African Medical Investments PLC Final Results -9-
August 31 2012 - 2:01AM
UK Regulatory
Dar es Motor Discounted cash Internal - 35 (h)
Salaam vehicles flow valuation assessment
Nairobi Assets under Fair value Internal - 383 (i)
construction assessment
Aviation Aircraft Fair value Independent - 843 (j)
expert
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Total impairment 5,227 3,068
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(a) In February 2012, the Harare hospital was illegally occupied
by a group led by former CEO, Dr Vivek Solanki. This has resulted
in loss of revenue from that date. The illegal occupation is being
challenged by the Group through the Zimbabwe judicial system and
based on the evidence the Board is confident that the Group's
occupancy will be restored. The assets associated with AMI Hospital
Harare have been compared to a discounted cash flow valuation
reflecting the impact of the expected duration of the occupation
and costs associated with restoring the facility to its former
condition and trading position. This review determined that an
impairment of US$ 3.6 m is required.
(b) During the year under review certain assets were identified
that were held to be in use on the current fixed asset register at
Maputo Hospital, which did not function as intended and were beyond
repair.
(c) During the year under review certain assets were identified
that were held to be in use on the current fixed asset register at
Dar es Salaam Hospital, which did not function as intended and were
beyond repair.
(d) The Board determined that the medical evacuation business,
AMI Aviation Services (Pty) Ltd, was no longer core to the Group's
strategy and concluded that it should be disposed. Subsequent to
the year end a sale was concluded with a third party independent
buyer for disposal of the shares in and intercompany loan to AMI
Aviation Services (Pty) Ltd for a total amount of $1,300,000. The
net assets of AMI Aviation Services (Pty) Ltd at 29 February 2012
were written down to reflect the impact of this sale.
(e) Monies receivable from Autoband Investments (Proprietary)
Limited, Airport Clinic Johannesburg International (Proprietary)
Limited and Airport Clinic and Travel Vaccination Centre Cape Town
International Airport (Proprietary) Limited are deemed
irrecoverable and have previously been written off in full. During
the current year, certain assets were retrieved from the
Johannesburg clinic and were treated as a repayment of the loan.
This resulted in the reversal of the impairment by the value of the
repayment.
(f) Based on the findings of the forensic investigation and the
analysis of independent experts, payments to Dansk Hospital
Supplies and Medical Equipment Limited, Higgins Technical Solutions
Limited, Marlene Interiors CC and LM Kitchens and Paint Contractors
CC appear to be significantly inflated. Using a sample of invoices
and comparable costs from original equipment manufacturers the
extent of overpayment has been estimated and raised as a provision
for impairment. In certain instances, goods and services from these
suppliers have been invoiced to the Group but for the benefit of
employees who may be complicit in the alleged financial
irregularities. An estimate of such goods and services has also
been raised as a provision for impairment. Equipment not fit for
purpose or identified as to be replaced has also been fully
provided.
(g) During the year ended 28 February 2011, the directors
decided to allocate all fair value impairments arising in 2010,
related to Harare assets, to the loan account of Autoband, the
previous management company responsible for the construction and
management of the Harare hospital. The allocation represents the
costs incurred by the group through Autoband's poor managerial
decision making. As a result it is the opinion of the directors
that these costs should be borne by Autoband. The implication of
this decision has resulted in the reversal of the prior year
impairment provision against these assets and a subsequent
reallocation of these costs from the asset account of Harare to the
loan receivable from Autoband. Refer to (e) above for further
details on write offs pertaining to this loan account.
(h) During the year ended 28 February 2011, continuously poor
trading conditions at the Dar es Salaam facility lead to the
internal impairment assessment of the hospital assets. A discounted
cash flow valuation was undertaken at year end which identified the
assets as being overvalued by $906,000. The impairment has been
allocated pro rata across the assets based on net book value at
year end.
(i) In August 2010, following a review of operations, the Board
decided to focus on the core business of hospitals. Accordingly the
Nairobi clinic project was abandoned and the remaining carrying
value of the project is fully impaired. Certain medical equipment
was transferred to other sites within the group prior to the
impairment charge.
(j) As of 28 February 2011, an independent valuation was done on
the net book value of the Falcon 20 aircraft. The result of the
valuation indicated that the aircraft was significantly over
valued. As a result, an impairment cost has been recognised in that
year to realign the carrying value of the plane with the valuation
obtained.
7. Segment reporting
a) Operating segments
At 29 February 2012, the Group was organised into two main
business segments - Hospitals and Clinics, and Emergency and
Evacuation Services.
The segment results for the year ended 29 February 2012 are as
follows:
Hospitals Emergency Unallocated
and Clinics and Evacuation
Services Total
$'000 $'000 $'000 $'000
------------------ -------------------- ----------------- -------------
REVENUE
External sales 10,944 1,147 - 12,091
Total revenue 10,944 1,147 - 12,091
RESULTS
Segment results (12,523) (443) (1,512) (14,479)
Net finance costs (541)
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Loss before income tax (15,021)
Income tax -
-------------
Loss for the year (15,021)
=============
Segment items included in the income statement for the year
ended 29 February 2012 are as follows:
Hospitals Emergency Unallocated
and Clinics and Evacuation
Services Total
$'000 $'000 $'000 $'000
------------------ -------------------- ------------------ -------------
Depreciation 1,310 315 - 1,625
Loss from fraud 4 23 447 474
Impairment of current loans
receivable - - (131) (131)
Impairment of property,
plant and equipment 4,302 1,056 - 5,358
------------------ -------------------- ------------------ -------------
Inter segment transactions are entered into under the normal
commercial terms and conditions that would be available to
unrelated third parties.
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