Balance at 1 October 2019 11 995    
Proceeds from interest-bearing borrowings 7 631    
Repayment of interest-bearing borrowings (8 009)   
Additional lease liabilities recognised on 1 October 2019 as a result of adopting IFRS 16 1 230    
Derecognition of lease liability (173)   
Other movements (34)   
Exchange differences 1 578   
Balance at 31 March 2020 14 218    


Fair value

Other non-current liabilities and other current liabilities as presented in the statement of financial position, include contingent consideration liabilities of R717 million (September 2019: R543 million) and derivative financial instrument liabilities of R37 million (September 2019: R30 million) at fair value (through profit or loss).

The derivative assets and liabilities used for hedging, as presented in the statement of financial position, are the financial assets and liabilities that are measured at fair value.

The fair values of quoted investments are based on current bid prices. If the market for a financial asset is not active and for unlisted securities, the Group establishes fair value by using valuation techniques. These include the use of recent arm's length transactions, reference to other instruments that are substantially the same, discounted cash flow analysis and option pricing models, making maximum use of market inputs and relying as little as possible on entity-specific inputs.

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 extent to which the fair values are observable. All of the resulting fair value estimates for the derivative financial instruments used for hedging are included in level 2. The contingent considerations are included in level 3. 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 31 March 2020.

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


The Group adopted IFRS 16 from 1 October 2019, and changed its accounting policies accordingly. The Group has elected the modified retrospective approach, with no restatement to comparative periods.

On adoption of IFRS 16, the Group recognised lease liabilities in relation to leases which had previously been classified as 'operating leases' under the principles of IAS 17 Leases. These liabilities were measured at the present value of the remaining lease payments, discounted using the lessee's incremental borrowing rate as of 1 October 2019.

For leases previously classified as finance leases the Group recognised the carrying amount of the lease asset and lease liability immediately before transition as the carrying amount of the right-of-use asset and the lease liability at the date of initial application. The measurement principles of IFRS 16 are only applied after that date.

Operating lease commitments disclosed as at 30 September 2019 1 293    
Discounted using the lessee’s incremental borrowing rate at the date of initial application (463)   
Finance lease liabilities recognised as at 30 September 2019 1 427    
Low-value leases recognised on a straight-line basis as expense (5)   
Adjustments as a result of a different treatment of extension and termination options 405    
Lease liability recognised as at 1 October 2019 2 657    
Current lease liabilities 640    
Non-current lease liabilities 2 017    
  2 657    

The associated right-of-use assets for all lease classes were recognised at an amount equal to the lease liabilities on 1 October 2019, adjusted by the amount of any prepaid or accrued lease payments relating to that lease recognised on the statement of financial position as at 30 September 2019. There were no onerous lease contracts that would have required an adjustment to the right-of-use assets at the date of initial application.

The recognised right-of-use assets relate to the following types of assets:

  31 March
  1 October
Land and buildings 1 526   1 537  
Medical equipment 1 242   1 105  
Motor vehicles and other equipment 28   29  
Total right-of-use assets 2 796   2 671  

The change in accounting policy affected the following items in the statement of financial position on 1 October 2019:

  • Right-of-use assets included under property, plant and equipment – increased by R1.1 billion
  • Prepayments included under other liabilities – decreased by R86 million
  • Lease liabilities included as part of interest-bearing borrowings – increased by R1.2 billion

There was no net impact on retained earnings on 1 October 2019.

Practical expedients applied

In applying IFRS 16 for the first time, the Group has used the following practical expedients permitted by the standard:

  • The use of a single discount rate to a portfolio of leases with reasonably similar characteristics
  • Reliance on previous assessments on whether leases are onerous
  • The accounting for operating leases with a remaining lease term of less than 12 months as at 1 October 2019 as short-term leases
  • The exclusion of initial direct costs for the measurement of the right-of-use asset at the date of initial application
  • The use of hindsight in determining the lease term where the contract contains options to extend or terminate the lease

The Group also elected not to reassess whether a contract is or contains a lease at the date of initial application. Instead, for contracts entered into before the transition date the Group relied on its assessment made applying IAS 17 and IFRIC 4 Determining whether an Arrangement contains a Lease.

Leasing activities and how these are accounted for

The Group leases various properties, medical equipment (including scanning equipment, blood gas machines and renal dialysis units), motor vehicles, IT equipment and gym equipment. Rental contracts are typically made for fixed periods of one to 25 years but may have extension options as described below. Lease terms are negotiated on an individual basis and contain a wide range of different terms and conditions. The lease agreements do not impose any covenants, but leased assets may not be used as security for borrowing purposes.

Up until 30 September 2019, leases of property, plant and equipment were classified as either finance or operating leases. Payments made under operating leases (net of any incentives received from the lessor) were charged to profit or loss on a straight-line basis over the period of the lease.

From 1 October 2019, 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. Each lease payment is allocated between the liability and finance cost. The finance cost is charged to profit or loss over the lease period so as to produce a constant periodic rate of interest on the remaining balance of the liability for each period. The right-of-use asset is depreciated over the shorter of the asset’s useful life and the lease term on a straight-line basis.

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
  • Variable lease payments that are based on CPI, the Polish inflation rate or WIBOR
  • Amounts expected to be payable by the lessee under residual value guarantees (only in our Polish operations)
  • The exercise price of a purchase option if the lessee is reasonably certain to exercise that option
  • Payments of penalties for terminating the lease, if the lease term reflects the lessee exercising that option

Payments associated with short-term leases and 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 (defined as assets with a value of less than R60 000 for our southern Africa business and GBP5 000 for our international business) comprise IT equipment and
contracts for general business services.

(i) Extension options
Extension options are included in a number of leases across the Group. These terms are used to maximise operational flexibility in terms of managing contracts. The majority of extension options held are exercisable only by the Group and not by the respective lessor.

Critical judgements in determining the lease term

In determining the lease term, the Group considers all facts and circumstances that create an economic incentive to exercise an extension option. Extension options are only included in the lease term if the lease is reasonably certain to be extended. The Group has assessed that it is reasonably certain that all extension options on property leases will be exercised and therefore has included all renewal periods as part of the lease term. Due to the medical equipment being highly technical in nature, and the possibility that new technology may be developed, extension options have not been taken into account for medical equipment.

(ii) Discount rate applied to leases

The lease payments are discounted using the incremental borrowing rate, which is the rate that the relevant business unit (lessee) would have to pay to borrow the funds necessary to obtain an asset of similar value in a similar economic environment with similar terms and conditions.

Critical estimates in calculating discount rates

The incremental borrowing rate was calculated using an adjusted Group weighted average cost of capital (WACC) approach by extracting the pre-tax cost of debt element from the WACC rate, which was adjusted for the following:

  • Local borrowing rates
  • The unsecured/secured nature
  • Lessee-specific credit risk
  • Lease start date and term

The weighted average incremental borrowing rate applied to the lease liabilities on 1 October 2019 was 9.33% for the Group’s leases in South Africa and 3.35% for the Group’s international operations.

Should the discount rate applied at the date of transition change by 0.5%, the impact would be as follows:

  • Increase by 0.5%: Right-of-use asset and lease liability decrease by R32 million
  • Decrease by 0.5%: Right-of-use asset and lease liability increase by R33 million


Impact on statement of profit or loss
  IFRS 16 
Pre-IFRS 16 
  Change %
Pre-IFRS 16
Pre-IFRS 16 
Operating profit 1 847    (21)   1 826    1.3    1 803   
Finance costs (455)   30    (425)       (525)  
Profit before tax 1 434      1 443    75.5    822   

No impact on FY2019.

Impact on earnings per share

Earnings per share decreased by 0.5 cps for the six months to 31 March 2020 as a result of the adoption of IFRS 16.


The condensed consolidated interim financial statements contained in the interim report are prepared in accordance with the requirements of the JSE Limited (JSE) Listings Requirements for preliminary reports, and the requirements of the South Africa Companies Act, 71 of 2008 (as amended) applicable to summary financial statements. The accounting policies are consistent with those applied in the previous consolidated annual financial statements, except for the adoption of IFRS 16 Leases. 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 South African Institute of Chartered Accountants (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.

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


The results for the period ended 31 March 2020 have not been reviewed or audited by the Group’s auditors

The directors take full responsibility for the preparation of the interim report.


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