IMPROVING LIVES Beyond Horizons
Annual
Report
2011
Contents 01 02 04 06 08 10 12 14 15 16 20 22 23 24 25
Key Figures Corporate Profile Across the Region Chairman’s Message Board of Directors Senior Management Our Humble Beginnings Management Discussion and Analysis Business Highlights Operating Review People Corporate Social Responsibility Investor Relations Corporate Information Financial Contents
KEY FIGURES
Profit before tax
+154% PATMI
Cash and cash equivalent
+59%
RM1.8 million Turnover
+23%
Total patient load
+15%
Health Management International Ltd Annual Report 2011
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CORPORATE PROFILE Vision
Improving lives through healthcare and education
Mission
To be a leading regional healthcare company committed to the delivery of quality products and services with care and compassion, that:
• • • •
Creates sustainable stakeholder value; Improves the quality of human life; Adheres to the highest ethical standards; and Attracts and develops quality human capital
About Health Management International Ltd Health Management International Ltd (HMI) is a healthcare company with presence in Singapore, Malaysia, Indonesia, and Cambodia. Listed on the SGX Mainboard, HMI is focused on the delivery of healthcare services. HMI owns and operates two tertiary care hospitals in Malaysia, the flagship Mahkota Medical Centre in Malacca and Regency Specialist Hospital in Iskandar Malaysia, Johor, which provide a comprehensive suite of medical and surgical disciplines. To reach out to regional patients, HMI has a network of 20 patient representative offices. With more than 15 years of experience in hospital management, HMI provides project consultancy and advisory services. HMI also owns and operates HMI Institute of Health Sciences in Singapore and Mahkota Institute of Health Sciences and Nursing in Malacca, Malaysia.
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Health Management International Ltd Annual Report 2011
Quality Healthcare Within Your Reach
HMI hospitals are poised to capitalise on the rising medical tourism trend, with their delivery of quality affordable healthcare.
Malacca Riverside, Malacca, Malaysia
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ACROSS THE REGION
Hospitals
Mahkota Medical Centre, Malacca
2 Hospitals
Regency Specialist Hospital, Iskandar Malaysia, Johor
Institutes • HMI Institute of Health Sciences • Mahkota Institute of Health Sciences and Nursing
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Health Management International Ltd Annual Report 2011
Malaysia
• Mahkota Medical Centre, Malacca • Regency Specialist Hospital, Johor • Mahkota Institute of Health Sciences and Nursing • 2 Representative Offices in Batu Pahat and Kuantan
Singapore
• HMI Headquarters • HMI Institute of Health Sciences • HMI Patient Service Centre
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Representative Offices
Cambodia
• Representative Office in Phnom Penh
Indonesia
• 16 Representative Offices in Aceh, Bali, Bandung, Batam, Jakarta Selatan, Jakarta Utara, Jambi, Makassar, Medan, Padang, Palembang, Pekan Baru, Semarang, Surabaya, Tanjung Balai Karimun and Yogyakarta
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CHAIRMAN’S MESSAGE Dear Shareholders, For more than two decades, HMI has been dedicated to improving lives through the provision of healthcare services. Since our humble beginnings in Singapore, we have extended our footprint across the region and established ourselves as a leader in Malaysian medical tourism. Even though the economic climate in the United States and Europe remains uncertain, we are confident about the growth prospects of the Malaysian healthcare market. Ageing populations in the region, a comparatively lower cost of healthcare in Malaysia and rising affluence among Malaysians are factors that augur well for the Malaysian private healthcare sector. In the year to come, we will continue to develop our hospitals into regional landmarks of healthcare excellence.
GROUP PERFORMANCE The Group achieved a revenue growth of 23% to RM173.9 million in FY2011. This was primarily attributed to higher numbers of patients seeking medical treatment and services at our hospitals, and was demonstrated by the 20% and 98% growth in revenue for Mahkota Medical Centre (“Mahkota”) and Regency Specialist Hospital (“Regency”) respectively. In addition to this strong revenue delivery, a net fair value gain from investment properties amounting to RM6.8 million held by our associated companies contributed to our better performance. In the year under review, the Group improved its net profit attributable to equity holders to RM1.8 million. This translated to earnings per share of 0.33 cents and return on equity of 2.4%.
Ageing populations in the region, a comparatively lower cost of healthcare in Malaysia and rising affluence among Malaysians are factors that augur well in the Malaysian private healthcare sector. In the year to come, we will continue to develop our hospitals into regional landmarks of healthcare excellence. Dr Gan See Khem
Executive Chairman and Managing Director Health Management International Ltd
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Health Management International Ltd Annual Report 2011
GOING FORWARD Our presence in the private healthcare sector is growing stronger. Over the past years, we have consistently delivered strong revenue and realised patient growth in our hospitals. With the hospitals responsible for more than 95% of total Group revenue, we have laid out strategies to further strengthen our core healthcare business in the coming year. Mahkota is now operating at almost full capacity due to its popularity among medical travellers and the rising demand for high quality healthcare in Southeast Asia. According to the Malaysian Economic Transformation Plan, Malaysia’s health tourism sector is anticipated to contribute RM9.6 billion in revenue through the arrival
Our presence in the private healthcare sector is growing stronger. Over the past years, we have consistently delivered strong revenue and realised patient growth in our hospitals.
of 1.9 million medical tourists by 2020. In our view, Mahkota is poised to capture the burgeoning medical tourism trend with its leading position as a hospital of choice in Malaysia. To cater to the anticipated escalation in medical tourism and local healthcare demand, we are prepared to open up extra beds within existing facilities. Moreover, we have set aside land neighbouring the hospital for expansion purposes. In the long term, we envisage a further expansion of Mahkota into a hospital known internationally for its comprehensive range of disciplines and medical excellence. Regency also has abundant room for growth to provide private healthcare services for the underserved Johor population. In the coming year, we have plans to open up two more wards to accommodate its steadily increasing patient loads. Regency also owns a plot of land in its vicinity that is pending development.
In our plans moving forward, we will continue to expand our presence in the Malaysian and Indonesian markets. By building on our fundamentals, we intend to fortify our healthcare business and amplify our market share.
APPRECIATION On behalf of the Board of Directors, I sincerely thank our shareholders, customers and business associates for their sustained confidence in the Group. I would also like to express my thanks to the Ministry of Health, government agencies and community organisations in Singapore and Malaysia for their generous support of HMI’s healthcare and education initiatives. Finally, I would like to convey my deepest appreciation to all employees across the Group for their commitment and dedication. I wish you the best in the year ahead and thank you for your continued investment in HMI.
Furthermore, the rapid transformation of Iskandar Malaysia is expected to spur economic growth in the Johor region, which will benefit Regency.
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BOARD OF DIRECTORS
Dr Gan See Khem
Dr Chin Koy Nam
Executive Chairman and Managing Director Appointed in January 1999
Executive Director Appointed in January 1999
Dr Gan See Khem is Executive Chairman and Managing Director of Health Management International Ltd. She has spearheaded the Group’s healthcare and education businesses since 1999.
Dr Chin Koy Nam is Executive Director of Health Management International Ltd. An established medical practitioner currently in private practice, Dr Chin has special interests in haematology, preventive medicine and diabetes management. He is the medical advisor to two clan associations and one community guild.
Dr Gan is an active figure in public services. She is on the Board of Trustees for the Singapore Management University (SMU) and serves on the Malaysia–Singapore Business Council. Dr Gan is distinguished as one of the first two women to become a council member at the Singapore Chinese Chamber of Commerce and Industry in 1995. She was a Nominated Member of Parliament of the Republic of Singapore. She was also previously on the Board of Trustees of the Institute of South East Asian Studies and was a member of the International Advisory Board of Curtin Business School. In addition, Dr Gan holds directorships in several private companies in Singapore, Malaysia and Hong Kong that are involved in various industries including property investment and development. Dr Gan specialised in strategic planning and management during her 15-year tenure at the National University of Singapore. She 3 4 holds5 a PhD in Business Administration from the University of Sheffield, United Kingdom.
Dr Chin holds a PhD and MBChB degree from the University of Bristol and University of Sheffield, United Kingdom respectively.
Dr Cheah Way Mun Non-Executive Director, Independent Appointed in September 1999 Dr Cheah Way Mun is an Independent Director. He is also a member of the Audit Committee, Remuneration Committee and Nominating Committee. Dr Cheah is an accomplished ophthalmic surgeon currently in private practice. He was previously the head of the eye department of Tan Tock Seng Hospital and a visiting consultant of the National University Hospital and the Singapore National Eye Centre. Dr Cheah holds an MBBS from the then University of Singapore and is a fellow of the Royal College of Surgeons (Glasgow and Edinburgh) and the American Academy of Ophthalmology.
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Health Management International Ltd Annual Report 2011
From left Dr Gan See Khem Dr Chin Koy Nam Dr Cheah Way Mun Mr Gan Lai Chiang, Andy Professor Tan Chin Tiong
Mr Gan Lai Chiang, Andy
Professor Tan Chin Tiong
Non-Executive Director, Independent Appointed in April 2002
Non-Executive Director, Independent Appointed in April 2002
Mr Gan Lai Chiang is the Lead Independent Director. He is also Chairman of the Audit Committee and a member of the Nominating Committee and Remuneration Committee.
Professor Tan Chin Tiong is an Independent Director. He is Chairman of the Remuneration Committee and Nominating Committee. He is also a member of the Audit Committee.
A Certified Public Accountant, Mr Gan is the Managing Director of Swiss Securitas Asia Pte Ltd and sits on the Board of Directors of various other companies. Mr Gan was a Member of Parliament for Marine Parade Group Representation Constituency and a member of the Government Parliamentary Committees for Health and Transport.
He is the Founding President of the new Singapore Institute of Applied Technology, and was the former Deputy President and Provost at SMU. Professor Tan specialises in marketing strategy and strategic management. He has co-authored several books on marketing and business and consults for corporations around the world.
Mr Gan holds a Bachelor of Commerce degree from the University of Western Australia and a Graduate Diploma in Accounting from Curtin University, Australia. He is a Fellow of the Institute of Certified Public Accountants of Singapore and Australia.
Professor Tan is the Non-Executive Chairman of Superior Multi-Packaging Ltd, sits on the Board of Directors of Citibank Singapore Ltd, and several publicly listed companies including Communication Design International Ltd, Hup Soon Global Ltd, and Hersing Corporation Ltd. Professor Tan holds a PhD from the Pennsylvania State University, United States of America.
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SENIOR MANAGEMENT
From left: Ms Sally Tan, Mr Wong Wei Tze, Ms Chin Wei Jia, Mr Seah Choo Pin, Mr Timothy Chang and Ms May Tan Mei Yen
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Mr Seah Choo Pin Group Chief Financial Officer Health Management International
Ms May Tan Mei Yen Chief Financial Officer Mahkota Medical Centre
Ms Chin Wei Jia Group General Manager Health Management International
Ms Sally Tan General Manager of Patient Services Mahkota Medical Centre
Mr Timothy Chang Chief Executive Officer Mahkota Medical Centre
Mr Wong Wei Tze Chief Executive Officer Regency Specialist Hospital
Health Management International Ltd Annual Report 2011
Quality Healthcare Affordable Prices
HMI hospitals emphasise the delivery of a good patient experience. We do our best to put a smile on our patients’ faces.
Sultan Istana Johor, Malaysia
Health Management International Ltd Annual Report 2011
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OUR HUMBLE BEGINNINGS
The HMI Story Our Early Years
Streamlining Our Business
1991 - 1999
2000 - 2004
HMI Balestier Hospital began operations in 1991 as Balestier Medical Centre, providing a range of primary and secondary healthcare facilities and services in Singapore.
Due to the prolonged economic slowdown and privatisation of public hospitals, the Group proceeded to restructure HMI Balestier Hospital into a healthcare training institute.
Amidst the Asian economic crisis in 1998, HMI purchased a stake in and was awarded the contract to manage the then loss-making Mahkota Medical Centre in Malacca from Lion Group.
In 2002, HMI launched HMI Institute of Health Sciences and became the first dedicated private healthcare education provider in Singapore.
HMI was listed on the SGX SESDAQ in 1999.
Under HMI’s management, Mahkota developed into an attractive destination for medical travellers looking for quality healthcare at affordable prices. HMI exited the Singapore private healthcare scene in 2004.
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Health Management International Ltd Annual Report 2011
Emerging as a Leader in Malaysian Medical Tourism
A Second Engine of Growth
2005 - 2008
2009 - 2010
Mahkota grew both in patient visits and revenue. For its outstanding efforts in medical tourism, Tourism Malaysia and the Malacca State Government presented Mahkota with the Best Tourism Award in 2005. Mahkota then went on to win a series of awards in recognition of its quality healthcare and service excellence.
To cater to the underserved Johor population, the Group launched Regency Specialist Hospital in 2009. The hospital is located half an hour’s drive from the Singapore Causeway. In 2010, Singapore’s Ministry of Health approved the use of Medisave overseas for hospitalisation and day surgeries at HMI hospitals.
HMI was upgraded to the SGX Mainboard in 2008. HMI reached another milestone with the opening of its 20th patient representative office.
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MANAGEMENT DISCUSSION AND ANALYSIS FINANCIAL HIGHLIGHTS FY2011 Year ended 30 June Year For the year (RM’000) 173,884 Revenue 10,022 Profit before tax 6,809 Profit after tax 1,816 Profit attributable to shareholders 2,977 Total comprehensive income attributable to shareholders 15,874 EBITDA* 10,485 Operating cash flow Per share 0.33 Earnings (cents) 14.59 Net assets (cents) At year-end (RM’000) Shareholders’ equity Cash and cash equivalents Total borrowings Total assets Total liabilities Financial ratios Return on shareholders’ equity** (%) Interest cover (times)
FY2010
Change
140,846 3,944 (1,626) (2,924) (3,719) 13,858 5,072
23% 154% n.m n.m n.m 15% 107%
(0.57) 13.69
n.m 7%
84,119 11,247 77,212 243,256 131,007
65,784 7,076 72,373 223,999 123,521
28% 59% 7% 9% 6%
2.42 3.5
(4.32) 3.5
n.m -
*EBITDA is defined as earnings before interest, tax, depreciation and amortisation, and share of profit of associated companies **Return on shareholders’ equity is calculated using profit/(loss) attributable to equity holders of the Company divided by average of two years’ capital and reserves attributable to equity holders of the Company
GROUP OVERVIEW Revenue increased by 23% from RM140.8 million to RM173.9 million in FY2011 due to higher contributions from the hospital segment. The hospital segment registered a 26% growth in revenue to RM168 million on the back of a 15% increase in total patient load. Indonesian patients made up the bulk, with an increase of more than 10,000 in FY2011. The higher patient load led to an improved bed occupancy rate at both hospitals. Due to fewer courses offered for vocational skills training at HMI Institute of Health Sciences, the Group’s education and training segment registered a decrease in turnover of RM1.7 million. Profit before tax rose substantially by 154% due to the
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Health Management International Ltd Annual Report 2011
fair value gain of the investment properties held by associated companies. EBITDA and operating cash flow both improved by 15% and 107% respectively to RM15.9 million and RM10.5 million. As such, HMI attained a net profit attributable to equity holders of RM1.8 million for FY2011, reversing the loss of RM2.9 million a year before. This translated to earnings per share of 0.33 cents and return on equity of 2.4%. Cash and cash equivalents was 59% higher at RM11.2 million as at the end of FY2011. Total shareholders’ equity rose by 28%, from RM65.8 million to RM84.1 million, largely attributed to the profit generated from operations and increase in share capital from the rights issue in December 2010.
BUSINESS HIGHLIGHTS Business Award of the Year (Service Provider Category) 2010
LINEAR ACCELERATOR 2nd
installed at Mahkota
awarded to Mahkota
New
INTERVENTIONAL RADIOLOGY discipline at Regency
Addition of
NEONATAL CARE UNIT at Regency
Completed
UPGRADING WORKS
at both hospitals
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OPERATING REVIEW Hospitals MAHKOTA MEDICAL CENTRE Another year of solid growth Revenue continued on its upward trajectory to RM149 million in FY2011, a 20% increase from the preceding year. This can be largely attributed to the increase in Malaysian and foreign patients by 7% and 22% respectively. The increase in patients contributed to a higher average occupancy rate of 62% for the hospital, up from 56% in FY2010. In January 2011, Mahkota Medical Centre (“Mahkota”) celebrated its 100,000th surgical patient milestone.
Towards an International Healthcare Provider Mahkota is committed to serving healthcare needs beyond its borders. The hospital also ensures that its facilities and services adhere to high quality standards. In FY2011, Mahkota underwent renovation of the front lobby and car park and introduced new staff uniforms. These initiatives aim to improve the overall patient experience and create a more pleasant working environment.
The hospital engaged professional consultants for menu planning and designing of new staff uniforms. Mahkota also invested in a new corporate video that reflects the enhanced Mahkota brand.
In the year under review, Mahkota added eight specialist consultants, a medical officer, and a dental officer to its team. This brought the total number of doctors to 60 full-time consultants, and 26 part-time and visiting consultants. To provide adequate facilities for its growing patient load, the hospital invested in new medical equipments and facilities. In July 2010, a second linear accelerator was installed to meet the rise in demand for radiotherapy
MALAYSIA Healthcare Review Healthcare has been identified as one of twelve National Key Economic Activities under the Economic Transformation Plan. At more than 4% of GDP, healthcare spending in Malaysia has consistently exceeded that of its regional peers. Expanding the pool of skilled healthcare professionals, especially highly-trained specialists, remains a significant challenge. Over the past year, the Government has unveiled new policies to attract foreign talent and overseas Malaysian professionals. In April 2011, it was announced that returning experts will enjoy a flat income tax rate of 15% for five years.
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Furthermore, the Malaysian Government has identified medical tourism as a key growth sector. To encourage its expansion, the Government laid out five incentives, including tax exemptions equivalent to 100% for capital expenditure on the construction of new hospitals or on expansion, modernisation or refurbishment of existing hospitals. With plans to create a differentiated position and broaden the customer base beyond Indonesia, such incentives will help reinvigorate health travel through the development of better infrastructure.
HMI hospitals are well-equipped with comprehensive facilities and advanced medical equipment to deliver quality healthcare services to a growing pool of patients in Malaysia and the region.
services. Mahkota also set up a Neurology Laboratory, Clinical Research Centre and an Eye Centre.
Enhancing the Mahkota Brand The hospital engaged professional consultants for menu planning and designing of new staff uniforms. Mahkota also invested in a new corporate video that reflects the enhanced Mahkota brand.
Year – Service Provider Category 2010 and The Brand Laureate – SMEs Chapter Awards (Corporate Branding) Wellness – Medical Tourism Category. It also became the first hospital-based laboratory outside of KL to achieve the MS ISO 15189 accreditation for quality and competence in Medical Testing for Chemical Pathology and Haematology.
Expansion of Capacity and Capabilities Testament to its strong brand and service quality, the hospital was awarded both the Business Award of The
With full occupancy during the peak months for medical tourism, expansion has been identified as a
MALAYSIA Economic Review After a challenging year in 2009, Malaysia delivered a turnaround with a robust growth of 7.2% in 2010. The economic expansion was underpinned by strong domestic demand and sturdy recovery of global trade. Trade volume rose by 18% to the 2008 pre-crisis level of RM1.2 trillion.
Rising interest in Iskandar Malaysia has also been observed. At the end of June 2011, Iskandar Malaysia recorded total cumulative committed investments of RM76 billion, a RM6 billion increase from December 2010. Of this, RM30 billion has been realised.
Investor confidence has improved with Foreign Direct Investment (FDI) soaring by 500.3% to reach US$8.58 billion in 2010, up from US$1.43 billion the previous year. The Ministry of International Trade and Industry (MITI) expects FDI to exceed US$9.89 billion in 2011.
According to Bank Negara Malaysia, GDP is expected to moderate to 5-6% in 2011 with main contributions from the services and manufacturing sector. Moving forward, MITI has indicated that it will steer the nation towards a knowledge-driven economy.
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OPERATING REVIEW
its marketing activities in order to enlarge its foreign market share.
REGENCY SPECIALIST HOSPITAL Growth Remains on Track Regency Specialist Hospital (“Regency”) recorded a year of good growth in FY2011. Revenue contribution increased two-fold to RM19 million. Still in its initial years of operation, Regency registered a 57% climb in patient load and an improved occupancy rate of 32%.
Moving forward, Regency will continue to increase its marketing activities, its pool of medical specialists, and open up more services to meet growing patient demands.
key strategy to sustain Mahkota’s growth. In view of the rising demand for bed space, the hospital has set aside a floor which can be converted into an extra ward when the need arises. Moreover, there are two additional plots of land adjacent to Mahkota that can be used to construct extension buildings.
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Growing Pool of Doctors Over the year, Regency continued to grow its pool of doctors. Besides recruiting local doctors, Regency also attracted a number of internationally-trained doctors. As an added incentive for returning Malaysian doctors, the government provided tax benefits and a faster licensing process. Returning Malaysian doctors pay 15% income tax for the first five years as compared with the top rate of 27%. As a result, the total number of doctors at Regency rose to 32.
Operational Developments
Riding on Medical Tourism
Regency further increased its range of healthcare services to include new specialties such as Neurosurgery, Paediatrics and Interventional Radiology.
Malacca is known as the “Historical City of Malaysia” and is one of the most visited cities in Malaysia by travellers from around the world. More recently, it has become a popular medical destination. Banking on the rising medical tourism trend, Mahkota has intensified
Since its launch in 2009, Regency has been opening new facilities to meet the growing demands of its patients, as well as to position the hospital for growth. In FY2011, renovations for the Chemotherapy Daycare
Health Management International Ltd Annual Report 2011
Centre and two additional Operating Theatres (OTs) were completed. The hospital now has a total of four fully-equipped OTs.
Reaching Out to Patients Regency strengthened its marketing activities to reach out to local patients from Johor, as well as regional patients in Indonesia and Singapore. Regency is currently attracting patients from Batam, Bintan and the Riau Islands. Regency is also attracting Singapore patients seeking health screening and elective medical procedures. In particular, Regency’s health screening and leisure day trip packages have been popular amongst Singaporeans.
Rosy Prospects Ahead Regency is poised to benefit from the economic and infrastructural developments in Iskandar Malaysia. Moreover, the expected completion of the new coastal highway and eastern dispersal link will improve accessibility to Regency. Moving forward, Regency will continue to increase its marketing activities, its pool of medical specialists, and open up more services to meet growing patient demands.
Institutes HMI INSTITUTE OF HEALTH SCIENCES HMI Institute of Health Sciences (“HMI-IHS”) is dedicated to providing healthcare training in a student-centric environment. In December 2010, it was registered with the Council for Private Education as a private education institution under the Enhanced Registration Framework. In the year under review, HMI-IHS undertook a Continuing Education and Training Innovation Fund project administered by the Institute for Adult Learning. This project aims to introduce simulation-based learning into its Workforce Skills Qualification programmes to inject a greater level of realism and improve students’ workplace competency.
MAHKOTA INSTITUTE OF HEALTH SCIENCES AND NURSING The Mahkota Institute of Health Sciences and Nursing was officially opened in June 2011. It will help to train a group of nurses for Mahkota and Regency. Hence, ensuring the quality and standards of nursing care for their patients.
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PEOPLE At HMI, people are viewed as its greatest assets. The company actively promotes hard work and fun as ingredients for success. To this end, HMI employees have many opportunities to develop strong working relationships through bonding and leisure activities. HMI also strives to enhance its employees’ sense of belonging to the Group by facilitating interactions among employees from different HMI entities. Employees travelled to Malacca in November 2010 to attend the Dinner and Dance organized by Mahkota Medical Centre and again in June 2011 for the Mahkota Institute of Health Sciences and Nursing opening ceremony. During these company sponsored trips, employees enjoyed dressing up for the fancy theme party and indulging in durians at Muar.
HMI strives to enhance employees’ sense of belonging to the Group by facilitating interactions among employees from different HMI entities.
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Health Management International Ltd Annual Report 2011
Keeping in line with the Group’s healthcare focus, HMI employees are encouraged to lead active and healthy lifestyles. Employees were sponsored to represent HMI at the 2011 J.P. Morgan Corporate Challenge. To further promote healthy work-life balance, HMI also began a series of lunchtime educational talks on topics ranging from stress management to nutrition. Once a week, employees have the opportunity to join free exercise classes conducted on site such as kickboxing, yoga, and circuit training. These programmes aim to cultivate effective habits for maintaining good physical, emotional, and mental health at the workplace.
Giving back to the community is a rewarding experience for HMI employees.
Responsible Corporate Stewardship
Muar, Malaysia
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CORPORATE SOCIAL RESPONSIBILITY Besides providing high quality healthcare services, HMI is committed to giving back to the community through its hospitals and institutes. To celebrate Christmas in 2010, Regency organised a Food Festival for the underprivileged from five children’s homes in Johor. This was a special opportunity for the children to experience the spirit of sharing in the company of many friends. Mahkota celebrated by inviting children from the Salvation Army to hang their wishes on a Christmas tree placed in the hospital lobby. These wishes, which included bicycles, calculators, teddy bears and t-shirts, were fulfilled by the public and distributed to the children at the Christmas party. The following Chinese New Year, Regency visited seniors living at Long Hua Old Folks Home in Johor. Regency doctors and nurses offered free health checks
Besides providing high quality healthcare services, HMI is committed to giving back to the community through its hospitals and institutes.
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to residents so they could kick start to a healthier New Year. Further demonstrating support for the ageing community, Mahkota sponsored the Caring for Your Eye Charity Phako Package organised by the Malacca Chinese Chamber of Commerce and Industry. This campaign, which commenced in April 2011, aims to sponsor 60 cataract surgeries for senior citizens. In addition to providing medical care, Mahkota strives to support the community in other ways. At the Walk for Autism 2011, Mahkota sponsored 1,000 event T-shirts that were sold to raise funds for Autism Association Melaka. Participants who took part in this event hailed from Malacca, Penang, Kuala Lumpur, Johor and Sarawak.
INVESTOR RELATIONS Active engagement with the investment community is emphasised by the Management. The Group has increased its efforts to establish contact with various groups including investment managers, research analysts, fund managers, financial journalists and shareholders. Over the past year, HMI was featured in financial publications including The Business Times, Shares Investment and The Edge. These activities raised corporate transparency and awareness of the Group. The Investor Relations team has also organised visits to HMI hospitals in Malaysia for analysts and fund managers, so that they can better understand the hospitals’ operating capability and potential of the Malaysian healthcare market. Company notes written on HMI came from UOB Kay Hian, OCBC Investment Research, Kim Eng Research, Standard & Poor’s and NRA Capital.
In order to keep investors updated with corporate developments, HMI initiated its first e-Newsletter. This biannual e-Newsletter featured significant developments across its business segments. Additionally, there has been timely dissemination of announcements, press releases and presentation slides to the Singapore Exchange through SGXNET and the HMI corporate website (www.hmi.com.sg). HMI received strong support from its shareholders during a rights issue during the financial year. The 1-for-5 rights issue was oversubscribed by approximately 114%. The key rationale for this fundraising was to provide working capital requirements for the growing Regency Specialist Hospital. Looking forward, HMI will continue to raise public awareness and build positive relationships with its shareholders and the investment community.
The Group has increased its efforts to establish contact with various groups including investment managers, research analysts, fund managers, financial journalists and shareholders.
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CORPORATE INFORMATION
BOARD OF DIRECTORS Dr Gan See Khem Executive Chairman and Managing Director Dr Chin Koy Nam Executive Director Dr Cheah Way Mun Independent Non-Executive Director Mr Gan Lai Chiang, Andy Independent Non-Executive Director Professor Tan Chin Tiong Independent Non-Executive Director EXECUTIVE COMMITTEE Dr Gan See Khem - Chairman Dr Chin Koy Nam AUDIT COMMITTEE Mr Gan Lai Chiang, Andy - Chairman Professor Tan Chin Tiong Dr Cheah Way Mun NOMINATING COMMITTEE Professor Tan Chin Tiong - Chairman Mr Gan Lai Chiang, Andy Dr Cheah Way Mun REMUNERATION COMMITTEE Professor Tan Chin Tiong - Chairman Mr Gan Lai Chiang, Andy Dr Cheah Way Mun
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JOINT COMPANY SECRETARIES Ms Noraini Latiff Mr Lim Lian Peng REGISTERED OFFICE 167 Jalan Bukit Merah, Tower 5, #05-10 Singapore 150167 Tel: 65 6253 3818 Fax: 65 6253 8259 Website: www.hmi.com.sg SHARE REGISTRAR Boardroom Corporate & Advisory Services Pte Ltd 50 Raffles Place, #21-01 Singapore Land Tower Singapore 048623 Tel: 65 6536 5355 INDEPENDENT AUDITORS PricewaterhouseCoopers LLP 8 Cross Street #17-00 PWC Building Singapore 048424 Tel: 65 6236 3388 Audit Partner-in-charge: Mr Daniel Khoo Year of appointment: 2008
26 CORPORATE GOVERNANCE REPORT 36 DIRECTORS’ REPORT 38 STATEMENT BY DIRECTORS 39 INDEPENDENT AUDITOR’S REPORT 40 CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FINANCIAL CONTENTS
41 BALANCE SHEETS 42 CONSOLIDATED STATEMENT OF CHANGES IN EQUITY 43 CONSOLIDATED STATEMENT OF CASH FLOWS 44 NOTES TO THE FINANCIAL STATEMENTS 84 SUPPLEMENTARY INFORMATION 86 STATISTICS OF SHAREHOLDINGS 88 NOTICE OF ANNUAL GENERAL MEETING PROXY FORM
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CORPORATE GOVERNANCE REPORT The Board and Management of Health Management International Limited (“HMI” or the “Company”) firmly believe that good corporate governance is essential to the sustainability of the Company’s business and performance. HMI’s corporate governance is built upon principles and guidelines set by the: 1) 2)
Code of Corporate Governance 2005 (the “Code”); Listing Manual of the Singapore Exchange Securities Trading Limited (“SGX-ST”)
The Company has adhered to principles and guidelines from the Code issued by the Singapore Council on Corporate Disclosure and Governance.
BOARD’S CONDUCT OF ITS AFFAIRS Principle 1 Principle Duties of the Board The Board oversees businesses and affairs of the Company with the objective of maximising long-term shareholder value. The principle duties of the Board include: 1) 2) 3) 4) 5)
Deciding on broad policies, strategic directions and objectives of HMI; Approving annual budgets, periodic plans and major investments and divestments; Overseeing processes for evaluating the adequacy of internal controls, risk management, financial reporting and compliance; Appointing the CEO, directors and Senior Management; and Monitoring the financial performance of HMI.
Board Committees To assist the Board in discharging its oversight function, various Board committees, namely the Executive, Audit, Nominating, and Remuneration Committees, have been constituted with clear written terms of reference. All the Board committees are actively engaged and play an important role in ensuring good corporate governance in the Company and within the Group. Matters which are specifically reserved for the Board’s decision are those involving a conflict of interest for a substantial shareholder or a director, material acquisitions and disposal of assets, corporate or financial restructuring and share issuances, dividends and other returns to shareholders, including those which require Board approval as specified under the Company’s Interested Person Transaction policy. Board Orientation and Training A formal letter of appointment is provided for every new director to explain their duties and obligation. All newly-appointed directors undergo a comprehensive orientation programme that includes site visits to our hospitals in Malacca and Johor. The Group provides extensive background information about its history, mission and values to its directors. As part of the Company’s continuing education programme for all directors, the Board maintains a policy for any director to attend relevant seminars and courses at the Company’s expense. Directors are also briefed on the latest developments in the area of Corporate Governance during the year.
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CORPORATE GOVERNANCE REPORT Board Meetings The Board meets regularly and as warranted. The Company adopts a policy whereby directors are welcome to request the Management for further explanations, briefings or informal discussions on any aspect of the Company’s operations or business issues. The attendance of the directors at meetings of the Board and Board committees, as well as the frequency of such meetings, are set out below.
Name
Nominating Remuneration HMI Board Audit Committee Committee Committee Number of Number of Number of Number of Number of Number of Number of Number of Meetings Meetings Meetings Meetings Meetings Meetings Meetings Meetings Attended Held Attended Held Attended Held Attended Held
Dr Gan See Khem
2
2
2
NA
2
NA
2
NA
Dr Chin Koy Nam
2
2
2
NA
2
NA
2
NA
Dr Cheah Way Mun
2
2
2
2
2
2
2
2
Professor Tan Chin Tiong
2
2
2
2
2
2
2
2
Mr Gan Lai Chiang, Andy
2
2
2
2
2
2
2
2
BOARD COMPOSITION AND GUIDANCE Principle 2 Board Composition and Size As at the date of this report, the Board of directors comprises two executive and three non-executive directors, who provide core competencies including healthcare, education, accounting, finance, law, business, and management. The directors also bring to the Board their industry knowledge and vast experiences in strategic planning and corporate development. The Nominating Committee is also of the view that the current Board comprises persons who can collectively provide core competencies necessary for meeting HMI’s objectives. The Executive Committee comprises two members who are responsible for supervising and managing the Group’s core businesses within the limits of their authority, as delegated by the Board. They are Dr Gan See Khem (Chairman) and Dr Chin Koy Nam. Details of the qualifications and major appointments of the directors are set out in pages 08 and 09 of this Annual Report. Board Independence The Nominating Committee determines on an annual basis whether or not a director is independent. The Code provides that an independent director is independent from any Management and business relationship with HMI, and also independent from any substantial shareholder of HMI. Under this definition, the Nominating Committee considers that, apart from Dr Gan See Khem and Dr Chin Koy Nam, the three non-executive directors are all independent. The Nominating Committee also considers its non-executive directors to be of calibre and adequate in number, and their views to be of sufficient weight that no individual or small group can dominate the Board’s decision-making processes. The nonexecutive directors have no financial or contractual interests in the Group other than by way of their fees and shareholdings as set out in the Directors’ Report.
Health Management International Ltd Annual Report 2011
27
CORPORATE GOVERNANCE REPORT Board Information The Board and Management firmly believe that an effective and robust Board engages in open and constructive debate and challenges Management on its assumptions and proposals. For that to happen, the Board, in particular, the non-executive directors, must be well-informed of the Company’s business and affairs, and be knowledgeable about the industry in which the Group’s businesses operate. With that in mind, regular informal meetings are held throughout the year for members of the Board to keep directors updated with prospective deals and potential developments, and before formal Board approval is sought.
CHAIRMAN AND CHIEF EXECUTIVE OFFICER Principle 3 Dr Gan See Khem is the Executive Chairman and Managing director of the Group. Dr Gan has also effectively assumed the role of Group CEO. As such, Dr Gan has executive responsibilities for the Group’s business as well as responsibility for the working of the Board and ensures that procedures are introduced to comply with the Code. She has played an instrumental role in developing the business of the Group and has also provided the Group with sound and strong leadership. Although the roles and responsibilities for Chairman and CEO are vested in Dr Gan, all major decisions are made in consultation with the Board, Audit Committee, Nominating Committee and Remuneration Committee. Independent directors represent more than half of the Board while the Audit Committee, Nominating Committee and Remuneration Committee comprise the independent directors. Therefore, the Board believes that there are adequate safeguards in place against having a concentration of power and authority in a single individual. Lead Independent Director The Board appointed Mr Gan Lai Chiang, Andy as Lead Independent Director (“LID”) to lead and co-ordinate activities of the non-executive directors of HMI. The LID is the principal liaison on Board issues between the non-executive directors and the Chairman. He meets periodically with the Chairman to provide feedback from the non-executive directors. The LID also aids the non-executive directors to constructively challenge and help develop proposals on strategy, and to review the performance of the Chairman and Management.
BOARD MEMBERSHIP Principle 4 Nominating Committee The main roles of the Nominating Committee (“NC”) are to make recommendations to the Board on all Board appointments, assess the effectiveness of the Board as a whole, and the contribution and independence of individual directors. The NC comprises three members, all of whom are independent non-executive directors: Professor Tan Chin Tiong Mr Gan Lai Chiang, Andy Dr Cheah Way Mun
28
Chairman (Independent Non-Executive Director) Member (Independent Non-Executive Director) Member (Independent Non-Executive Director)
Health Management International Ltd Annual Report 2011
CORPORATE GOVERNANCE REPORT The terms of reference to the NC include the following: 1) 2) 3) 4) 5) 6)
Recommend appointment/ reappointment of directors; Decide on procedures for the evaluation of the Board’s performance and propose objective performance criteria; Assess effectiveness of the Board as a whole and contributions of each director; Decide, when a director has multiple board representations, whether the director is able to and has been adequately carrying out his or her duties as director of the Company; Re-nominate director(s) based on the review of director’s contribution and performance; and Ensure that the independent directors meet criterias set out in the SGX-ST guidelines.
Directors’ Time Commitments The NC also considers whether directors, who have multiple board representations, are able to and have been devoting sufficient time to discharge their responsibilities adequately. The NC is satisfied that all directors have discharged their duties adequately for FY2011, and will continue to do so in FY2012. None of the directors hold more than five listed company directorships. Process and Criteria Used for Appointment of New Directors In appointing directors, the NC first considers the range of skills and experience required in the light of the: 1) 2) 3) 4)
Geographical spread and diversity of the Group’s businesses; Strategic direction and progress of the Group; Current composition of the Board; and Need for independence.
After which, the NC will source for potential candidates, usually through recommendations from directors and Management. However, external help may also be used. Next, the NC will conduct interviews and assess the suitability of the candidates. The criteria used to select new appointments include possession of expert knowledge that meet the needs of the Company, the ability to commit time and character, business experience and acumen. Where a director has multiple board representations, the NC will evaluate whether or not a director is able to and has been adequately carrying out his or her duties as director of the Company. Final approval of a candidate is determined by the full Board. The NC is also responsible for the re-nomination of directors. For this purpose, the NC reviews each director’s contribution and results of the assessment of the performance of the director by his peers for the relevant year. Article 95 of the Company’s Articles of Association requires one-third of its directors, other than the Managing director, to retire and subject themselves to re-election by shareholders at every Annual General Meeting (“AGM”). Directors above the age of 70 are also required under the Companies Act to retire and subject themselves to re-appointment by shareholders at every AGM. The directors standing for re-election at the forthcoming AGM pursuant to articles 95 are Dr Chin Koy Nam and Professor Tan Chin Tiong. The NC is also satisfied that the current directors, having external directorships, have devoted sufficient time and attention to the affairs of the Group.
Health Management International Ltd Annual Report 2011
29
CORPORATE GOVERNANCE REPORT BOARD PERFORMANCE Principle 5 Evaluation Processes The NC believes that evaluating the effectiveness of the Board is essential for good corporate governance. On a yearly basis, directors are required to assess themselves in areas like execution of duties, knowledge and interaction skills. The Board has also implemented formal processes for assessing the Board as a whole, the performance of individual directors, as well as the effectiveness of the Chairman and the Management. Using results from the assessment exercise, the Board then takes the opportunity to discuss areas of improvement so that necessary steps can be executed to improve Board performance.
ACCESS TO INFORMATION Principle 6 Complete, Adequate and Timely Information Management recognises that the flow of accurate and timely information to the Board is fundamental to the Board’s effective and efficient discharge of its duties. Prior to each Board meeting, HMI’s Management provides the Board with information relevant to matters on the agenda for the Board meeting. The papers generally include sufficient information from Management on financial, business and corporate issues to brief the directors on issues to be considered at the Board and Board Committee meetings. Management and staff who have prepared the papers, or who can provide additional insight into the matters to be discussed, are invited to attend at the relevant time during the meeting. All directors also receive regular supplies of information from the Management about the Group. Company Secretary Directors have unrestricted access to the Company’s records and information, and independent access to the Company’s Management and the Company Secretary. The Company Secretary attends all meetings and is responsible for ensuring that Board procedures are observed and that the Memorandum and Articles of Association, the Companies Act and the Listing Manual of the SGX-ST, are complied with.
PROCEDURES FOR DEVELOPING REMUNERATION POLICIES Principle 7 LEVEL AND MIX OF REMUNERATION Principle 8 DISCLOSURE OF REMUNERATION Principle 9 Remuneration Committee The Remuneration Committee (“RC”) approves the framework of remuneration for the entire Group and reviews the appropriateness, transparency and accountability to shareholders on the remuneration issues of the directors and Management in the Company.
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Health Management International Ltd Annual Report 2011
CORPORATE GOVERNANCE REPORT The RC comprises three members, all of whom are independent non-executive directors: Professor Tan Chin Tiong Mr Gan Lai Chiang, Andy Dr Cheah Way Mun
Chairman (Independent Non-Executive Director) Member (Independent Non-Executive Director) Member (Independent Non-Executive Director)
The Group’s objective is to provide compensation packages at market rates which reward successful performance and attract, retain and motivate the Managers and directors. The key roles of the RC are to: 1) 2) 3) 4) 5)
Recommend to the Board a framework of remuneration for the Board members and key executives; Decide on the appropriate level of remuneration to attract, retain and motivate the directors and executives; Evaluate the performance of executive directors; Consider whether directors should be eligible for benefits under long-term incentive schemes; and Review terms, conditions and remuneration of the senior executives of the Company.
Directors’ Remuneration Directors’ fees are established annually for the Chairman and the other directors. Additional fees are paid, where applicable, for participation in Board Committees. They are set in accordance with a remuneration framework comprising responsibility fees after taking into consideration the performance of the Group and the individual directors. In addition, the fees take into account the effort, time spent and responsibilities of the directors. No individual directors are allowed to fix his own remuneration. The fees are submitted to shareholders for approval at each AGM. The remuneration of the directors of the Company for the year under review in bands of S$250,000 is set out below:
Above $500,000 Dr Gan See Khem Below $250,000 Dr Chin Koy Nam Mr Gan Lai Chiang, Andy Professor Tan Chin Tiong Dr Cheah Way Mun
Allowance & other benefits
Base/Fixed Salary
Bonus
Director’s Fee
73%
21%
2%
4%
64% -
18% -
6% -
12% 100% 100% 100%
The Company has no key executive, who is not a director, and who is receiving remuneration in excess of S$250,000 during the financial year under review. Besides the directors disclosed in the table above, there are no employees who are immediate family members of the directors whose remuneration exceeded S$150,000 during the year under review. Remuneration Mix The Company remuneration framework is made up of two key components namely fixed pay and total incentives. Fixed pay comprises a base salary and annual wage supplement. The total incentives can be further broken down into a short-term incentive and a long-term incentive. The short-term incentive takes the form of an annual variable bonus. The RC reviews and approves the variable bonus pool for distribution. The Management then moderates and allocates the variable bonus based on the individual performance of employees and their contributions towards the achievement of HMI’s performance.
Health Management International Ltd Annual Report 2011
31
CORPORATE GOVERNANCE REPORT A share-based incentive scheme is also in place to reward, motivate, and retain key senior executives under the HMI Employee Share Option Scheme. In the year under review, no shares were awarded under this scheme.
ACCOUNTABILITY Principle 10 The Board is committed to providing shareholders with a balanced and comprehensive assessment of the Company’s financial performance, position, and prospects, including interim and other price-sensitive public reports, and reports to regulatory bodies.
AUDIT COMMITTEE Principle 11 The Audit Committee (“AC”) meets regularly and as warranted to carry out its role of reviewing the financial reporting process, the system of internal controls, budget and the audit process. The AC comprises three members, all of whom are independent non-executive directors: Mr Gan Lai Chiang, Andy Professor Tan Chin Tiong Dr Cheah Way Mun
Chairman (Independent Non-Executive Director) Member (Independent Non-Executive Director) Member (Independent Non-Executive Director)
The Board is of the view that at least two members of the Audit Committee have the appropriate accounting or related financial management expertise or experience to carry out their roles. Authority and Duties of the AC The AC’s primary role is to monitor proposed changes in accounting policies, review the internal audit function and discuss the accounting implications of major transactions. The AC also advises the Board regarding the adequacy of the Group’s internal controls and contents and presentation of its interim and annual reports. The AC discharged the following delegated functions: 1) 2) 3) 4) 5) 6) 7) 8)
9)
32
Reviews the adequacy of the internal control systems with the internal audit department and external auditors; Reviews the consolidated financial statements of the Group with external auditors before submission to the Board for adoption; Reviews Interested Person Transactions (as defined in Chapter 9 of the Listing Manual of the SGX-ST) to ensure that they are on normal commercial terms and not prejudiced to the interest of the Company or its shareholders; Reviews the scope of the internal audit function and the scope of work of the external auditors and the results arising therefrom; Reviews the independence and objectivity of the external auditors, consideration of their appointment, and their audit fee; Reviews the audit plans and findings of the internal audit department and external auditors; Reviews the interim, full year announcements and reports that are submitted to the Board for approval; Reviews suspected fraud or irregularity, or suspected infringement of any Singapore law, rule and regulation, of which the Audit Committee is aware, which has or is likely to have a material impact on the Company’s or Group’s operating results and/or financial position, and the findings of any internal investigations, and Management’s response thereto; and Considers other matters as requested by the Board.
Health Management International Ltd Annual Report 2011
CORPORATE GOVERNANCE REPORT The Audit Committee meets periodically with the Group’s internal audit department and external auditors and its Management to review accounting, auditing and financial reports matters so as to ensure that an effective control environment is maintained in the Group. The Audit Committee meets with the internal audit department and external auditors, without the presence of the Management, at least once a year. No non-audit fee was paid to the external auditors for FY2011. In accordance with the principles and best practices as set out in the Code issued by the Singapore Council on Corporate Disclosure and Governance, the Audit Committee has: 1) 2) 3)
Full access to and cooperation from the Management as well as full discretion to invite any director or executive officer to attend its meetings; Been given reasonable resources to enable it to complete its function properly; and Reviewed findings and evaluation of the system of internal controls with the internal audit department and external auditors.
INTERNAL CONTROLS Principle 12 The AC reviews the effectiveness of the Company’s internal controls, including financial, operational and administrative controls and risks management to safeguard shareholders’ investments and company assets. This review is conducted by an in-house internal auditor, who presents the findings to the Management and the AC. The system of internal controls is designed to manage rather than to eliminate the risk of failing to achieve business objectives. The Board believes that, in the absence of any evidence to the contrary, the system of internal control maintained by the Company’s Management was in place throughout the financial year and up to the date of this report, provide reasonable, but not absolute, assurance against material financial misstatements or loss, and including the safeguarding of assets, the maintenance of proper accounting records, the reliability of financial information, compliance with appropriate legislation, regulation and best practices, and the identification and containment of business risk. The Company does not have a Risk Management Committee. However, the AC and senior managers assume the responsibility and set the Group risk management policy and strategy. By identifying areas of significant business risk, including revenue loss, property loss and breach of information security, the AC generates appropriate measures to control and mitigate these risks. In determining the appropriate measures, the cost of control and risk management, and the impact of risks occurring will be balanced with the benefits of reducing risk. Whistle-blowing Policy The Company has a whistle-blower protection policy to encourage the reporting in good faith of suspected reportable conduct by establishing clearly defined processes through which such reports may be made, with the confidence that employees and other persons making such reports to the employees’ supervisors, will be treated fairly and, to the extent possible, protected from reprisal.
INTERNAL AUDIT Principle 13 During the year, the Group had an in-house internal audit department which was independent of the activities it audits. The AC was satisfied that the internal audit department had met the standards set by internationally recognised professional bodies including the Standards for the Professional Practice of Internal Auditing set by the Institute of Internal Auditors.
Health Management International Ltd Annual Report 2011
33
CORPORATE GOVERNANCE REPORT The internal auditor reported primarily to the Chairman of the Audit Committee on audit matters and reported to the Executive Chairman on administrative matters. The Audit Committee ensured that the internal audit department had adequate resources and appropriate standing within the Group. The Audit Committee assessed the effectiveness of the internal audit department by examining: 1) 2) 3) 4)
The scope of the internal audit department’s work; The quality of their reports; Their relationship with the external auditors; and Their independence of the areas reviewed.
Currently, the Management monitors and evaluates the adequacy and effectiveness of controls through an internal framework of checks and balances which include internal control procedures. In addition, the Group engages the external auditor to perform independent reviews of internal controls over certain areas of the Group’s operations as an extension of their statutory audit scope. Through this, the Board and Management are able to determine if the Group’s internal controls, risk management policies and systems adequately address risk. The Audit Committee and Board will continue to regularly evaluate and assess the need to engage an in-house or outsourced internal audit function.
COMMUNICATION WITH SHAREHOLDERS Principle 14 Proactive Engagement with Shareholders The Company is committed to engaging and strengthening relationships with its shareholders. Its investor relations team takes a proactive approach and regularly engages in timely communication with its shareholders, investors, analysts, fund managers, the media and the general public. (For details on the Group’s investor relations activities, please refer to page 23 of this Annual Report.) Disclosure of Information on a Timely Basis The Company adopts the practice of disclosing relevant information in a timely, fair and transparent manner to its shareholders. Material information is disclosed in a comprehensive, accurate and timely basis via SGXNET. The release of such timely and relevant information is central to good corporate governance and enables shareholders to make informed decisions with respect to their investments in HMI. Furthermore, the Company communicates to the financial community and its shareholders through various methods: 1)
2) 3) 4) 5) 6) 7)
Annual Reports that are prepared and issued to all shareholders. The Board makes every effort to ensure that the Annual Report includes all relevant information about the Group, including future developments and other disclosures required by the Companies Act and Singapore Statements of Accounting Standards; Half-year and full-year financial statements containing a summary of financial information and affairs of the Group for the period under review; Notices of the explanatory memoranda for AGMs and Extraordinary General Meetings (“EGM”); Press releases on major developments of the Group; Disclosures to the SGX-ST; The Group’s website at which shareholders can access information on the Group; and Presentation slides used to share financial results and developments of the Group.
The notice of the AGM/EGM is despatched to shareholders, together with explanatory notes or a circular on items of special business, in accordance with the required notice period. The notice is also advertised in a daily newspaper and made available on the SGXNET.
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Health Management International Ltd Annual Report 2011
CORPORATE GOVERNANCE REPORT Corporate Website HMI’s website has a clearly dedicated Investor Relations (IR) link, which features prominently the latest and past financial results and related information. The contact details of the IR team are available on the dedicated IR link, to enable shareholders to contact HMI easily. The website provides, inter alia, corporate announcements, press releases, annual reports, presentation slides, and profiles of the Group. To ensure fair and equal dissemination to shareholders, the latest AR, financial results and presentation slides are posted on the website following their release to the market.
GREATER SHAREHOLDER PARTICIPATION Principle 15 The Company is in full support of the Code’s principle to encourage shareholder participation. Its Articles of Association allows a shareholder entitled to attend and vote to appoint a proxy or two proxies to attend and vote in place of the shareholder. The Chairman of the Audit, Remuneration, and Nominating Committees are normally available at the meeting to answer those questions relating to the work of these committees. The external auditors would also be present to assist the directors in addressing any relevant queries by shareholders. The Company is not implementing absentia voting methods such as voting via mail, e-mail or fax until security, integrity and other pertinent issues are satisfactorily resolved. To facilitate informative sessions, shareholders are also invited to raise issues either formally or informally before or at the AGMs/EGMs. Shareholders are encouraged to attend the AGM/EGM to ensure a high level of accountability and to stay informed of the Group’s strategy and goals. The AGM/EGM is the principal forum for dialogue with shareholders.
ADDITIONAL INFORMATION Securities Transactions The Company has adopted internal codes pursuant to the SGX-ST Listing Manual applicable to all its officers in relation to dealings in the Company’s securities. Its officers are not allowed to deal in the Company’s shares during the period commencing one month before the announcement of the Company’s half-year and full-year results and ending on the date of the announcement of the results. Interested Person Transactions Policy The Company has adopted an internal policy with respect to any related persons and has set out in the procedures for review and approval of the Company’s related party transactions. For the financial year ended 30 June 2011, there were no Interested Person Transactions pursuant to Rule 1207(16) and whereby the transaction was $100,000 or more. Material Contracts There were no other material contracts of the Company or its subsidiaries involving any related person.
Health Management International Ltd Annual Report 2011
35
DIRECTORS’ REPORT
For the financial year ended 30 June 2011
The directors present their report to the shareholders together with the audited financial statements of the Group for the financial year ended 30 June 2011 and the balance sheets of the Company as at 30 June 2011.
Directors The directors of the Company in office at the date of this report are as follows: Dr Gan See Khem Dr Chin Koy Nam Dr Cheah Way Mun Professor Tan Chin Tiong Mr Gan Lai Chiang, Andy
Arrangements to enable directors to acquire shares and debentures Neither at the end of nor at any time during the financial year was the Company a party to any arrangement whose object was to enable the directors of the Company to acquire benefits by means of the acquisition of shares in, or debentures of, the Company or any other body corporate.
Directors’ interests in shares or debentures According to the register of directors’ shareholdings, none of the directors holding office at the end of the financial year had any interest in the shares or debentures of the Company or its related corporations, except as follows: Holdings registered in name of director or nominee At At 30.6.2011 1.7.2010
Holdings in which a director is deemed to have an interest At At 30.6.2011 1.7.2010
Company (Number of ordinary shares) Dr Gan See Khem Dr Chin Koy Nam Dr Cheah Way Mun Professor Tan Chin Tiong
600,600 1,224,000 22,162,119 3,153,360
500,500 1,020,000 18,301,766 2,627,800
227,433,195 226,809,795 -
189,369,330 188,849,830 -
The directors’ interests in the ordinary shares of the Company as at 21 July 2011 were the same as those as at 30 June 2011.
Directors’ contractual benefits Since the end of the previous financial year, no director has received or become entitled to receive a benefit by reason of a contract made by the Company or a related corporation with the director or with a firm of which he is a member or with a company in which he has a substantial financial interest, except as disclosed in the accompanying financial statements.
Share options On 23 October 2008, the shareholders of the Company approved the adoption of an Employee Share Option Scheme (“ESOS”) to grant equity-based incentives to all its eligible employees. The maximum aggregate number of shares on which options may be granted under the ESOS is 15% of the total issued equity shares. In the event of a bonus issue, rights issue or a capital reconstruction, the number of options and the exercise price would be adjusted in accordance with the formula stipulated in the ESOS.
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Health Management International Ltd Annual Report 2011
DIRECTORS’ REPORT
For the financial year ended 30 June 2011
Share options (continued) No options to subscribe for unissued shares of the Company were granted during the financial year. No shares have been issued during the financial year by virtue of the exercise of options to take up unissued shares of the Company. There were no unissued shares of the Company under option at the end of the financial year.
Audit Committee The members of the Audit Committee at the end of the financial year were as follows: Mr Gan Lai Chiang, Andy (Chairman) Professor Tan Chin Tiong Dr Cheah Way Mun All members of the Audit Committee are non-executive directors and are independent. The Audit Committee carried out its functions in accordance with Section 201B(5) of the Singapore Companies Act. In performing those functions, the Committee reviewed:
•
the audit plan of the Company’s independent auditor and its report on the weaknesses of internal accounting controls arising from the statutory audit;
•
the assistance given by the Company’s management to the independent auditor; and
•
the balance sheet of the Company and the consolidated financial statements of the Group for the year ended 30 June 2011 before their submission to the Board of Directors, as well as the independent auditor’s report on the balance sheet of the Company and the consolidated financial statements of the Group.
The Audit Committee has recommended to the Board that the independent auditor, PricewaterhouseCoopers LLP, be nominated for re-appointment at the forthcoming Annual General Meeting of the Company.
Independent Auditor The independent auditor, PricewaterhouseCoopers LLP, has expressed its willingness to accept re–appointment.
On behalf of the directors
DR GAN SEE KHEM Director
GAN LAI CHIANG, ANDY Director
27 September 2011
Health Management International Ltd Annual Report 2011
37
STATEMENT BY DIRECTORS For the financial year ended 30 June 2011
In the opinion of the directors, (a)
the balance sheet of the Company and the consolidated financial statements of the Group as set out on pages 40 to 83 are drawn up so as to give a true and fair view of the state of affairs of the Company and of the Group at 30 June 2011 and of the results of the business, changes in equity and cash flows of the Group for the financial year then ended; and
(b)
at the date of this statement, there are reasonable grounds to believe that the Company will be able to pay its debts as and when they fall due.
On behalf of the directors
DR GAN SEE KHEM Director
27 September 2011
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Health Management International Ltd Annual Report 2011
GAN LAI CHIANG, ANDY Director
INDEPENDENT AUDITOR’S REPORT
TO THE SHAREHOLDERS OF HEALTH MANAGEMENT INTERNATIONAL LTD
Report on the Financial Statements We have audited the accompanying financial statements of Health Management International Ltd (the “Company”) and its subsidiaries (the “Group”) set out on pages 40 to 83, which comprise the balance sheets of the Company and of the Group as at 30 June 2011, and the consolidated statement of comprehensive income, the consolidated statement of changes in equity and the consolidated cash flow statement of the Group for the financial year then ended, and a summary of significant accounting policies and other explanatory information. Management’s Responsibility for the Financial Statements Management is responsible for the preparation of financial statements that give a true and fair view in accordance with the provisions of the Singapore Companies Act (the “Act”) and Singapore Financial Reporting Standards, and for devising and maintaining a system of internal accounting controls sufficient to provide a reasonable assurance that assets are safeguarded against loss from unauthorised use or disposition, that transactions are properly authorised and that they are recorded as necessary to permit the preparation of true and fair profit and loss accounts and balance sheets and to maintain accountability of assets. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Singapore Standards on Auditing. Those Standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal controls relevant to the entity’s preparation of financial statements that give a true and fair view in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements of the Group and the balance sheet of the Company are properly drawn up in accordance with the provisions of the Act and Singapore Financial Reporting Standards so as to give a true and fair view of the state of affairs of the Group and of the Company as at 30 June 2011, and the results, changes in equity and cash flows of the Group for the financial year ended on that date. Report on other Legal and Regulatory Requirements In our opinion, the accounting and other records required by the Act to be kept by the Company and by those subsidiaries incorporated in Singapore of which we are the auditors, have been properly kept in accordance with the provisions of the Act.
PricewaterhouseCoopers LLP Public Accountants and Certified Public Accountants
Singapore, 27 September 2011
Health Management International Ltd Annual Report 2011
39
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME For the financial year ended 30 June 2011
Group Note
2011 RM
2010 RM
173,883,730 (130,502,779) 43,380,951
Revenue Cost of services Gross profit
3 6
Interest income
3
1,211,489
1,011,261
Other gains - net
4
20,868
2,398,988
Expenses - Distribution and marketing - Administrative - Finance
6 6 5
(3,566,708) (34,307,897) (4,493,455)
(3,428,813) (28,764,822) (3,990,406)
Share of profit of associated companies
13
7,776,267
1,387,581
10,021,515
3,943,738
(3,213,013)
(5,569,341)
6,808,502
(1,625,603)
Currency translation difference arising from consolidation
1,166,559
(801,254)
Total comprehensive income/(loss)
7,975,061
(2,426,857)
1,816,430 4,992,072 6,808,502
(2,923,717) 1,298,114 (1,625,603)
2,977,483 4,997,578 7,975,061
(3,719,231) 1,292,374 (2,426,857)
0.33 0.33
(0.57) (0.57)
Profit before income tax Income tax expense Total profit/(loss)
7
140,845,666 (105,515,717) 35,329,949
Other comprehensive income/(loss)
Profit/(loss) attributable to: Equity holders of the Company Non-controlling interests
Total comprehensive income/(loss) attributable to: Equity holders of the Company Non-controlling interests
Profit/(loss) per share for income/(loss) attributable to equity holders of the Company (expressed in cents per share) - Basic - Diluted
The accompanying notes form an integral part of these financial statements.
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Health Management International Ltd Annual Report 2011
8(a) 8(b)
BALANCE SHEETS As at 30 June 2011
ASSETS Current assets Cash and cash equivalents Trade and other receivables Inventories Other current assets Income tax recoverable
Non-current assets Trade and other receivables Investments in associated companies Investments in subsidiaries Property, plant and equipment
Note
2011 RM
Group 2010 RM
2009 RM
2011 RM
Company 2010 RM
9 10 11 12 7
11,247,457 55,095,921 5,344,822 4,862,823 826,757 77,377,780
7,075,625 63,029,855 4,365,263 6,058,110 80,528,853
3,078,462 33,744,492 3,356,544 3,197,109 77,834 43,454,441
982,085 39,264,108 184,096 40,430,289
286,896 31,613,612 178,565 32,079,073
1,094,681 711,096 91,122 34,885 1,931,784
10
6,119,551
-
24,473,816
6,119,551
-
24,473,816
26,418,549 18,297,866 17,195,661 6,010,320 - 47,992,343 133,339,945 125,172,526 116,592,018 144,077 165,878,045 143,470,392 158,261,495 60,266,291 243,255,825 223,999,245 201,715,936 100,696,580
5,798,871 39,804,701 194,824 45,798,396 77,877,469
6,101,927 38,945,480 261,268 69,782,491 71,714,275
13 14 15
Total assets LIABILITIES Current liabilities Trade and other payables Current income tax liabilities Borrowings Deferred income
16 7 17 19
Non-current liabilities Trade and other payables Borrowings Deferred income tax liabilities
16 17 20
36,830,481 39,528,407 836,862 77,195,750
2009 RM
46,059,205 1,273,090 26,493,383 1,439,515 75,265,193
24,610,598 339,538 19,434,770 2,050,758 46,435,664
6,486,150 13,973,465 20,459,615
15,332,879 4,071,154 19,404,033
9,803,746 4,364,568 14,168,314
Total liabilities
13,273,462 37,683,445 45,879,549 2,854,679 2,376,096 53,811,586 48,255,645 131,007,336 123,520,838
43,602,175 2,339,105 45,941,280 92,376,944
51,163 51,163 20,510,778
3,583,392 3,583,392 22,987,425
4,507,001 4,507,001 18,675,315
NET ASSETS
112,248,489 100,478,407 109,338,992
80,185,802
54,890,044
53,038,960
90,564,308 (142,056) 4,515,646 (14,752,096) 80,185,802 80,185,802
75,206,249 (142,056) 735,977 (20,910,126) 54,890,044 54,890,044
75,206,249 (142,056) 3,257,485 (25,282,718) 53,038,960 53,038,960
EQUITY Capital and reserves attributable to equity holders of the Company Share capital 21 90,564,308 Treasury shares 21 (142,056) Currency translation reserve 22(b) 4,405,285 22(c) Other reserves 51,787 22(a) (10,760,099) Accumulated losses 84,119,225 Non-controlling interests 28,129,264 TOTAL EQUITY 112,248,489
75,206,249 (142,056) 3,244,232 51,787 (12,576,529) 65,783,683 34,694,724 100,478,407
75,206,249 (142,056) 4,039,746 (9,652,812) 69,451,127 39,887,865 109,338,992
The accompanying notes form an integral part of these financial statements. Health Management International Ltd Annual Report 2011
41
CONSOLIDATED STATEMENT OF changes in equity For the financial year ended 30 June 2011
Note 2011 Beginning of financial year
Attributable to equity holders of the Company (Accumulated Currency losses)/ Treasury translation Other retained shares Reserve reserves earnings RM RM RM RM
Share capital RM
75,206,249
Total comprehensive income Dividend paid to noncontrolling interests by a subsidiary Capital injection in a subsidiary Issuance of shares from rights issue - net of rights issue expenses End of financial year
90,564,308
2010 Beginning of financial year (restated)
75,206,249
Total comprehensive (loss)/income Dilution of interest in a subsidiary 22(c) Dividend paid to noncontrolling interests by a subsidiary Capital injection in a subsidiary End of financial year
(142,056)
3,244,232
51,787
Noncontrolling Interests RM
Total RM
(12,576,529)
65,783,683
34,694,724
100,478,407
-
-
1,161,053
-
1,816,430
2,977,483
4,997,578
7,975,061
-
-
-
-
-
-
(12,763,038)
(12,763,038)
-
-
-
-
-
-
1,200,000
1,200,000
15,358,059
-
-
-
-
15,358,059
-
15,358,059
(142,056)
4,405,285
51,787
(10,760,099)
84,119,225
28,129,264 112,248,489
(142,056)
4,039,746
-
(9,652,812)
69,451,127
39,887,865
109,338,992
(795,514)
-
(2,923,717)
(3,719,231)
1,292,374
(2,426,857)
-
-
-
-
-
51,787
-
51,787
(28,014)
23,773
-
-
-
-
-
-
(7,657,501)
(7,657,501)
-
-
-
-
-
-
1,200,000
1,200,000
3,244,232
51,787
75,206,249
(142,056)
(12,576,529)
65,783,683
34,694,724 100,478,407
An analysis of the movements in each category within “Currency translation reserve” is presented in Note 22(b).
The accompanying notes form an integral part of these financial statements.
42
Total equity RM
Health Management International Ltd Annual Report 2011
CONSOLIDATED STATEMENT OF CASH FLOWS As at 30 June 2011
Note
Cash flows from operating activities Net profit/(loss) after tax Adjustments for: - Income tax - Allowance for impairment of trade and other receivables - net - Depreciation of property, plant and equipment - Loss on disposals of property, plant and equipment - Gain on disposals of subsidiaries - Gain on dilution of interest in an associated company - Interest income - Interest expense - Share of profit from associated companies Operating cash flow before working capital changes Change in operating assets and liabilities - Inventories - Trade and other receivables - Other current assets - Trade and other payables - Deferred income - Currency translation differences Cash provided by operations
2011 RM
2010 RM
6,808,502
(1,625,603)
3,213,012 (160,920) 9,135,650 328,991 (1,211,489) 4,493,455 (7,776,267) 14,830,934
5,569,341 (277,450) 7,311,445 640,730 (838) (132,684) (1,011,261) 3,990,406 (1,387,581) 13,076,505
(979,559) 683,061 1,195,287 3,317,291 (602,653) 1,367,940 19,812,301
(1,008,719) (7,518,434) (2,861,001) 13,325,020 (611,243) (818,565) 13,583,563
(4,493,455) (4,834,277) 10,484,569
(3,990,406) (4,521,298) 5,071,859
Cash flows from investing activities (Repayment)/drawdown of loans by an associated company Additions to property, plant and equipment Disposals of property, plant and equipment Dilution of interest in an associated company Proceeds from dilution of interest in a subsidiary Net cash used in investing activities
(47,781) (11,914,313) 233,135 (11,728,959)
4,278,744 (5,587,857) 321,183 149,160 23,773 (814,997)
Cash flows from financing activities Proceeds from issuance of shares – net Drawdown of borrowings Repayment of borrowings Repayment of lease liabilities (Repayment)/drawdown of loan from shareholders – net Loan from non-controlling interests Capital injection in a subsidiary by non-controlling interests Dividends paid to non-controlling interests Interest received Net cash provided by/(used in) financing activities
15,358,059 16,963,796 (13,540,952) (8,491,050) (4,569,308) 6,636,780 1,200,000 (12,763,038) 1,211,489 2,005,776
3,500,000 (3,545,536) (6,449,395) 4,569,308 6,636,682 1,200,000 (7,657,501) 1,011,261 (735,181)
761,386 6,538,348 20,183 7,319,917
3,521,681 3,078,462 (61,795) 6,538,348
Interest paid Income tax paid Net cash provided by operating activities
Net increase in cash and cash equivalents Cash and cash equivalents at beginning of financial year Effects of currency translation on cash and cash equivalents Cash and cash equivalents at end of financial year
9 9
The accompanying notes form an integral part of these financial statements. Health Management International Ltd Annual Report 2011
43
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
These notes form an integral part of and should be read in conjunction with the accompanying financial statements.
1.
General information
Health Management International Ltd (the “Company”) is listed on the Singapore Exchange and is incorporated and domiciled in Singapore. The address of its registered office is 167 Jalan Bukit Merah, #05-10 Connection One, Singapore 150167.
The principal activities of the Company are those of investment holding and management consultants. The principal activities of its subsidiaries are stated in Note 29 to the financial statements.
2.
Significant accounting policies
2.1 Basis of preparation
The financial statements have been prepared in accordance with Singapore Financial Reporting Standards (“FRS”). The financial statements have been prepared under the historical cost convention, except as disclosed in the accounting policies below. The preparation of financial statements in conformity with FRS requires management to exercise its judgement in the process of applying the Group’s accounting policies. It also requires the use of critical accounting estimates and assumptions. Interpretations and amendments to published standards effective in 2011 On 1 July 2010, the Group adopted the new or amended FRS and Interpretations to FRS (“INT FRS”) that are mandatory for application from that date. Changes to the Group’s accounting policies have been made as required, in accordance with the relevant transitional provisions in the respective FRS and INT FRS. The adoption of these new or amended FRS and INT FRS did not result in substantial changes to the Group’s and Company’s accounting policies and had no material effect on the amounts reported for the current or prior financial years except as disclosed below:
(a)
Amendment to FRS 7 Statement of Cash Flows (effective for annual periods beginning on or after 1 January 2010) Under the amendment, only expenditures that result in a recognised asset in the balance sheet can be classified as investing activities in the statement of cash flows. Previously, such expenditure could be classified as investing or operating activities in the statement of cash flows.
2.2 Going concern
In the opinion of the Management, the consolidated financial statements of the Group and the balance sheet of the Company are prepared under the going concern assumption on the basis that:
44
(i)
The new and continuing investments made by the Group in its hospital and healthcare operations generate additional cash flows for the Group.
(ii)
The Group continues to receive the support of its bankers and other financial institutions.
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.3 Revenue recognition Revenue comprises the fair value of the consideration received or receivable for the rendering of services in the ordinary course of the Group’s activities. Revenue is presented, net of value-added tax, rebates and discounts, and after eliminating sales within the Group. The Group recognises revenue when the amount of revenue and related cost can be reliably measured, when it is probable that the collectibility of the related receivables is reasonably assured and when the specific criteria for each of the Group’s activities are met as follows: (a)
Rendering of services Revenue from hospital and other healthcare services is recognised in the period in which the services are rendered. Revenue from healthcare education and training is recognised on a straight-line basis over the duration of the course. Revenue received in advance is deferred and recognised in the balance sheet as deferred income.
(b)
Interest income Interest income is recognised using the effective interest method.
(c)
Car park income Car park income is recognised on a straight-line time proportion basis.
(d)
Rental income Rental income from operating leases (net of any incentives given to the lessees) is recognised on a straight-line basis over the lease term.
2.4 Group accounting (a)
Subsidiaries (i)
Consolidation Subsidiaries are entities (including special purpose entities) over which the Group has power to govern the financial and operating policies so as to obtain benefits from its activities, generally accompanying a shareholding giving rise to a majority of the voting rights. The existence and effect of potential voting rights that are currently exercisable or convertible are considered when assessing whether the Group controls another entity. Subsidiaries are consolidated from the date on which control is transferred to the Group. They are deconsolidated from the date on which control ceases. In preparing the consolidated financial statements, transactions, balances and unrealised gains on transactions between group companies are eliminated. Unrealised losses are also eliminated but considered an impairment indicator of the asset transferred. Accounting policies of subsidiaries have been changed where necessary to ensure consistency with the policies adopted by the Group.
Health Management International Ltd Annual Report 2011
45
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.4 Group accounting (continued) (a)
Subsidiaries (continued)
(i)
Consolidation (continued) Non-controlling interests are that part of the net results of operations and of net assets of a subsidiary attributable to the interests which are not owned directly or indirectly by the equity holders of the Company. They are shown separately in the consolidated statement of comprehensive income, statement of changes in equity and balance sheet. Total comprehensive income is attributed to the non-controlling interests based on their respective interests in a subsidiary, even if this results in the non-controlling interests having a deficit balance.
(ii)
Acquisition of businesses The acquisition method of accounting is used to account for business combinations by the Group. The consideration transferred for the acquisition of a subsidiary comprises the fair value of the assets transferred, the liabilities incurred and the equity interests issued by the Group. The consideration transferred also includes the fair value of any contingent consideration arrangement and the fair value of any pre-existing equity interest in the subsidiary. Acquisition-related costs are expensed as incurred. Identifiable assets acquired and liabilities and contingent liabilities assumed in a business combination are, with limited exceptions, measured initially at their fair values at the acquisition date. On an acquisition-by-acquisition basis, the Group recognises any non-controlling interest in the acquiree at the date of acquisition either at fair value or at the non-controlling interest’s proportionate share of the acquiree’s net identifiable assets. The excess of the consideration transferred, the amount of any non-controlling interest in the acquiree and the acquisition-date fair value of any previous equity interest in the acquiree over the fair value of the net identifiable assets acquired is recorded as goodwill.
(iii)
Disposals of subsidiaries or businesses When a change in the Company’s ownership interest in a subsidiary results in a loss of control over the subsidiary, the assets and liabilities of the subsidiary including any goodwill are derecognised. Amounts recognised in other comprehensive income in respect of that entity are also reclassified to profit or loss or transferred directly to retained earnings if required by a specific standard. Any retained interest in the entity is remeasured at fair value. The difference between the carrying amount of the retained investment at the date when control is lost and its fair value is recognised in profit or loss. Please refer to the paragraph “Investments in subsidiaries, and associated companies” for the accounting policy on investments in subsidiaries in the separate financial statements of the Company.
46
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.4 Group accounting (continued) (b)
Transactions with non-controlling interests
Changes in the Company’s ownership interest in a subsidiary that do not result in a loss of control over the subsidiary are accounted for as transactions with equity owners of the Group. Any difference between the change in the carrying amounts of the non-controlling interest and the fair value of the consideration paid or received is recognised in a separate reserve within equity attributable to the equity holders of the Company.
(c)
Associated companies Associated companies are entities over which the Group has significant influence, but not control, and generally accompanied by a shareholding giving rise to voting rights of 20% and above but not exceeding 50%. Investments in associated companies are accounted for in the consolidated financial statements using the equity method of accounting less impairment losses, if any. Investments in associated companies are initially recognised at cost. The cost of an acquisition is measured at the fair value of the assets given, equity instruments issued or liabilities incurred or assumed at the date of exchange, plus costs directly attributable to the acquisition. In applying the equity method of accounting, the Group’s share of its associated companies’ post-acquisition profits or losses is recognised in profit or loss and its share of post-acquisition other comprehensive income is recognised in other comprehensive income. These post-acquisition movements and distributions received from the associated companies are adjusted against the carrying amount of the investment. When the Group’s share of losses in an associated company equals or exceeds its interest in the associated company, including any other unsecured noncurrent receivables, the Group does not recognise further losses, unless it has obligations or has made payments on behalf of the associated company. Unrealised gains on transactions between the Group and its associated companies are eliminated to the extent of the Group’s interest in the associated companies. Unrealised losses are also eliminated unless the transaction provides evidence of an impairment of the asset transferred. The accounting policies of associated companies have been changed where necessary to ensure consistency with the accounting policies adopted by the Group. Gains and losses arising from partial disposals or dilutions in investments in associated companies are recognised in profit or loss. Investments in associated companies are derecognised when the Group loses significant influence. Any retained interest in the entity is remeasured at its fair value. The difference between the carrying amount of the retained investment at the date when significant influence is lost and its fair value is recognised in profit or loss. Please refer to the paragraph “Investment in subsidiaries and associated companies” for the accounting policy on investments in associated companies in the separate financial statements of the Company.
Health Management International Ltd Annual Report 2011
47
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.5 Property, plant and equipment (a)
Measurement All items of property, plant and equipment are initially recognised at cost and subsequently carried at cost less accumulated depreciation and accumulated impairment losses. The cost of an item of property, plant and equipment initially recognised includes its purchase price and any cost that is directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the manner intended by management. The projected cost of dismantlement, removal or restoration is also included as part of the cost of property, plant and equipment if the obligation for the dismantlement, removal or restoration is incurred as a consequence of acquiring or using the asset.
(b)
Depreciation Depreciation on property, plant and equipment is calculated using the straight-line method to allocate their depreciable amounts over their estimated useful lives as follows:
Leasehold land Leasehold buildings Electrical equipment Medical equipment Motor vehicles Furniture, office equipment and housekeeping equipment
Useful lives Over the lease term of 99 years commencing from 2002 50 years 10 years 8 - 10 years 5 - 10 years 3 - 10 years
During the financial year, the Group revised the estimated useful life of certain medical equipment from 15 years to 10 years. The change in accounting estimate has been applied prospectively and as a result, the depreciation charge for the current financial year has increased by RM533,654. The residual values, estimated useful lives and depreciation method of property, plant and equipment are reviewed, and adjusted as appropriate, at each balance sheet date. The effects of any revision are recognised in profit or loss when the changes arise. Construction in progress represents medical equipment under construction which is stated at cost less any impairment losses, and is not depreciated. Cost comprises direct costs incurred during the periods of construction. Construction in progress is reclassified to the appropriate category of property, plant and equipment when completed and ready for use. (c)
Subsequent expenditure Subsequent expenditure relating to property, plant and equipment that has already been recognised is added to the carrying amount of the asset 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 repair and maintenance expenses are recognised in profit or loss when incurred.
(d)
Disposal On disposal of an item of property, plant and equipment, the difference between the disposal proceeds and its carrying amount is recognised in profit or loss within “Other gains - net”.
48
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.6
Borrowing costs Borrowing costs are recognised in profit or loss using the effective interest method except for those costs that are directly attributable to the construction or development of properties. This includes those costs on borrowings acquired specifically for the construction or development of properties, as well as those in relation to general borrowings used to finance the construction or development of properties. The actual borrowing costs incurred during the period up to the issuance of the temporary occupation permit less any investment income on temporary investment of these borrowings, are capitalised in the cost of the property under development. Borrowing costs on general borrowings are capitalised by applying a capitalisation rate to construction or development expenditures that are financed by general borrowings.
2.7
Investment properties
Investment properties held by associated companies include those portions of office buildings that are held for longterm rental yields and/or for capital appreciation and land under operating leases that are held for long-term capital appreciation or for a currently indeterminate use.
Investment properties are initially recognised at cost and subsequently carried at fair value, determined annually by independent professional valuers on the highest-and-best-use basis. Changes in fair values are recognised in profit or loss.
Investment properties are subject to renovations or improvements at regular intervals. The cost of major renovations and improvements is capitalised and the carrying amounts of the replaced components are written off to profit or loss. The cost of maintenance, repairs and minor improvements is charged to profit or loss when incurred.
On disposal of an investment property, the difference between the disposal proceeds and the carrying amount is recognised in profit or loss.
Please refer to “Supplementary Information” for details of investment properties held by associated companies of the Group.
2.8 Investments in subsidiaries and associated companies Loan to an associated company
Investments in subsidiaries and associated companies including loans and receivables from subsidiaries or associated companies that form part of the net investment in the subsidiary or associated company are carried at cost less accumulated impairment losses in the Company’s balance sheet. On disposal of investments in subsidiaries and associated companies, the difference between disposal proceeds and the carrying amounts of the investments are recognised in profit or loss.
Health Management International Ltd Annual Report 2011
49
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.9 Impairment of non-financial assets (a) Property, plant and equipment Investments in subsidiaries and associated companies
Property, plant and equipment and investments in subsidiaries and associated companies are tested for impairment whenever there is any objective evidence or indication that these assets may be impaired.
For the purpose of impairment testing, the recoverable amount (i.e. the higher of the fair value less cost to sell and value-in-use) is determined on an individual asset basis unless the asset does not generate cash flows that are largely independent of those from other assets. If this is the case, recoverable amount is determined for the Cash Generating Unit (“CGU”) to which the asset belongs.
If the recoverable amount of the asset (or CGU) is estimated to be less than its carrying amount, the carrying amount of the asset (or CGU) is reduced to its recoverable amount.
The difference between the carrying amount and recoverable amount is recognised as an impairment loss in profit or loss.
An impairment loss for an asset is reversed if, and only if, there has been a change in the estimates used to determine the asset’s recoverable amount since the last impairment loss was recognised. The carrying amount of an asset is increased to its revised recoverable amount, provided that this amount does not exceed the carrying amount that would have been determined (net of any accumulated amortisation or depreciation) had no impairment loss been recognised for the asset in prior years.
A reversal of impairment loss for an asset is recognised in profit or loss.
2.10 Loans and receivables Trade and other receivables Trade and other receivables are initially recognised at fair value plus transaction costs and subsequently carried at amortised cost using the effective interest method. They are presented as current assets, except those maturing later than 12 months after the balance sheet date which are presented as non-current assets. Trade receivables are derecognised when the rights to receive cash flows from the customers have expired or have been received. Receivables that form part of the net investment in subsidiaries or associated companies are carried at cost less impairment. The Group assesses at each balance sheet date whether there is objective evidence that trade and other receivables are impaired and recognises an allowance for impairment when such evidence exists. Significant financial difficulties of the debtor, probability that the debtor will enter bankruptcy and default or significant delay in payments are objective evidence that these financial assets are impaired. The carrying amount of these assets is reduced through the use of an impairment allowance account which is calculated as the difference between the carrying amount and the present value of estimated future cash flows, discounted at the original effective interest rate. These assets are presented as current assets except for those that are expected to be realised later than 12 months after the balance sheet date, which are presented as non-current assets.
50
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.11 Borrowings Borrowings are presented as current liabilities unless the Group has an unconditional right to defer settlement for at least 12 months after the balance sheet date. Borrowings are initially recognised at fair value (net of transaction costs) and subsequently carried at amortised cost. Any difference between the proceeds (net of transaction costs) and the redemption value is recognised in profit or loss over the period of the borrowings using the effective interest method. 2.12 Trade and other payables Trade and other payables are initially recognised at fair value, and subsequently carried at amortised cost, using the effective interest method. 2.13 Fair value estimation of financial assets and liabilities
The fair values of current financial assets and liabilities carried at amortised cost approximate their carrying amounts.
2.14 Leases The Group leases land, medical equipment and motor vehicles under finance leases. Land and buildings and office premises are leased under operating leases. (a)
Lessee – Finance leases
Leases where the Group assumes substantially all risks and rewards incidental to ownership of the leased assets are classified as finance leases.
The leased assets and the corresponding lease liabilities (net of finance charges) under finance leases are recognised on the balance sheet as property, plant and equipment and borrowings respectively, at the inception of the leases based on the lower of the fair values of the leased assets and the present value of the minimum lease payments.
Each lease payment is apportioned between the finance expense and the reduction of the outstanding lease liability. The finance expense is recognised in profit or loss on a basis that reflects a constant periodic rate of interest on the finance lease liability.
(b)
Lessee - Operating leases
Leases where substantially all risks and rewards incidental to ownership are retained by the lessor are classified as operating leases. Payments made under operating leases (net of any incentives received from the lessors) are recognised in profit or loss on a straight-line basis over the period of the lease. When a lease is terminated before the lease period expires, any payment made (or received) by the Group as penalty is recognised as an expense (or income) in the period when termination takes place.
Health Management International Ltd Annual Report 2011
51
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.15 Inventories
Inventories are carried at the lower of cost and net realisable value. Cost is determined using weighted average basis and includes all costs in bringing the inventories to their present location and condition. Net realisable value is the estimated selling price in the ordinary course of business, less applicable variable selling expenses.
2.16 Income taxes Current income tax for current and prior periods is recognised at the amounts expected to be paid to or recovered from the tax authorities, using the tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date. Deferred income tax is recognised for all temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the financial statements except when the deferred income tax arises from the initial recognition of goodwill or an asset or liability in a transaction that is not a business combination and affects neither accounting nor taxable profit or loss at the time of the transaction. A deferred income tax liability is recognised on temporary differences arising on investments in subsidiaries and associated companies, except where the Group is able to control the timing of the reversal of the temporary difference and it is probable that the temporary difference will not reverse in the foreseeable future. A deferred income tax asset is recognised to the extent that it is probable that future taxable profit will be available against which the deductible temporary differences and tax losses can be utilised. Deferred income tax is measured: (i)
at the tax rates that are expected to apply when the related deferred income tax asset is realised or the deferred income tax liability is settled, based on tax rates and tax laws that have been enacted or substantially enacted by the balance sheet date; and
(ii)
based on the tax consequence that would follow from the manner in which the Group expects, at the balance sheet date, to recover or settle the carrying amounts of its assets and liabilities.
Current and deferred income tax are recognised as income or expenses in profit or loss. 2.17 Employee compensation
52
(a)
Defined contribution plans
Defined contribution plans are post-employment benefit plans under which the Group pays fixed contributions into separate entities such as the Central Provident Fund on a mandatory, contractual or voluntary basis. The Group has no further payment obligations once the contributions have been paid. The Group’s contributions are recognised as employee compensation expense when they are due.
(b)
Employee leave entitlement
Employee entitlements to annual leave are recognised when they accrue to employees. A provision is made for the estimated liability for annual leave as a result of services rendered by employees up to the balance sheet date.
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.18 Currency translation (a)
Functional and presentation currency
Items included in the financial statements of each entity in the Group are measured using the currency of the primary economic environment in which the entity operates (“functional currency”). The functional currency of the Company is Singapore Dollar.
During the current financial year, the Group and the Company changed the presentation currency of the financial statements from Singapore Dollar to Malaysian Ringgit as it provides a better understanding of the Group’s operations being predominantly based in Malaysia. The change in presentation currency is accounted for as a change in accounting policy, and accordingly, the comparative information have been restated.
(b)
Transactions and balances
Transactions in a currency other than the functional currency (“foreign currency”) are translated into the functional currency using the exchange rates at the dates of the transactions. Currency exchange differences from the settlement of such transactions and from the currency translation differences of monetary assets and liabilities denominated in foreign currencies at the closing rates at the balance sheet date are recognised in profit or loss.
In preparation of the Group financial statements, exchange differences arising on a monetary item that forms part of a reporting entity’s net investment in a foreign operation shall be recognised in profit or loss in the separate financial statements of the reporting entity or the individual financial statements of the foreign operation, as appropriate. In the financial statements that include the foreign operation and the reporting entity, such exchange differences shall be recognised initially in a separate component of equity and recognised in profit or loss on disposal of the net investment.
(c)
Translation of Group entities’ financial statements
The results and financial position of all the Group entities (none of which has the currency of a hyperinflationary economy) that have a functional currency different from the presentation currency are translated into the presentation currency as follows: (i) (ii)
Assets and liabilities are translated at the closing rates at the date of the balance sheet; Income and expenses are translated at average exchange rates (unless the average is not a reasonable approximation of the cumulative effect of the rates prevailing on the transaction dates, in which case income and expenses are translated using the exchange rates at the dates of the transactions); and
(iii) All resulting currency translation differences are recognised in the currency translation reserve.
Health Management International Ltd Annual Report 2011
53
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
2.
Significant accounting policies (continued)
2.19 Provisions Provision for other liabilities and charges are recognised when the Group has a present legal or constructive obligation as a result of past events, it is more likely than not that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. Provision for cost of conversion of wards to medical suites is measured at the present value of the expenditure expected to be required to settle the obligation using a pre-tax discount rate that reflects the current market assessment of the time value of money and the risks specific to the obligation. The increase in the provision due to the passage of time is recognised in profit or loss as finance expense. 2.20 Segment reporting Operating segments are reported in a manner consistent with the internal reporting provided to the executive committee whose members are responsible for allocating resources and assessing performance of the operating segments. 2.21 Cash and cash equivalents For the purpose of presentation in the consolidated statement of cash flows, cash and cash equivalents include cash on hand, deposits with financial institutions which are subject to an insignificant risk of change in value, and bank overdrafts. Bank overdrafts are presented as current borrowings on the balance sheet. 2.22 Government grants Grants from the government are recognised as a receivable at their fair value where there is reasonable assurance that the grant will be received and the Group will comply with all the attached conditions. Government grants receivable are recognised as income over the periods necessary to match them with the related costs which they are intended to compensate, on a systematic basis. Government grants relating to expenses are shown separately as other income. 2.23 Share capital and treasury shares
Ordinary shares are classified as equity. Incremental costs directly attributable to the issuance of new ordinary shares are deducted against the share capital account. When any entity within the Group purchases the Company’s ordinary shares (“treasury shares”), the consideration paid including any directly attributable incremental cost is presented as a component within equity attributable to the Company’s equity holders, until they are cancelled, sold or reissued. When treasury shares are subsequently cancelled, the cost of treasury shares are deducted against the share capital account if the shares are purchased out of capital of the Company, or against the retained earnings of the Company if the shares are purchased out of earnings of the Company. When treasury shares are subsequently sold, the cost of treasury shares is reversed from the treasury share account and the realised gain or loss on sale or reissue, net of any directly attributable incremental transaction costs and related income tax, is recognised in the capital reserve of the Company.
2.24 Dividends to Company’s shareholders
54
Dividends to Company’s shareholders are recognised when the dividends are approved for payments.
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
3.
Revenue Group
Revenue from hospital and other healthcare services Healthcare education and training Total revenue Interest income - bank deposits - loans to associated companies
2011 RM
2010 RM
168,294,968 5,588,762 173,883,730
133,590,440 7,255,226 140,845,666
27,938 1,183,551 1,211,489
14,181 997,080 1,011,261
175,095,219
141,856,927
The healthcare education and training revenues include grants from the Singapore Workforce Development Agency (“WDA”) amounting to RM 3,206,176 (2010: RM 5,385,906).
4.
Other gains – net Group 2011 RM Currency exchange (loss)/gain – net Gain on disposals of subsidiaries Loss on disposals of property, plant and equipment Car park income Rental income Gain on dilution of interest in an associated company Government grant – Jobs Credit Scheme Other grants Recovery of trade receivables previously written off Provision for impairment of trade receivables Others
2010 RM
(1,585,943) (328,991) 520,739 59,354 -
977,548 838 (640,730) 594,614 36,588 132,684
481,982 344,309 (183,389) 712,807 20,868
150,032 298,620 (21,170) 869,964 2,398,988
Other grants comprise funding from government bodies for course development and promotion and subsidy for purchasing training equipment.
5.
Finance expenses Group 2011 RM Interest expense : - bank borrowings - finance lease liabilities
2,846,685 1,646,770 4,493,455
2010 RM 2,911,360 1,079,046 3,990,406
Health Management International Ltd Annual Report 2011
55
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
6.
Expense by nature Group 2011 RM 9,135,650
7,311,445
618,249 139,050
602,985 118,800
Staff cost: Directors’ remuneration other than fee Directors of the Company - Salaries and other related expenses - Contribution to defined contribution plans
2,369,422 50,887
2,509,231 84,357
Directors of subsidiaries - Salaries and other related expenses - Contribution to defined contribution plans
306,818 36,864
261,493 31,416
Other than directors: - Salaries and other related expenses - Contribution to defined contribution plans
38,172,458 3,719,973
31,367,337 2,937,902
Included in cost of services: - Medical materials costs - Medical consultants’ fee - Educators’ fee
35,453,980 46,553,783 881,097
27,549,901 38,564,630 670,239
10,024,562 3,417,395 1,514,561 15,982,635
9,632,864 3,771,664 1,196,820 11,098,268
168,377,384
137,709,352
Depreciation of property, plant and equipment Directors’ fee: - Directors of the Company - Directors of subsidiaries
(i)
(ii)
(iii)
2010 RM
Rental and other operating leases Utilities Repairs and maintenance Others Total cost of services, distribution and marketing expenses and administrative expenses
7.
Income taxes
(a)
Income tax expense Group 2011 RM Tax expense attributable to profit is made up of: Current income tax - Singapore - Foreign Deferred income tax (Note 20)
(Over)/under provision in preceding financial years - current income tax (b) - deferred income tax (Note 20)
56
Health Management International Ltd Annual Report 2011
2010 RM
32,822 2,763,744 272,763 3,069,329
33,459 4,705,020 118,991 4,857,470
(62,136) 205,820 143,684 3,213,013
793,871 (82,000) 711,871 5,569,341
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
7.
Income taxes (continued)
(a)
Income tax expense (continued)
The tax on the Group’s profit before tax differs from the theoretical amount that would arise using the Singapore standard rate of income tax as follows: Group 2011 RM
2010 RM
10,021,515 (7,776,267) 2,245,248
Profit before tax Less: Share of profit of associated companies
3,943,738 (1,387,581) 2,556,157
381,692
Tax calculated at a tax rate of 17% (2010: 17%) Effects of: - Different tax rates in other countries - Expenses not deductible for tax purposes - Income not subject to tax - Utilisation of tax incentive in other country - Utilisation of tax losses not previously recognised as deferred income tax assets - Deferred income tax assets on temporary differences not recognised Tax charge
898,693 1,157,959 (875,221) (3,070,830) 4,577,036 3,069,329
434,547 2,848,233 1,432,688 (1,050,074) (225,341) 1,417,417 4,857,470
In the current financial year, one of the subsidiaries was granted tax incentives equivalent to the increase in value of services exported. (b)
Movements in current income tax liabilities
Beginning of financial year Currency translation differences Income tax (paid)/ received Tax expense on profit/(loss) for the current financial year Under/(over) provision in preceding financial years Acquisition of subsidiary End of financial year Income tax recoverable Current income tax liabilities
2011 RM
Group 2010 RM
Company 2010 RM
1,273,090 (4,834,277)
261,704 334 (4,521,298)
343,390 (504) (1,717,705)
-
(34,885) 334 1,092
(34,502) (383) (57,228)
2,796,566
4,738,479
3,329,228
-
33,459
57,228
(62,136) (826,757)
793,871 1,273,090
(1,687,355) (5,350) 261,704
-
-
(34,885)
(826,757) (826,757)
1,273,090 1,273,090
(77,834) 339,538 261,704
-
-
(34,885) (34,885)
2011 RM
2009 RM
Health Management International Ltd Annual Report 2011
2009 RM
57
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
8.
Earnings/ (loss) per share
(a)
Basic earnings/ (loss) per share Basic earnings/(loss) per share is calculated by dividing the net profit/(loss) attributable to equity holders of the Company by the weighted average number of ordinary shares outstanding during the financial year. Group 2011
1,816,430
Net profit/ (loss) attributable to equity holders of the Company (RM) Weighted average number of ordinary shares outstanding for basic earnings per share
2010
(2,923,717)
551,562,654 516,417,570 0.33
Basic earnings/ (loss) per share (cents per share)
(0.57)
(b)
Diluted earnings/ (loss) per share
Diluted earnings/ (loss) per share for financial years 2011 and 2010 are the same as basic earnings/ (loss) per share since there are no dilutive potential ordinary shares.
9.
Cash and cash equivalents For the purpose of presenting the consolidated statement of cash flows, cash and cash equivalents comprise the following:
2011 RM Cash at bank and on hand Less: Bank overdrafts (Note 17) Cash and cash equivalent per consolidated statement of cash flows
58
Health Management International Ltd Annual Report 2011
Group 2010 RM
2009 RM
2011 RM
Company 2010 RM
2009 RM
11,247,457 (3,927,540)
7,075,625 (537,277)
3,078,462 -
982,085 -
286,896 -
1,094,681 -
7,319,917
6,538,348
3,078,462
982,085
286,896
1,094,681
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
10. Trade and other receivables 2011 RM
Group 2010 RM
2009 RM
Current Trade receivables: - non-related
14,824,045
15,716,691
14,965,288
-
-
-
Less: Allowance for impairment of receivables Trade receivables – net
(3,266,835) (3,456,461) (4,323,500) 11,557,210 12,260,230 10,641,788
-
-
-
Other receivables Less: Allowance for impairment of receivables Amount due from subsidiaries Amount due from associated companies - non-trade Amount due from non-controlling interest of a subsidiary Non-current Trade receivables - non-related Less: Allowance for impairment of receivables Amount due from associated companies - non-trade Less: Allowance for impairment of receivables (Note 13(b))
Company 2010 RM
2011 RM
2009 RM
710,052
575,067
1,350,059
-
-
11,966
(80,000) 630,052
(80,000) 495,067
(80,000) 1,270,059
-
-
11,966
-
-
-
14,676,381
7,082,292
408,313
42,794,855
50,206,648
21,832,645
24,473,923
24,473,923
290,817
113,804 55,095,921
67,910 63,029,855
33,744,492
113,804 39,264,108
57,397 31,613,612
711,096
1,193,732
1,193,732
1,193,732
-
-
-
(1,193,732) -
(1,193,732) -
(1,193,732) -
-
-
-
8,874,814
2,755,263
27,229,079
8,874,814
2,755,263
27,229,079
(2,755,263) 6,119,551 6,119,551
(2,755,263) (2,755,263) - 24,473,816 - 24,473,816
(2,755,263) 6,119,551 6,119,551
(2,755,263) (2,755,263) - 24,473,816 - 24,473,816
Included in trade receivables from third parties was RM 1,437,532 (2010: RM 1,694,203, 2009: RM 1,721,538) relating to grants receivable from the Singapore Workforce Development Agency (“WDA”). There are no unfulfilled conditions and other contingencies attaching to the WDA grants receivable. The amounts due from subsidiaries represent advances which are unsecured, interest-free and are recoverable on demand. The current amounts due from associated companies arose from sales of leasehold land and building and advances granted to certain associates. These balances are unsecured, recoverable on demand and bear interest at 6.95% per annum (2010: 6.95%, 2009: 6.95%). In the current financial year, an amount of RM 6,119,551 has been loaned to an associated company as its expansion capital. The settlement is neither planned nor likely to occur in the foreseeable future and is in substance part of the Company’s net investment in the associated company. Accordingly this amount is classified as non-current. Prior to 1 July 2009, the non- current non-trade amount due from an associated company of RM 24,473,816 is unsecured, interest-free and is repayable upon occurrence of certain events as stipulated in the loan agreement. However, the company has assessed that settlement of the loan was neither planned nor likely to occur in the foreseeable future. As a result, the management considered the loan to be in substance part of the Group’s net investment in the associated company and the amount was classified as non-current. As at 30 June 2010 and 30 June 2011, the Company is in process of finalising the repayment arrangement with the associated company and the settlement of the loan is planned to occur within the next twelve months. Accordingly, the amount due from the associated company is classified as current. Health Management International Ltd Annual Report 2011
59
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
11. Inventories 2011 RM At cost Pharmaceutical and surgical medicine Medical supplies
1,973,542 3,371,280 5,344,822
Group 2010 RM 1,605,411 2,759,852 4,365,263
2009 RM 1,196,863 2,159,681 3,356,544
The cost of inventories recognised as expense and included in cost of services amounted to RM 35,453,980 (2010: RM 27,549,901, 2009: RM 23,640,141).
12. Other current assets 2011 RM Deposits Prepayments Deposit for purchase of plant and equipment
Group 2010 RM
2009 RM
2011 RM
Company 2010 RM
2009 RM
1,513,287 3,125,761
1,659,785 2,959,453
1,652,898 1,544,211
1,229 182,867
10,418 168,147
91,122
223,775 4,862,823
1,438,872 6,058,110
3,197,109
184,096
178,565
91,122
Included in deposits are rental deposits of RM 1,355,598 (2010: RM 1,355,598, 2009: RM 1,355,598) placed with associated companies.
13. Investments in associated companies 2011 RM
Group 2010 RM
2009 RM
Cost Beginning of financial year Capital injection Capital reduction
Translation difference End of financial year Accumulated impairment losses Beginning of financial year Additional impairment loss made (c) Translation difference End of financial year Net Beginning of financial year Share of profit Dilution of interest (e) Currency translation differences End of financial year
60
18,297,866 7,776,267 -
17,195,661 16,598,258 1,387,581 503,280 (16,476) -
344,416 26,418,549
(268,900) 94,123 18,297,866 17,195,661
Health Management International Ltd Annual Report 2011
2011 RM
Company 2010 RM
2009 RM
8,152,705 8,152,705
8,565,744 11,028 (41,682) 8,535,090
8,471,621 8,471,621
489,229 8,641,934
(382,385) 8,152,705
94,123 8,565,744
(2,353,834)
(2,463,817)
(2,436,746)
(132,967) (144,813) (2,631,614)
109,983 (2,353,834)
(27,071) (2,463,817)
6,010,320
5,798,871
6,101,927
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
13. Investments in associated companies (continued) The summarised financial information of associated companies adjusted for the proportion of ownership interest held by the Group are as follows:
- Assets - Liabilities - Revenues - Net profit/(loss) (before non-controlling interests)
2011 RM
Group 2010 RM
109,882,030 94,574,228 6,010,375 8,833,937
98,539,712 92,217,630 5,980,464 276,771
2009 RM 94,082,550 87,913,829 4,285,413 (339,340)
Details of associated companies are provided in Note 29. (a)
Investments in associated companies of RM 43,660 (2010: RM 41,188, 2009: RM 43,113) have been pledged as security for bank borrowings of the Company (Note 17(a)).
(b)
The Company has made allowance of RM 2,495,077 and RM 2,755,263 (Note 10) for impairment of its investment in and receivables from an associated company. This associated company has been dormant for the current and past financial years.
(c)
In the current financial year, the Company has made allowance of RM 132,967 for impairment of its investment in an associated company.
(d)
In the current financial year, the Group has not recognised its share of loss of an associated company amounting to RM 3,900 (2010: RM 1,174,000, 2009: RM 34,000) because the Group’s cumulative share of losses exceeds its interest in that associated company and the Group has no obligation in respect of those losses. The cumulative unrecognised losses amount to RM 1,212,000 (2010: RM 1,208,000, 2009: RM 34,000) at the balance sheet date.
(e)
In 2010, the Group disposed 0.25% interest in Regency Medical Centre (Seri Alam) Sdn. Bhd. for a cash consideration of RM 149,160. As a result, the Group’s interest decreased from 29.25% to 29%. The Company and the Group had recorded a gain on dilution of RM 107,478 and RM 132,684 in profit or loss respectively.
14. Investments in subsidiaries 2011 RM Equity investments at cost Beginning of financial year Translation differences Additional capital contribution (b) Disposal (c) End of financial year Less: Impairment losses Beginning of financial year Translation differences End of financial year
Company 2010 RM
2009 RM
73,724,277 4,423,095 5,800,020 83,947,392
74,450,064 (3,252,583) 5,775,000 (3,248,204) 73,724,277
73,631,988 818,076 74,450,064
(33,919,576) (2,035,473) (35,955,049) 47,992,343
(35,504,584) 1,585,008 (33,919,576) 39,804,701
(35,114,448) (390,136) (35,504,584) 38,945,480
Details of subsidiaries are included in Note 29.
Health Management International Ltd Annual Report 2011
61
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
14. Investments in subsidiaries (continued) (a) Security for bank borrowings Investments in subsidiaries of RM 26,088,114 (2010: RM 24,611,223, 2009: RM 25,761,267) have been pledged as security for bank borrowings of the Company (Note 17(a)). (b) Additional capital contribution in financial years 2011 and 2010 A subsidiary issued new shares amounting to RM 20,000,000 for cash in 2011 and 2010 which were fully subscribed in the proportion of the shareholdings of the Company and the non-controlling interests. The Company’s interest in the subsidiary has remained unchanged after completion of the above subscriptions. (c)
Disposals in financial year 2010 The Company liquidated its wholly-owned subsidiaries, Unirio Corporation Sdn. Bhd. and 633 Medical Sdn. Bhd. with carrying value of investment of RM 3,248,204 and RM 2 respectively in the prior financial year. On 31 October 2009, the Company disposed a 0.25% interest in Regency Specialist Hospital Sdn. Bhd. with carrying amount of RM 25,000, for a cash consideration of RM 23,773. The effect of such change on the equity attributable to the Group was as follows: 2010 RM Change in carrying amount of non-controlling interests Consideration received from non-controlling interests, net of transaction cost Recognised in other reserves (Note 22(c))
28,014 23,773 51,787
15. Property, plant and equipment
Leasehold land RM
Leasehold buildings RM
Electrical equipment RM
Medical equipment RM
Motor vehicles RM
The Group 2011 Cost Beginning of financial year Currency translation differences Additions Disposals End of financial year
19,038,386 19,038,386
63,187,006 63,187,006
20,359,662 461 4,936,457 (338,351) 24,958,229
71,959,385 7,823,368 (896,541) 78,886,212
1,981,181 34,757 527,354 (487,532) 2,055,760
Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge Disposals End of financial year
580,004 223,030 803,034
7,250,687 1,274,532 8,525,219
17,148,342 213 985,297 (91,600) 18,042,252
32,866,882 4,965,248 (771,345) 37,060,785
1,321,187 18,884 204,742 (348,376) 1,196,437
5,161,403 46,924 1,482,801 (8,996) 6,682,132
64,328,505 66,021 9,135,650 (1,220,317) 72,309,859
18,235,352
54,661,787
6,915,977
41,825,427
859,323
10,842,079
133,339,945
Net book value at end of financial year
62
Furniture, office equipment and housekeeping equipment RM
Health Management International Ltd Annual Report 2011
Total RM
12,975,411 189,501,031 108,356 143,574 4,500,463 17,787,642 (60,019) (1,782,443) 17,524,211 205,649,804
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
15. Property, plant and equipment (continued) Furniture, office equipment and housekeeping equipment RM
Leasehold land RM
Leasehold buildings RM
Electrical equipment RM
Medical equipment RM
Motor vehicles RM
The Group 2010 Cost Beginning of financial year Currency translation differences Additions Reclassifications Disposals End of financial year
18,678,957 359,429 19,038,386
63,187,006 63,187,006
19,686,743 (358) 1,185,816 (153,621) (358,918) 20,359,662
64,850,676 13,271,756 1,470 (6,164,517) 71,959,385
2,160,026 (27,065) 129,652 (281,432) 1,981,181
Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge Reclassifications Disposals End of financial year
230,699 349,305 580,004
6,103,630 1,147,057 7,250,687
16,959,441 (141) 725,038 (182,364) (353,632) 17,148,342
34,157,525 3,789,190 142,916 (5,222,749) 32,866,882
1,397,597 (12,336) 217,357 (281,431) 1,321,187
4,073,146 (29,363) 1,083,498 39,448 (5,326) 5,161,403
62,922,038 (41,840) 7,311,445 (5,863,138) 64,328,505
18,458,382
55,936,319
3,211,320
39,092,503
659,994
7,814,008
125,172,526
Net book value at end of financial year
The Group 2009 Cost Beginning of financial year Currency translation differences Acquisition of a subsidiary Additions Reclassifications Disposals End of financial year Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge Disposals End of financial year Net book value at end of financial year
Total RM
10,950,648 179,514,056 (61,308) (88,731) 1,954,104 16,900,757 152,151 (20,184) (6,825,051) 12,975,411 189,501,031
Furniture, office equipment and housekeeping Construction equipment in progress RM RM
Leasehold land RM
Leasehold buildings RM
Electrical equipment RM
Medical equipment RM
Motor vehicles RM
2,966,690
62,723,703
18,406,177
45,628,110
2,003,627
8,817,259
-
-
88
-
6,662
14,059
3,722,715 11,989,552 18,678,957
463,303 63,187,006
1,300,621 (20,143) 19,686,743
11,574,135 10,470,974 (2,822,543) 64,850,676
149,737 2,160,026
2,119,330 10,950,648
200,015
4,710,880
16,369,967
33,889,998
1,165,768
3,162,375
-
59,499,003
30,684 230,699
1,392,750 6,103,630
27 606,727 (17,280) 16,959,441
3,032,358 (2,764,831) 34,157,525
2,298 229,531 1,397,597
5,320 905,451 4,073,146
-
7,645 6,197,501 (2,782,111) 62,922,038
18,448,258
57,083,376
2,727,302
30,693,151
762,429
6,877,502
- 116,592,018
Total RM
10,470,974 151,016,540 -
20,809
3,722,715 - 27,596,678 (10,470,974) (2,842,686) - 179,514,056
Health Management International Ltd Annual Report 2011
63
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
15. Property, plant and equipment (continued) Furniture and office equipment RM
Total RM
Company 2011 Cost Beginning of financial year Currency translation differences End of financial year
19,132 1,148 20,280
398,914 23,938 422,852
418,046 25,086 443,132
Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge End of financial year
4,769 338 1,978 7,085
218,453 14,689 58,828 291,970
223,222 15,027 60,806 299,055
Net book value End of financial year
13,195
130,882
144,077
2010 Cost Beginning of financial year Currency translation differences Additions End of financial year
16,105 (856) 3,883 19,132
417,555 (18,641) 398,914
433,660 (19,497) 3,883 418,046
Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge End of financial year
3,381 (206) 1,594 4,769
169,011 (9,638) 59,080 218,453
172,392 (9,844) 60,674 223,222
Net book value End of financial year
14,363
180,461
194,824
2009 Cost Beginning of financial year Currency translation differences End of financial year
15,928 177 16,105
412,967 4,588 417,555
428,895 4,765 433,660
Accumulated depreciation Beginning of financial year Currency translation differences Depreciation charge End of financial year
1,753 35 1,593 3,381
108,159 1,811 59,041 169,011
109,912 1,846 60,634 172,392
12,724
248,544
261,268
Net book value End of financial year
64
Motor vehicles RM
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
15. Property, plant and equipment (continued) (a)
The net carrying amount of motor vehicles and medical equipment of the Group and Company held under finance leases are as follows: Group Company 2010 2009 2010 2009 2011 2011 RM RM RM RM RM RM Motor vehicles Medical equipment
859,323 34,971,436 35,830,759
659,994 32,304,718 32,964,712
762,429 19,951,603 20,714,032
130,882 130,882
180,461 180,461
248,544 248,544
(b)
Property, plant and equipment of certain subsidiaries with net carrying amount of RM 98,858,053 (2010: RM 97,648,091, 2009: RM 93,417,362) have been pledged to financial institutions for credit facilities granted to the Group.
(c)
During the financial year, the Group acquired property, plant and equipment at aggregate cost of RM 17,787,642 (2010: RM 16,900,757, 2009: RM 27,596,678) of which RM 5,873,329 (2010: RM 11,312,900, 2009: RM 7,865,894) were acquired by means of finance leases.
16. Trade and other payables
Current Trade payables (non-related) Deferred grant from WDA Accrual for cost of conversion of wards to medical suites Interest payable Deposits received Directors’ fee payable Accrued employee compensation expense Accrued rental expense Other payables and accruals Amount due to associated companies (non-trade) Amount due to subsidiaries (non-trade) Amount due to related parties (non-trade) Amount due to shareholders (non-trade) Amount due to non-controlling interests of a subsidiary (non-trade)
Non-current Amount due to non-controlling interests of a subsidiary (non-trade)
2011 RM
Group 2010 RM
2009 RM
Company 2010 RM
18,519,448
16,793,592
13,731,179
7,456
164,291
211,411
250,508
2,431,821
-
-
-
-
462,394 7,186 196,578 403,800
462,394 171,517 362,270
462,394 17,239 191,081 379,198
7,186 403,800
362,270
17,239 379,198
6,821,650 6,633,156 3,354,155
3,895,377 6,884,519 2,304,754
3,693,069 3,659,338 2,362,815
380,693 277,986
301,602
262,560
68,667
1,408,692
114,285
-
-
-
-
-
-
5,296,090
9,797,129
8,933,338
112,939
138,279
-
112,939
138,279
-
-
4,569,308
-
-
4,569,308
-
36,830,481
6,636,682 46,059,205
24,610,598
6,486,150
15,332,879
9,803,746
13,273,462
-
-
-
-
-
2011 RM
Health Management International Ltd Annual Report 2011
2009 RM
65
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
16. Trade and other payables (continued) Included in “other payables and accruals” are lease expenses accrued on a straight-line basis for a non-cancellable operating lease with an associated company of RM 6,633,156 (2010: RM 6,884,519, 2009: RM 3,659,338). Please refer to Note 23(b). The current amounts due to subsidiaries, associated companies, non-controlling interests and related companies are unsecured, interest-free and are repayable on demand. Accrual for cost of conversion of wards to medical suites is in respect of wards sold in prior years for which a subsidiary incorporated in Malaysia has a contractual obligation to convert. The non-current non-trade amount due to non-controlling interests of a subsidiary is in substance part of the noncontrolling interests’ investment in the subsidiary. The amount is unsecured, interest- free and settlement is neither planned nor likely to occur in the foreseeable future and accordingly classified as non-current.
17. Borrowings
Current Overdraft (Note 9) – secured Short-term bank loan - secured Current portion of long-term bank borrowings – secured Finance lease liabilities - secured (Note 18)
Non-current Long-term bank borrowings - secured Finance lease liabilities - secured (Note 18)
Total borrowings
2011 RM
Group 2010 RM
2009 RM
2011 RM
3,927,540 16,260,726
537,277 11,000,000
7,965,202
6,760,726
-
-
10,551,511
6,924,574
6,621,904
7,168,829
4,029,730
4,321,208
8,788,630 39,528,407
8,031,532 26,493,383
4,847,664 19,434,770
43,910 13,973,465
41,424 4,071,154
43,360 4,364,568
22,645,105
27,477,953
31,245,060
-
3,493,701
4,369,761
15,038,340 37,683,445
18,401,596 45,879,549
12,357,115 43,602,175
51,163 51,163
89,691 3,583,392
137,240 4,507,001
77,211,852
72,372,932
63,036,945
14,024,628
7,654,546
8,871,569
(a)
Security granted
The overdraft, short-term and long-term bank borrowings are secured by the following:
Company 2010 RM
2009 RM
(i)
The Company - A memorandum of charge and assignment over all of the Company’s shares in a subsidiary incorporated in Malaysia (Note 14(a)) and an associate incorporated in Malaysia (Note 13(a)).
(ii)
The Group – In addition to paragraph (i) above, a first assignment on land and buildings and assignment of rental proceeds of certain subsidiaries in Malaysia (Note 15(b)).
(iii) The finance lease liabilities of the Group and the Company are effectively secured as the rights to the hire purchase asset (Note 15(a)) revert to the hiree in the event of default.
66
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
17. Borrowings (continued) (b)
Maturity of borrowings
The non-current borrowings (excluding finance lease liabilities (Note 18)) had the following maturity:
Between two and five years Later than five years
2011 RM
Group 2010 RM
2009 RM
15,494,651 7,150,454 22,645,105
16,790,391 10,687,562 27,477,953
17,156,139 14,088,921 31,245,060
2011 RM -
Company 2010 RM
2009 RM
3,493,701 3,493,701
4,369,761 4,369,761
(c)
Interest rate risk
The weighted average effective interest rates of total borrowings at the balance sheet date were as follows:
Group 2011 % Short-term bank loan Long-term bank borrowings Finance lease liabilities
2010 %
4.78 6.16 6.49
5.94 6.64 5.18
Company 2009 % 4.52 6.50 5.11
2011 % 3.31 3.30 6.44
2010 %
2009 %
6.39 6.47
9.00 6.47
(d)
Carrying amounts and fair values
The carrying amounts of current borrowings approximated their fair values. The carrying amounts and fair value of noncurrent borrowings were as follows:
Group 2011 RM Bank borrowings Finance lease liabilities
22,645,105 15,038,278
27,477,953 18,401,596
31,245,060 12,357,115
2011 RM
Fair values 2010 RM
2009 RM
22,645,105 15,038,278
27,477,953 18,401,596
31,245,060 11,690,300
2011 RM
Fair values 2010 RM
2009 RM
3,493,701 89,691
4,369,761 131,087
Company 2011 RM Bank borrowings Finance lease liabilities
Carrying amounts 2010 2009 RM RM
Carrying amounts 2010 2009 RM RM
51,163
3,493,701 89,691
4,369,761 137,240
51,163
The fair values were determined from cash flow analyses, discounted at the borrowing rates which the management expects to be available to the Group and the Company at the balance sheet date.
Health Management International Ltd Annual Report 2011
67
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
17. Borrowings (continued) (e)
Undrawn borrowing facilities The Group and the Company had the following undrawn borrowing facilities:
Floating rates: - Expiring not later than one year - Expiring later than one year
2011 RM
Group 2010 RM
2009 RM
2011 RM
13,241,881 7,224,550 20,466,431
10,026,577 5,000,000 15,026,577
5,100,000 5,947,731 11,047,731
4,302,280 4,302,280
Company 2010 RM
2009 RM
-
-
The facilities expiring within one year were annual facilities subjected to review at various dates in 2012. The borrowing facilities were arranged to partially finance the Group’s expansion.
18. Finance lease liabilities
The Group and the Company leases certain plant and equipment, and motor vehicles from non-related parties under finance leases. The lease agreements do not have renewal clauses but provide the Group and the Company with options to purchase the leased assets at nominal values at the end of the lease term.
2011 RM Minimum lease payments due: - Not later than one year - Between two and five years Less: Future finance charges Present value of finance lease liabilities
2009 RM
9,374,668 5,799,168 9,918,859 16,050,550 19,885,529 13,493,164 25,969,409 29,260,197 19,292,332 (2,142,439) (2,827,069) (2,087,553) 23,826,970
26,433,128
17,204,779
2011 RM
Company 2010 RM
2009 RM
54,666 63,711 118,377 (23,304)
51,571 121,822 173,393 (42,278)
53,981 170,875 224,856 (44,256)
95,073
131,115
180,600
The present value of finance lease liabilities is analysed as follows:
2011 RM
Group 2010 RM
2009 RM
8,788,630
8,031,532
4,847,664
43,910
41,424
43,360
15,038,340
18,401,596
12,357,115
51,163
89,691
137,240
23,826,970
26,433,128
17,204,779
95,073
131,115
180,600
Not later than one year (Note 17) Later than one year (Note 17): - Between two and five years
68
Group 2010 RM
Health Management International Ltd Annual Report 2011
2011 RM
Company 2010 RM
2009 RM
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
19. Deferred income This relates to fees received in advance in respect of healthcare education and training courses as follows:
Beginning of financial year Additions during the financial year Amount credited to profit or loss Currency translation difference End of financial year
2011 RM
Group 2010 RM
2009 RM
1,439,515 3,048,221 (3,719,253) 68,379 836,862
2,050,758 6,044,471 (6,583,232) (72,482) 1,439,515
1,097,310 6,061,756 (5,130,120) 21,812 2,050,758
20. Deferred income taxes Deferred income tax assets and liabilities are offsetted when there is a legally enforceable right to set off current income tax assets against current income tax liabilities and when the deferred income taxes relate to the same fiscal authority. The amounts, determined after appropriate offsetting, are shown on the balance sheets as follows:
Deferred income tax liabilities: - to be settled after one year
2011 RM
Group 2010 RM
2009 RM
2,854,679
2,376,096
2,339,105
2011 RM
Group 2010 RM
2009 RM
2,376,096 478,583 2,854,679
2,339,105 36,991 2,376,096
2,015,505 323,600 2,339,105
The movement in the deferred income tax account is as follows:
Beginning of financial year Tax charge to profit or loss (Note 7) End of financial year
The movement in deferred income tax assets and liabilities (prior to offsetting of balances within the same tax jurisdiction) during the financial year were as follows:
Health Management International Ltd Annual Report 2011
69
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
20. Deferred income taxes (continued)
Group Deferred income Deferred income tax liabilities tax assets Accelerated tax depreciation Provisions RM RM
Total RM
2011 Beginning of financial year Charged/(credited) to profit or loss End of financial year
3,522,096 880,006 4,402,102
(1,146,000) (401,423) (1,547,423)
2,376,096 478,583 2,854,679
2010 Beginning of financial year Charged/(credited) to profit or loss End of financial year
3,323,105 198,991 3,522,096
(984,000) (162,000) (1,146,000)
2,339,105 36,991 2,376,096
2009 Beginning of financial year Charged/(credited) to profit or loss End of financial year
2,641,805 681,300 3,323,105
(626,300) (357,700) (984,000)
2,015,505 323,600 2,339,105
Deferred income tax assets are recognised for tax losses and capital allowances carried forward to the extent that realisation of the related tax benefits through future taxable profits is probable. The Group has unrecognised tax losses of RM 78,222,000 (2010: RM 55,307,000, 2009: RM 44,267,000) and capital allowances and provisions of RM 23,881,000 (2010: RM 20,705,000, 2009: RM 22,206,000) at the balance sheet date which can be carried forward and used to offset against future taxable income.
21. Share capital No. of ordinary shares Issued share Treasury capital shares 2011 Beginning of financial year Issue of shares from rights issue - net of rights issue expenses End of financial year
Amount Issued share Treasury capital shares RM RM
481,161,239
(606,000)
75,206,249
(142,056)
96,111,047 577,272,286
(606,000)
15,358,059 90,564,308
(142,056)
2010 Beginning and end of financial year
481,161,239
(606,000)
75,206,249
(142,056)
2009 Beginning of financial year Treasury shares purchased (Note (a)) End of financial year
481,161,239 481,161,239
(606,000) (606,000)
75,206,249 75,206,249
(142,056) (142,056)
All issued ordinary shares are fully paid. There is no par value for these ordinary shares.
(a)
In 2009, the Company acquired 606,000 shares through open market purchases on the Singapore Exchange. The total amount paid to acquire the shares was RM 142,056, presented as a component within shareholders’ equity.
70
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
22. Other reserves (a)
Accumulated losses (i)
Accumulated losses of the Group include the accumulated share of profits of associated companies amounting to RM 17,781,331 (2010: RM 10,005,064).
(ii)
Movement in accumulated losses for the Company is as follows: Company 2011 RM (20,910,126) 6,158,030 (14,752,096)
Beginning of financial year Net profit End of financial year (b)
2010 RM (25,282,718) 4,372,592 (20,910,126)
Currency translation reserve Group 2011 RM Beginning of financial year Net currency translation differences of holding company and Singapore subsidiaries Non-controlling interests End of financial year
2010 RM
3,244,232
4,039,746
1,166,558 (5,505) 1,161,053 4,405,285
(801,254) 5,740 (795,514) 3,244,232
The currency translation reserve comprises foreign exchange differences arising from the translation of the financial statements of Singapore operations whose functional currencies are different from the presentation currency of the financial statements of the Group. (c)
Other reserves Other reserves represents the difference between the change in the carrying amounts of the non-controlling interest and the fair value of the consideration received, arising from transactions with non-controlling interests. Group 2011 RM Beginning of financial year Disposal of interest in a subsidiary (Note 14(c)) End of financial year
2010 RM
51,787 51,787
51,787 51,787
Other reserves are non-distributable.
Health Management International Ltd Annual Report 2011
71
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
23. Commitments (a)
Capital commitments
Capital expenditure contracted for at the balance sheet date but not recognised in the financial statements are as follows: Group
Property, plant and equipment
Company
2011 RM
2010 RM
2,277,424
5,549,330
2011 RM
2010 RM -
-
(b)
Operating lease commitments – where the Group is a lessee
The Group leases various land and office premises under non-cancellable operating lease agreements. The leases have varying terms, escalation clauses and renewal rights.
The future aggregate minimum lease payable under non-cancellable operating leases contracted for at the balance sheet date but not recognised as liabilities are as follows: Group
Not later than one year Between two and five years Later than five years Less: Accrual for operating lease expenses recognised on a straight-line basis (Note 16) Operating lease commitments not recognised as liabilities at balance sheet date
2011 RM
2010 RM
6,885,283 28,066,553 112,749,689 147,701,525
10,165,191 35,608,269 113,261,611 159,035,071
(6,633,156) 141,068,369
(6,884,519) 152,150,552
In 2009, the Group had revised a hospital leasing arrangement with an associated company, Regency Medical Centre Seri Alam Sdn. Bhd. (“RMCSA”). The revised lease was non-cancellable with remaining lease term of 27 years as at balance sheet date, with an option to renew for another 30 years.
24. Contingent liabilities Corporate guarantee The Company has issued corporate guarantees to banks for borrowings of its subsidiaries. These bank borrowings amount to RM 3,736,327 (2010: RM 4,032,596) at the balance sheet date.
25. Financial risk management Financial risk factors The Group’s financial risk management policy seeks to ensure that adequate financial resources are available for the development of the Group’s business whilst managing its market risk (including currency risk and interest rate risk), credit risk and liquidity risk. The Group’s policy is not to engage in speculative transactions.
72
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
25. Financial risk management (continued) (a)
Market risk
(i)
Currency risk Currency risk is the risk that the value of a financial instrument will fluctuate due to changes in currency exchange rates. The Company’s operational activities are carried out in Singapore dollars. The Group also has operational activities carried out in Malaysian Ringgit (“RM”) by its subsidiaries in Malaysia. Management monitors the Group’s exposure to currency risk to keep the net exposure at an acceptable level. As at balance sheet date, the Company’s subsidiaries have their financial instruments mainly denominated in their respective functional currencies, and currency risk is insignificant. The Company’s exposure to currency risk mainly arises from an RM denominated amount due from an associated company of RM 24,473,923 (2010: RM 24,473,923) as the Company’s functional currency is Singapore Dollar (“SGD”). As at 30 June 2011, if RM has strengthened/weakened by 2% (2010: 4%) against SGD with all other variables including tax rate being held constant, the Group’s profit after tax would have been RM 395,651 (2010: RM 842,347) higher/lower, as a result of currency translation gains/losses on these RM denominated balances.
(ii)
Cash flow and fair value interest rate risk Cash flow interest rate risk is the risk that future cash flows of a financial instrument will fluctuate because of changes in market interest rates. Fair value interest rate risk is the risk that the value of financial instrument will fluctuate because of changes in market interest rate. The Group’s exposure to movements in market interest rates is primarily due to its debt obligations with financial institutions. The Group manages its interest rate exposure by monitoring movements in interest rates and actively reviewing its debt obligations. As the Group has no significant interest bearing assets, the Group’s income is substantially independent of changes in market interest rates. The Group’s borrowings at variable rates comprise approximately 45% (2010: 34%) of the total borrowings. If the interest rate during the financial year was higher/lower by 0.5% (2010: 0.5%) with all other variables including tax rates being held constant, the profit after tax will be lower/higher by RM 142,762 (2010: loss after tax will be higher/lower by RM 101,799) as a result of higher/lower interest expense on variable rate borrowings.
(b)
Credit risk Credit risk refers to the risk that counterpart will default on its contractual obligations resulting in financial loss to the Group. Trade receivables are monitored on an ongoing basis via Group management reporting procedures. The Group has no significant concentration exposure to any individual customer or counterparty nor does it have any major concentration of credit risk related to any financial instruments. Concentrations of credit risk with respect to trade receivables are limited due to the Group’s large number of customers who are dispersed. Management believes that there is no anticipated additional credit risk beyond the amount of allowance for impairment made in the Group’s trade receivables. Health Management International Ltd Annual Report 2011
73
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
25. Financial risk management (continued) (b)
Credit risk (continued) As the Group and Company does not hold any collateral, the maximum exposure to credit risk for each class of financial instruments is the carrying amount of that class of financial instruments presented on the balance sheet. The Group’s and Company’s major classes of financial assets that are subject to credit risk are short-term bank deposits and trade and non-trade receivables. All non-trade receivables are from subsidiaries and associated companies and the carrying amounts are not past due. The Group’s dominant operations are in Malaysia, and the Group’s trade receivables located in Malaysia represents 84% (2010: 84%) of total trade receivables. The remainder represents revenues arising from operations in Singapore. Trade receivables arises entirely from non-related parties: corporate customers and individual customers which represents 96% (2010: 95%) and 4% (2010: 5%) respectively. It is the Group’s policy to transact with creditworthy counterparties. In addition, the granting of material credit limits to counterparties is reviewed and approved by senior management. (i)
Financial assets that are neither past due nor impaired
Trade and other receivables that are neither past due nor impaired are creditworthy debtors with good payment record with the Group. Cash and cash equivalents are placed with or entered into with reputable financial institutions.
(ii) Financial assets that are either past due or impaired
There is no other class of financial assets that is past due and/or impaired except for trade receivables (refer below for analysis) and an amount due from an associated company (refer to Note 13(b) for analysis).
The age analysis of trade receivables past due but not impaired is as follows: Group 2011 RM Past due 1 to 3 months Past due 4 to 6 months Past due over 6 months
74
Health Management International Ltd Annual Report 2011
1,940,444 276,632 440,429 2,657,505
2010 RM 5,175,309 513,710 2,317,646 8,006,665
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
25. Financial risk management (continued) (b)
Credit risk (continued) (ii) Financial assets that are either past due or impaired (continued) The carrying amount of trade receivables individually determined to be impaired and the movement of the related allowance for impairment is as follows: Group 2011 RM
2010 RM
Gross amount Less: Allowance for impairment
4,460,568 (4,460,568) -
4,650,194 (4,650,194) -
Beginning of financial year Currency translation differences Allowance made Allowance utilised Allowance written back End of financial year
4,650,194 1,277 183,389 (29,983) (344,309) 4,460,568
5,517,233 (10,344) 21,170 (877,865) 4,650,194
The impaired trade receivables arise mainly from corporate and individual customers, which are provided on a case-by-case basis. (c)
Liquidity risk The Group and the Company manage liquidity risk by maintaining sufficient cash to enable them to meet their normal operating commitments and having an adequate amount of committed credit facilities. The table below analyses the maturity profile of the financial liabilities of the Group and the Company based on contractual undiscounted cash flow. Less than 1 year RM Group 2011 Trade and other payables Borrowings
2010 Trade and other payables Borrowings
Between 2 and 5 years RM
Over 5 years RM
36,579,973 42,693,574 79,273,547
38,496,624 38,496,624
13,273,462 6,240,886 19,514,348
43,627,384 29,698,903 73,326,287
41,669,451 41,669,451
12,836,845 12,836,845
Health Management International Ltd Annual Report 2011
75
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
25. Financial risk management (continued) (c)
Liquidity risk (continued) Less than 1 year RM Company 2011 Trade and other payables Borrowings
2010 Trade and other payables Borrowings (d)
Between 2 and 5 years RM
Over 5 years RM
6,486,150 14,309,142 20,795,292
63,711 63,711
-
15,332,879 4,230,758 19,563,637
3,907,307 3,907,307
-
Capital risk The Group’s objectives when managing capital are to safeguard the Group’s ability to continue as a going concern and to maintain an optimal capital structure so as to maximise shareholder value. In order to maintain or achieve an optimal capital structure, the Group may adjust the amount of dividend payment, return capital to shareholders, issue new shares, buy back issued shares, obtain new borrowings or sell assets to reduce borrowings.
(e)
Financial instruments by category The aggregate carrying amounts of loans and receivables and financial liabilities at amortised cost are as follows:
76
2011 RM
2010 RM
Group Loans and receivables Financial liabilities at amortised cost
73,976,216 127,065,287
71,765,265 116,000,316
Company Loans and receivables Financial liabilities at amortised cost
46,366,973 25,510,778
31,910,926 22,987,425
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
26. Related party transactions (a)
In addition to the information disclosed elsewhere in the financial statements, the following transactions took place between the Group and the related parties at terms agreed between the parties: Group 2011 RM
Company 2011 RM
2010 RM
2010 RM
(i)
Rental expense to associated companies
8,321,156
8,172,440
-
-
(ii)
Interest income from associated companies
1,181,855
-
213,262
-
(iii)
Loan to associated company
5,900,565
-
5,900,565
-
(iv)
Loan to a subsidiary for subscription of redeemable convertible preference shares
-
-
6,363,220
6,363,320
6,636,780
6,636,682
-
-
86,191
28,852
86,191
28,852
(vii) Agency fee recharged to subsidiaries
-
-
86,191
28,852
(viii) Management fee income from a subsidiary
-
-
624,000
504,000
(ix)
Salaries recharged to subsidiaries
-
-
1,766,785
908,370
(x)
Service fee income from subsidiaries
-
-
20,360
4,950
(v)
(vi)
Loan from non-controlling interests to a subsidiary Agency fee paid to a company owned by a director of the Company
Rental expense to associated companies is based on lease agreements. Interest income from associated companies and service fee income from subsidiaries are determined based on commercial terms and conditions and at market prices.
(b)
Key management compensation (represents to directors only) is disclosed in Note 6 – Directors’ remuneration other than fees.
27. Segment information The Management has determined the operating segments based on the reports that are used to make strategic decisions. The Management comprises the Executive Chairman/Managing Director, the Executive Director and the Group Chief Financial Officer. The Management considers the business from both a geographic and business segment perspective. Geographically, management manages and monitors the business in the two primary geographic areas, Singapore and Malaysia. The Singapore segment derives revenue from healthcare education and training services. The Malaysia segment derives revenue from hospital and other healthcare services. Other operations included within Singapore and Malaysia relate to investment holding; but these are not included within the reportable operating segments, as they are not included in the reports provided to the Management. The results of these operations are included in the “all other segments” column. Health Management International Ltd Annual Report 2011
77
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
27. Segment information (continued) The segment information provided to the Management for the reportable segments are as follows: Malaysia Hospital and otherhealthcare services RM
Singapore Healthcare education and training RM
All other segments RM
Total RM
2011 Revenue: - external revenue Adjusted EBIT Depreciation Share of profit of associated companies Segment assets Segment assets includes: Investment in associated companies Additions to: - property, plant and equipment Segment liabilities
168,294,968
5,588,762
-
173,883,730
12,745,379 8,808,189 -
(1,316,223) 266,655 -
(1,301,696) 60,806 -
10,127,460 9,135,650 7,776,267
180,163,570
3,898,993
58,366,505
242,429,068
-
-
26,418,549
26,418,549
16,722,864
1,064,778
-
17,787,642
21,716,430
4,052,707
25,171,668
50,940,805
133,590,440
7,255,226
-
140,845,666
7,432,090 7,030,353 -
1,028,490 220,418 -
1,224,926 60,674 -
9,685,506 7,311,445 1,387,581
177,332,912
3,076,888
43,589,445
223,999,245
-
-
18,297,866
18,297,866
16,801,081
95,792
3,884
16,900,757
29,604,638
5,718,150
12,175,932
47,498,720
2010 Revenue: - external revenue Adjusted EBIT Depreciation Share of profit of associated companies Segment assets Segment assets includes: Investment in associated companies Additions to: - property, plant and equipment Segment liabilities
Revenue between segments is carried out at arm’s length. The revenue from external parties reported to the Management is measured in a manner consistent with that in the statement of comprehensive income. The Management assesses the performance of the operating segments based on a measure of earnings before interest and tax (“adjusted EBIT”). Interest income and finance expenses are not allocated to segments, as this type of activity is driven by the Group finance function, which manages the cash position and borrowings of the Group.
78
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
27. Segment information (continued) (a)
Reconciliations
(i)
Segment profits A reconciliation of adjusted EBIT to profit before tax and discontinued operations is as follows: Group 2011 RM Adjusted EBIT for reportable segments Other segments EBIT Finance expense Interest income Unallocated: Corporate expenses Share of profit of associated companies Profit before tax
(ii)
2010 RM
11,429,156 (1,301,696) (4,493,455) 1,211,489
8,460,580 1,224,926 (3,990,406) 1,011,261
(4,600,246) 7,776,267 10,021,515
(4,150,203) 1,387,581 3,943,739
Segments assets The amounts reported to the Management with respect to segment assets are measured in a manner consistent with that of the financial statements. For the purposes of monitoring segment performance and allocating resources between segments, the Management monitors the property, plant and equipment, inventories, receivables and operating cash attributable to each segment. All assets are allocated to reportable segments other than income tax recoverable. Segment assets are reconciled to total assets as follows: Group
Segment assets for reportable segments Other segment assets Unallocated: Income tax recoverable
2011 RM
2010 RM
184,062,563 58,366,505
180,409,800 43,589,445
826,757 243,255,825
223,999,245
Health Management International Ltd Annual Report 2011
79
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
27. Segment information (continued) (a)
Reconciliations (continued)
(iii)
Segment liabilities The amounts reported to the Management with respect to segment liabilities are measured in a manner consistent with that of the financial statements. These liabilities are allocated based on the operations of the segment. All liabilities are allocated to the reportable segments other than income tax liabilities, borrowings and deferred tax liabilities. Segment liabilities are reconciled to total liabilities as follows: Group 2011 RM Segment liabilities for reportable segments Other segment liabilities Unallocated: Income tax liabilities Deferred tax liabilities Borrowings
(b)
2010 RM
25,769,137 25,171,668
35,322,788 12,175,932
2,854,679 77,211,852 131,007,336
1,273,090 2,376,096 72,372,932 123,520,838
Revenue from major products and services Revenue from external customers are derived mainly from hospital and other healthcare services and healthcare education and training. Investment holding is included in “Others”. Breakdown of the revenue is as follows: Group
Hospital and other healthcare services Healthcare education and training
80
Health Management International Ltd Annual Report 2011
2011 RM
2010 RM
168,294,968 5,588,762 173,883,730
133,590,440 7,255,226 140,845,666
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
27. Segment information (continued) (c)
Geographical information The Group’s two business segments operate in two main geographical areas: (i) Singapore – the Company is headquartered and has operations in Singapore. The operations in this area are healthcare education and training (ii) Malaysia – the operations in this area are hospital and other healthcare services Total sales
Singapore Malaysia
2011 RM
2010 RM
5,593,335 168,290,395 173,883,730
7,275,365 133,570,301 140,845,666
Total non-current assets 2010 2011 RM RM Singapore Malaysia
32,682,177 133,195,868 165,878,045
19,261,432 124,208,960 143,470,392
28. New or revised accounting standards and interpretations Below are the mandatory standards, amendments and interpretations to existing standards that have been published, and are relevant for the Group’s accounting periods beginning on or after 1 July 2011 or later periods and which the Group has not early adopted: • • •
Amendments to FRS 24 – Related party disclosures (effective for annual periods beginning on or after 1 January 2011) Amendments to FRS 32 Financial instruments: Presentation – classification of rights issues (effective for annual periods beginning on or after 1 February 2010) Amendments to INT FRS 114 – Prepayments of a minimum funding requirement (effective for annual periods commencing on or after 1 January 2011)
The management anticipates that the adoption of the above amendments to FRSs and INT FRSs in the future periods will not have a material impact on the financial statements of the Group and of the Company in the period of their initial adoption.
Health Management International Ltd Annual Report 2011
81
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
29. Listing of companies in the Group
Principal activities
Country of business/ incorporation
HMI Consulting Pte. Ltd. (a)
Consulting services
Singapore
100
100
HMI Institute of Health Sciences Pte. Ltd. (a)
Healthcare education and training
Singapore
100
100
HMI Health Management (M) Sdn. Bhd.(b)
Hospital management services
Malaysia
100
100
Mahkota Medical Centre Sdn. Bhd. (“MMCSB”) (b) (e)
Hospital and healthcare services, higher education and training courses for nurses, paramedical personnel and provision of project management and hospital consultancy services
Malaysia
48.95
48.95
Mahkota Medical Group Sdn. Bhd. (“MMGSB”) (b)(f)
Investment holding
Malaysia
48.95
48.95
Regency Specialist Hospital Sdn. Bhd. (“RSH”) (b)(g)
Hospital and healthcare services
Malaysia
29
29
Held by MMCSB Mahkota Realty Sdn. Bhd. (b)
Property investment
Malaysia
75
75
Mahkota Land Sdn Bhd. (b)
Property investment
Malaysia
75
75
PT. Mahkota Healthcare Services (b)
Dormant
Indonesia
95
95
Held by MMGSB Regency Specialist Hospital Sdn. Bhd. (“RSH”) (b)(g)
Hospital and healthcare services
Malaysia
65
65
Held by RSH Regency Specialist Hospital (S) Pte Ltd(a)
Singapore patient centres
Singapore
100
100
Associated companies held by the Company Nathill Track (M) Sdn. Bhd.(c)
Dormant
Malaysia
30
30
Mahkota Commercial Sdn. Bhd. (“MCSB”) (d)
Holding company of investment properties
Malaysia
48.95
48.95
Regency Healthcare Sdn. Bhd. (“RHSB”) (d)
Investment holding
Malaysia
35
35
Name of companies
Equity holding* 2010 2011 % %
Subsidiaries held by the Company
82
Health Management International Ltd Annual Report 2011
NOTES TO THE FINANCIAL STATEMENTS For the financial year ended 30 June 2011
29. Listing of companies in the Group (continued)
Name of companies
Country of business/ incorporation
Principal activities
Equity holding* 2010 2011 % %
Associated companies held by the Company (continued) Regency Medical Centre (Seri Alam) Sdn. Bhd. (d)
Development and lease of a hospital building
Malaysia
29
29
Panodahlia Sdn. Bhd. (b) (h)
Healthcare education and training
Malaysia
43.35
43.35
Held by MCSB Mahkota Realty Sdn. Bhd. (b)
Property investment
Malaysia
25
25
Raspuri Sdn. Bhd. (d)
Property investment
Malaysia
100
100
Mahkota Land Sdn. Bhd. (b)
Property investment
Malaysia
25
25
Pancastle Sdn. Bhd. (d)
Property investment
Malaysia
100
100
Regency Healthcare Sdn. Bhd. (“RHSB”) (d)
Investment holding
Malaysia
65
65
Regency Medical Centre (Seri Alam) Sdn. Bhd. (d)
Development and lease of a hospital building
Malaysia
65
65
Held by RHSB Regency Medical Centre (Sungai Petani) Sdn. Bhd. (d)
Dormant
Malaysia
85
85
(a) (b) (c) (d) (e)
(f)
(g) (h) *
Audited by PricewaterhouseCoopers LLP, Singapore Audited by PricewaterhouseCoopers, Malaysia Audited by BKR Peter Chong, Malaysia Audited by Horwath, Malaysia Although the Company holds 48.95% equity interest in MMCSB, pursuant to an agreement signed by the shareholders of MMCSB on 21 September 2002, the Company exercises control over the Board of Directors and accordingly considers MMCSB as a subsidiary. Although the Company holds 48.95% equity interest in MMGSB, pursuant to an agreement signed by the shareholders of MMGSB on 31 January 2009, the Company exercises control over the Board of Directors and accordingly considers MMGSB as a subsidiary. The Company controls directly and indirectly interest of 29% and 48.95% respectively and accordingly considers RSH a subsidiary. The Company operates the Mahkota Institute of Health Sciences and Nursing. Equity holding refers to the equity holding by the respective entity referred above.
30. Authorisation of financial statements
These financial statements were authorised for issue in accordance with a resolution of the Board of Directors of Health Management International Ltd on 27 September 2011.
Health Management International Ltd Annual Report 2011
83
SUPPLEMENTARY INFORMATION (A)
Leasehold land and leasehold buildings of the Group as set out in Note 15 to the financial statements held by subsidaries include the following:Group's effective interest in the Gross Floor property Location Description Area (Sq ft) Tenure Held by Mahkota Medical Centre Sdn Bhd ("MMCSB") No. 3 Mahkota Melaka, Jalan Merdeka, 75000 Melaka (a)
Basement of Mahkota Medical Centre for facilities support and road infrastructure
43,605
99 years commencing from 19 July 2002
48.95%
107,803
99 years commencing from 19 July 2002
48.95%
Held by Mahkota Realty Sdn Bhd (subsidiary of MMCSB) No. 3 Mahkota Melaka, Jalan Merdeka, 75000 Melaka (a)
Ground floor, 1st, 2nd, 3rd,5th, and 6th floor of Mahkota Medical Centre, for hospital use
Held by Mahkota Land Sdn Bhd (subsidiary of MMCSB)
84
Lot 1349, Kawasan Bandar XLII, Melaka Tengah, Melaka (a)
Car park
46,812
95 years commencing from 16 November 2007
48.95%
Lot 1344, Kawasan Bandar XLII, Melaka Tengah, Melaka (a)
Car park
115,884
99 years commencing from 19 July 2002
48.95%
Health Management International Ltd Annual Report 2011
SUPPLEMENTARY INFORMATION (B)
Land and buildings of the Group held by associated companies include the following:-
Location
Description
Gross Floor Area (Sq ft)
Tenure
Group's effective interest in the property
Held by Mahkota Commercial Sdn Bhd ("MCSB") No. 3 Mahkota Melaka, Jalan Merdeka, 75000 Melaka (a) (d)
Ground floor, 1st and 2nd floor of Mahkota Medical Centre, for commercial use Hospital services, medical suites, administration office and nursing college at 4th and 9th floor of Mahkota Medical Centre
53,689
99 years commencing from 19 July 2002
48.95%
43,400
99 years commencing from 19 July 2002
48.95%
8,525
99 years commencing from 19 July 2002
48.95%
Freehold
56.79%
Freehold
60.82%
Held by Raspuri Sdn Bhd (subsidiary of MCSB) No. 3 Mahkota Melaka, Jalan Merdeka, 75000 Melaka (a) (d)
Patient wards at 7th and 8th floor of Mahkota Medical Centre
Held by Pancastle Sdn Bhd (subsidiary of MCSB) No. 3 Mahkota Melaka, Jalan Merdeka, 75000 Melaka (a) (d)
Medical Suites at 2nd and 3rd floor of Mahkota Medical Centre
Held by Regency Medical Centre (Sungai Petani) Sdn Bhd (subsidiary of MCSB) Lot 151, Seksyen 55, Pekan Sungai Petani, Daerah Kuala Muda, Negeri Kedah (b) (d)
Land to be used for future expansion
408,930
Held by Regency Medical Centre (Seri Alam) Sdn Bhd (subsidiary of MCSB) HS(D) 239043, PTD 111517, Mukim Plentong, Daerah Johor Bahru, Negeri Johor (c) (d) (a) (b) (c) (d)
Hospital building and land
413,613
Valuation performed by Henry Butcher Malaysia (Malacca) Sdn. Bhd. Valuation performed by CH Williams Talhar & Wong Sdn Bhd Valuation performed by KGV International Property Consultants (Johor) Sdn Bhd Accounting policy for the investment property held by the associated company is disclosed in Note 2.7 to the financial statements.
Health Management International Ltd Annual Report 2011
85
STATISTICS OF SHAREHOLDINGS As at 20 September 2011
Share Capital Issued and fully paid-up shares Class of shares Voting rights Treasury shares
: : : :
577,272,286 Ordinary shares One vote per share 606,000 (0.10%)
Distribution of Shareholdings Size of Shareholdings 1 - 999 1,000 - 10,000 10,001 - 1,000,000 1,000,001 and above Total :
No. of Shareholders
%
No. of Shares
%
43 3,333 1,895 57 5,328
0.81 62.55 35.57 1.07 100.00
10,407 9,711,647 146,903,799 420,040,433 576,666,286
0.00 1.68 25.48 72.84 100.00
Substantial Shareholders
Name of shareholders Nam See Investment (Pte) Ltd Dr Gan See Khem Dr Chin Koy Nam Kabouter Management, LLC
Registered in the name of the substantial shareholders 74,563,673 600,600 1,524,000 -
Shareholdings in which substantial shareholders are deemed to have an interest 144,320,000 227,733,195 226,809,795 29,233,200
Based on the information available to the Company as at 20 September 2011, approximately 50.95% of the issued shares of the Company is held by the public and therefore, Rule 723 of the SGX-ST's Listing Manual is complied with.
86
Health Management International Ltd Annual Report 2011
STATISTICS OF SHAREHOLDINGS As at 20 September 2011
Twenty Largest Shareholders No. Name 1 Nam See Investment Pte Ltd 2 Mayban Nominees (S) Pte Ltd 3 KB Nominees Pte Ltd 4 Raffles Nominees (Pte) Ltd 5 SBS Nominees Pte Ltd 6 Cheah Way Mun 7 Singapore Nominees Pte Ltd 8 Sing Investment & Finance Nominees Pte Ltd 9 Citibank Nominees Singapore Pte Ltd 10 OCBC Securities Private Ltd 11 Chuah Ah Nooi 12 Gan Cheong or @ Ngan Chong Hoo 13 Kaka Singh s/o Dalip Singh 14 Amfraser Securities Pte. Ltd. 15 United Overseas Bank Nominees Pte Ltd 16 DBS Nominees Pte Ltd 17 HSBC (Singapore) Nominees Pte Ltd 18 DBS Vickers Securities (S) Pte Ltd 19 Ng Chee Fatt 20 Ching Kwok Choy Total :
No. of Shares
%
74,563,673 50,000,000 35,350,000 29,334,000 27,990,200 22,162,119 18,970,000 16,000,000 13,363,984 10,125,052 7,905,781 7,227,000 7,095,000 6,710,000 5,315,671 5,138,936 5,075,600 3,925,000 3,600,000 3,320,000 353,172,016
12.93 8.67 6.13 5.09 4.85 3.84 3.29 2.77 2.32 1.76 1.37 1.25 1.23 1.16 0.92 0.89 0.88 0.68 0.62 0.58 61.23
Health Management International Ltd Annual Report 2011
87
Notice OF Annual General Meeting NOTICE IS HEREBY GIVEN that the Thirteenth Annual General Meeting of HEALTH MANAGEMENT INTERNATIONAL LTD will be held at: Venue
:
i-Connect Room, 168 Jalan Bukit Merah, Ground Floor, Surbana One, Singapore 150168
Date/Time
:
Monday, 24 October 2011 at 4:00 p.m.
to transact the following business:
AS ORDINARY BUSINESS 1.
To receive, consider and adopt the Directors’ Report and Financial Statements for the financial year ended 30 June 2011 together with the Auditors’ Report thereon. [Resolution 1]
2.
To re-elect Dr. Chin Koy Nam, retiring by rotation under Article 95 of the Company’s Articles of Association and who, being eligible, offers himself for re-election. [Resolution 2]
3.
To re-elect Professor Tan Chin Tiong, retiring by rotation under Article 95 of the Company’s Articles of Association and who, being eligible, offers himself for re-election.
Professor Tan Chin Tiong, if re-elected, will remain as the Chairman of the Nominating Committee and Remuneration Committee and a member of the Audit Committee. Professor Tan is considered as an Independent Non-Executive Director. [Resolution 3]
4.
To approve the payment of Directors’ Fees of S$164,250 for the financial year ended 30 June 2011 (2010: S$156,200). [Resolution 4]
5.
To re-appoint Messrs PricewaterhouseCoopers LLP as the Auditors of the Company and to authorise the Directors to fix their remuneration. [Resolution 5]
AS SPECIAL BUSINESS To consider and if thought fit, to pass the following resolutions as Ordinary Resolutions, with or without any modifications: 6.
Mandate to issue shares in the capital of the Company
That authority be and is hereby given to the Directors to:
88
[Resolution 6]
(a)
(i)
issue shares in the Company (“shares”) whether by way of rights, bonus or otherwise; and/or
(ii)
make or grant offers, agreements or options (collectively, the “instruments”) that might or would require shares to be issued, including but not limited to the creation and issue of (as well as adjustments to) warrants, debentures or other instruments convertible into shares,
at any time and upon such terms and conditions and for such purposes and to such persons as the Directors may in their absolute discretion deem fit; and
(b)
(notwithstanding the authority conferred by this Resolution may have ceased to be in force) issue shares in pursuance of any instrument made or granted by the Directors while this Resolution was in force,
Health Management International Ltd Annual Report 2011
Notice OF Annual General Meeting provided that: (1)
the aggregate number of shares to be issued pursuant to this Resolution (including shares to be issued in pursuance of instruments made or granted pursuant to this Resolution) shall not exceed 50 per cent of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in paragraph (2) below), of which the aggregate number of shares and instruments to be issued other than on a pro rata basis to shareholders of the Company shall not exceed 20 per cent of the total number of issued shares in the capital of the Company excluding treasury shares (as calculated in accordance with paragraph (2) below);
(2)
(subject to such manner of calculation as may be prescribed by the SGX-ST) for the purpose of determining the aggregate number of shares that may be issued under paragraph (1) above, the percentage of issued shares shall be based on the total number of issued shares in the capital of the Company excluding treasury shares at the time this Resolution is passed, after adjusting for: (i)
new shares arising from the conversion or exercise of any convertible securities;
(ii)
new shares arising from exercise of share options or vesting of share awards which are outstanding or subsisting at the time this Resolution is passed; and
(iii) any subsequent bonus issue, consolidation or subdivision of shares; c)
in exercising the authority conferred by this Resolution, the Company shall comply with the provisions of the Listing Manual for the time being in force (unless such compliance has been waived by the SGX-ST) and the Articles of Association for the time being of the Company; and
d)
unless revoked or varied by the Company in General Meeting, the authority conferred by this Resolution shall continue in force (i) until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier or (ii) in the case of shares to be issued in pursuance of the instruments, made or granted to this Resolution, until the issuance of such shares in accordance with the terms of the instruments. [See Explanatory Note (i)] 7.
Authority to issue shares under the HMI Employee Share Option Scheme
[Resolution 7]
That pursuant to Section 161 of the Companies Act, Cap. 50, the Directors of the Company be authorised and empowered to offer and grant options under the HMI Employee Share Option Scheme (the “Scheme”) and to issue from time to time such number of shares in the capital of the Company as may be required to be issued pursuant to the exercise of options granted by the Company under the Scheme, whether granted during the subsistence of this authority or otherwise, provided always that the aggregate number of additional ordinary shares to be allotted and issued pursuant to the Scheme shall not exceed 15 per cent of the total number of issued shares (excluding treasury shares, if any) in the capital of the Company from time to time and that such authority shall, unless revoked or varied by the Company in a general meeting, continue in force until the conclusion of the next Annual General Meeting of the Company or the date by which the next Annual General Meeting of the Company is required by law to be held, whichever is earlier. [See Explanatory Note (ii)]
8.
To transact any other business as may properly be transacted at an AGM.
By Order of the BOARD Ms Noraini Latiff Company Secretary 7 October 2011 Singapore
Health Management International Ltd Annual Report 2011
89
Notice OF Annual General Meeting EXPLANATORY NOTES (i)
The Resolution 6 in item 6 above empowers the Directors to issue shares in the capital of the Company and to make or grant instruments (such as warrants or debentures) convertible into shares, and to issue shares in pursuance of such instruments, up to a number not exceeding 50% the issued shares (excluding treasury shares) in the capital of the Company. For the purpose of determining the aggregate number of shares that may be issued, the percentage of issued shares shall be based on the total number of issued shares (excluding treasury shares) in the capital of the Company at the time that Resolution 6 is passed, after adjusting for (a) new shares arising from the conversion or exercise of any convertible securities or share options or vesting of share awards which are outstanding or subsisting at the time that Resolution 6 is passed, and (b) any subsequent bonus issue or consolidation or subdivision of shares.
(ii)
The Resolution 7 above, if passed, will empower the Directors of the Company, from the date of this Meeting until the next Annual General Meeting of the Company, or the date by which the next Annual General meeting of the Company is required by law to be held or such authority is varied or revoked by the Company in general meeting, whichever is the earlier, to issue shares in the Company pursuant to the exercise of options granted or to be granted under the Scheme up to a number not exceeding in total (for the entire duration of the Scheme) 15 per cent of the total number of issued shares (excluding treasury shares, if any) in the capital of the Company from time to time.
NOTES 1.
A member of the Company entitled to attend and vote at the Thirteenth Annual General Meeting of the Company is entitled to appoint one or two proxies to attend and vote in his stead.
2.
Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholdings (expressed as a percentage of the whole) to be represented by each proxy.
3.
A proxy need not be a member of the Company.
4.
If the appointer is a corporation, the instrument appointing the proxy must be executed under seal or the hand of its duly authorised officer or attorney.
5.
The instrument appointing a proxy must be deposited at the Registered Office of the Company at 167 Jalan Bukit Merah, #05-10 Connection One, Singapore 150167 not less than forty-eight (48) hours before the time appointed for holding the Meeting.
90
Health Management International Ltd Annual Report 2011
HEALTH MANAGEMENT INTERNATIONAL LTD
IMPORTANT:
(Company Registration No : 199805241E) (Incorporated in the Republic of Singapore)
1.
PROXY FORM
For investors who have used their CPF monies to buy shares in Health Management International Ltd, this report is forwarded to them at the request of their CPF Approved Nominees and is sent solely FOR INFORMATION ONLY.
2.
This Proxy Form is not valid for use by CPF investors and shall be ineffective for all intents and purposes if used or purported to be used by them.
3.
CPF investors who wish to vote should contact their CPF Approved Nominees.
(Please see notes overleaf before completing this Form)
*I/We of being *member/members of HEALTH MANAGEMENT INTERNATIONAL LTD (the “Company”), hereby appoint Name
Address
NRIC/Passport Number
Proportion of Shareholdings (%)
And/or (delete as appropriate)
as my/our proxy to vote for me/us on my/our behalf and, if necessary, to demand a poll, at the Thirteenth Annual General Meeting of the Company to be held at i-Connect Room, 168 Jalan Bukit Merah, Ground Floor, Surbana One, Singapore 150168 on 24 October 2011, at 4.00 p.m. and at any adjournment thereof. (Please indicate with an “X” in the spaces provided whether you wish your vote(s) to be cast for or against the Resolutions as set out in the Notice of Thirteenth Annual General Meeting. In the absence of specific directions, your proxy/proxies will vote or abstain from voting as he/she/they may think fit, as he/she/they will on any other matter arising at the Thirteenth Annual General Meeting.)
RESOLUTIONS
1
2 3 4 5
6 7
Ordinary Resolutions: Adoption of Financial Statements for the financial year ended 30 June 2011 and the Reports of the Directors and Auditors and the Statement by Directors thereon. Re-election of Dr. Chin Koy Nam retiring pursuant to Article 95 of the Association of the Company. Re-election of Professor Tan Chin Tiong retiring pursuant to Article 95 of the Articles of Association of the Company. Approval of Directors’ Fees of S$164,250 for the financial year ended 30 June 2011. To re-appoint Messrs PricewaterhouseCoopers LLP as the Auditors of the Company and to authorise the Directors to fix their remuneration. Authority to Directors to allot and issue new shares. Authority to issue shares up to 15% of issued ordinary shares, excluding treasury shares under the HMI Employee Share Option Scheme.
TO BE USED ON A SHOW OF HANDS
For*
Against*
TO BE USED IN THE EVENT OF A POLL Number of Votes Number of Votes For** Against**
Dated this ________ day of _______________ 2011 Total number of Shares Held
________________________________ Signature(s) of Member(s) or Common Seal of Corporation *Delete accordingly
FOLD HERE FOR SEALING
PLEASE AFFIX 26 CENTS POSTAGE STAMP HERE
The Company Secretary HEALTH MANAGEMENT INTERNATIONAL LTD 167 Jalan Bukit Merah, #05-10 Connection One Singapore 150167
FOLD HERE
Notes: 1. Please insert the total number of shares held by you. If you have shares entered against your name in the Depository Register (as defined in Section 130A of the Companies Act, Cap. 50), you should insert that number of shares. If you have shares registered in your name in the Register of members, you should insert that number of shares. If you have shares entered against your name in the Depository Register and shares registered in your name in the Register of Members, you should insert the aggregate number of shares entered against your name in the Depository Register and registered in your name in the Register of Members. If no number is inserted, the instrument appointing a proxy or proxies shall be deemed to relate to all the shares held by you. 2. A member of the Company entitled to attend and vote at the Thirteenth Annual General Meeting is entitled to appoint one or two proxies to attend and vote in his stead. A proxy need not be a member of the Company. 3. Where a member appoints two proxies, the appointments shall be invalid unless he specifies the proportion of his shareholding (expressed as a percentage of the whole) to be represented by each proxy. However, if no such proportion is specified, the first named proxy may be treated as representing 100 per cent of the shareholding and any second named proxy as an alternate to the first named. 4. The instrument appointing a proxy or proxies must be deposited at the Registered Office of the Company at 167 Jalan Bukit Merah, #05-10 Connection One, Singapore 150167 not less than forty-eight (48) hours before the time fixed for holding the Thirteenth Annual General Meeting. 5. This instrument appointing a proxy or proxies must be under the hand of the appointor or his attorney duly authorized in writing. Where the instrument appointing a proxy or proxies is executed by a corporation, it must be executed either under its seal or under the hand of any officer or attorney duly authorized. 6. A corporation which is a member may also authorize by resolution of its directors or other governing body such person as it thinks fit to act as its representative at the Thirteenth Annual General Meeting in accordance with Section 179 of the Companies Act, Chapter 50 of Singapore. 7. The Company shall be entitled to reject this instrument appointing a proxy or proxies if it is incomplete, improperly completed or illegible or where the true intentions of the appointor are not ascertainable from the instructions of the appointor specified in the instrument appointing a proxy or proxies. 8. In the case of members whose Shares are entered against their names in the Depository Register, the Company may reject any instrument appointing a proxy or proxies lodged if such members are not shown to have Shares entered against their names in the Depository Register as at forty-eight (48) hours before the time fixed for holding the Thirteenth Annual General Meeting as certified by the CDP to the Company.
An Engage Media production
Health Management International Ltd (Company Reg No. 199805241E) 167 Jalan Bukit Merah Connection One #05-10 Singapore 150167 Tel: +65 6253 3818 Fax: +65 6253 8259 www.hmi.com.sg
