Acquisitions and disposals of investments

Changes in ownership interest in subsidiaries as a result of non-controlling interest transactions.

The Group had marginal increases and decreases in its shareholdings in some of its subsidiary companies, due to transactions with minority shareholders. On 11 August 2016, the Group acquired an additional 30% shareholding in Flohoc Investments Proprietary Limited (Flohoc) for R306 million, resulting in Flohoc becoming a wholly owned subsidiary of the Group. During September 2016, the Group disposed of 17.3% of its shareholding in Flohoc for R110 million. The Group now owns 82.7%.

Increase in investment in Max Healthcare Institute Limited

The Group invested R320 million in Max Healthcare Institute Limited (Max) in November 2015, as its contribution to Max’s acquisition of 51% of Saket City, renamed Max Smart Super Speciality Hospital (Max Smart).

Business combinations

Scanmed Multimedis S.A. (Scanmed) acquired 100% of both Gastromed REM and Multimedycyna on 15 October 2015 and 12 November 2015 respectively, for a total of R31 million. These companies are incorporated in Poland and had no significant contingent liabilities at the acquisition date.

The following additional material acquisitions took place during the current financial year:

  Polska Grupa
Medyczna
Group (PGM
Carint
Scanmed
 
Acquirer Scanmed Scanmed  
Country of incorporation Poland Poland  
Acquisition date 31 October 2015 1 April 2016  
% voting equity interest acquired 100% 100%  
Primary reasons for business combination Diversification Diversification  
Qualitative factors that make up goodwill recognised Synergies Synergies  
Contingent liabilities at acquisition None None  

Details of the fair value of net assets acquired and goodwill are as follows:

  PGM
2016
R’m
  Carint
Scanmed
2016
R’m
 
Total purchase consideration (629)   (158)  
   Cash portion (614)   (103)  
   Contingent consideration (15)    
   Fair value of equity interest held before the business combination   (55)  
Fair value of net assets acquired 200   42  
   Inventories 12   1  
   Trade and other receivables 58   44  
   Trade and other payables (43)   (20)  
   Cash and cash equivalents 54   2  
   Interest-bearing borrowings (47)   (3)  
   Property, plant and equipment 103   15  
   Intangible assets 93   14  
   Deferred tax (21)   (11)  
   Non-controlling interest (9)    
Goodwill (429)   (116)  

Contingent consideration

The contingent consideration is dependent on the business gaining additional contracts in the next 12 – 24 months.

The contingent consideration is calculated by applying the same EBITDA multiple used on the acquisition date.

Impact on consolidated information if each business combination took place on 1 October 2015

  PGM
2016
R’m
  Carint
Scanmed
2016
R’m
 
Revenue 386   67  
Net profit 25   16  

Basis of presentation and accounting policies

The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings Requirements (Listings Requirements) for preliminary reports, and the requirements of the Companies Act applicable to summary financial statements. The Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.

The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated financial statements were derived are in terms of IFRS, and are consistent with those applied in the previous consolidated annual financial statements, except for the adoption of the new and revised standards.

These financial results have been prepared under the supervision of PP van der Westhuizen CA(SA), the Group Chief Financial Officer.

Report of the independent auditor

This summarised report is extracted from audited information, but is not itself audited. The annual financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the auditor’s report thereon are available for inspection at the Company’s registered office.

The directors take full responsibility for the preparation of the preliminary report and that the financial information has been correctly extracted from the underlying annual financial statements.