Notes

The table below illustrates the disaggregation disclosure by primary geographical areas, type of customer and timing of revenue recognition, including a reconciliation of how the disaggregated revenue ties in to the segmental report (refer Segmental information).

Management believes that both disaggregations depict how the nature, amount, timing and uncertainty of the Group's revenue and cash flows are affected by economic factors.

Segments	Hospitals and complementary services R’m	Healthcare services R’m	Diagnostic services R’m	Growth initiatives R’m	Total R’m
2021
Primary geographical areas
Southern Africa	17 567	1 456	–	1	19 024
International	–	–	7 474	387	7 861
UK	–	–	3 918	30	3 948
Italy	–	–	2 120	5	2 125
Ireland	–	–	765	–	765
Other	–	–	671	352	1 023
	17 567	1 456	7 474	388	26 885
Type of customer
Contract from customers
Private (including private medical aids and cash paying patients)	17 143	–	959	1	18 103
Government and public healthcare facilities	321	619	5 158	–	6 098
Corporate institutions	–	837	1 357	387	2 581
Rental revenue
Rental income related to auxiliary services	103	–	–	–	103
	17 567	1 456	7 474	388	26 885
Timing of revenue recognition
Over time	13 134	1 456	–	–	14 590
At a point in time	4 433	–	7 474	388	12 295
	17 567	1 456	7 474	388	26 885

 

Segments	Hospitals and complementary services R’m	Healthcare services R’m	Diagnostic services R’m	Growth initiatives R’m	Total R’m
2020
Primary geographical areas
Southern Africa	15 899	1 346	–	1	17 246
International	–	–	6 286	319	6 605
UK	–	–	3 278	43	3 321
Italy	–	–	1 823	5	1 828
Ireland	–	–	562	–	562
Other	–	–	623	271	894
	15 899	1 346	6 286	320	23 851
Type of customer
Contract from customers
Private (including private medical aids and cash paying patients)	15 465	–	719	1	16 185
Government and public healthcare facilities	351	568	4 242	–	5 161
Corporate institutions	–	778	1 325	319	2 422
Rental revenue
Rental income related to auxiliary services	83	–	–	–	83
	15 899	1 346	6 286	320	23 851
Timing of revenue recognition
Over time	11 928	1 346	–	–	13 274
At a point in time	3 971	–	6 286	320	10 577
	15 899	1 346	6 286	320	23 851

• Transactions with non-controlling interests

Increases and decreases in ownership interest in subsidiaries

The Group had marginal increases and decreases in its percentage shareholdings in some of its southern Africa subsidiary companies due to transactions with minority shareholders. The individual transactions are immaterial.

• Acquisitions that resulted in business combinations

	North West Dialysis Centre	ZAG Zyklotron AG (ZAG)	Monza Medicina SRL*
Acquirer	East Rand Dialysis Incorporated	AMG	AMG
Country of incorporation	South Africa	Germany	Italy
Acquisition date	1 Nov 2020	1 Jan 2021	30 Jun 2021
Total purchase consideration	R14 million	R90 million	R14 million
Goodwill recognised	R11 million	R59 million	R9 million
Percentage voting equity interest acquired	100%	100%	100%
Primary reasons for business combination	This is in line with Life Healthcare's strategy to grow its non-acute businesses.
Qualitative factors that make up goodwill recognised	Attributable to the acquired workforce and expected synergies from combining the acquired operations within the existing southern Africa and international operations.
Contingent liabilities at acquisition	None

*	The acquisitions have been provisionally accounted for in terms of IFRS 3 "Business combinations".

None of the goodwill recognised is expected to be deductible for income tax purposes.

The acquisitions qualify as a business as defined in IFRS 3.

The aggregated fair values of the assets and liabilities arising from all the acquisitions listed above are as follow:

	2021  R’m
Total purchase consideration	(121)
Cash portion	(118)
Contingent consideration	(3)
Fair value of net assets acquired	42
Property, plant and equipment	34
Customer relations	8
Trade and other receivables	15
Cash and cash equivalents	15
Inventories	13
Interest-bearing borrowings	(5)
Trade and other payables	(29)
Provisions	(9)
Goodwill	79

 

	2021  R’m
Aggregated cash outflow to acquire businesses, net of cash acquired
Initial cash considerations	(118)
Less: Cash at acquisitions	15
	(103)
Aggregated impact on consolidated information from date of acquisitions
Revenue	50
Net profit	2
Aggregated impact on consolidated information if the business combinations took place on 1 October 2020
Revenue	96
Net profit	2

• Consolidated Aone Trade and Invest 12 Proprietary Limited (Consolidated Aone)

1. Disposal of investment in associate

The Group acquired the remaining 70% of the assets and liabilities of Consolidated Aone, resulting in Consolidated Aone becoming a wholly-owned subsidiary of the Group. The Group previously had an interest of 30% in Consolidated Aone, which was accounted for as an associate. The investment in associate was derecognised.

	R’m
Derecognition of investment in associate	1 July 2021
Effective date
Previously interest held	30.0%
Total consideration received	28
Fair value of equity interest held before the acquisition	28
Carrying value of the associate	–
Profit on remeasuring previously held interest in associate to fair value	28

2. Acquisition of assets and liabilities

The Group acquired the remaining 70% of the assets and liabilities of Consolidated Aone on 1 July 2021 for a total consideration of R92 million. Consolidated Aone is a property company and the acquisition was accounted for as an asset acquisition due to the absence of inputs and processes to contribute to the creation of outputs. The assets acquired are not a business as defined in IFRS 3.

	2021  R’m
Total purchase consideration	(92)
Cash portion	(64)
Fair value of equity interest held before the acquisition	(28)
Fair value of net assets acquired	92
Property, plant and equipment	150
Other liabilities	(3)
Interest-bearing borrowings	(52)
Trade and other payables	(3)

• Investment in joint venture (Altakassusi Alliance Medical LLC)

The Group acquired 45% of Altakassusi Alliance Medical LLC in Saudi Arabia on 10 November 2020. The amount invested was R5 million and was accounted for as an investment in joint venture.

• Discontinued operation and sale of Scanmed

Description

On 16 November 2020 the Group received an offer to dispose of its Polish operation, Scanmed. The related agreements were signed on 24 November 2020 and the transaction was subject to regulatory approvals. The sale proceeds per the agreements were lower than the carrying value of Scanmed at 30 September 2020. With the receipt of the offer, the Group considered it prudent and appropriate to impair the carrying value at 30 September 2020 to reflect the air value less costs to sell. The impairment recognised in FY2020 amounted to R793 million.

The sale of Scanmed was concluded on 26 March 2021 and was reported as a discontinued operation. Scanmed met the criteria of a discontinued operation as Scanmed operated in a separate geographical area and was previously disclosed as a separate segment. Financial information relating to the discontinued operation for the period to the date of disposal is set out on next page.

Financial performance and cash flow information

The results of the discontinued operation, which have been included in the profit for the year, were as follows:

	2021  R’m	2020  R’m
Revenue	847	1 535
Normalised EBITDA	85	191
Depreciation, amortisation, interest and other expense	(34)	(164)
Fair value adjustments to contingent consideration	(9)	(37)
Transaction costs	–	(9)
Impairment of investment	–	(793)
Profit/(loss) before tax	42	(812)
Tax expense	(9)	13
Profit/(loss) after tax from discontinued operation	33	(799)
Profit on disposal of Scanmed after income tax (refer here)	54	–
Profit/(loss) from discontinued operation	87	(799)
Basic earnings per share from discontinued operation	6.0	(54.9)
Diluted earnings per share from discontinued operation	6.0	(54.7)
Other comprehensive income
Foreign currency differences on translation before disposal	(129)	165
Exchange gain reclassified to profit or loss on disposal	(188)	–
Tax on exchange gain reclassified to profit or loss on disposal	41	–
Reversal of previously recognised deferred tax	133	–
	(143)	165
The impact on the statement of cash flows relating to operational performance
Net cash generated from operating activities	87	116
Net cash utilised in investing activities	(23)	(73)
Net cash utilised in financing activities	(35)	(69)
Net increase/(decrease) in cash and cash equivalents	29	(26)
The impact on the statement of cash flows after impact of disposal
Net cash generated from operating activities	35	116
Net cash generated/(utilised) in investing activities	550	(73)
Net cash utilised in financing activities	(35)	(69)
Net increase/(decrease) in cash and cash equivalents	550	(26)

Details of the sale

	2021  R’m
Total consideration received	733
Cash	733
Carrying value of net assets sold	(725)
Property, plant and equipment	(1 021)
Intangible assets	(377)
Cash and cash equivalents	(160)
Trade and other receivables	(199)
Inventories	(37)
Deferred tax liabilities	3
Interest-bearing borrowings	797
Trade and other payables	260
Contingent consideration liabilities	9
Profit on disposal before taxes, transaction costs and reclassification of FCTR	8
Withholding tax	(20)
Transaction costs	(32)
Exchange gain reclassified to profit or loss on disposal	188
Tax on exchange gain reclassified to profit or loss on disposal	(41)
Tax recognised as a result of assessed losses	(49)
Profit on disposal after taxes, transaction costs and reclassification of FCTR	54
Net cash inflow on disposal
Cash consideration received	733
Less: cash and cash equivalents disposed of	(160)
	573

	2021  R'm
Total borrowings at 30 September 2020	14 214
Proceeds from interest-bearing borrowings	5 221
Repayment of interest-bearing borrowings	(5 568)
Additional lease liabilities recognised	625
Derecognition of lease liability	(56)
Arising on acquisition of subsidiaries	57
Disposal of subsidiary	(797)
Other movements	22
Effect of foreign currency movement	(993)
Total borrowings at 30 September 2021	12 725

Fair value

Other non-current assets, as presented in the statement of financial position, include derivative financial instrument assets of R4 million (2020: Rnil) at fair value (through profit or loss).

Other non-current liabilities and other current liabilities, as presented in the statement of financial position, include contingent consideration liabilities of R631 million (2020: R642 million) and derivative financial instrument liabilities of R9 million (2020: R53 million) at fair value (through profit or loss).

The largest contingent consideration payable (R626 million) relates to a potential amount payable to the previous owners of LMI, acquired during June 2018. The decrease in the contingent consideration relating to LMI from 30 September 2020 (R629 million) relates to the movement in foreign currency rates (-R65 million), set off by the unwinding of the contingent consideration (+R62 million).The contingent consideration will become payable when the acquired business is generating a positive cash contribution, measured on a cumulative basis from the date of acquisition. The contingent consideration is a 50% share of pre-tax cash generated for a period of 10 years post-acquisition or a maximum amount payable of USD200 million. The amount included is the calculated payment, based on long-term forecasts adjusted for probabilities associated with the success of the product developed, discounted to present value using a discount rate of 13.37% (2020: 13.25%)

The fair value of interest rate swaps is calculated as the mark-to-market valuation, which represents the mid-market value of the instrument as determined by the financial institution at 30 September 2021.

The Group's financial instruments held at fair value are measured subsequent to their initial recognition and are grouped into levels 1 to 3 based on the significance of the inputs used in the valuation. All of the resulting fair value estimates for the derivative financial instruments used for economic hedging are included in level 2. The contingent considerations are included in level 3.

The fair value of forward exchange contracts is determined using forward exchange rates at the statement of financial position date, with the resulting value discounted back to the present value, as determined by the financial institution at 30 September 2021.

There were no transfers between levels 1, 2 and 3 during the year.

No event which is material to the understanding of this report has occurred between year-end and the date of the annual financial statements, other than:

• the cash dividend distribution – refer here.