0 93.0 Mediclinic Midstream (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 81.8 81.8 Mediclinic Paarl (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 77.7 75.5 Mediclinic Properties (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Property ownership and management 100.0 100.0 Mediclinic Renal Services (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 70.0 100.0 Mediclinic Renal Services Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 70.0 100.0 Mediclinic Stellenbosch (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 87.3 87. 3 Mediclinic Tzaneen (Pty) Ltd 2 (50% plus one share) Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 52.9 50.0 Newcastle Private Hospital (Pty) Ltd 2 (50% plus one share, including B class shares) Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 21.4 21.4 Practice Relief (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Provision of debt collection and related services 100.0 100.0 Victoria Hospital (Pty) Ltd 2 (50% plus ﬁve shares, including B class shares) Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 33.7 33.7 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT248 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH MEDICLINIC SOUTHERN AFRICA (PTY) LTD CONTINUED Sandton Day Hospital (Pty) Ltd 4 Glenfair Oce Block, Lynnwood & Daventry Roads, Lynnwood 0081 South Africa Healthcare services 70.0 70.0 Sandton Sub-Acute Hospital (Pty) Ltd 4 Glenfair Oce Block, Lynnwood & Daventry Roads, Lynnwood 0081 South Africa Healthcare services 70.0 70.0 INDIRECTLY HELD THROUGH CURAMED HOLDINGS (PTY) LTD Curamed Hospitals (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 100.0 100.0 Curamed Properties (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Property ownership and management 100.0 100.0 INDIRECTLY HELD THROUGH CURAMED HOSPITALS (PTY) LTD 2 Mediclinic Thabazimbi (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 76.0 76.0 INDIRECTLY HELD THROUGH ER24 HOLDINGS (PTY) LTD ER24 EMS (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Emergency medical services 100.0 100.0 ER24 Trademarks (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Intellectual property holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC (PTY) LTD Mediclinic Ermelo (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 61.8 59.8 Mediclinic Hermanus (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 39.1 39.1 Mediclinic Kimberley (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 89.1 89.6 Mediclinic Limpopo (Pty) Ltd 2&3 (50% plus 1 share) Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 50.0 50.0 Mediclinic Potchefstroom (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 87.4 87.7 Mediclinic Upington (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 50.0 50.0 INDIRECTLY HELD THROUGH MEDICLINIC LIMPOPO (PTY) LTD 2&3 Mediclinic Limpopo Day Clinic (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 56.4 56.4 Mediclinic Limpopo Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Investment holding company 100.0 100.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 249 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % HOSPITAL INVESTMENT COMPANIES Mediclinic Bloemfontein Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 98.2 98.2 Mediclinic Cape Gate Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 93.5 91.4 Mediclinic Cape Town Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 98.0 99.0 Mediclinic Constantiaberg Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 75.0 75.0 Mediclinic Durbanville Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 99.4 99.4 Mediclinic Emfuleni Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 81.0 81.0 Mediclinic George Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 99.5 99.5 Mediclinic Highveld Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 97.1 97.1 Mediclinic Hoogland Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 98.5 98.8 Mediclinic Kathu Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Deregistered 0.0 100.0 Mediclinic Klein Karoo Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 100.0 100.0 Mediclinic Legae Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 87.5 87. 5 Mediclinic Louis Leipoldt Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 99.9 99.9 Mediclinic Milnerton Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 97.4 99.4 Mediclinic Morningside Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 81.3 82.3 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT250 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % HOSPITAL INVESTMENT COMPANIES CONTINUED Mediclinic Nelspruit Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 98.0 98.2 Mediclinic Panorama Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 99.2 99.2 Mediclinic Pietermaritzburg Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 77.5 77.6 Mediclinic Plettenberg Bay Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 93.0 93.0 Mediclinic Sandton Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 91.0 93.8 Mediclinic Secunda Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 100.0 82.2 Mediclinic Vereeniging Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 99.4 99.4 Mediclinic Vergelegen Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 94.9 94.9 Mediclinic Welkom Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 93.2 91.6 Mediclinic Worcester Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Hospital investment company 97.3 97.3 INDIRECTLY HELD THROUGH MEDICLINIC BLOEMFONTEIN INVESTMENTS (PTY) LTD Mediclinic Bloemfontein Day Clinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Day case clinic investment company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC CAPE GATE INVESTMENTS (PTY) LTD Mediclinic Cape Gate Day Clinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Day case clinic investment company 83.2 100.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 251 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH MEDICLINIC DURBANVILLE INVESTMENTS (PTY) LTD Mediclinic Durbanville Day Clinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Day case clinic investment company 85.2 85.2 INDIRECTLY HELD THROUGH MEDICLINIC NELSPRUIT INVESTMENTS (PTY) LTD Mediclinic Nelspruit Day Clinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Day case clinic investment company 86.6 100.0 INDIRECTLY HELD THROUGH MEDICLINIC VERGELEGEN INVESTMENTS (PTY) LTD Mediclinic Vergelegen Day Clinic Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Day case clinic investment company 89.3 100.0 INDIRECTLY HELD THROUGH MEDICLINIC WELKOM INVESTMENTS (PTY) LTD Welkom Medical Centre (Free State) (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 84.7 83.5 INDIRECTLY HELD THROUGH MEDICLINIC HOLDINGS (NAMIBIA) (PTY) LTD Mediclinic Capital (Namibia) (Pty) Ltd Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Investment holding company 100.0 100.0 Mediclinic Otjiwarongo (Pty) Ltd 2 Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Healthcare services 100.0 100.0 Mediclinic Properties (Swakopmund) (Pty) Ltd Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Property ownership and management 100.0 100.0 Mediclinic Properties (Windhoek) (Pty) Ltd Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Property ownership and management 100.0 100.0 Mediclinic Swakopmund (Pty) Ltd 2 Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Healthcare services 98.9 98.9 Mediclinic Windhoek (Pty) Ltd 2 Grant Thornton Neuhaus, 12 th ﬂoor, Sanlam Centre, 157 Independence Avenue, Windhoek Namibia Healthcare services 97.5 97.4 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT252 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH MEDICLINIC STELLENBOSCH (PTY) LTD 2 Mediclinic Stellenbosch Day Clinic (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Dormant 76.1 76.1 Mediclinic Winelands (Pty) Ltd 2 Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Healthcare services 50.1 50.1 INDIRECTLY HELD THROUGH MEDICLINIC TZANEEN (PTY) LTD 2 Mediclinic Tzaneen Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Investment holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC VICTORIA HOSPITAL (PTY) LTD Victoria Hospital Investments (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600 South Africa Investment holding company 100.0 100.0 INDIRECTLY HELD THROUGH MEDICLINIC MIDDLE EAST HOLDINGS LIMITED Emirates Healthcare Holdings Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Intermediary holding company 100.0 100.0 Mediclinic International Co Limited 6 th ﬂoor, 65 Gresham Street, London, EC2V 7NQ United Kingdom Dormant 100.0 100.0 Mediclinic KSA Holdings Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Intermediary holding company 100.0 100.0 INDIRECTLY HELD THROUGH EMIRATES HEALTHCARE HOLDINGS LIMITED Emirates Healthcare Limited 6 IFC 5, St Helier, Jersey, JE1 1ST Jersey Healthcare services 100.0 100.0 INDIRECTLY HELD THROUGH EMIRATES HEALTHCARE LIMITED 5 Delah Cafe FZ LLC Ground ﬂoor, Mediclinic City Hospital, Building no 35 and 37, Dubai Healthcare City, Al Razi Street, Dubai The UAE Food and catering 100.0 100.0 Mediclinic Al Qusais Clinic LLC Plot no 284/243, Shop 3–5, Legend Middle East Building, Al Qusais The UAE Healthcare services 49.0 49.0 Mediclinic Beach Road LLC First ﬂoor, Dubai International Properties, Dubai The UAE Healthcare services (in process of liquidation) 49.0 49.0 Mediclinic City Hospital FZ LLC Building no 35 and 37, Dubai Healthcare City, Al Razi Street, Dubai The UAE Healthcare services 100.0 100.0 Mediclinic Clinics Investment LLC Third ﬂoor, Dubai Mall, Parcel ID 345897, Dubai The UAE Healthcare services 49.0 49.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 253 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH EMIRATES HEALTHCARE LIMITED 5 CONTINUED Mediclinic Hospitals LLC (Al Noor Hospital) 7&8 Sheikh Mohamed Bin Butti Building, Sheikh Khalifa Street, Abu Dhabi The UAE Healthcare services 49.0 49.0 Mediclinic Ibn Battuta Clinic LLC Shop 142, China Cluster, Retail Corp, Ibn Battuta Mall, Dubai The UAE Healthcare services 49.0 49.0 Mediclinic Mirdif Clinic LLC Ground ﬂoor, Oce 13, Uptown Mirdif Building, Parcel no 321-224 Mirdif, Dubai The UAE Healthcare services 49.0 49.0 Mediclinic Parkview Hospital LLC Mediclinic Middle East management services, FZ.LLC Building, Al Barsha South 3, Dubai The UAE Healthcare services 49.0 49.0 Pharma Light Medical Store LLC Shop 27, Plot no 49, Musaah, M38, Abu Dhabi The UAE Medical store/procurement 49.0 49.0 Welcare Hospitals Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Healthcare services 100.0 100.0 Welcare World Health Systems Limited IFC 5, St Helier, Jersey, JE1 1ST Jersey Healthcare services 100.0 100.0 Bourn Hall International MENA Limited 9 C/o Al Tamimi & Company, Dubai International Financial Centre, Registered with the DFSA, Level 7, Central Park Towers, Dubai, UAE The UAE General Commercial Business 100.0 30.0 INDIRECTLY HELD THROUGH BOURN HALL INTERNATIONAL MENA LIMITED Bourn Hall LLC 10 Al Hudaiba Awards Building, Block C, 7 th ﬂoor, Dubai Martime City, UAE The UAE Fertility Centre 49.0 - INDIRECTLY HELD THROUGH MEDICLINIC HOSPITALS LLC (AL NOOR HOSPITAL) 6&7 Al Noor Hospital Clinics – Al Ain 11 Al Ain Town Center, Sheikh Mohammed Bin Butti Al Hamed Building, Al Ain The UAE Healthcare Services 49.0 49.0 Al Madar Medical Center Pharmacy LLC 12 Al Jimi, Al Jimi Ali Jumaa Ali Darmaki Building, Al Mouror Street, Abu Dhabi Island, Jabr Mohamed Ghanem Sultan Al Suwaidi, Al Ain The UAE Healthcare services 49.0 49.0 Mediclinic – Al Mamora LLC 13 Jabr Mohamed Ghanem Sultan Al Suwaidi, Al Mouror Street, Abu Dhabi Island The UAE Healthcare services 99.0 99.0 Mediclinic Khalifa City LLC 14 Mabkhoot Saleh Al Mansouri Building, plot no 14, Eastern South 42, Khalifa City, Abu Dhabi The UAE Healthcare services 49.0 49.0 Mediclinic Hospitals – Al Musafah Specialty Clinics LLC Musafah Sh 10 Parcel ID 401, Floor no. M, 1&2 Huashel Saeed, Khaseeb Al Yakooubi Building, Abu Dhabi The UAE Healthcare services 49.0 49.0 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT254 Company Registered oce address Country of incorporation and place of business Principal activities Interest in capital 1 31 March 2022 % 31 March 2021 % INDIRECTLY HELD THROUGH MEDICLINIC HOSPITALS LLC (AL NOOR HOSPITAL) 6&7 CONTINUED Mediclinic Pharmacy – Al Musaah 2 LLC Madinat Mohamed Bin Zayed, Sh 10 Parcel ID 401, Huashel Saeed, Khaseeb Al Yakooubi Building, Abu Dhabi The UAE Healthcare services 49.0 49.0 Aman Home for Health Medical Home Care LLC 15 Shaabiyat Makam, No 20 Al Makam, Ground Floor, Oce no 2, Mohamed Thaloob Salem Hamad Al Derei Building, Al Ain, Abu Dhabi The UAE Home Healthcare services 49.0 0.0 Ayadi Home Health Care LLC 16 Shaabiyat Makam, No 4 Al Makam, Ground Floor, Oce no 2, Mohamed Thaloob Salem Hamad Al Derei Building, Al Ain, Abu Dhabi The UAE Healthcare services 49.0 0.0 INDIRECTLY HELD THROUGH WELCARE HOSPITALS LIMITED (JERSEY) Mediclinic Welcare Hospital LLC Deira Nasser Abdullah Hussein Lootah Building, Al Garhood, Dubai The UAE Healthcare services 49.0 49.0 INDIRECTLY HELD THROUGH WELCARE WORLD HEALTH SYSTEMS LIMITED Mediclinic Middle East Management Services FZ LLC Floor 5–7, Publishing Pavilion, Dubai Production City, Dubai The UAE Healthcare management services 100.0 100.0 Notes 1 The equity interest in the UAE entities is disclosed herein, with the beneﬁcial interest further explained in the notes. 2 Controlled through long-term management agreements. 3 Operating through trusts or partnerships. 4 Managed by Intercare. 5 Mediclinic Kathu Investments (Pty) Ltd deregistered on 3 January 2022. 6 In terms of constitutional and contractual arrangements, the Group has full management control and economic interest in the listed entities. 7 Al Nahda International Holding LLC holds 100% share capital of Al Noor Commercial Investments Sole Proprietorship LLC (‘ANCI’). In terms of the shareholders agreement dated 17 May 2017, executed between Emirates Healthcare Limited, Al Nahda International Limited, Al Noor Commercial Investment Sole Proprietorship LLC and Mediclinic Hospitals LLC (Al Noor Hospital LLC), the parties agreed that Al Nahda International Holding LLC will become the sole shareholder of ANCI and the local sponsor for all the group entities registered in Abu Dhabi (i.e. of Mediclinic Hospitals LLC [Al Noor Hospital] and its subsidiaries and the respective registered branches and operational units from time to time). In terms of this agreement, ANCI holds 51% of the share capital of Mediclinic Hospitals LLC (Al Noor Hospital) and Emirates Healthcare Limited holds the remaining 49%. By virtue of this shareholders agreement, the parties have agreed that ANCI and Mediclinic Hospitals LLC (Al Noor Hospital) will be managed and controlled by Emirates Healthcare Limited (‘EHL’). Given that management, voting rights and the dividend rights have been assigned to EHL, all dividends declared by Mediclinic Hospitals LLC (Al Noor Hospital) are paid directly to EHL. As per the termination agreement dated 21 August 2017, between Al Noor Golden Commercial Investment LLC (‘ANGCI’), Sheikh Mohamed Bin Butti Al Hamid, Al Noor Commercial Investment LLC, ANMC Management Limited (‘ANMC’), Al Noor Holdings Cayman and EHL, the parties agreed to terminate the following: a) The relationship management agreement entered into between ANGCI, Sheikh Bin Butti and Mediclinic Hospitals LLC (Al Noor Hospital) on 20 May 2013; b) The relationship agreement entered into between ANGCI, ANCI and Mediclinic Hospitals LLC (Al Noor Hospital) on 20 May 2013; c) The management agreement entered into between ANCI and ANMC on 20 May 2013; and d) A shareholder’s agreement entered into between Sheikh Bin Butti, The First Arabian Corporation LLC, Al Noor Cayman, ANMC and ANCI on 20 May 2013. 8 EHL holds 49% of the issued share capital of Mediclinic Hospitals LLC (Al Noor Hospital), with the remaining 51% held by ANCI. ANCI assigned 100% of the voting rights, management control and dividend to EHL. EHL has the right to be appointed as the proxy of ANCI, to attend and to vote at all shareholder meetings of Mediclinic Hospitals LLC (Al Noor Hospital). 9 EHL holds 100% of the issued share capital of Bourn Hall International MENA Limited. Bourn Hall International MENA Ltd is registered in Jebel Al Free Zone, Dubai, and EHL, Jersey, holds 100% issued paid-up and subscribed share capital of this company. 10 Bourn Hall LLC is registered in Dubai. The shareholders of Bourn Hall LLC are: • Bourn Hall International MENA Ltd - 49%; • Al Noor Commercial Investment - Sole Proprietorship LLC - 51%. 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 255 NOTES TO THE GROUP ANNUAL FINANCIAL STATEMENTS CONTINUED Note 1 Shareholding indirectly held through Clinique des Grangettes SA. JOINT VENTURES COMPANY COUNTRY OF INCORPORATION AND PLACE OF BUSINESS PRINCIPAL ACTIVITIES INTEREST IN CAPITAL 31 March 2022 % 31 March 2021 % Wits University Donald Gordon Medical Centre (Pty) Ltd Mediclinic Corporate Oce, 25 Du Toit Street, Stellenbosch 7600, South Africa Healthcare services 49.9 49.9 GRGB Santé SA, Genève Chemin de Beau-Soleil 20, 1206 Genève, Switzerland Healthcare services 30.0 30.0 Centre de Chirurgie Ambulatoire (CCA) - HUG Hirslanden SA, Genève 3 Rue Gabrielle-Perret-Gentil 4, c/o Les hôpitaux universitaires de Genève, 1205 Genève, Switzerland Healthcare services 50.0 50.0 11 100% beneﬁcial interest of Bourn Hall LLC is ultimately held by EHL. Bourn Hall LLC has two branches, one in Abu Dhabi and one in Al Ain. Bourn Hall LLC and its branch in Al Ain are operating as clinics and the statutory licensing of the Abu Dhabi branch to operate as a clinic is under process. Al Noor Commercial Investment Sole Proprietorship LLC holds 51% of the issued share capital of Al Noor Hospital Clinics – Al Ain, with the remaining 49% held by Mediclinic Hospitals LLC (Al Noor Hospital). 12 Mediclinic Hospitals LLC (Al Noor Hospital) holds 49% of the issued share capital of Al Madar Medical Centre Pharmacy LLC, with the remaining 51% held by ANCI. The memorandum of association of the company provides that Mediclinic Hospitals LLC (Al Noor Hospital) is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. Mediclinic Hospitals LLC (Al Noor Hospital)’s eective beneﬁcial interest in the entity is therefore 99%. 13 Mediclinic Hospitals LLC (Al Noor Hospital) holds 99% and ANCI holds 1% of the issued share capital of Mediclinic Al Mamora LLC. 14 Mediclinic Hospitals LLC (Al Noor Hospital) holds 49% of the issued share capital of Mediclinic Khalifa City Clinic LLC, with the remaining 51% held by ANCI. The memorandum of association of the company provides that Mediclinic Hospitals LLC (Al Noor Hospital) is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. Mediclinic Hospitals LLC (Al Noor Hospital)’s eective beneﬁcial interest in the entity is therefore 99%. 15 Mediclinic Hospitals LLC (Al Noor Hospital) holds 49% of the issued share capital of Aman Home for Health Medical Home Care LLC, with the remaining 51% held by ANCI. The memorandum of association of the company provides that Mediclinic Hospitals LLC (Al Noor Hospital) is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. Mediclinic Hospitals LLC (Al Noor Hospital)’s eective beneﬁcial interest in the entity is therefore 99%. 16 Mediclinic Hospitals LLC (Al Noor Hospital) holds 49% of the issued share capital of Ayadi Home Health Care LLC, with the remaining 51% held by ANCI. The memorandum of association of the company provides that Mediclinic Hospitals LLC (Al Noor Hospital) is entitled to receive 99% of distributions by the company and ANCI is entitled to receive 1%. Mediclinic Hospitals LLC (Al Noor Hospital)’s eective beneﬁcial interest in the entity is therefore 99%. 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED SUBSIDIARIES CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT256 COMPANY REGISTERED OFFICE ADDRESS INTEREST IN CAPITAL BOOK VALUE OF INVESTMENT 31 March 2022 % 31 March 2021 % 31 March 2022 £’m 31 March 2021 £’m Listed Spire Healthcare Group plc (held through Mediclinic Jersey Limited) 3 Dorset Rise, London, EC4Y 8EN 29.9 29.9 156 157 Unlisted Intercare Holdings Proprietary Limited Glenfair Oce Block, Lynnwood & Daventry Roads, Lynnwood 0081 34.0 34.0 3 2 Icon Joint Venture Proprietary Limited 1 st Floor Madison Square Park, 4 Howick Close, Tygerfalls, 7530, South Africa 25.0 – – – Bourn Hall International MENA Limited C/o Al Tamimi & Company Dubai International Financial Centre, Registered with the DFSA Level 7, Central Park Towers, Dubai, UAE 100.0 30.0 – 5 Zentrallabor Zürich, Zürich 3 Forchstrasse 452, 8702 Zollikon 49.0 49.47 – 1 Baukonsortium, Cham Rigistrasse 1, 6330 Cham 24.0 24.0 1 1 EFG Parkierung Rigistrasse, Cham 2 Rigistrasse 1, 6330 Cham 25.0 25.0 – – La Colline, Centre de Réeducation et de Physiothérapie SA 2 , Genève Avenue de la Roseraie 76A, 1205 Genève 20.0 20.0 – – La Colline, Centre de Physiothérapie du Sport S.à.r.l. 2 , Genève Chemin Thury 7A, 1206 Genève 23.0 23.0 – – CORTS AG, Maur 2 c/o ETU Treuhand und Unternehmensberatung, Ch. Lutz, Zürichstrasse 268, 8122 Binz 37.8 37.8 – – Hystrix Medical AG Bahnhofstrasse 47, 4900 Langenthal 8.7 8.7 1 1 Al Murjan Medical Center Company Limited Al Rawdah District, Prince Saud Al Faisal Street, Jeddah, 21573, Saudi Arabia 1.0 – – – 161 167 ASSOCIATES 1 Notes 1 The nature of the activities of the associates is similar to the major activities of the Group. 2 Book value is less than £0.5m. 3 The Swiss division does not control Zentrallabor Zürich. 39. INVESTMENTS IN SUBSIDIARIES, ASSOCIATES AND JOINT VENTURES CONTINUED STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 257 Notes 2022 £’m 2021 £’m Non-current assets Investment in subsidiaries 3 3 311 3 311 Current assets Cash and cash equivalents 74 54 Total assets 3 385 3 365 EQUITY Share capital 5 74 74 Capital redemption reserve 6 6 Share premium 5 690 690 Retained earnings 2 585 2 568 Total equity 3 355 3 338 Current liabilities Other payables 2 1 Amount due to related parties 4 28 26 Total liabilities 30 27 3 385 3 365 COMPANY STATEMENT OF FINANCIAL POSITION AT 31 MARCH 2022 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2022 The proﬁt after tax for the year ended 31 March 2022 amounted to £17m (2021: £21m). These ﬁnancial statements as set out on pages 258–262 were approved and authorised for issue by the Board of Directors and signed on their behalf by: Dr Ronnie van der Merwe Jurgens Myburgh Chief Executive Ocer Group Chief Financial Ocer 24 May 2022 24 May 2022 Mediclinic International plc (Company no 08338604) The notes on pages 259–262 form an integral part of these ﬁnancial statements. The notes on pages 259–262 form an integral part of these ﬁnancial statements. Share capital £’m Capital redemption reserve £’m Share premium reserve £’m Retained earnings £’m Total At 1 April 2020 74 6 690 2 547 3 317 Proﬁt for the year – – – 21 21 At 30 March 2021 74 6 690 2 568 3 338 Proﬁt for the year – – – 17 17 At 31 March 2022 74 6 690 2 585 3 355 MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT258 COMPANY STATEMENT OF CHANGES IN EQUITY FOR THE YEAR ENDED 31 MARCH 2022 COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 MARCH 2022 Notes 2022 £’m 2021 £’m Operating activities Proﬁt before tax 17 21 Adjustments for: Foreign exchange dierences 2 (3) Dividend income (25) (23) Change in other payables 1 (1) Net cash used in operating activities (5) (6) Investing activities Proceeds from derivative – 2 Dividend received 4 25 23 Net cash generated from investing activities 25 25 Financing activities Dividend paid 6 – – Net cash used in ﬁnancing activities – – Net movement in cash and cash equivalents 20 19 Cash and cash equivalents at the beginning of the year 54 35 Cash and cash equivalents at the end of the year 74 54 The notes on pages 259–262 form an integral part of these ﬁnancial statements. 1. STATUS AND ACTIVITY Mediclinic was incorporated in England and Wales on 20 December 2012. The address of the registered oce of the Company is c/o Link Company Matters Limited, 6 th Floor, 65 Gresham Street, London, EC2V 7NQ. The registration number of the Company is 08338604. There is no ultimate controlling party. The domicile of the Company is the UK. The Company is a public limited company with divisions in Switzerland, Southern Africa (South Africa and Namibia) and the Middle East (the UAE). The Company is a holding company. The activities of the subsidiaries are the operation of hospitals and clinics, and the sale of pharmaceuticals, medical supplies and related equipment. These ﬁnancial statements are the ﬁnancial statements of the Company only. The ﬁnancial statements are available at the registered oce of the Company. 2. BASIS OF PREPARATION The Company’s principal accounting policies applied in the preparation of these ﬁnancial statements are the same as those set out in the Group annual ﬁnancial statements, except as noted below. These policies have been consistently applied to all the years presented. • Investments in subsidiaries are carried at cost less any accumulated impairment. • Dividend income is recognised when the right to receive payment is established. The Company is taking advantage of the exemption in Section 408 of the UK Companies Act 2006 not to present its individual income statement as part of these ﬁnancial statements. 2.1. Basis of measurement The ﬁnancial statements of the Company have been prepared in accordance with UK-adopted International Accounting Standards and with the requirements of the Companies Act 2006 as applicable to companies reporting under those standards. There are no dierences for the Company in applying IFRS as issued by the IASB and UK-adopted IFRS. The ﬁnancial statements are prepared on the historical-cost convention, as modiﬁed by the revaluation of certain ﬁnancial instruments to fair value through proﬁt or loss. NOTES TO THE COMPANY ANNUAL FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 MARCH 2022 STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 259 2.2. Functional and presentation currency The ﬁnancial statements and ﬁnancial information are presented in sterling, rounded to the nearest million. 2.3. Going concern The Company annual ﬁnancial statements were prepared on a going concern basis. The directors believe that the Company will continue to be in operation for at least 12 months from the date of this report and in the foreseeable future. See note 2.7 in the Group annual ﬁnancial statements for more detail relating to the going concern basis of accounting used in preparing the ﬁnancial statements. 2.4. Accounting estimates The Company makes estimates and assumptions concerning the future. Although these estimates and assumptions are based on management’s best information regarding current circumstances and future events, actual results may dier. 3. INVESTMENT IN SUBSIDIARIES Investment in subsidiaries is stated at cost less impairment. 2022 £’m 2021 £’m Shares at cost 5 916 5 916 Less: accumulated impairment charge (2 605) (2 605) Closing balance 3 311 3 311 The investments held by the Company are Mediclinic CHF Finco Ltd, Mediclinic Holdings Netherlands B.V., Mediclinic Middle East Holdings Ltd and Mediclinic International (RF) (Pty) Ltd, each being wholly owned subsidiaries. The activities of the subsidiaries are the operation of hospitals and clinics, and the sale of pharmaceuticals, medical supplies and related equipment. NOTES TO THE COMPANY ANNUAL FINANCIAL STATEMENTS CONTINUED Impairment assessment At 31 March 2022, the Company’s market capitalisation of £2 626m (2021: £2 109m) was less than the net assets of the Company. The recoverable amounts of the investment of subsidiaries were calculated based on FVLCOD calculations and exceeded the carrying value. As a result no impairment was recognised. The following assumptions were used in the FVLCOD calculations: - Mediclinic CHF Finco Ltd: the cash ﬂows were discounted at a rate of 6.8% and beyond ﬁve years a growth rate of 1.9% was used; - Mediclinic Holdings Netherlands B.V.: the cash ﬂows were discounted at a rate of 5.0% and beyond ﬁve years a growth rate of 1.6% was used; - Mediclinic Middle East Holdings Ltd: the cash ﬂows were discounted at a rate of 8.1% and beyond ﬁve years a growth rate of 3.0% was used; and - Mediclinic International (RF) (Pty) Ltd: the cash ﬂows were discounted at a rate of 12.8% and beyond ﬁve years a growth rate of 5.5% was used. See note 39 of the Group annual ﬁnancial statements for a complete list of investments in subsidiaries, associates and joint ventures of the Group, and details of the country of incorporation, place of business, principal activities and interest in capital. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT260 NOTES TO THE COMPANY ANNUAL FINANCIAL STATEMENTS CONTINUED 4. RELATED PARTY BALANCES AND TRANSACTIONS Related parties comprise the subsidiaries, the shareholders, key management personnel and those entities over which the parent, the directors or the Company can exercise signiﬁcant inﬂuence or which can signiﬁcantly inﬂuence the Company. Note 1 This amount included the transaction and operational expenses paid by Mediclinic Hospitals LLC on behalf of the Company. This amount is payable on demand. Information regarding the Group’s subsidiaries and associates can be found in note 39 to the Group annual ﬁnancial statements. 2022 £’m 2021 £’m a) Transactions with key management personnel Key management includes the directors (executive and non-executive) and members of the Group Executive Committee Directors’ fees 1 1 b) Amount due to a related party 1 Mediclinic Hospitals LLC 28 26 c) Dividends received from related parties: Mediclinic CHF Finco Ltd – 2 Mediclinic Holdings Netherlands B.V. 8 21 Mediclinic International (RF) (Pty) Ltd 17 – 25 23 2022 £’m 2021 £’m Issued share capital Share capital 74 74 Share premium 690 690 764 764 Ordinary shares 2022 2021 Number of shares in issue and fully paid 737 243 810 737 243 810 Nominal value 10p 10p 5. SHARE CAPITAL Value: Indicating nominal and share premium amount Rights of the ordinary shares to proﬁts: All dividends shall be declared and paid according to the amounts paid up on the ordinary shares. Rights of the ordinary shares to capital: If there is a return of capital on winding up or otherwise, the ordinary shares shall confer full rights but they do not confer any rights of redemption. Voting rights of the ordinary shares: The ordinary shares shall confer, on each holder of the ordinary shares, the right to receive notice of and to attend, speak and vote at all general meetings of the Company. Each ordinary share carries the right to one vote on a poll. 6. DIVIDENDS The Company did not declare interim dividends for FY22 or ﬁnal dividends for FY21 during the year under review (2021: nil). Details on the ﬁnal proposed dividend have been disclosed in note 13 to the Group annual ﬁnancial statements. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 261 NOTES TO THE COMPANY ANNUAL FINANCIAL STATEMENTS CONTINUED 7. AUDITORS’ REMUNERATION The Company incurred an amount of £0.8m (2021: £0.7m) to its auditors in respect of the audit of the Company’s and Group’s ﬁnancial statements for the year ended 31 March 2022. The fee includes an amount of less than £0.1m (2021: £0.1m) in respect of prior years. Fees paid to the Company’s auditors for other services amounted to £0.1m (2021: £0.1m). 8. TAXATION At 31 March 2022, the Company had unutilised tax losses of approximately £62m (2021: £54m). No deferred tax asset has been recognised in respect of these losses due to the unpredictability and availability of future proﬁt streams. 9. FINANCIAL INSTRUMENTS 9.1. Capital risk management The Company manages its capital to ensure it is able to continue as a going concern while maximising the return on equity. The Company does not have a formalised optimal target capital structure or target ratios in connection with its capital risk management objective. The Company’s overall strategy remains unchanged from the prior year. The Company is not subject to externally imposed capital requirements. 9.2. Financial risk management objectives The Company is exposed to the following risks related to ﬁnancial instruments: credit risk, liquidity risk and foreign currency risk. The Company does not enter into or trade in ﬁnancial instruments, investments in securities, including derivative ﬁnancial instruments, for speculative purposes. 9.3. Credit risk The carrying amount of cash and cash equivalents represents the maximum credit exposure. There is no material credit risk involved on the Company ﬁnancial statements. The Company’s cash equivalents are placed with reputable ﬁnancial institutions with a high credit rating. 9.4. Liquidity risk The ultimate responsibility for liquidity risk management rests with the directors of the Company, who have built an appropriate liquidity risk management framework for managing the Company’s short-, medium- and long-term funding and liquidity management requirements. The Company manages liquidity risk by maintaining adequate reserves by continuously monitoring forecast and actual cash ﬂows, and matching the maturity proﬁles of ﬁnancial assets and liabilities. Liquidity risk is the risk that the Company will be unable to meet its funding requirements. The table below summarises the maturity proﬁle of the Company’s ﬁnancial liabilities. The contractual maturities of the ﬁnancial liabilities have been determined on the basis of the remaining period at the end of the reporting period to the contractual repayment date. The maturity proﬁle is monitored by management to ensure adequate liquidity is maintained. The maturity proﬁle of the liabilities at the end of the reporting period based on existing contractual repayment arrangements was as follows: Carrying amount £'m Contractual cash ﬂows £’m 1 year or less £’m 31 March 2022 Other payables 2 2 2 Related-party payables 28 28 28 30 30 30 31 March 2021 Other payables 1 1 1 Related-party payables 26 26 26 27 27 27 9.5. Foreign currency risk The Company has insigniﬁcant exposure to foreign currency risk, but a prudent approach towards foreign cover is followed where applicable. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT262 SHARE CAPITAL AND SHAREHOLDERS STRUCTURE The Company’s ordinary issued share capital at 31 March 2022 was 737 243 810 ordinary shares of £0.10 each, with a primary listing on the LSE in the UK and secondary listings on the JSE in South Africa and the NSX in Namibia. The ordinary share class represents 100% of the Company’s total issued share capital. See note 21 to the Group annual ﬁnancial statements on page 210 for more on the Company’s issued share capital There are no known arrangements under which ﬁnancial rights are held by a person other than the holder of the shares. Shares acquired through the Company’s share schemes and plans rank equally with the other shares in issue and have no special rights. See the Remuneration Committee Report on pages 160–161 for more on the Company’s employee share scheme The Company has no intention to complete a market purchase of its ordinary shares and will not seek this authority at the Company’s 2022 AGM. RESTRICTIONS ON THE TRANSFER OF COMPANY SHARES There are no restrictions on transfer of the Company’s shares. RESTRICTIONS ON VOTING RIGHTS The Company’s Articles provide that, unless the directors determine otherwise, a shareholder shall not be entitled to vote, either personally or by proxy, at any general meeting of the Company or to exercise any other right conferred by membership, if: • any call or other sum payable to the Company in respect of that share remains unpaid; or • such shareholder, having been duly served with a notice to provide the Company with information under Section 793 of the Act, has failed to do so within 14 days of such notice, for so long as the default continues.  SUBSTANTIAL SHAREHOLDERS At year end, the following shareholders notiﬁed the Company in accordance with the Disclosure Guidance and Transparency Rules of their interest of 3% or more in the Company’s issued share capital: Between year end and the Last Practicable Date, the Company received the following notiﬁcation from shareholders in their interest of 3% or more in the Company’s issued share capital, in accordance with the Disclosure Guidance and Transparency Rules: SHAREHOLDER INFORMATION TABLE 1: FY22 SUBSTANTIAL SHAREHOLDERS ORDINARY SHARES % VOTING RIGHTS DATE NOTIFIED Remgro Ltd (through wholly owned subsidiaries) 328 497 888 44.56 17/02/2016 Public Investment Corporation SOC Ltd 74 357 880 10.09 22/09/2021 ORDINARY SHARES % VOTING RIGHTS DATE NOTIFIED Public Investment Corporation SOC Ltd 81 184 020 11.01 17/05/202 2 2022 ANNUAL GENERAL MEETING The Company’s AGM will take place at 15:00 (BST) on Thursday, 28 July 2022 at Rosewood London Hotel, 252 High Holborn, London, WC1V 7EN, UK. Shareholders should read the 2022 Notice of AGM carefully should they plan to attend. The 2022 Notice of AGM is available at annualreport.mediclinic.com and has been posted as a separate booklet at the same time as this Annual Report. STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 263 DIVIDENDS At the end of FY20, the Board took the prudent and appropriate decision to suspend the dividend as part of the Group’s eorts to maintain its liquidity position and maximise its ability to navigate through the pandemic. Given the ﬁnancial strength of the Company today, the resilience we displayed throughout the pandemic and a more stable outlook, though subject to macroeconomic factors, the Board felt it appropriate to propose a ﬁnal dividend of 3.00 pence, for approval by the Company’s shareholders at the 2022 AGM. Shareholders on the South African register will be paid the South African rand cash equivalent of 59.53230 cents (47.62584 cents net of dividend withholding tax) per share. A dividend withholding tax of 20% will be applicable to all shareholders on the South African register who are not exempt therefrom. The South African rand cash equivalent has been calculated using the following exchange rate: GBP1:ZAR19.8441, being the ﬁve-day average ZAR/GBP exchange rate (Bloomberg) on Friday, 20 May 2022 at 3:00pm GMT. The ﬁnal dividend will be paid on Friday, 26 August 2022 to all ordinary shareholders who are on the register of members at the close of business on the record date of Friday, 5 August 2022. The salient dates for the dividend will be as follows: The Company’s Dividend Policy is dealt with in the ‘Financial review’ section of the Group Chief Financial Ocer’s Report on page 80. SHARE PRICE The latest share price information can be found on the Company’s website at www.mediclinic.com or through a broker. SHAREHOLDER SERVICES AND CONTACTS Enquiries relating to shareholdings, including notiﬁcation of change of address, queries regarding the loss of a share certiﬁcate and dividend payments should be made to the Company’s registrars: SHAREHOLDERS ON THE UK REGISTER Computershare Investor Services PLC The Pavilions, Bridgwater Road, Bristol, BS13 8AE, UK Tel: +44 370 703 6022 E-mail: [email protected] Website: www.investorcentre.co.uk Lines are open during normal business hours from 08:30 to 17:30 GMT, Monday to Friday, and charged at the standard rate. Shareholders can use Computershare’s website to check and maintain their records. SHARE DEALING SERVICE Computershare oers a share dealing service that allows UK resident shareholders to buy and sell the Company’s shares. Shareholders can deal in their shares on the Internet or by telephone. Please contact Computershare for more details on this service. SHAREGIFT If a few shares are held, whose low value makes them dicult to sell, they may be donated to charity through ShareGift, an independent charity share donation scheme. For further details, please contact Computershare or ShareGift at tel. +44 20 7930 3737 or visit their website at www.sharegift.org. SHAREHOLDERS ON THE SOUTH AFRICAN AND NAMIBIAN REGISTERS SOUTH AFRICAN TRANSFER SECRETARY Computershare Investor Services (Pty) Ltd Rosebank Towers, 15 Biermann Avenue, Rosebank 2196, South Africa Postal address: Private Bag X9000, Saxonwold 2132, South Africa Tel: +27 11 370 5000 Fax: +27 11 688 5200 Email: [email protected] NAMIBIAN TRANSFER SECRETARY Transfer Secretaries (Pty) Ltd 4 Robert Mugabe Avenue, Windhoek, Namibia Postal address: PO Box 2401, Windhoek, Namibia Tel: +264 61 227 647 Fax: +264 61 248 531 Email: [email protected] TABLE 2: FY22 DIVIDENDS DECLARED FY21 FY22 Interim dividend n/a n/a Final dividend n/a 3.00 Total dividend n/a 3.00 Dividend announcement date Wednesday, 25 May 2022 Last date to trade cum dividend (SA register) Tuesday, 2 August 2022 First date of trading ex-dividend (SA register) Wednesday, 3 August 2022 First date of trading ex-dividend (UK register) Thursday, 4 August 2022 Record date Friday, 5 August 2022 Payment date Friday, 26 August 2022 Share certiﬁcates may not be dematerialised or rematerialised within Strate from Wednesday, 3 August 2022 to Friday, 5 August 2022, both dates inclusive. No transfers between the UK and South African registers may take place from Tuesday, 25 May 2022 to Friday, 5 August 2022, both dates inclusive. The tax treatment of the dividend for shareholders on the South African register is available on the Company’s website. Details of the Dividend Access Trust established for South African resident shareholders are provided in note 21 of the Group annual ﬁnancial statements on page 210. The dividends declared by the Company to its ordinary shareholders during the reporting period are summarised below: SHAREHOLDER INFORMATION CONTINUED MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT264 COMPANY INFORMATION Mediclinic International plc (incorporated and registered in England and Wales) Company number: 08338604 REGISTERED OFFICE Mediclinic International plc 6 th Floor, 65 Gresham Street London, EC2V 7NQ, United Kingdom Tel: +44 333 300 1930 Email: [email protected] Website: www.mediclinic.com TOLL-FREE ETHICS LINES AND EMAIL SWITZERLAND Tel: 0800 005 316 SOUTH AFRICA Tel: 0800 005 316 NAMIBIA Tel: 0800 003 313 MTC Networks: 081 91847 THE UAE Tel: 800 1 55000 Email: mediclinic@tip-os.com LISTING FTSE sector: Health Care – Health Care Providers – Health Care Facilities ISIN code: GB00B8HX8Z88 SEDOL number: B8HX8Z8 EPIC number: MDC LEI: 2138002S5BSBIZTD5I60 Primary listing: LSE (share code: MDC) Secondary listing: JSE (share code: MEI) Secondary listing: NSX (share code: MEP) COMPANY SECRETARY Link Company Matters Limited Caroline Emmet 6 th Floor, 65 Gresham Street London, EC2V 7NQ, United Kingdom Tel: +44 333 300 1930 Email: [email protected] INVESTOR RELATIONS James Arnold Head of Investor Relations Hudson House, 8 Tavistock Street London, WC2E 7PP, United Kingdom Tel: +44 20 3786 8180/1 Email: [email protected] REGISTRAR/TRANSFER SECRETARIES UK United Kingdom Computershare Investor Services PLC The Pavilions, Bridgwater Road, Bristol, BS13 8AE Tel: +44 370 703 6022 Email: [email protected] SOUTH AFRICA Computershare Investor Services (Pty) Ltd Rosebank Towers, 15 Biermann Avenue, Rosebank 2196 Private Bag X9000, Saxonwold 2132 Tel: +27 11 370 5000 Email: [email protected] NAMIBIA Transfer Secretaries (Pty) Ltd 4 Robert Mugabe Avenue, Windhoek PO Box 2401, Windhoek Tel: +264 61 227 647 Email: [email protected] CORPORATE ADVISERS AUDITOR PricewaterhouseCoopers LLP, London CORPORATE BROKER AND SPONSORS UK Joint corporate brokers: Morgan Stanley & Co International plc and UBS Investment Bank SOUTH AFRICA JSE sponsor: Rand Merchant Bank (a division of FirstRand Bank Limited) NAMIBIA NSX sponsor: Simonis Storm Securities (Pty) Ltd LEGAL ADVISERS UK Slaughter and May SOUTH AFRICA Clie Dekker Hofmeyr Inc. REMUNERATION CONSULTANT Deloitte LLP COMMUNICATION AGENCY FTI Consulting Tel: +44 20 3727 1000 Email: [email protected] STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 265 FORWARD-LOOKING STATEMENTS This Annual Report contains certain forward-looking statements relating to the business of the Company and its subsidiaries, including with respect to the progress, timing and completion of the Group’s development; the Group’s ability to treat, attract and retain patients and clients; its ability to engage consultants and healthcare practitioners and to operate its business and increase referrals; the integration of prior acquisitions; the Group’s estimates for future performance and its estimates regarding anticipated operating results; future revenue; capital requirements; shareholder structure; and ﬁnancing. In addition, even if the Group’s actual results or developments are consistent with the forward-looking statements contained in this Annual Report, those results or developments may not be indicative of the Group’s results or developments in the future. In some cases, forward- looking statements can be identiﬁed by words such as ‘could’, ‘should’, ‘may’, ‘expects’, ‘aims’, ‘targets’, ‘anticipates’, ‘believes’, ‘intends’, ‘estimates’, or similar. These forward-looking statements are based largely on the Group’s current expectations as of the date of this Annual Report and are subject to a number of known and unknown risks and uncertainties and other factors that may cause actual results, performance or achievements to be materially dierent from any future results, performance or achievement expressed or implied by these forward-looking statements. In particular, the Group’s expectations could be aected 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 Middle East; poor performance by healthcare practitioners who practise at its facilities; unexpected regulatory actions or suspensions; competition in general; the impact of global economic changes; the impact of pandemics, including COVID-19; the impact of military conﬂicts, including the current events in the Ukraine; and the Group’s ability to obtain or maintain accreditation or approval for its facilities or service lines. In light of these risks and uncertainties, there can be no assurance that the forward-looking statements made in this Annual Report will in fact be realised and no representation or warranty is given with regard to the completeness or accuracy of the forward-looking statements contained herein. The Group is providing the information in this Annual Report as of this date, and disclaims any intention to, and makes no undertaking to, publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT266 GLOSSARY OF TERMS TERM MEANING A action Act the United Kingdom Companies Act 2006 AGM annual general meeting ANCI Al Noor Commercial Investments Sole Proprietorship LLC ANGCI Al Noor Golden Commercial Investment LLC ANMC ANMC Management Limited Annual Report this annual report with ﬁnancial statements for the reporting period ended 31 March 2022 APMs alternative performance measures AR6 6 th Assessment Report of the Intergovernmental Panel for Climate Change Articles the Company’s Articles of Association as adopted on 22 July 2020 Ayadi Home Healthcare Ayadi Home Health Care LLC B-BBEE broad-based black economic empowerment Board or Board of Directors the board of directors of Mediclinic International plc Bourn Hall Bourn Hall International MENA Limited BUPA British United Provident Association CAP College of American Pathologists CCC Comprehensive Cancer Centre CE marking certiﬁcation mark for products sold in the European Economic Area CEO Chief Executive Ocer CFO Chief Financial Ocer CGU cash-generating unit CMA the UK’s Competition and Market Authority CMI case mix index CO 2 e carbon dioxide equivalent Code 2018 UK Corporate Governance Code published by the Financial Reporting Council CoE(s) Centre(s) of Excellence COHSASA Council for Health Service Accreditation of Southern Africa Committee pertaining to the committee previously deﬁned, e.g. Audit and Risk Committee Company Mediclinic International plc CSI corporate social investment D decision DAS Dividend Access Scheme TERM MEANING DHA Dubai Health Authority DRG diagnostic-related group EASO European Association for the Study of Obesity EBA economic beneﬁt available EBIT earnings before interest and taxes EBITDA earnings before interest, tax, depreciation and amortisation EEA European Economic Area EHL Emirates Healthcare Limited EHRs electronic health records EMEA Europe, Middle East and Africa region EMP environmental management programme EMS environmental management system Energy Exchange Energy Exchange of Southern Africa EPS earnings per share ERM enterprise-wide risk management ESG environmental, social and governance external auditors the Group’s independent external auditors, PricewaterhouseCoopers LLP FBU fair, balanced and understandable FCA Financial Conduct Authority FRC Financial Reporting Council FVLCOD fair value less cost of disposal FVOCI fair value through other comprehensive income FVPL fair value through proﬁt or loss FY20 the ﬁnancial year ended on 31 March 2020 FY21/prior ﬁnancial year the ﬁnancial year ended on 31 March 2021 FY22/period under review/ reporting period/ year under review the ﬁnancial year ended on 31 March 2022 FY23, FY24 the ﬁnancial years ending 31 March 2023 and 31 March 2024, respectively GDP gross domestic product GDPR General Data Protection Regulation GHG greenhouse gas GRI Standards Global Reporting Initiative Sustainability Reporting Standards 2016 Group Mediclinic International plc and its subsidiaries, including its divisions in Switzerland, Southern Africa and the Middle East STRATEGIC REPORT GOVERNANCE AND REMUNERATION REPORT FINANCIAL STATEMENTS ADDITIONAL INFORMATION 2022 ANNUAL REPORT MEDICLINIC INTERNATIONAL PLC 267 GLOSSARY OF TERMS CONTINUED TERM MEANING Group Executive Committee the executive committee of Mediclinic International plc HCRW healthcare risk waste HCT Higher Colleges of Technology HEPS headline earnings per share Hirslanden the Group’s operations in Switzerland, trading under the Hirslanden brand, with Hirslanden AG as the intermediary holding company of the Group’s operations in Switzerland IAS International Accounting Standard ICT Information and communications technology ICU intensive care unit IFRS International Financial Reporting Standards IPCC Intergovernmental Panel for Climate Change ISA International Standards of Auditing (UK) IT information technology IVF in vitro fertilisation JACIE Joint Accreditation Committee ISCT-Europe and EBMT JCI Joint Commission International JIBAR Johannesburg Interbank Average Rate JSE the stock exchange operated by the JSE Ltd, based in Johannesburg KPI key performance indicator Last Practicable Date the date of the approval of the Annual Report, being 24 May 2022 LIBOR London Interbank Oered Rate Lintstock Lintstock Ltd, the ﬁrm appointed to evaluate the Board’s performance Listing Rules the listing rules issued by the Financial Conduct Authority Listings Requirements the listings requirements of the JSE LSE the stock exchange operated by London Stock Exchange plc, based in London LTI long-term incentive scheme for executive and senior management Mediclinic Mediclinic International plc Mediclinic Middle East the Group’s operations in the Middle East, trading under the Mediclinic brand, with Mediclinic Middle East Holdings (registered in Jersey) as the intermediate holding company of the Group’s operations in Dubai and Abu Dhabi Mediclinic Southern Africa the Group’s operations in South Africa and Namibia, trading under the Mediclinic brand, with Mediclinic Southern Africa (Pty) Ltd as the intermediary holding company of the Group’s operations in South Africa and Namibia MR mixed reality NCI non-controlling interests TERM MEANING NHS the National Health Service in the UK NPS® Net Promoter Score® NSX Namibian Stock Exchange OECD Organisation for Economic Co-operation and Development PCR polymerase chain reaction, used in testing for COVID-19 PH Pensionskasse Hirslanden, the fund which provides post-employment, death-in-service and disability beneﬁts PPDs paid patient days PPPs public-private partnerships PV photovoltaic PwC the Group’s independent external auditors, PricewaterhouseCoopers LLP RCF revolving credit facility Relationship Agreement the Company’s relationship agreement with its principal shareholder, Remgro Remgro Remgro Ltd, a controlling shareholder of Mediclinic, which through wholly owned subsidiaries held a 44.56% stake in the Company as at 31 March 2022 ROIC return on invested capital RPA robotic process automation RPM remote patient monitoring SAICA South African Institute of Chartered Accountants SARON Swiss Average Rate Overnight SCADA supervisory control and data acquisition, a system to monitor energy consumption Section 172 Section 172 of the United Kingdom Companies Act 2006 SID Senior Independent Director SOFR Secured Overnight Financing Rate Spire Spire Healthcare Group plc, a leading UK-based independent hospital group listed on the LSE STI short-term incentive scheme for management TARMED national outpatient tari in Switzerland TCFD Task Force on Climate-related Disclosures TSR total shareholder return UAE the United Arab Emirates UK the United Kingdom of Great Britain and Northern Ireland US the United States of America WACC weighted average cost of capital MEDICLINIC INTERNATIONAL PLC 2022 ANNUAL REPORT268 Produced by and

AI Terminal

More from MEDICLINIC INTERNATIONAL PLC

Talk to a Data Expert