france hotel laxou

Transcription

france hotel laxou

</0/</8-/
.9-?7/8>
IMPORTANT NOTICE
This document is a free translation of Medica’s Document de base dated December 9, 2009. This
free translation (the “Translation”) is provided for your convenience only and may not be
reproduced, redistributed or passed on, directly or indirectly, to any other person or published in
whole or in part for any purpose. This Translation has not been prepared for use in connection with
any offering of securities and under no circumstances shall the Translation constitute an offer or
invitation to sell or the solicitation of an offer to buy any securities. It does not contain all of the
information that an offering document would contain and does not purport to contain all information
that may be required to evaluate Medica and/or its financial position and in particular it is subject to
revision, amendment and updating. No representation, express or implied, is given by or on behalf
of Medica as to the accuracy or completeness of the information contained in the Translation.
None of Medica,any of its advisors or representatives or any of their respective officers, directors,
employees or affiliates, or any person controlling any of them assume any liability or responsibility
for any loss however arising, directly or indirectly, from any use of the Translation and any such
liability is hereby expressly disclaimed. In particular none of Medica, any of its advisors or
representatives or any of their respective officers, directors, employees or affiliates, or any person
controlling any of them assume any liability or responsibility whatsoever in respect of any
difference between the Translation and the final form of Medica’s Document de base or any final
international offering circular.
This Translation does not constitute or form part of any offer to sell or the solicitation of an offer to
purchase securities, nor shall it or any part of it form the basis of, or be relied on in connection
with, any contract or commitment whatsoever. Persons into whose possession this Translation
may come are required by Medica to inform themselves about and to observe any restrictions as
to the distribution of this Translation.
You shall not treat the translation as advice relating to legal, taxation or investment matters, and
you must make your own assessments concerning these and other consequences of the various
investments, including the merits of investing and the risks.
THIS DOCUMENT IS A FREE TRANSLATION OF THE FRENCH LANGUAGE “DOCUMENT DE BASE”, DATED THE
DATE OF THIS DOCUMENT, PREPARED BY MEDICA. IN THE EVENT OF ANY AMBIGUITY OR CONFLICT BETWEEN
CORRESPONDING STATEMENTS OR OTHER ITEMS CONTAINED IN THESE DOCUMENTS, THE RELEVANT
STATEMENTS OR ITEMS OF THE FRENCH LANGUAGE “DOCUMENT DE BASE” SHALL PREVAIL.
Société Anonyme with share capital of €11,348,478
Registered office: 39 rue du Gouverneur Général Félix Eboué, 92130 Issy-les-Moulineaux
421 896 408 RCS Nanterre
REFERENCE DOCUMENT
Pursuant to Article L.212-23 of its General Regulation, the Autorité des marchés financiers (“AMF”)
granted registration number I.09-092 to this reference document on 9 December 2009. This
document may only be used in connection with a financial transaction if completed by a note
d’opération (securities note) which has been granted a visa by the AMF.
This reference document has been prepared by the issuer and the signatories hereto are liable for
its contents. In accordance with Article L.621-8-1-I of the French Monetary and Financial Code
(Code monétaire et Financier), the registration of this reference document was completed
following the review of the AMF as to “whether the document is complete and understandable, and
whether the information that it contains is coherent”. It does not imply verification by the AMF of
the financial and accounting items including herein.
Copies of the reference document are available at no cost from Medica, 39 rue du Gouverneur
Général Félix Eboué, 92130 Issy-les-Moulineaux, as well as on the Medica website (www.medicafrance.fr) and on the website of the Autorité des marchés financiers (http://www.amf-france.org).
NOTE
This reference document concerning Medica (the “Company”) and the Medica group together (the
“Medica group”, or the “Group”) presents the Company’s consolidated financial information for
the past three financial years. To take into account the change in the corporate structure of the
Medica group following its acquisition in 2006, as stated in section 15.6 “Company history and
reorganisation” and the correction of an accounting error, as stated in Chapter 20 “Management’s
discussion and analysis of financial condition and results of operations” below, this document
contains:
the condensed interim consolidated financial statements of the Company for the nine months
ended 30 September 2009;
the corrected consolidated financial statements of the Company for the 12 months ended 31
December 2008;
the corrected consolidated financial statements of the Company for the 20 months ended 31
December 2007;
restated consolidated financial information for the 12 months ended 31 December 2007;
pro forma financial information for the Company for the 12 months ended 31 December 2006;
the consolidated financial statements of Medica SA (now called Société de Financement de
Medica) for the year ended 31 December 2006.
Important note
During the preparation of its condensed interim consolidated financial statements for the ninemonth period ended 30 September 2009, the Medica group identified an error in the calculation of
interest on the syndicated loan arranged in August 2006 in the context of applying the amortised
cost method under IAS 39. This error affects the consolidated financial statements prepared in
respect of the 12-month financial year ended 31 December 2008 and the 20-month financial year
ended 31 December 2007 approved by the shareholders’ general meeting and filed with the clerk
of the Nanterre Commercial Court. These financial statements are not included in this document.
Corrected financial statements for the 2007 (20-month) and 2008 financial years were approved by
the Company’s board of directors on 3 December 2009 and are the subject of a Statutory Auditors’
report in accordance with the NEP 90-10 standard.
A reconciliation of the key indicators for the consolidated financial statements as published for the
(20-month) financial year ended 31 December 2007 and the financial year ended 31 December
2008 to the same key indicators as corrected is shown under additional information in Note 2 to
the condensed interim consolidated financial statements for the nine-month period ended 30
September 2009.
The condensed interim consolidated financial statements for the nine-month period ended 30
September 2009 include for comparison purposes figures for the nine-month period from 1
January to 30 September 2008, as well as the condensed financial statements for the financial
year ended 31 December 2008. In accordance with IAS 8 “Accounting policies, changes in
accounting estimates and errors”, the condensed financial statements for the financial year ended
31 December 2008 presented for comparison purposes have been corrected as if the error had
been corrected at the beginning of the first period presented.
This reference document includes forward-looking statements and information on the objectives of
the Medica group, in particular in Chapters 12 “Strategy” and 13 “Trend information” of this
ii
document. These statements are sometimes identified by the use of the future or conditional
tense, as well as terms such as “estimate”, “believe”, “have the objective of”, “expect”, “result in”,
“should”, “hope” and “may”. This information is based on data, assumptions and estimates
considered reasonable by the Company. The forward-looking statements and objectives contained
in this reference document may be affected by known and unknown risks, uncertainties associated
with the regulatory, economic, financial and competitive environment, and other factors that may
significantly alter the future results, performance and accomplishments planned or expected by the
Company. These factors may particularly include those described in Chapter 5 “Risk factors” of
this reference document.
Investors are invited to read the risk factors included in Chapter 5 “Risk factors” of this reference
document carefully before making a decision on whether to invest in the Company. The
materialisation of one or more of these risks may adversely affect the business, financial condition,
results of operation and objectives of the Company. Additional risks, not currently known or
considered immaterial by the Company, may have the same unfavourable effect and investors
may lose all or part of their investment.
This reference document also contains information related to the market and market segments in
which the Company and its competitors are active, as well as its competitive position, notably in
Chapter 7 “Presentation of the market in France” and Chapter 9 “Presentation of the market in
Italy”. This information is primarily derived from studies conducted by external organisations.
However, publicly available information that the Company considers to be accurate, has not been
verified by an independent expert and the Company cannot guarantee that a third party employing
different methods to collect, analyse or calculate market information would obtain the same
results. The Company, its indirect and direct shareholders, and investment service providers have
not given any undertakings concerning and do not guarantee the accuracy of this information.
iii
TABLE OF CONTENTS
Page
1
RESPONSIBLE PERSON ...................................................................................................... 1
1.1
1.2
Person responsible for the reference document ............................................................... 1
Statement by the person responsible for the reference document ................................. 1
2
PERSONS RESPONSIBLE FOR THE AUDIT OF THE FINANCIAL STATEMENTS ........... 3
2.1
2.2
Statutory Auditors ................................................................................................................. 3
Alternate Statutory Auditors ................................................................................................ 3
3
OVERVIEW OF MEDICA’S BUSINESS ACTIVITIES AND DEVELOPMENT....................... 4
4
SELECTED FINANCIAL INFORMATION .............................................................................. 5
5
RISK FACTORS.................................................................................................................... 10
5.1
5.2
5.3
Risks associated with the Medica group’s business ...................................................... 10
Risks specific to the Medica group................................................................................... 14
Risks associated with the Medica group’s activities in Italy .......................................... 19
6
RISK MANAGEMENT POLICY AND INSURANCE............................................................. 21
6.1
6.2
Risk management policy .................................................................................................... 21
Management of operations-related risks.......................................................................... 21
6.2.1 Property portfolio...................................................................................................... 21
6.2.2 Food products ........................................................................................................... 22
6.2.3 Best practices ........................................................................................................... 22
6.2.4 IT-related risk management ..................................................................................... 24
6.2.5 Financial risk management...................................................................................... 24
6.2.6 Crisis management................................................................................................... 25
Insurance ............................................................................................................................. 25
6.3.1 Insurance policy........................................................................................................ 25
6.3.2 Insurance cover ........................................................................................................ 26
6.3
7
PRESENTATION OF THE MARKET IN FRANCE ............................................................... 29
7.1
Favourable demographic trends for the dependency care market................................ 30
7.1.1 Overall ageing of the over 60 population ............................................................... 30
7.1.2 Growth in “extreme ageing” and in the population of “very elderly people”..... 31
7.1.3 Increase in age-related dependency....................................................................... 33
Factors conducive to the development of the long-term care sector ........................... 34
7.2.1 Caregivers are ageing .............................................................................................. 34
7.2.2 Increase in dependency owing to the higher prevalence of neuro-degenerative
diseases ..................................................................................................................... 35
Factors conducive to the development of the post-acute and psychiatric sector....... 36
Favourable social policies and regulatory environment ................................................ 36
7.4.1 Health policy instrumental in the development of the long-term care sector .... 37
7.4.2 Health policy contributing to the development of the post-acute and psychiatric
sector ......................................................................................................................... 39
7.2
7.3
7.4
iv
7.5
7.4.3 Market solvency supported by the public finances, various social and tax
subsidies and the increase in patients’ living standards ..................................... 40
7.4.4 Regulatory barriers to entry conducive to concentration in the sector.............. 43
A still fragmented market providing scope for consolidation........................................ 44
7.5.1 Long-term dependency care in France (long-term care sector) .......................... 44
7.5.2 Short-term dependency care in France (post-acute and psychiatric sector) ..... 46
8
REGULATORY ENVIRONMENT IN FRANCE ..................................................................... 49
8.1
The long-term care sector .................................................................................................. 49
8.1.1 Nursing home permits.............................................................................................. 49
8.1.2 Evaluation of nursing homes .................................................................................. 52
8.1.3 Fee schedule under tripartite agreements ............................................................. 52
8.1.4 Draft decree concerning the fee schedule applicable in nursing homes ........... 54
Post-acute and psychiatric sector: rehabilitation and recuperative care and
psychiatric care ................................................................................................................... 54
8.2.1 Authorisation of post-acute and psychiatric facilities .......................................... 55
8.2.2 Certification ............................................................................................................... 56
8.2.3 Multi-year targets and resources contracts ........................................................... 56
8.2.4 Fee schedule ............................................................................................................. 57
8.2.5 Medical information system programme (PMSI) ................................................... 57
Other regulations ................................................................................................................ 58
8.3.1 Facilities open to the public (“ERP”, Etablissements recevant du public) ........ 58
8.3.2 Waste.......................................................................................................................... 58
8.2
8.3
9
PRESENTATION OF THE MARKET IN ITALY .................................................................... 59
9.1
9.2
9.3
9.4
Ageing of the population in Italy ....................................................................................... 59
Increased dependency ....................................................................................................... 61
Small proportion of the elderly living in homes............................................................... 61
The capacity of specialised facilities accommodating the dependent elderly ............. 62
10
REGULATORY ENVIRONMENT AND FINANCING IN ITALY ............................................ 64
10.1 Regulations.......................................................................................................................... 64
10.2 Financing at regional level ................................................................................................. 64
11
COMPETITIVE ADVANTAGES ............................................................................................ 66
12
STRATEGY ........................................................................................................................... 70
13
TREND INFORMATION........................................................................................................ 73
14
PROFIT FORECASTS AND ESTIMATES............................................................................ 76
15
HISTORY AND DEVELOPMENT OF THE COMPANY........................................................ 80
15.1
15.2
15.3
15.4
15.5
15.6
Company name.................................................................................................................... 80
Trade and Companies Registry ......................................................................................... 80
Date of incorporation and life of the Company................................................................ 80
Head office, legal form and governing law....................................................................... 80
Organisation chart of the Medica group........................................................................... 80
Company history and reorganisation ............................................................................... 82
16
DESCRIPTION OF BUSINESS ACTIVITIES ....................................................................... 85
v
16.1
16.2
16.3
16.4
16.8
16.9
16.10
16.11
The long-term care sector: long-term dependency care ................................................ 86
Post-acute and psychiatric sector: short-term dependency care.................................. 92
A sales and marketing policy focused on maximising yield .......................................... 95
An active policy of real estate management, a means of developing the Medica group,
together with a strong track record of acquisitions ........................................................ 97
16.4.1 Real estate assets held............................................................................................. 98
16.4.2 Real estate complexes leased ................................................................................. 99
16.4.3 Plans to create and restructure facilities and acquisitions policy .................... 100
The Medica group: a recognised image ......................................................................... 102
Certified quality and ethical standards ........................................................................... 103
Training and qualification of teams................................................................................. 105
16.7.1 Professional training within the Medica group.................................................... 105
16.7.2 Institut des Bonnes Pratiques (Best practices institute) ....................................... 106
16.7.3 Training partnerships ............................................................................................. 106
Organisation of the Medica group................................................................................... 107
Management information system .................................................................................... 109
Purchasing and subcontracting ...................................................................................... 109
Research and development, patents and licences .........................................................111
17
EMPLOYEES ...................................................................................................................... 112
16.5
16.6
16.7
17.1 Employees of the Company ............................................................................................. 112
17.2 Profit-sharing..................................................................................................................... 115
17.3 Group Works Committee.................................................................................................. 115
18
ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY BODIES AND SENIOR
MANAGEMENT .................................................................................................................. 116
18.1 Composition and operation of management and control bodies ................................ 116
18.1.1 Board of directors................................................................................................... 116
18.1.2 Executives/Senior managers................................................................................. 122
18.2 Board of directors and senior management conflicts of interest ................................ 123
19
CORPORATE GOVERNANCE........................................................................................... 124
19.1 Appointments of members to executive and management bodies ............................. 124
19.2 Information on service contracts between members of the board of directors and the
company or its subsidiaries............................................................................................. 124
19.3 Committees of the board of directors............................................................................. 124
19.4 Limitations on management authority ............................................................................ 126
19.5 Information regarding the board of directors ................................................................ 127
19.6 Corporate governance declaration ................................................................................. 127
20
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS ............................................................................................. 129
20.1 Overview ............................................................................................................................ 129
20.1.1 Key figures .............................................................................................................. 136
20.1.2 Principal factors affecting the Group’s business activities, results of operations
and principal line items in the financial statements............................................ 138
20.2 Comparison of interim periods (nine months) ended 30 September 2008 and 30
September 2009................................................................................................................. 153
vi
20.3 Comparison of years ended 31 December 2008 (corrected) and 31 December 2007
(restated) ............................................................................................................................ 157
20.4 Comparison of years ended 31 December 2006 (pro forma) and 31 December 2007
(restated) ............................................................................................................................ 161
20.5 Liquidity and capital resources ....................................................................................... 166
21
CASH AND CASH EQUIVALENTS.................................................................................... 178
22
COMPENSATION AND BENEFITS ................................................................................... 179
22.1 Interests and compensation of members of the board of directors and executives . 179
22.2 Total provisions for payment of pensions, retirement provision and other benefits. 180
23
PRINCIPAL SHAREHOLDERS.......................................................................................... 181
23.1
23.2
23.3
23.4
Majority shareholder......................................................................................................... 181
Voting rights of the majority shareholder....................................................................... 181
Statement relating to the control of the Company by the majority shareholder ........ 181
Agreement relating to the control of the Company ....................................................... 181
24
RELATED-PARTY TRANSACTIONS................................................................................. 182
24.1 Related-party transactions............................................................................................... 182
24.2 Statutory auditors’ special reports on regulated agreements for 2008 and 2007....... 184
24.2.1 Statutory auditors’ special report on regulated agreements for the 12-month
period ended 31 December 2008........................................................................... 184
24.2.2 Statutory auditors’ special report on regulated agreements for the 20-month
period ended 31 December 2007........................................................................... 186
25
FINANCIAL INFORMATION REGARDING THE ASSETS, FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF THE ISSUER ................................................................ 189
25.1 Condensed interim consolidated financial statements as at 30 September 2009...... 189
25.2 Auditors’ report on the condensed interim consolidated financial statements as at 30
September 2009................................................................................................................. 215
25.3 Corrected consolidated financial statements for the 12-months ended 31 December
2008 .................................................................................................................................... 217
25.4 Auditors’ report on the corrected consolidated financial statements for the 12-months
ended 31 December 2008 ................................................................................................. 262
25.5 Corrected consolidated financial statements for the 20-months ended 31 December
2007 .................................................................................................................................... 264
25.6 Auditors’ report on the corrected consolidated financial statements for the 20-months
ended 31 December 2007 ................................................................................................. 308
25.7 Restated consolidated financial information for the 12 months ended 31 December
2007 .................................................................................................................................... 310
25.8 Auditors’ report on the restated consolidated financial information for the 12-months
ended 31 December 2007 ................................................................................................. 316
25.9 Pro forma consolidated financial information for the 12 months ended 31 December
2006 .................................................................................................................................... 318
25.10 Auditors’ report on the pro forma consolidated financial information for the 12months ended 31 December 2006 ................................................................................... 323
25.11 Consolidated financial statements of Médica SA for the year ended 31 December 2006
............................................................................................................................................ 325
vii
25.12 Statutory auditors’ report on the consolidated financial statements of Médica SA for
the year ended 31 December 2006 .................................................................................. 366
26
DIVIDEND POLICY............................................................................................................. 368
27
LEGAL AND ARBITRATION PROCEEDINGS .................................................................. 369
28
NO MATERIAL CHANGE IN THE ISSUER’S FINANCIAL OR TRADING POSITION ..... 370
29
ADDITIONAL INFORMATION ............................................................................................ 371
29.1 Information about the share capital ................................................................................ 371
29.1.1 Amount of share capital (Article 6 of the Articles of Association) .................... 371
29.1.2 Pledges of the Company’s shares ........................................................................ 371
29.1.3 Shares not representing capital ............................................................................ 371
29.1.4 Shares held by the Company or for its own account.......................................... 371
29.1.5 Breakdown of the share capital and voting rights .............................................. 372
29.1.6 Other securities conferring rights to the share capital....................................... 372
29.1.7 Share capital authorised, but not issued ............................................................. 373
29.1.8 Changes in the Company’s ownership structure during the past three years. 374
29.2 Memorandum and Articles of Association ..................................................................... 375
29.2.1 Corporate purpose (Article 2 of the Articles of Association) ............................. 375
29.2.2 Provisions of the Articles of Association concerning the administration and
management bodies – Internal regulations of the board of directors............... 375
29.2.3 Rights, privileges and restrictions placed on shares ......................................... 379
29.2.4 Changes in the share capital and rights attached to shares (excerpt from Article
7 of the Articles of Association) ............................................................................ 380
29.2.5 Shareholders’ general meetings ........................................................................... 381
29.2.6 Shareholders’ agreement ....................................................................................... 383
29.2.7 Crossing of disclosure thresholds (excerpts from Article 13 of the Articles of
Association) ............................................................................................................ 383
29.2.8 Changes in the share capital ................................................................................. 383
30
MATERIAL CONTRACTS .................................................................................................. 384
31
THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND DECLARATIONS
OF ANY INTEREST ............................................................................................................ 385
32
DOCUMENTS ON DISPLAY .............................................................................................. 386
33
INFORMATION ON HOLDINGS......................................................................................... 387
CROSS-REFERENCE TABLE...................................................................................................... 388
viii
1
RESPONSIBLE PERSON
1.1
Person responsible for the reference document
Jacques Bailet, Chairman and Chief Executive Officer of Medica
1.2
Statement by the person responsible for the reference document
“I certify that, having taken all reasonable care to ensure that such is the case, the
information contained in this reference document is, to the best of my knowledge, in
accordance with the facts and contains no omission likely to affect its import.
I have received an audit completion letter (lettre de fin de travaux) from the Statutory
Auditors, in which they state that they have verified the information relating to the
Group’s financial condition and financial statements in this reference document and have
read through the entire document.
The interim consolidated financial statements for the nine-month period ending 30
September 2009, the corrected consolidated accounts for the years ending 31 December
2008 and 31 December 2007 and the restated consolidated financial information for the
period from 1 January 2007 to 31 December 2007 presented in the reference document
have been the subject of reports by the statutory auditors appearing in sections 25.1,
25.3, 25.5 and 25.7 and which contain the following details and notes:

For the interim consolidated financial statements for the period from 1 January to
30 September 2009:
“Without contradicting the opinion given above, we would like to draw your
attention to Note 2-2 to the financial statements describing the potential impact of
the correction of the error regarding the calculation of the syndicated loan’s
financial interests on the consolidated financial statements for the years ending 31
December 2008 and 31 December 2007.”

For the corrected consolidated accounts for the year ending 31 December 2008:
“These corrected consolidated financial statements, finalised on 3 December 2009
by the board of directors, reflect the correction of the calculation error concerning
the determination of the syndicated loan financial interests, described in Note 2-3
and identified in November 2009. They were prepared under the responsibility of
the board of directors and it is our duty to express an opinion on these corrected
consolidated financial statements based on our audit. We stress that these
corrected consolidated financial statements do not correspond to the consolidated
financial statements finalised by the Chairman, which were presented in our legal
report dated 30 April 2009, and were approved by the general meeting on 29 June
2009. . . . Without contradicting the opinion expressed above, we would like to
draw your attention to Note 2-3 which explains the impact of the correction of the
error in the calculation of the financial interests on the syndicated loan.”

For the corrected consolidated accounts for the year ending 31 December 2007:
“These corrected consolidated financial statements, finalised by the board of
directors on 3 December 2009, reflect the correction of the calculation error
concerning the determination of the syndicated loan financial interests, described
in Note 2-3 and identified in November 2009. They were prepared under the
1
responsibility of the board of directors. It is our duty to express an opinion on these
corrected consolidated financial statements based on our audit. We stress that
these corrected consolidated financial statements do not correspond to the
consolidated financial statements finalised by the Chairman, which were presented
in our legal report dated 23 April 2008, and were approved by the general meeting
on 25 June 2008. . . . Without contradicting the opinion expressed above, we
would like to draw your attention to Note 2-3 of the corrected consolidated
financial statements relating to the impact of the correction of the error in the
calculation of the syndicated loan financial interests.”

For the restated consolidated financial information for the period from 1 January
2007 to 31 December 2007:
“Without contradicting the opinion expressed above, we would like to draw your
attention to the explanatory notes which specify that the restated consolidated
data was prepared in the context mentioned above and as such, does not
represent full statements with regard to the IFRS reference system as adopted by
the European Union. With regard to this reference system, only the full accounts
comprising a balance sheet, an income statement with comparative information, a
statement of changes in equity, a statement of cash flows and notes to the
financial statements can fairly reflect, in all material aspects, the net worth and
financial position of the group comprised by the people and the entities included in
the consolidation as well as the result of its transactions.””
Jacques Bailet
Chairman and Chief Executive Officer of Medica
2
2
PERSONS RESPONSIBLE
STATEMENTS
2.1
Statutory Auditors
FOR
THE
AUDIT
OF
THE
FINANCIAL
Constantin Associés
Member of Deloitte Touche Tohmatsu
114 rue Marius Aufan
92300 Levallois Perret
Appointed on 9 August 2006 until 31 December 2012 pursuant to the Articles of
Association
(Compagnie Régionale des Commissaires aux Comptes de Versailles)
Patrick Grimaud
17 rue du Sergent Bauchat
75012 Paris
Appointment renewed on 27 June 2005 until 31 December 2010 pursuant to the Articles
of Association
(Compagnie Régionale des Commissaires aux Comptes de Paris)
2.2
Alternate Statutory Auditors
Jean Lebit
18 avenue du 8 mai 1945
95200 Sarcelles
Appointed on 9 August 2006 until 31 December 2012 pursuant to the Articles of
Association
(Compagnie Régionale des Commissaires aux Comptes de Versailles)
Jean-Luc BESSON
17 rue du Sergent Bauchat
75012 Paris
Appointment renewed on 27 June 2005 until 31 December 2010 pursuant to the Articles
of Association
(Compagnie Régionale des Commissaires aux Comptes de Paris)
3
3
OVERVIEW OF MEDICA’S BUSINESS ACTIVITIES AND DEVELOPMENT
The Medica group, a leading player in the French long-term and short-term dependency
care market, operates chiefly in two business sectors:

the “long-term care” sector 1 (EHPAD, Etablissements d’Hébergement pour
Personnes Agées Dépendantes), commonly known as nursing homes, providing
long-term care (107 facilities offering a total capacity of 8,726 beds as at
31 December 2008); and

the post-acute and psychiatric sector, chiefly at rehabilitation and recuperative
care (“SSR”) facilities and facilities specialising in psychiatric services, which
provide short-term dependency care (37 post-acute and psychiatric facilities, with
capacity of 2,316 beds as at 31 December 2008).
The Medica group is chiefly present in France, but has also operated in Italy since 2005.
Originally a family-owned business, the Medica group was acquired in 1999 by a
subsidiary of Caisse des Dépôts et Consignations, then in 2003 by investment funds
managed chiefly by Bridgepoint and Alpinvest and in 2006 by funds advised by BC
Partners (see section 15.6 “Company history and Reorganisation”).
A management team headed by Jacques Bailet and Christine Jeandel has overseen the
Medica group’s development for the past ten years.
With a total of 144 facilities and a capacity of 11,042 beds as at 31 December 2008, the
Medica group ranks as the number 3 operator in the French dependency care sector
given its presence in both the long-term care and post-acute and psychiatric sectors and
as the number 2 French operator in Italy.
The Medica group’s consolidated revenue grew from €69.8 million in 2000 (2,469 beds)
to €448.8 million in the year ended 31 December 2008 (11,042 beds), of which over
89.5% was generated in France, representing a compound annual growth rate (CAGR)
in revenue of 26% under the combined effect of acquisitions and the Group’s active yield
management strategy (see section 20.1.2 “Changes in yield”). Consolidated operating
profit from ordinary activities (EBIT) for the year ended 31 December 2008 came to
€60.6 million. For the nine-month period ended 30 September 2009, the Medica group
recorded €356.7 million in consolidated revenue and consolidated operating profit from
ordinary activities of €48.6 million.
1
This sector comprises the Medica group’s nursing homes in France and its RSA (Sanitaria Assistenziale per Anziani)
facilities in Italy.
4
4
SELECTED FINANCIAL INFORMATION
The selected financial information has been taken from the restated pro forma financial
information for the 2006 financial year, the restated consolidated financial information for
the 2007 financial year (audited) (12 months), the audited corrected consolidated
accounts for the 2008 financial year prepared in accordance with IFRS as adopted by
the European Union (“IFRS” or International Financial Reporting Standards) and the
condensed interim consolidated financial statements for the nine-month period ended 30
September 2009, prepared in accordance with IFRS and subject to a limited review by
the Statutory Auditors. The principal accounting and operating figures should be read
together with the information contained in Chapter 20 “Management’s discussion and
analysis of financial condition and results of operations” and Chapter 25 “Financial
information on the issuer’s assets, financial condition and results of operations”. 2
During the preparation of its condensed interim consolidated financial statements for the
nine-month period ended 30 September 2009, the Medica group identified an error in the
calculation of interest on the syndicated loan arranged in August 2006 in the context of
applying the amortised cost method under IAS 39. This error affects the consolidated
financial statements prepared for the financial years ended 31 December 2008 and 31
December 2007 approved by the shareholders’ general meeting. It had no impact on
changes in cash.
For the first time, the Medica group is presenting condensed interim consolidated
financial statements for the period from 1 January 2009 to 30 September 2009. These
consolidated financial statements appearing in section 25.1 “Condensed interim
consolidated financial statements as at 30 September 2009” include comparative figures
for the period from 1 January to 30 September 2008, as well as condensed financial
statements for the 12-month financial year ended 31 December 2008. In accordance
with IAS 8 “Accounting policies, changes in accounting estimates and errors”, the
financial statements for the 12-month financial year ended 31 December 2008 presented
for comparison purposes have been corrected as if the error had been corrected at the
beginning of the first period presented. In addition, as additional information, the key
indicators in the consolidated financial statements for the (20-month) financial year
ended 31 December 2007 also corrected for the impact of the error are shown in Note
2.2 to the condensed interim consolidated financial statements for the nine-month period
ended 30 September 2009.
The figures for the period from 1 January to 30 September 2008 were prepared solely for
comparison purposes for the interim consolidated financial statements for the nine-month
period ended 30 September 2009 following identification of the error described above.
All of the financial data appearing in Chapter 25 and this section have been corrected to
exclude the impact of this error.
2
See also section 20.1 “Basis for the preparation of the corrected pro forma 2006 financial data” and “Basis for the
preparation of the restated 2007 consolidated financial data”.
5
Selected financial information from the income statement
2006
2007
2008
2008
2009
12 months
(pro forma)
12 months
(restated)
12 months
(corrected)
9 months
(30 September)
9 months
(30 September)
Total in millions of euros
324.8
384.7
448.8
333.0
356.7
France in millions of euros
297.3
345.7
401.7
298.0
319.5
France as a %
91.5%
89.9%
89.5%
89.5%
89.6%
of which long-term care in millions of euros
218.6
239.3
266.9
198.2
213.8
of which long-term care as a %
67.3%
62.2%
59.5%
59.5%
59.9%
78.7
106.4
134.8
99.8
105.8
24.2%
27.7%
30.0%
30.0%
29.6%
Italy in millions of euros
27.6
39.0
47.2
35.0
37.2
Italy as a %
8.5%
10.1%
10.5%
10.5%
10.4%
86.7
101.8
118.4
88.7
94.6
Total as a % of revenue
26.7%
26.5%
26.4%
26.6%
26.5%
Revenue
of which post-acute and psychiatric in millions
of euros
of which post-acute and psychiatric as a %
EBITDAR (EBITDA excl. rental expense)*
80.7
91.5
106.5
79.7
85.8
France as a % of revenue
27.1%
26.5%
26.5%
26.7%
26.9%
61.9
65.5
73.9
54.5
58.1
of which long-term care as a % of revenue
28.3%
27.4%
27.7%
27.5%
27.2%
of which post-acute and psychiatric in millions
of euros
18.8
26.0
32.6
25.2
27.7
of which post-acute and psychiatric as a % of
revenue
23.9%
24.4%
24.2%
25.2%
26.2%
6.0
10.2
11.9
9.0
8.8
Italy as a % of revenue
21.6%
26.3%
25.2%
25.8%
23.8%
57.2
66.9
78.3
58.6
62.7
17.6%
17.4%
17.5%
17.6%
17.6%
44.1
47.3
60.6
47.0
48.6
13.6%
12.3%
13.5%
14.1%
13.6%
-52.3
-59.5
-67.1
-49.9
-48.0
EBITDA**
Operating profit from ordinary activities
Cost of net debt
3
3
Since 1 January 2009, changes in the fair value of derivative products have been recognised in equity (for the effective
portion), and income and expense arising from the interest-rate hedges have been recognised in the cost of gross debt
(see section 20.1.2 “Principal factors affecting results of operations and principal line items in the financial statements”).
6
Net profit attributable to equity holders of
4
the parent
-4.5
-5.9
-22.7
-3.8
0.6
-1.4%
-1.5%
-5.1%
-1.1%
0.2%
-0.62
-0.81
-3.11
-0.52
0.09
Earnings per share
in euros
* See paragraph 20.1.1 “Key figures”.
** See paragraph 20.1.1 “Key figures”.
Selected financial information from the balance sheet
2006
12 months
(pro forma)
2009
(30 September)
2008
12 months
(corrected)
2007
12 months
(restated)
9 months
Assets (in millions of euros)
Intangible assets
752.3
791.7
832.4
835.9
of which Goodwill
502.8
332.8
349.8
353 .0
480.5
of which Operating permits
248.0
457.5
479.9
Property, plant and equipment
141.6
260.7
295.0
307.9
of which Buildings
116.0
234.3
247.6
253.5
Other non-current assets
Non-current assets
Inventories
Trade receivables
28.6
17.4
16.9
20.6
922.6
1,069.8
1,144.2
1,164.4
1.2
1.4
1.6
1.7
29.2
29.0
35.9
32.7
Other current assets
28.1
54.2
23.6
22.8
Cash
17.4
25.9
24.0
22.6
Current assets
75.8
110.4
85.2
79.7
TOTAL ASSETS
998.4
1,180.2
1,229.3
1,244.1
Liabilities and equity (in
millions of euros)
Share capital
116.6
116.6
116.6
116.6
Other reserves
41.2
50.4
44.5
16.8
Retained earnings
-4.5
-5.9
-22.7
0.6
Minority interest
4
1.4
5.9
6.1
3.2
Equity
154.7
167
144.5
137.3
Long-term debt
603.3
666.5
721.1
746.3
Other non-current liabilities
154.4
254.1
247.4
256.6
Non-current liabilities
757.8
920.6
968.6
1,003.0
Trade payables
27.5
33.9
37.0
37.4
Short-term debt
17.6
14.2
17.0
17.8
Other current liabilities
40.9
44.4
62.3
48.6
Current liabilities
TOTAL LIABILITIES AND
EQUITY
86.0
92.5
116.3
103.8
998.4
1,180.2
1,229.3
1,244.1
Net profit attributable to equity holders of the parent reflects, in particular, a cost of net debt and other financial income
and expense linked to existing net debt. This debt comprises convertible bonds, which are to be converted ahead of the
Company’s IPO, and bank loans, which are to be repaid in part. Bank debt will be partially repaid from the proceeds of
the capital increase at the time of the IPO (see section 20.5 “Liquidity and capital resources – Debt”).
7
Net debt
2009 (30
September)
2006
2007
2008
12 months
pro forma
12 months
restated
12 months
corrected
9 months
Convertible bond
111.0
117.6
135.5
150.5
Bank loans
509.9
563.1
602.6
613.7
Bank loans and financial
liabilities(1)
620.9
680.7
738.1
764.2
Cash and cash equivalents(2)
17.4
25.9
24.0
22.6
Net debt(1-2)
603.5
654.8
714.1
741.6
In millions of euros
Selected financial information concerning consolidated cash flows
2007
restated
Cash flow from operations
Cash flow used in investing activities
2008
2009
(30 September) (30 September)
46.9
99.6
69.3
60.6
-50.1
-86.0
-72.3
-33.1
10.0
-16.1
-6.4
-29.5
Cash flow from (used in) financing
activities
2008
corrected
2007
restated
2008
corrected
2008
2009
(30 September) (30 September)
Cash and cash equivalents at beginning of
period
17.3
24.2
24.2
21.6
Cash and cash equivalents at end of period
24.2
21.6
14.8
19.6
6.8
-2.5
-9.4
-2.0
Change in cash and cash equivalents
8
Key indicators over the 2006-2009 period
2006
2007
2008
2009
30 September
124
136
144
147
6,827
7,278
7,308
Post-acute and psychiatric sector, France
1,754
2,019
2,316
2,317
Italy
1,062
1,358
1,418
1,428
9,643
10,655
11,042
11,297
95.6%
96.9%
96.7%
96.7%
98.8
104.5
111.5
116.8
Number of facilities
Number of beds
Long-term care, France
TOTAL
Occupancy rate
5
7,552
6
Yield
(in euros)
5
The occupancy rate is defined as the ratio of days billed over the number of days billable for facilities that have been
open for more than 12 months.
6
The yield, which is defined as revenue per bed per day (for facilities open only part of the year, only the number of days
these facilities are open is used), is an important management indicator for the Medica group, reflecting its ability to
maximise the returns generated by its facilities. The manner in which yield is calculated facilitates comparisons between
years, independent of changes in the number of beds it manages.
9
5
RISK FACTORS
Investors should consider all the information contained in this reference document,
including the following risk factors, before deciding to invest in the Company’s shares.
The risks described below are, at the registration date of the reference document, those
which are likely to have a material adverse effect on the Medica group, its business,
financial condition and results of operations and which are material to a decision to
invest in the Company’s shares. Investors’ attention is drawn to the fact that the list of
risk factors presented in Chapter 5 is not exhaustive and that other risks, either unknown
or the occurrence of which has not been considered at the registration date of this
reference document, are likely to have an adverse effect on the Medica group, its
business, financial condition and results of operations.
5.1
Risks associated with the Medica group’s business
Climate risks
The Medica group’s employees and facilities must be prepared to respond to abnormal
weather conditions, which might put the health of residents and patients in danger, as
occurred during the heatwave in France during the summer of 2003.
Such events are by their nature unpredictable. Long-term care and post-acute and
psychiatric facilities for the elderly must ensure that internal systems are in place to
implement rapidly any decision required for the safety and well-being of residents and
patients. In particular, this includes mobilising staff, supervising residents and patients,
and ensuring premises are cooled when a weather alert is issued. Implementation of this
coordinated regulatory response (“Plan Blue”), applicable to nursing homes since
February 2004, could cause difficulties or may result in the failure to fully meet the
targets set for nursing homes. In addition, if the Medica group’s facilities and employees
fail to adequately respond to such abnormal conditions, they may also be held civilly
liable and their public image could be affected, thereby diminishing their appeal. This
could adversely affect the Medica group’s business and results of operations.
Risks of epidemic or pandemic
The outbreak of an epidemic, pandemic or fears of such an outbreak, could have an
adverse effect on facilities’ business and the costs incurred by the Medica group, and, as
a result, on the Medica group’s financial condition and results of operations. This could
result, in particular, in a loss of business and additional expenditures and costs arising
from the implementation of exceptional measures to address such an outbreak.
Employee/Staff risks
The quality of services offered by the Medica group as well as its business levels may be
affected by a shortage of qualified staff in the market or by any failure to retain such
employees in the long term, particularly nursing staff.
Likewise, wage pressures due to competition from the public sector or competing private
sector facilities could increase the Medica group’s operating costs and decrease its
operating margins.
The development of the Medica group could be hampered by any such staff shortage
and the quality of its services could be adversely affected.
10
Risks associated with the development of social policy and fee rates applicable in
France
For nursing homes, the Conseils Généraux and the Assurance Maladie jointly set the fee
rates for dependency and treatment services respectively, with the Conseils Généraux
and the Assurance Maladie bearing part or all of the cost of the services.
Whether or not the cost of these services is reimbursed and the level of such
reimbursements depend in part on French social policy. They are therefore subject to
change because, for example, funding may either be increased or withdrawn. More
generally, nursing home residents may receive reduced social allowances, which, in
certain circumstances, could oblige the Medica group to lower accommodation rates to
adapt its range of services to the financial resources of patients and their families. In
particular, limitation or modification of social benefit allowances, such as the allocation
personnalisée d’autonomie (“APA”, personal independence allowance), currently paid by
French departments, or the reimbursement by the Assurance Maladie of fees paid for
treatment, may affect the solvency of residents and/or patients, which could increase
non-recovery risk for treatment facilities.
For the post-acute and psychiatric sector (representing approximately 30% of the Medica
group’s consolidated revenue in 2008), a reduction or cap on treatment rates could have
an adverse effect on the Medica group’s results of operations.
Generally speaking, any unfavourable trend in social and pricing policy in France,
particularly with respect to private commercial sector participants, may have a material
adverse effect on the Medica group’s business, strategy, financial condition, results of
operations or prospects.
Risks associated with the issuance and retention of operating permits in France
Permit issuance and renewal
To operate a nursing home in France, operators must first secure authorisation issued by
the regulatory authorities valid for a period of 15 years based notably on there being a
proven need in the gerontological section of social and long term care plans (“SGD” or
“Schéma Gérontologique Départemental”) drawn up by the Conseil Général
(departmental authorities) in each department. These permits are valid for 15 years
pursuant to the law of 2 January 2002. The permit renewal dates for the Medica group’s
nursing home permits lie between 2017 and 2023.
Operation of a facility providing rehabilitation and recuperative care services, as well as
facilities providing psychiatric care, requires a permit issued by the regulatory authorities
for a minimum period of five years. Such permits are issued solely where there is a
recognised need in the regional medical organisation plan (“SROS” or “Schéma Régional
d’Organisation Sanitaire”) drawn up by the Regional Hospital Agency (“ARH” or “Agence
Régionale de l’Hospitalisation”).
The permits are issued and renewed by the competent regulatory authorities subject to
compliance with minimum technical organisational and operational standards. In this
respect, for rehabilitation and recuperative care facilities to comply with the decrees of 17
April 2008 (see section 8.2.1 “Authorisation of post-acute and psychiatric facilities”), all
rehabilitation and recuperative care facilities belonging to the Medica group must, like all
other market participants, resubmit permit applications, it being noted that these new
decrees are not applicable to psychiatric facilities.
11
Failure to meet these standards, changes to the SGDs, social and long-term care or
regional medical organisation plans and/or the development of competing projects
capable of meeting the needs identified by the social and long-term care or regional
medical organisation plans may render it more difficult to obtain or renew the permits that
Medica group must possess to operate its businesses.
Evaluation of facilities and renewal of permits
Long-term care facilities and post-acute and psychiatric facilities (facilities providing
rehabilitation and recuperative care services and facilities providing psychiatric services)
must undergo an evaluation procedure (known as certification for post-acute and
psychiatric facilities), which is supervised respectively by an external organisation
approved by the “ANESM” (“Agence nationale de l’évaluation et de la qualité des
établissements sociaux et médico-sociaux”, French national agency for the evaluation
and quality of social and long-term care facilities) and by the HAS (“Haute Autorité de
Santé”, Health High Authority). This is necessary for the permit to be renewed. Each
facility operating in the long-term care sector is obliged to conduct two external
appraisals between the authorisation date and its renewal date, which means around
every seven years on average. Evaluations of post-acute and psychiatric facilities are
conducted by experts from the Health High Authority every four years. Should the
qualitative criteria not be met, nursing homes and post-acute and psychiatric facilities
may lose their permit or have it suspended for a given period.
When facilities are acquired, the transfer of the relevant operating permit must be
approved by the competent regulatory authorities. The Medica group’s policy of growth
by acquisition carries the risk that permits may not be transferred, which could have a
material adverse effect on the Group’s growth strategy.
The failure to obtain, the suspension or withdrawal of permits may restrict the growth of
the Medica group or lead to a direct loss of customers in the event of temporary or
definitive business closure, or an indirect loss owing to a possible negative impact on the
image and reputation of the Medica group. Such events may materially affect the Medica
group’s business, strategy, prospects, financial condition and results of operation.
Risk associated with tripartite agreements and multi-year targets and resources
contracts in France
Risk associated with tripartite agreements
Nursing homes accommodating the dependent elderly must sign a tripartite agreement
with the authorities, i.e., with the relevant Conseil Général and with the Direction
Départementale des Affaires Sanitaires et Sociales (“DDASS”, Departmental Medical
and Social Service Directorate) on behalf of the French Assurance maladie (French
national insurance plan). These agreements aim to set the charges for treatment and
dependency care, as well as the nature of the related services among other goals. Under
these agreements, the facility director undertakes to put in place the requisite resources
in terms of qualified staff to accommodate and care for residents. The director also
undertakes to meet qualitative objectives in connection with the facility plan.
Pursuant to Article L.313-12 of the French Code de l’action sociale et des familles
(“CASF”, Social and Family Action Code), all nursing homes are required to sign a
tripartite agreement.
12
Tripartite agreements are entered into for a period of five years. At the end of this period,
they must be renewed. As agreements were signed on various different dates, renewals
are spread out over time. The Medica group has already renewed 40% of its so-called
“first-generation” tripartite agreements. By 2013, 85% of Medica group’s nursing homes
in France will have had to renew their tripartite agreement.
If the Medica group were unable to renew one or more tripartite agreements, operating
permits for the relevant facilities could be suspended or withdrawn.
In addition, upon renewal of these agreements or renewal of Contrats Pluriannuels
d’Objectifs et de Moyens (“CPOM”, multi-year targets and resources contracts), the
Conseils Généraux (departmental authorities), DDASS, ARH or Agences Régionales de
Santé (ARS, Regional Health Agencies) may raise the quality and financial standards
with which these facilities must comply starting from 1 July 2010 at the latest.
If these risks were to materialise, they may adversely affect the Medica group’s
business, strategy, financial condition, results of operations or growth prospects.
Regulatory risks
The Medica group’s long-term care and post-acute and psychiatric businesses must
comply with a strict set of regulations specific to each of these sectors, as well as
numerous environmental, hygiene, safety and ethics-related regulations, particularly as
the business operates établissements recevant du public (“ERP”, Facilities open to the
public) (see section 8.3.1 “Facilities open to the public”).
Pursuant to these regulations, the Medica group’s facilities must receive various prior
authorisations and are subject to assessment by the French State, departments and the
decentralised bodies that supervise them. They must also comply with strict standards in
respect of health and safety (in particular fire prevention and asbestos exposure), ethics,
environmental protection and disposal of waste from medical treatment. The tighteningup of these regulations or their enforcement in a manner that results in new procedures
for the Medica group may result in increased investment costs for the Medica group. For
example, the Medica group’s facilities or operating costs may require modification if
additional supervisory procedures or inspections are introduced. Any such additional
procedures or assessments could also restrict the Medica group’s growth. Although the
Medica group endeavours to plan ahead for such changes, it may not be able to foresee
them. Any unforeseen changes may adversely affect the Medica group’s strategy,
financial condition, results of operations or its growth prospects.
Likewise, the failure to comply with any of the regulations to which Medica group is
subject could also result in the suspension or withdrawal of administrative operating
permits, which may affect Medica group’s ability to operate its facilities.
Risk associated with the competitive environment
The Medica group faces fierce competition from numerous competitors in the post-acute
and psychiatric sector and the long-term care sector. The dependency care market is
highly diverse, both in terms of facilities and treatment. Nursing homes compete in
particular with other services offered to the elderly, such as home care, which, in recent
years, has been supported by various measures taken by the public authorities in order
to develop this type of care and also, to a lesser extent, with home and services
residences (see section 7.4.3 “Market solvency supported by the public finances, various
social and tax subsidies and the increase in patients’ living standards”). Participants in
13
this market are highly diverse and come from the public sector, non-profit sector and the
private commercial dependency care sector. The market for post-acute and psychiatric
facilities and nursing homes is also witnessing a round of consolidation in the private
commercial sector, which has further intensified competition. These moves towards the
consolidation of the sector (completed or underway) have resulted in the emergence of
major regional as well as national groups. Some of these groups are publicly traded and
have substantial resources, which are in some cases greater than those of the Medica
group.
The Medica group’s ability in the long term to maintain and to strengthen its position in
the short- or long-term dependency care market will depend on its ability to develop its
residential capacity and services and meet the needs of residents and patients. For postacute and psychiatric facilities, new client referrals are primarily made by hospitals, while
referrals for nursing homes are made by families, attending physicians and social
services. They advise future patients and residents on the selection of a facility based on
a number of criteria, particularly the facility’s geographic location, the perceived quality of
treatment, the skill of staff or availability of beds. Some prescribers (social services or
attending physicians) may change their approach to referrals and give priority to facilities
run by competing operators offering higher quality services, lower prices or located
closer to the home of the patient or his or her family.
Competition also influences whether the Medica group is able to acquire new facilities.
The number of nursing home operating permits is limited by Schémas Gérontologiques
Départementaux. In addition, since increased bed capacity in post-acute and psychiatric
facilities must be provided for in regional medical plans, the principal growth prospects lie
in acquisition-led development. In addition, the future system of invitations to tender for
projects to secure operating permits for new facilities applicable from 1 July 2010 at the
latest could intensify competition between the various sector participants (see Chapter 8
“Regulatory environment in France”). As a result, the Medica group’s competitors
boasting greater financial resources, a stronger regional or local presence, or generally
greater appeal could offer higher acquisition prices than the Medica group deems it
appropriate to pay or receive preferred treatment from acquisition targets, thereby
limiting the Medica group’s growth strategy. Any of these conditions could adversely
affect the Medica group’s growth, business and results of operations.
5.2
Risks specific to the Medica group
Medical, health and safety risks
Medical, health and safety risks are constantly present in long-term care and post-acute
and psychiatric facilities. A medical, health or safety incident would be particularly
serious, as the residents and patients at the Medica group facilities are primarily
dependent persons, and therefore highly vulnerable.
The Medica group’s activities are, in particular, exposed to significant medical risks,
relating for example to the transmission of nosocomial infections or the prescription and
administration of drugs for residents and patients. The Medica group’s activities are also
exposed to risks relating to health and safety, primarily in respect of food and water
quality, and in addition, legionnaire’s disease and fire safety.
If any of the above medical, health and safety risks were to materialise, the Medica
group may be held liable and an operating permit could be suspended or even withdrawn
14
for failure to comply with applicable regulations. This may have an adverse impact on its
reputation, business, financial condition, results of operations and its outlook.
Ethical risk
Although the Company places particular importance on compliance with strict ethical
standards when caring for the dependent, the risk of real or alleged mistreatment cannot
be excluded. Legal action for mistreatment could be brought against employees of or
companies in the Medica group. This could lead to a material adverse effect on the
image and reputation of the Medica group and reduce the occupancy rate at the Medica
group’s facilities, thereby affecting the Group’s business, growth prospects, financial
condition and results of operations.
Environmental risks
The Medica group’s business is subject to laws and regulations relating to the
environment and public health. If applicable laws and regulations were to become
stricter, the Medica group may incur additional compliance expenses.
As part of its normal business activities, the Medica group produces and stores waste, in
particular waste from its treatment activities, which carry infection and related risks and
which may produce effects harmful to the environment or human health.
The storage, treatment and transportation of such waste are strictly regulated. Should
the Medica group or the waste disposal service provider fail to comply with these
regulations, the Medica group could face prosecution, which may adversely affect its
business or financial condition. Any such situation could also have an adverse effect on
the Medica group’s reputation and image.
Commercial and operating risks
Owing to the nature of the services it offers, the Medica group is particularly exposed to
possible claims by residents and patients or their families in respect of treatment or
residence services supplied to them.
In recent years, legal actions have increasingly been brought against treatment staff,
practitioners and the facilities in which they work in France, particularly for professional
misconduct. Physicians employed in the Medica group’s facilities bear their own
professional liability for any misconduct during their treatment activities. Nonetheless,
attempts to hold Medica group companies liable for payment of damages in respect of
misconduct by employees cannot be excluded.
The Medica group’s insurance policies may not cover all legal actions against the
Company or its subsidiaries, or may be insufficient to protect the Medica group.
Furthermore, the Medica group may not be able to obtain adequate insurance coverage
or obtain it at an acceptable cost if medical negligence actions involving it, or healthcare
facilities more generally, were to increase significantly.
The reputation of the facility involved and of the entire Medica group could be affected by
a practitioner being alleged or held to be personally liable for professional misconduct in
litigation by a resident or patient. This could affect the Medica group’s image and its
communications policy, which emphasises an image of quality. This could have a
material adverse effect on the Group’s business, growth prospects, financial condition
and results of operations.
15
Risks associated with the retirement of key personnel
The Medica group’s success depends to a significant extent on the quality and
experience of its management team, and in particular of those individuals who have
been employed by the Company since it was acquired by the Caisse des Dépôts in
1999. The Company believes that its management team has acquired excellent
knowledge of the Medica group and the sector in general, having seen it develop since
1999 and participated in the Medica group’s acquisitions. It is not possible to guarantee
that the executives and other key employees will continue to work for the Medica group
in the future, particularly in the current, highly competitive environment for personnel in
the dependency sector.
The departure of one or more of these individuals, or the inability of the Company to
attract, train, retain and motivate highly-qualified employees and executives, could
restrict the Medica group’s ability to expand and have a material adverse effect on its
business, financial condition and results of operations.
Risks relating to acquisitions
Historically, the Medica group has predicated a significant portion of its expansion on the
acquisition of companies or facilities in the dependency care sector. Nonetheless, for
several years, this sector has been undergoing a process of concentration. As a result,
the Medica group cannot guarantee that, in the future, it will be able to make the
acquisitions required to expand its business on acceptable economic and financial terms,
in particular given the limited opportunities for acquisitions, or that the acquisitions it
does carry out will be profitable or not adversely affect the Group’s financial condition,
results of operations or business strategy.
In addition, the acquisition of companies operating one or more long-term care or postacute and psychiatric facilities carries a number of risks linked to the assessment of: (i)
the advantages, weaknesses and potential profitability of these acquisitions; (ii) the
short-term effects on the Medica group’s operational performance; (iii) the assignment of
key executives and managers to these transactions; and (iv) in the event of acquisitions
outside France, additional risks linked notably to the Group’s less extensive knowledge
of the local environment from a regulatory, economic and social standpoint or of the risks
inherent in the integration of the new units or businesses within the Medica group. Other
risks may arise with acquisitions, especially where these involve large-scale deals.
These include the discovery of issues related to the acquisitions (not covered by
representations and warranties) or to their financing, the cost of the investments required
to bring the acquired company up to Medica group standards, the possibility that postacquisition synergies may not be achieved and the cost of merging infrastructure.
Risks associated with the creation of new facilities
The Medica group does not seek to carry the real estate development risks arising out of
the creation of new facilities. In connection with the creation of new facilities, it may be
exposed to a certain number of risks arising in particular from additional costs or delays
in the start-up of projects in the event of legal action being taken by third parties against
building permits or in the delivery of a project in the event of failures by certain
subcontractors or, to a lesser extent, the marketing risk given the undercapacity
characterising the provision of dependency care.
16
Risks relating to information systems
The Medica group and/or its suppliers use several information technology tools and
information systems, in particular for managing residents, patients, and human
resources. These tools also play an important role in exercising management control
over its operations. The Medica group and/or its suppliers have implemented a back-up
system for their databases. However, given the number of its residents and patients, the
Medica group’s business could be disrupted if these information systems or databases
were to fail, or if the databases were to be destroyed or damaged.
Risks associated with subcontractors and suppliers
The Medica group works together with a number of subcontractors and suppliers in its
business activities.
It has entered into three principal sub-contracts:

two with Medirest, one covering catering in post-acute and psychiatric facilities
and the other covering the supply of food in nursing homes by the Servirest central
purchasing unit,

and a third agreement with the Punto Service workers’ cooperative in Italy for the
vast majority of staff required to operate the facilities, excluding management and
administration.
Although the Medica group does not believe it is dependent on one or more of its
subcontractors or suppliers, if one or more of these subcontractors or suppliers were to
terminate its activity or become insolvent, or the quality of their services or products were
to decline, this could adversely affect the Medica group. In particular, it could lead to a
decline in the quality of daily services and to a rise in related costs, specifically as a
result of replacing subcontractors with more expensive service providers. This situation
could also have an adverse effect on the Medica group’s reputation and image, and
adversely affect its business, financial condition and/or results of operations.
The replacement of these service providers could also result in a period of adaptation for
any new provider, given the knowledge of Medica group’s facilities acquired by the prior
provider in the course of its service, and the specific nature of the Company’s
dependency care activities. Such replacement could lead to a temporary reduction in the
efficiency of services provided and more generally in the quality of those services. It
could also lead to a reduction in the satisfaction of residents and patients of the Medica
group during the transition period, as well as to additional expenditures.
Risk associated with the concentration of commercial leases with a limited
number of lessors
Around 66% of the facilities held in the Medica group’s portfolio are operated under
commercial leases (see section 16.4.2 “Real estate complexes leased”). The Medica
group’s six principal lessors own directly or indirectly 55% of the buildings leased by the
Medica group. The failure of one or more of these lessors could have an adverse impact
on the Medica group’s business activities.
Liquidity risks associated with the Medica group’s indebtedness
The Medica group conducted a specific review of its liquidity risk and considers that it is
in a position to honour its future repayments.
17
As at 31 December 2008, the amount of bank debt and lease obligations amounted to
€613.6 million. The bulk of this debt comprises bank loans arranged during August 2006
with a syndicate of banks led by the Royal Bank of Scotland. These loans mature
between 2013 and 2016 (see section 20.1.2 “Principal factors affecting the Group’s
business activities, results of operations and principal line items in the financial
statements”).
The following table shows a maturity schedule for these borrowings as at 31 December
2008 (based on the amount of bank debt and lease obligations, excluding fair value and
issuance costs):
Less than
one year
Between one and
five years
More than five
years
Nominal
Leases
7.8
21
5.9
34.8
Syndicated loan and
other debt
9.2
20.6
549.1
578.8
Total
17
41.6
555
613.6
All the Group’s borrowings are denominated in euros.
In August 2006, the Medica group also issued a convertible bond with a nominal amount
of €174.8 million. The outstanding amount of this borrowing stood at €219.9 million as at
31 December 2008. It is worth noting, however, that the convertible bond is intended to
be converted into shares upon the admission of the Company’s shares to trading on the
Euronext Paris market.
The bank loans arranged by the Medica group carry a number of restrictive clauses and
financial ratios that the Medica group has always met to date (see section 20.1.2
“Principal factors affecting the Group’s business activities, results of operations and
principal line items in the financial statements”).
The restrictions placed on the Medica group’s bank loans could:

affect the Medica group’s ability to obtain additional financing for acquisitions,
investments or any other purpose;

require the Group to devote a significant percentage of its operating cash flow to
interest payments, thereby reducing its ability to finance working capital
requirements and capital costs;

restrict its ability to pay out dividends; and

weaken its competitive position vis-à-vis competitors with greater financial
resources.
These borrowings also contain an early repayment clause in the event of a change in
control of the Medica group obliging its majority shareholder to maintain a certain level of
ownership in the Medica group (see section 20.5 “Liquidity and capital resources Medica group’s debt”). These ratios are tested quarterly and audited every year by the
statutory auditors.
The future ability of the Medica group to comply with the contractual restrictions and
covenants in certain loan agreements or to refinance and repay its borrowings in line
with the agreed arrangements will notably depend on its future operating performance
and may be affected by numerous factors beyond its control. The breach of the
contractual commitments could lead to the acceleration of amounts borrowed under
18
these loan agreements, thereby obliging the Medica group to cut or postpone its
investment spending, to seek to raise additional capital or to restructure its debt.
Interest rate risk
As at 31 December 2008, the majority of the Medica group’s bank debt and lease
obligations, i.e., around 89%, was subject to a floating rate of interest. The Medica group
has implemented a hedging policy to protect itself against fluctuations in interest rates by
swapping floating for fixed interest rates (see section 6.2.5, “Financial risk
management”).
Risks associated with internal control procedures
calculation of interest on the syndicated loan arranged in August 2006. This error affects
the consolidated financial statements prepared in respect of the 12-month financial year
ended 31 December 2008 and the 20-month financial year ended 31 December 2007
approved by the shareholders’ general meeting and filed with the clerk of the Nanterre
Commercial Court. Those financial statements are not included in this document (see
section 20.1 “General presentation – The Medica group – Notice”). In connection with the
internal control procedures already in place and to the planned listing of its shares on
Euronext Paris, the Company will establish an audit committee to oversee issues related
to the review and control of financial and accounting information. The purpose of this
committee will include, in particular, ensuring the effectiveness of internal control
systems and risk management and putting in place new procedures to respond to any
weaknesses if necessary. Nonetheless the Company cannot ensure that such problems
will not continue in the future.
Risks associated with intangible assets
As at 31 December 2008, the Medica group had €832.4 million in intangible assets on its
consolidated balance sheet, including €349.8 million in goodwill and €479.9 million in
operating permits. The Medica group conducts annual impairment tests of its goodwill
and administrative permits (see section 20.1 “Overview – Significant accounting
principles of the Medica group”). The occurrence of certain future events, which are
unpredictable by their nature, could lead to the impairment of certain intangible assets.
Significant impairment losses could have an adverse effect on the Medica group’s
financial condition and results of operations in the financial year in which such losses are
recognised.
5.3
Risks associated with the Medica group’s activities in Italy
The operation of the Medica group’s facilities in Italy, which contributed around 10.5% of
consolidated revenue during the financial year ended 31 December 2008, is subject to a
regulatory environment relatively comparable to the French model. The principal risks
arising from this sector of activity and the risks specific to the Medica group, including the
operational risks described above, are also relevant to its business activities in Italy. It
should be noted, however, that the Medica group subcontracts almost all the staff
required to run facilities in Italy (excluding management and administration) to the Punto
Service workers’ cooperative. It does not believe that it is exposed to the risks
associated with owning an asset portfolio in Italy given that, aside from one real estate
finance lease, the Medica group does not own the facilities property. Changes in the
19
regulatory framework and requirements applicable to its business activities in Italy could
have adverse effects on the Medica group’s strategy, financial condition, results of
operation and growth prospects in the country.
20
6
RISK MANAGEMENT POLICY AND INSURANCE
6.1
Risk management policy
The Medica group’s employee policies are based on respect for individuals and
demanding quality standards.
Daily risk management forms an integral part of the procedures introduced by the
Medica group as part of the quality and professional best practices programme
implemented at its facilities (“Best Practices”) (see section 16.6 “Certified quality and
ethical standards”). All areas of activity in the Group’s facilities are affected, in particular
medical information channels, including confidentiality, medication, food, linen and water.
A prevention plan is defined by each facility. It is reviewed annually by the management
at each facility and notably includes:

the composition, duties and rules for implementing the crisis management unit;

the accommodation and circulation arrangements to be implemented;

the employee information and communication arrangements;

the prevention and treatment arrangements, particularly in the event of a
heatwave, epidemic or pandemic (H1N1 influenza, H5N1 influenza, etc.);

the arrangements for keeping the facility running in a crisis situation (business
continuity plan).
This section presents the principal measures taken by the Medica group to curb its
exposure to the risks inherent in providing dependency care in the long-term care and
post-acute and psychiatric sector. The procedures described below are verified by the
Medica group at each facility on a bi-annual basis.
6.2
Management of operations-related risks
6.2.1
Property portfolio
(a)
Technical safety inspections required for facilities open to the public
One of the Medica group’s objectives is to ensure the safety of its buildings and
equipment. The Medica group has implemented rigorous monitoring of the
condition of its properties and compliance with safety standards within its facilities,
facilitating specialist verification of the safety, compliance and appropriate
operation of its installations.
In particular, the Medica group pays great attention to fire prevention, as severe
consequences could result from the occurrence of a fire in Medica group facilities
as they accommodate reduced-mobility, dependent residents. In accordance with
the regulations, the Medica group maintains a safety register and inspects
detection equipment twice per year. The Medica group also provides staff safety
training four times a year, and a technical inspection report is prepared every six
months.
(b)
Water
In 1999, the Medica group introduced procedures designed to ensure monitoring
of the quality of its water systems (for example, water potability and the presence
21
of legionnaires’ disease). Monitoring and analysis of all samples is carried out by
external inspectors who implement and verify corrective measures in conjunction
with the manager of each facility. Agreements have been signed with Bureau
Veritas, which supervises the monitoring of water networks and verifies the
sanitation records for all facilities. The Company has also retained Biomnis
(formerly Mérieux) 7 to carry out annual physico-chemical and legionnaires’
disease analysis at all its facilities.
6.2.2
Food products
The supply of catering services for residents and their guests is an integral part of the
services provided by the Medica group for dependent people. All these catering services
are subcontracted to Medirest 8 at its post-acute and psychiatric facilities. Medirest also
controls the quality of the food used in meal preparation and carries out annual hygiene
audits on premises, staff, equipment and compliance with HACCP procedures. (Hazard
Analysis Critical Control Point, food safety methods and management principles).
Moreover, to help prevent the risk of food contamination or poisoning in nursing homes,
the Medica group has asked Silliker, an independent laboratory 9 , to carry out a monthly
analysis of its kitchen and food storage spaces, and also to sample and analyse dishes.
These inspections facilitate the monitoring of the cold chain and also assist in the control
and prevention of food poisoning, kitchen and sanitary facility maintenance and
compliance with hygiene procedures and HACCP standards. Facilities are not given
notice of when these spot checks are to occur. A quarterly audit is carried out to ensure
compliance with established procedures and perform certain HACCP checks. In
accordance with its Best Practices, the Medica group has also developed procedures to
be followed in the event of food poisoning.
A total of 1,981 bacteriological analyses took place during 2008 at the Medica group’s
facilities, with a compliance rate of 96.6%. These rates are compliant with the regulations
and are slightly higher than those regularly observed by Silliker in the Medica group’s
sector of activity.
6.2.3
Best practices
Through its business activities, the Medica group may be exposed to certain medical
risks relating to treatment provided in its nursing homes or post-acute and psychiatric
facilities (medical waste management, drug distribution, nosocomial infections,
heatwave, epidemics, pandemics, resident falls and the mistreatment of residents, etc.).
The principal best practices and measures carried out by the Medica group to curb its
exposure to the risks inherent in its business are described below.
(a)
Distribution of toxic medications
The Medica group has introduced several procedures applicable to the reception,
prescription, administration and possible recovery of toxic drugs distributed to its
residents. These procedures also permit traceability in order to avoid the risk of
overdoses, incorrect drug distribution or theft. Physicians are responsible for
7
Biomnis is one of the leading European laboratories in specialist biology, with nearly 1,500 agents in mainland France,
overseas departments and abroad.
8
Medirest (a subsidiary of the Compass group) specialises in catering and healthcare services for seniors.
9
Silliker is one of the principal French laboratories in the field of food product safety and quality analysis and consulting.
22
prescriptions, whereas pharmacists (in the case of an internal dispensary) or
state-registered nurses are responsible for the preparation of the treatment. Stateregistered nurses are responsible for distribution. For traceability purposes, the
administration of each dose is recorded.
(b)
Mistreatment
In order to prevent the risk of physical or psychological mistreatment of its
residents and patients, the Medica group has introduced a guide to Best Practices
and procedures that are to be followed by all its staff in each facility.
The Medica group has paid particular attention to all aspects of training related to
the development of proper care and respect. The goal of these training sessions is
to help care teams deal with their own stress and their relationships with residents
and their families. During the 2008 financial year, the Medica group trained over
3,200 people specifically in these areas.
In addition to the compulsory training provided to all staff and education on the
prevention of such risks and, more generally, how to ensure the respect due to
residents and patients, an internal alert procedure has been implemented. The
aim of this procedure is to inform the facility director immediately of any suspicions
of mistreatment. Upon receiving such notification, the director may perform an
internal enquiry, take the appropriate measures in respect of families and social
services (particularly the DDASS) and manage reputational risk in conjunction with
the Medica group’s senior management. If mistreatment is confirmed, the facility
director with the approval of the legal department, informs the relevant legal
authorities.
(c)
Nosocomial infections
The Medica group has introduced certain procedures to prevent the risk of
exposure to nosocomial infections for its residents. These procedures, which have
been implemented across all the Medica group’s facilities, include
recommendations on basic hygiene (including hand washing and disinfection) as
well as specific measures such as conduct during the application of isolation
measures to limit the risk of contamination. Infections are also systematically
recorded in post-acute and psychiatric facilities to ensure traceability. The facility’s
Comité de Lutte contre l’Infection Nosocomiale (Anti-Nosocomial Infection
Committee), which has existed in all hospital facilities since 1988, analyses these
files. At the date of this reference document, the Medica group has not been
involved in any dispute relating to such infections.
(d)
Heatwaves
Prolonged exposure to heat or heatwaves, such as that experienced in France in
summer 2003, may result in serious risks for the most vulnerable dependent
people, in particular the elderly. The Medica group has introduced certain
procedures in accordance with the provisions of the French National Heatwave
Plan. In the event of extreme temperatures, these procedures provide for the
cooling of its facilities at night and by day (by means of air flow and/or vaporisers,
mobile air conditioning equipment) to ensure that residents and patients are
exposed to as little heat as possible and to eliminate the risk of dehydration.
23
(e)
Epidemics and pandemics
The Medica group endeavours to limit exposure to the risk of an epidemic and/or
pandemic in its facilities. To this end, the Medica group’s Medical Department has
drawn up a formal set of recommendations and best practices in the form of a plan
to prevent and combat the influenza pandemic. In addition, all employees have
been informed about the free vaccination campaign put in place by the Group for
seasonal influenza and for H1N1 influenza. The health authorities are kept
informed on a regular basis about the measures implemented at each facility.
(f)
Resident falls
Since the Medica group cares for dependent individuals, all its staff are trained in
the risk of falls by its residents and patients. Such falls can have relatively serious
consequences on their general state of health, particularly for elderly persons
resident in the Group’s long-term care facilities.
Falls are reported and recorded, and the resident’s or patient’s family is informed.
First aid is immediately administered to determine the seriousness of the fall and
decide, if necessary, whether accelerated transfer to a specialist department is
required.
(g)
Medical waste
The Medica group has implemented standard procedures for managing
contaminated medical waste and removing it from its facilities, with the objective of
ensuring that the waste is safe and traceable. At each residence, the facility
director is responsible for ensuring that measures to dispose of sharp objects or
medical waste are properly applied. In particular, these measures require the
disposal of such waste in secure intermediate receptacles, then in special closed
containers and premises intended for this purpose, such that any contamination of
staff or patients may be avoided. The removal of such waste is logged and dealt
with by external service providers specialised in the handling of such medical
waste.
6.2.4
IT-related risk management
In order to limit the risks relating to loss of IT data or intrusion into information systems
containing sensitive data (such as internal reporting relating to occupancy rates or centre
revenue, patient medical records or drug inventories, etc.), the Medica group has
centralised and secured all its application and infrastructure platforms at an SFR
Business Team data centre 10 , which hosts the core information system of the Medica
group.
6.2.5
Financial risk management
The Medica group may be exposed to several types of financial risk in connection with its
activities: market risk (risk of changes in market prices and exchange rates), credit risk
and liquidity risk. The Medica group’s risk management policy attempts to minimise the
potentially adverse effects of financial risks on the Medica group’s financial performance.
10
SFR Business Team, an alternative land-line and mobile telephone operator in the French corporate market, specialises
in business solutions and is a subsidiary of Vivendi.
24
Counterparty risk
The Medica group is not faced with a significant concentration of counterparty risk. In the
long-term care sector, accommodation charges are paid in advance by residents,
eliminating counterparty risk. This is not the case for additional services (such as private
rooms, televisions and telephones) in the post-acute and psychiatric sectors. With
respect to treatment and dependency charges in the long-term care and post-acute and
psychiatric sectors, there is no counterparty risk in practice, as these costs are paid for
by the Assurance Maladie and departments.
Interest rate risk
The Medica group has implemented a hedging policy to protect itself against fluctuations
in interest rates. It has thus arranged three interest-rate hedges covering a nominal
amount of €545 million, under which it has swapped 3-month Euribor for a fixed interest
rate of around 3.7%. These hedges enabled the Medica group to hedge close to 89% of
its bank debt and lease obligations as at 31 December 2008. They were put in place for
a duration of five years and expire in June 2011. Beyond this date, the Medica group has
arranged three so-called “caps”, enabling it to obtain a hedge at a fixed rate of 6% until
June 2013 covering a nominal amount of €500 million.
6.2.6
Crisis management
In parallel with procedures and policies to prevent and respond to operating risks, a team
consisting of the relevant facility director, the Chief Executive Officer and a press
spokesperson is responsible for taking charge of a number of situations seen as
requiring specific management attention (in particular, a fire or a malicious act resulting
in injury or a critical weather event or water pollution), in view of their possible impact on
residents and potentially adverse effect on the reputation of the Company and the
Medica group. This unit defines the immediate responses to be implemented at the
relevant facility and endeavours to carry out the requisite communication initiatives.
6.3
Insurance
All the subsidiaries of the Company are covered by insurance policies at the Medica
group level. For extended coverage and competitive prices, and to rationalise and control
risk coverage for the Medica group, all the various insurance policies are arranged by
Medica France. Each Medica group subsidiary is included as a covered entity on all
insurance policies arranged in this manner. Premiums for these policies are re-invoiced
by Medica France to the subsidiaries on an annual basis.
In 2008, the Medica group paid approximately €0.5 million in insurance policy premiums.
6.3.1
Insurance policy
The Medica group has implemented a policy for insurance coverage that aims to protect
its assets and protect against incurred liabilities. In particular, the Medica group’s
insurance coverage complies with safety regulations applicable to facilities open to the
general public. The Company’s insurance policy takes account of the following
requirements:

identifying and quantifying the most significant risks in terms of exposure and
capital insured;
25

purchasing insurance coverage for damages up to the level of reasonably
anticipated losses. These claims are derived from risk estimates generated in
conjunction with internal Company departments, the Medica group’s insurance
broker and the insurers’ technical departments; and

verifying insurer solvency.
The principles outlined above and the coverage described below are provided for
indicative purposes only and may change due to fluctuations in insurable risks and the
level of insurance required. The insurance level may also change at any time, due to
insurance market constraints and/or possible arbitrage by the Medica group.
The Group’s global coverage policy may also change given the large number of Group
facilities, their location and specific features of each site, or their operations (post-acute
and psychiatric sector or long-term care sector). In compliance with the objectives stated
above and subject to insurance market-related constraints, the level of insurance
coverage retained is designed to provide the financial resources for significant coverage
of claims whose amount and probability have been subject to assessment.
At the date of this reference document, no major and/or significant claim has occurred
that is likely to change future terms of coverage or the overall amount paid for insurance
premiums and/or self insurance.
The Medica group does not itself have an insurance or reinsurance subsidiary and has
opted to adopt traditional self-insurance solutions based on negotiations with its
insurance broker and relevant insurers. The Company’s self-insurance programme
includes primarily comprehensive multi-risk insurance and general tort and professional
liability programmes. The self-insurance programme is designed to identify the level of
deductibles which may be reasonably borne by the Medica group while achieving the
lowest total cost, based on the probability of claims materialising and the level of
deductibles that each facility can support without jeopardising business continuity.
6.3.2
Insurance cover
The bulk of insurance premiums paid by the Company are for professional
comprehensive and liability coverage, as this is strategically important for the Company
in terms of capital insured and risk.
The Medica group believes that the insurance coverage levels subscribed by the Group
are comparable to those of similarly-sized companies and businesses.
(a)
Comprehensive insurance
The maximum principal amounts insured per facility are shown below:
Per facility
PROPERTY/CASUALTY COVERAGE
Buildings/rental risks
Buildings, general and technical installations
Reconstruction value
Rental liabilities
Value of building
Contents
Damage
Theft
€97,509
Other material damage
€866,629
26
Per facility
All IT risks
Damage to property
€435,922
Bank overdraft interest
€104,287
LIABILITY
Tenant recourse, deposit-holder liability, loss of rent, neighbour and thirdparty recourse, tenant loss of use
COSTS AND FINANCIAL LOSSES
€4,855,624
1
€2,930,477
OPERATING LOSSES
Guaranteed cash flow in 24 month compensation period
€7,500,000
MONETARY VALUE AND FINANCIAL ASSISTANCE
€5,653,000
1
These costs and financial losses relate to displacement and relocation costs, loss of use of premises, spoil,
demolition or cleaning costs.
The principal deductibles payable under the Group’s comprehensive multi-risk
insurance policy have been set at €3,500 per claim for property damage and for
business interruption loss, the equivalent of three days, with a minimum equivalent
to €3,500.
The contractual limit to compensation per facility is €19,500,000.
(b)
General and professional civil liability
The coverage levels provided for under this policy are shown below:
ALL CLAIMS
€15,000,000
Non-consequential property damage and economic losses
€6,100,000
Non-consequential pure economic loss
€3,050,000
Workplace accidents or work-related illness due to negligence
€2,000,000
Property damage and economic loss resulting from fire, explosion
or water occurring on the business premises
€305,000
All bodily injury, property damage and economic loss
consequential to a common claim when resulting from accidental
pollution
€750,000
Theft by employees
€150,000*
Custodian liability
*
Twice the Social Security
cap, in accordance with
law 92-614 of 6 July 1992
(per depositor)
Per claim per insurance year.
In the event of a claim, the deductible is set at €3,500 for all property damage and
economic losses. There is no deductible in the event of bodily injury.
(c)
Other insurance
The Medica group believes that other insurance coverage, particularly relating to
its fleet of vehicles or company officer liability conforms to standard coverage
offered by the insurance market.
27
The Medica group’s facilities in Italy are covered by separate insurance policies,
subscribed locally with Italian insurance companies and which provide coverage
that in the Group’s opinion corresponds to market standards.
28
7
PRESENTATION OF THE MARKET IN FRANCE
The dependency care market comprises three sectors:

the long-term care sector (nursing homes) for the dependent elderly, for whom
support at home is difficult due to the scale and cost of treatment necessitated by
their conditions (see section 16.1 “Long-term care sector: long-term care for the
dependent elderly);

the post-acute and psychiatric sector, offering rehabilitation and recuperative care
services (“SSR”), physical therapy and rehabilitation services (“MPE”), and
psychiatric services (see section 16.2 “Post-acute and psychiatric sector: shortterm dependency care”);

the home care sector.
These sectors are characterised by a diverse infrastructure and different situations on
the ground in terms of the patients cared for and the length of their stay.
The dependency care market in France has three principal features:

the primary demographic indicators and the increased prevalence of certain
illnesses and conditions provide some predictability in terms of forecasting needs,
particularly in the long-term care sector, and there is a general trend towards
increased demand for care;

the strict and evolving regulatory environment (see Chapter 8 “Regulatory
environment”) acts as a significant barrier to entry. This reduces the risk of new
entrants in the market, benefiting major players already established, and helps
enhance their solvency, given the increasingly restrictive access conditions
imposed by the various regulatory authorities and the cost of the expertise
required to secure regulatory approvals;

the supply of treatment services is highly fragmented between public operators,
private companies and non-profit associations. However, a trend towards greater
consolidation in favour of large operators in the private commercial sector appears
to be developing.
The Medica group operates in the short-term and long-term dependency care market in
both France and Italy (see Chapter 9 “Presentation of the market in Italy”). Unlike the
principal European markets, in particular the UK and German markets, in which permits
are not granted so restrictively and are issued predominantly in return for compliance
with quality standards, the markets in France and Italy are governed by a very strict
permit and accreditation system, which represents a major barrier to entry.
The average occupancy rates in the German and UK markets stand respectively at 89%
(Source: German Federal Statistical Office, 2005 data) and 90% (Source: Laing &
Buisson, 2007 data, commercial private facilities only), i.e., well below the French
occupancy rate of 97% (Source: DREES, Etudes et Résultats no. 689 “L’offre en
établissement d’hébergement pour personnes âgées en 2007” (Accommodation for
elderly people in 2007)) and Italian occupancy rate of around 94% (2005 data).
29
In terms of pricing controls, the principal difference lies in the fact that UK and German
operators enjoy less flexibility in terms of pricing in comparison with their French and
Italian counterparts, who can set their accommodation rates directly with new residents.
7.1
Favourable demographic trends for the dependency care market
The dependency care market is supported by demographic trends including the gradual
ageing of the population, which is resulting in a corresponding increase in physical and
psychological dependency. This is a characteristic feature of French society, as well as
of most western societies.
7.1.1
Overall ageing of the over 60 population
The phenomenon of demographic ageing is inevitable. The number and proportion of
elderly people is expected to increase significantly by 2050.
The following chart illustrates the demographic projections for the population aged 60
and over 11 in France over the 2005-2050 period in thousands of people (Source: INSEE,
“Projections de la population pour la France Métropolitaine à l’Horizon 2050” (Population
projections for mainland France to 2050) of July 2006):
Projections of the population aged 60 and over in France between 2005 and 2050
Population aged 60 and over (in millions)
24.00
22.1 22.3
22.00
21.4
20.9
20.00
19.7
Age 60 and
older
18.1
18.00
16.8
16.00
15.7
14.1
14.00
12.6
12.00
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
According to the INSEE estimates, the number of people aged 60 or over in France,
which stood at around 12.6 million in 2005, is expected to reach around 14.1 million in
2010, around 15.7 million in 2015 and 16.8 million by 2020.
Based on this trend, around one in every three people would be over 60 years old by
2050, compared with one in five in 2005. By 2050, mainland France would have around
22 million people aged 60 or over, i.e., close to double the number in 2005.
This growth in older sections of the population as a proportion of the total is notably
attributable to a drop in the birth rate and the baby boom generation, born in the post-war
11
Mortality trend - Fertility rate 1.8 - Net migration + 50,000 p.a.
30
period between 1946 and 1975, entering higher age brackets. The first of these
generations will reach the age of 65 in 2010. These generations are also expected to live
longer given the decline in mortality rates owing to improved lifestyles and hygiene, as
well as medical progress in treatments for age-related diseases. Based on the mortality
assumptions adopted by INSEE, life expectancy at birth is set to rise from 76.9 years to
83.8 years for men and from 83.8 years to 89 years for women between 2005 and 2050
(Source: INSEE, “Population projections 2005-2050: ageing of the population in
mainland France”, 2007).
Growth in “extreme ageing” and in the population of “very elderly people”
The growth rate in the elderly sections of the population will be even stronger for the
oldest group (75 years and older).
According to the demographic projections produced by INSEE showing expected trends
in the population of mainland France from 1950 to 2050 (baseline scenario: “Mortality
trend - Fertility rate 1.8 - Net migration + 50,000 p.a.”, 2003): in January 2050, assuming
that recent demographic trends hold up, mainland France is expected to have some
70 million inhabitants, of which close to 11 million will be over 75. By this date, the
number of people aged over 75 would have more than doubled compared with 2005.
The following chart illustrates the demographic projections for the population aged over
75 years old in France over the 2005-2050 period in thousands of inhabitants (Source:
INSEE, “Population projections for mainland France in 2050”, July 2006):
11.5
10.9
10.4
10.5
9.9
7.1.2
9.5
9.0
8.5
Age 75
and over
8.1
7.5
7.0
6.5
5.8
5.9
5.5
5.5
4.9
4.5
2005
2010
2015
2020
2025
2030
31
2035
2040
2045
2050
According to INSEE estimates, the number of people aged 75 or over in France, which
stood at around 4.9 million in 2005, is expected to reach around 5.5 million in 2010,
5.8 million in 2015 and 5.9 million by 2020.
This increase in the population of “very elderly” will be even more marked for people
aged 85 and over. The number of elderly people over 85 years old is expected to rise
from around 1 million to 4.5 million between 2005 and 2050. This represents an
especially important trend in that this age bracket represents an increasingly critical
threshold in terms of isolation and dependency care owing to the higher prevalence of
dependency at these greater ages (see below “Increase in age-related dependency”).
The following chart illustrates the demographic projections of the population aged over
85 years old in France over the 2005-2050 period in thousands of inhabitants (Source:
INSEE, “Mortality trend - Fertility rate 1.8 - Net migration + 50,000 p.a.”, 2003):
4.5
4.2
3.9
4.0
3.5
3.5
Age 85 and
over
2.9
3.0
2.5
2.1
2.2
2.2
1.9
2.0
1.5
1.5
1.1
1.0
2005
2010
2015
2020
2025
2030
2035
2040
2045
2050
According to INSEE estimates, the number of people aged 85 or over in France, which
stood at around 1 million in 2005, is expected to reach around 1.5 million in 2010,
1.9 million in 2015 and 2.1 million by 2020.
32
7.1.3
Increase in age-related dependency
The level of dependency increases with age in terms of:

frequency: although only 13% of people over 60 are dependent, the rate rises to
50% for people aged 85 and over;

degree of dependency: 10% of people aged 75 are highly dependent, compared to
35% of people over 85 and 90% of people over 95.
The following chart demonstrates how the proportion of dependent people rises with age
(Source: DREES, HID survey, 2002):
97%
80%
50%
25%
13%
< 60 years
< 75 years
< 85 years
< 95 years
< 100 years
Proportion of dependent individuals by age bracket
While most people under 70 years old retain their mobility and while the move into
nursing homes is taking place later and later in life given the extension in life expectancy
and the progress made by medicine, a far higher proportion of people experience a
handicap beyond this age. The loss of mobility and physical strength due to ageing
results in other disabilities. In particular, this includes the inability to carry out various
domestic chores, leading to an increased need for assistance for everyday tasks such as
shopping, preparing and eating meals, housework and maintaining the home.
According to INSEE’s baseline scenario, the number of dependent individuals is
expected to increase by 50% between 2000 and 2040 to reach around 1.2 million
people. This figure varies between 1.1 million and 1.5 million dependent people,
depending on whether an optimistic or pessimistic scenario is adopted. In both
scenarios, the increase is set to become more rapid from 2030 onwards. At around this
time, the baby boom generation is set to reach 80 to 85 years old, which is when
dependency increases.
33
The following chart shows the growth in the number of dependent people in France in
thousands from 2000 to 2040 (source: INSEE, Destinie and DREES- HID surveys 19982001):
7.2
Factors conducive to the development of the long-term care sector
7.2.1
Caregivers are ageing 12
While a number of elderly people may live at home, in many cases they do so with the
help of their families (children or spouse), generally women, who are themselves
between around 50 and 80 years old. The ageing of caregivers, their dwindling number
and changes in lifestyles are, however, set to contribute to a growing need for care
solutions for dependent people in suitable accommodation.
The following chart illustrates the trend in the number of dependent elderly people (IGR 1
to 4) 13 and the number of potential caregivers (base-line 100 for 2000) over the 20002040 period:
12
DREES, “Personnes âgées et aidants potentiels : une projection à l’horizon 2040” (Elderly people and potential
caregivers: a projection out to 2040), February 2002.
13
The degree of a person’s dependency is evaluated using the AGGIR (Autonomie gérontologique groupe iso-ressources)
matrix, created by the Sécurité Sociale (French social security system) and the Société Française de Gérontologie
(French Gerontology Society). The everyday activities and actions which the person can or cannot perform are
identified. The matrix includes 10 key parameters, which can be used to assess the degree of dependency. An
algorithm classifies the elderly into six levels of loss of independence ranging from IGR 1 (highest degree of
dependency) to IGR 6.
34
Women aged 50 to 79
Men aged 50 to 79
Women aged 50 to 64, not active
professionally
People rated in categories IGR 1 to 4
The population of 50-79 year olds, and thus the number of potential caregivers is
expected to stabilise in absolute terms from 2011 onwards, before declining in around
2040, thereby increasing by just 10% between 2000 and 2040 according to INSEE’s
projections. The number of potential caregivers is thus expected to grow less rapidly
than the number of dependent elderly, which implies that the number of potential
caregivers per dependent elderly person is set to decrease.
The assistance provided by the dependent person’s immediate family (spouses and
children) is also set to decline sharply for sociological reasons, including growth in
professional activities, particularly among women, who account for the majority of
caregivers. Likewise, the geographic dispersal of families and, more generally, the limits
to family solidarity, as well as the increase in the number of childless elderly people, are
also conducive to the placement for the short and long term of dependents in
accommodation and facilities catering to their state of health.
7.2.2
Increase in dependency owing to the higher prevalence of neuro-degenerative
diseases
As well as predictable demographic changes, the development of neuro-degenerative
conditions such as Alzheimer’s or related illnesses, also play a role in increasing the
need for accommodation and treatment in nursing homes.
Based on the French health ministry’s current figures, Alzheimer’s disease and related
conditions affect around 850,000 people in France. At present, the Association
Internationale pour la Recherche sur la Maladie d’Alzheimer (“AIRMA”, the international
association for Alzheimer’s research) estimates that approximately 15% of Alzheimer’s
sufferers are less than 75 years old, a figure that rises to approximately 25% after 85
years old and around 50% among those 90 or over.
Given the demographic trends described above, a steep increase in the number of
people suffering from these conditions is expected over the next few years, since the
prevalence of Alzheimer’s and related conditions is apparently age-correlated. AIRMA
believes that at present the number of sufferers stands at approximately 1.3 million and
could grow to approximately 25% of people aged 65 and older in France by 2020.
Trends in this condition are expected to contribute to the increase in the number of
dependent elderly and the demand for accommodation and care facilities.
35
The Alzheimer’s plan, which was introduced in France in 2007, calls for €1.6 billion to be
spent in this area over the 2008-2012 period. Among the measures proposed, the main
lines of attack are the creation or identification within nursing homes of specialised units
geared to this type of condition.
7.3
Factors conducive to the development of the post-acute and psychiatric sector
While the impact of the ageing of the French population is also expected to drive
increased demand for care in the post-acute and psychiatric sector, a number of other
factors, specific to the post-acute and psychiatric sector, are set to play an instrumental
role in its development.
The rehabilitation and recuperative care sector has enjoyed steady development thanks
to demand linked to chronic conditions and population ageing. Demand for care in this
sector is also growing due to the decrease in the average length of stay in medical,
surgical and obstetrical facilities in France since the implementation of the TAA
(tarification à l’activité, activity-based pricing) fee schedule, leading to a growing need for
increasingly technical care (see also section 7.4.2 “Health policy contributing to the
development of the post-acute and psychiatric sector”).
In the psychiatric segment, the prevalence of psychiatric conditions is expected to
contribute to the growth of the post-acute and psychiatric sector. Psychiatric conditions
are the second-largest cause of lost work time in France and the leading cause of
invalidity. Schizophrenia is estimated to affect 635,000 people, including 26,000 young
people between 15 and 25 years old (Source: Report no. 328 (2008-2009) by French
Senator Alain Milon on behalf of the French parliamentary office for the evaluation of
health policies, submitted on 8 April 2009). It is estimated that one third of the total
number of sufferers of these conditions are accommodated in an institution. According to
the report, depression affects five million people and is the leading cause of suicide in
France. The proportion of sufferers whose depression is untreated is estimated at 44%.
Bipolar disorders 14 reportedly affect 750,000 people, leading to consequences in terms
of desocialisation and substance abuse. Moreover, 6% of people are estimated to have
suffered an anxiety disorder (Source: Union Nationale des Cliniques Psychiatriques de
France, French national union of clinical psychiatrists).
At present, increased awareness of new disorders related to drug and alcohol addiction,
gambling, the misuse of new technologies and prescription drugs is expected to grow, as
well as disorders linked to psycho-social risks, such as violence in the workplace.
7.4
Favourable social policies and regulatory environment
The French dependency care market is heavily affected by the regulatory environment
created by the social policies implemented that shape the type of care available and help
to increase the viability of the market.
The French government’s actual spending for 2008 put total health expenditure in
France at €215 billion. This figure represents 11% of French GDP (Source: DREES,
Études et Résultats no. 701, “Les Comptes nationaux de la Santé en 2008” (National
health accounts in 2008), September 2009), reflecting the scale of demand for the
treatment of the ill and dependent sections of the population. The French Social Security
14
In psychiatry, bipolar disorders are defined as alternating periods of some degree of mania and then periods of
moderate or severe depression.
36
system covered the cost of 75.5% of spending on healthcare and medical items during
2008, while another 1.3% was paid for by the Couverture Maladie Universelle (“CMU”,
universal health insurance) and state medical aid. Complementary bodies (mutual
insurers, insurance companies and personal protection institutions) covered 13.7% of
expenditure, with the remaining portion paid by households working out at just 9.4% of
the total (Source: DREES, Études et Résultats no. 701, “Les Comptes nationaux de la
Santé en 2008” (National health accounts in 2008), September 2009).
7.4.1
Health policy instrumental in the development of the long-term care sector
Given the phenomenon of an ageing population and increased dependency, the overall
availability of dependency care capacity has in the past been insufficient, failing to cover
the needs of the most dependent individuals (rated in categories IGR 1 to 4), as the
number of beds available in institutions is below the care requirement for this dependent
population.
From a historical perspective, the growth in capacity has been exceeded by that in the
number of people aged 75 or over. For instance, between 1996 and 2003, the overall
availability rate in France went from 166 beds per 1,000 people aged 75 and over to 140
beds per 1,000 people, which represents a decline of 16% (Source: Report by the Cour
des Comptes “Les personnes âgées dépendantes” (Dependent elderly people),
November 2005).
To illustrate this point, close to 1.4 million people in France were over 85 years old as at
31 December 2007 according to INSEE estimates (Source: INSEE Résultats no. 57 Baseline Scenario). Given the greater prevalence of age-related dependency described
above (see section 7.1.3 “Increase in age-related dependency”), capacity in the French
long-term care sector, which stood at around 470,000 beds at the same date, was thus
no longer sufficient to meet demand for dependency care in this age bracket alone.
Accordingly, the public authorities, aware of the need to increase accommodation
capacity, have implemented various plans over the past few years, notably the
Vieillissement et Solidarités (ageing and solidarity) plan, which was launched in late
2003 following the summer 2003 heatwave and led to the addition of 10,000 beds of
additional capacity, the Solidarité Grand Age (Solidarity with the Very Elderly) plan
implemented in June 2006, and the Alzheimer’s plan, the major national cause of 2008,
which aims to create 7,500 beds per year starting in 2008 over a period of four years.
In spite of the implementation of these bold policies, the number of places in facilities for
the elderly increased by just 1.4% between 2003 and 2007. At year-end 2007, the
number of beds in accommodation facilities for the elderly stood at an average for
France of 127 beds per 1,000 inhabitants aged 75 or over, including 95 beds in nursing
homes, with the remainder split primarily between homes and long-term care units. The
overall availability rate continues to decline, since the population of people aged 75 or
over has increased far more rapidly than the number of beds in institutions.
Against this backdrop, for the sector as a whole, the average occupancy rate for 2007,
calculated as the ratio of the actual number of bed-days to the theoretically available
number of bed days available, stood at 97%, up from 95% in 2003 (Source: DREES,
Etudes et Résultats no. 689, “L’offre en établissements d’hébergement pour personnes
âgées en 2007” (Available capacity in accommodation facilities for the elderly in 2007),
May 2009).
37
Aside from this longstanding undercapacity, the quality of facilities may also be
inadequate. The Cour des Comptes (French audit office) estimates that 30% of beds
require partial refurbishment and that 10% to 15% of them require a complete overhaul.
For instance, in the elderly residence segment, 30% of single-bed rooms (i.e., 82% of
capacity) have less than 16m² in space and just 52% of these rooms are fitted with a
shower, especially at nursing homes attached to a hospital, where the rate is even lower
(36%). The combination of these unfavourable situations (small rooms, lack of certain
basic equipment, non-compliance with safety standards, etc.) points to the need for
restructuring and even the closure of certain facilities (Source: Report by the
Commissariat au Plan, July 2005).
The budget set aside by the Assurance Maladie system for the elderly is constantly
increasing, given the upturn in long-term care expenditure as dependency increases.
Each year, the Social Security budget bill sets a National Health Insurance Spending
Target (“ONDAM” - Objectif National d’Evolution des Depenses d’Assurance Maladie),
enabling the government to set a target representing the annual budget for healthcare
spending in the private hospital sector that is paid for by the Social Security system.
Over the 2000-2008 period, the amount of ONDAM expenditure on the elderly has
almost doubled, rising from €2.4 billion in 2000 to €5.5 billion by 2008. Even so, this
spending only accounted for 2.6% of total health expenditures in France in 2008. This
policy is reflected in the projections of the Programme Interdépartemental
d’Accompagnement des handicaps et de la perte d’autonomie (“PRIAC”,
Interdepartmental programme to assist with disabilities and the loss of independence), a
budgeting system that sets the regional priorities in terms of financing the creation,
extension and conversion of facilities or long-term care services accommodating or
caring for the elderly and the disabled.
As stated below, the PRIAC programme will provide for the financing of 8,700 new beds
in nursing homes on average each year from now to 2013 for the public and private
sector combined (no breakdown between the two is stipulated), representing a total of
43,505 beds between 2009 and 2013 15 (Source: PRIAC: Programmation Prévisionnelle
des actions prioritaires selon la Thématique (Projected scheduling of priority measures
by theme) – “L’accompagnement en Institution” (Support in institutions)).
15
With the exception of the regions of Alsace, Aquitaine, Brittany, Haute-Normandie and Poitou-Charentes (2008-2012)
and Lorraine (2009-2011).
38
Priorities defined in the PRIAC
Region
Alsace
Rebalancing of
Creation of
local
Conversion into Alzheimer’s
infrastructure nursing homes
units



Aquitaine
1,913
383



Auvergne
874
175




Basse-Normandie
1,375
275
Bourgogne
1,406
281

Bretagne
1,038
208

Centre
1,631
326

Champagne-Ardennes




1,552
310

Corse
653
131

Franche-Comté
617
123


Haute-Normandie
1,004
201



Ile de France
8,872
1,774



Languedoc-Roussillon
3,274
655

Limousin
455
91

Lorraine
265
88












Midi-Pyrennées
1,348
270
Nord-Pas-de-Calais
3,548
710

PACA
2,822
564

Pays de Loire
4,410
882

Picardie
2,058
412

Poitou-Charentes
1,658
332


Rhône-Alpes
1,727
345


43,505
8,737
19/22
14/22
Total
7.4.2
2009-2013
1,005
Increase in the
by year
number of beds

201







06/22
18/22
Health policy contributing to the development of the post-acute and psychiatric
sector
The development of the post-acute and psychiatric sector also represents one of the
French health ministry’s priorities in terms of care capacity in particular owing to:

its positioning between the short-term care sector and the long-term care sector;

the growing increase in the technical aspects and specialisation of the various
conditions treated and unmet needs in terms of post-hospitalisation rehabilitation,
notably for dependent individuals, but also the rehabilitation care required as a
result of neurological conditions; and

the shorter length of hospital visits in short-stay units (i.e., medical, surgical and
obstetrical facilities) in recent years.
The rehabilitation and recuperative care sector represents a strategic part of care
capacity, since it acts as a type of platform ensuring the fluidity of the post-acute and
psychiatric sector owing to its position mid-way between the short-stay and long-term
care sectors. This sector has experienced steady development given the relentless
growth in demand for care and the shorter average length of stays in short-stay public
hospitals and private clinics. Developments in medical and surgical practices and a
policy of reducing healthcare spending have led to a reduction in the average period of
hospitalisation in short-stay facilities (medical, surgical and obstetrical facilities), giving
rise to a growing need for downstream care benefiting post-acute and psychiatric
39
facilities, since short-term dependency is becoming more frequent. Surveys put at
around 30% the portion of hospitalisation days attributable to unnecessary short-term
hospital stays (Source: CCECQA/ANAES, “Les coûts de la qualité et de la non qualité
des soins dans les établissements de santé” (Costs of quality and non-quality of care at
healthcare facilities), 2004). The dependent elderly are the principal segment affected by
these unnecessary hospital stays: between 18% and 22% of patients hospitalised in
medical wards are patients who are ready for discharge from a medical perspective, but
are kept in short-stay hospital beds principally because it is hard to find appropriate
rehabilitation care or to arrange for them to return home. This represents around
5 million days, working out at a cost of over €2.5 billion. Half these patients are said to
need post-acute facilities, notably rehabilitation and recuperative care services, and the
other half need long-term care facilities, or home care with treatment on an out-patient
basis. These adjustments could thus pave the way for significant improvements in care,
notably for the dependent elderly, through accommodation in a suitable environment and
a lower unit cost for the authorities, since the average cost of a day’s hospitalisation is
estimated at around €500 (Source: Second report of the “Prospective des équipements
et services pour les personnes âgées dépendantes” commission (Outlook for facilities
and services for the dependent elderly) led by Stéphane Le Bouler, June 2006).
This trend is expected to continue over the next few years as the new fee schedule
(“TAA”, activity-based pricing) (see section 8.2.4 “Fee structure”) is implemented at
short-stay facilities (medicine, surgery and obstetrics). This new method of activity-based
pricing encourages productivity gains and is expected to lead to a reduction in periods of
short-stay hospital care and higher patient rotation, thereby automatically increasing the
need for subsequent care in medium-stay facilities and in particular rehabilitation and
recuperative care facilities.
In the rehabilitation and recuperative care sector in which the Medica group operates,
private commercial facilities accounted for 26.6% (in terms of stays) of the market at
year-end 2007 (Source: DREES, Études et résultats no. 691, May 2009). The
rehabilitation and recuperative care activities of healthcare facilities have grown for
several years to reach 2.8 million stays in 2007, representing an increase of 5.8%
compared to 2006 (Source: DREES, Études et résultats no. 691, May 2009).
The Medica group estimates that this growth is firmer in the private sector and is
attributable to the greater efficiency of the private sector, since it provides care at a lower
cost than the public sector.
7.4.3
Market solvency supported by the public finances, various social and tax
subsidies and the increase in patients’ living standards
The dependency care market in France is also characterised by its solvency, which
derives notably from the increase in public financial subsidies for dependency care,
particularly the APA (personal independence allowance), social assistance and housing
benefits, tax rebates, as well as, more generally, owing to the rise in households’ living
standards.
The APA
The introduction of the personal independence allowance (APA) on 1 January 2002 has
made it possible to finance dependency expenses (at home and in facilities). Originally
intended to help 800,000 dependent individuals, the APA was received by 1,117,000
people as at 30 June 2009 (Source: DREES, Études et résultats no. 690, “L’allocation
40
personnalisée d’autonomie et la prestation de compensation du handicap au
31 décembre 2008” (Personal independent allowance and the disability compensation
grant as at 31 December 2008, May 2009/DREES), “L’allocation personnalisée
d’autonomie (APA)” (The Personal independence allowance (APA) as at 30 June 2009).
The personal independence allowance is aimed at the most dependent people aged 60
and over, i.e., people whose dependency level is assessed at between IGR 1 to 4. This
allowance sets objective criteria for the amount to be paid. Any elderly person who is
unable to finance the consequences of a lack or loss of independence due to physical or
mental illness has the right to receive a personal independence allowance, paid by the
department (French administrative division) either directly to the person or to the care
facility (at the facilities’ discretion). It may also be paid directly to the facility in the form of
a global allowance by the Conseil Général (departmental authorities) for residents living
in the facility’s department. In accordance with the regulations, this type of direct
payment is set to be rolled out across the board starting in 2010, provided the relevant
Conseils Généraux agree to this. This allowance may be used either for the assistance
required to carry out essential daily activities, or for such regular supervision as may be
needed. This allowance may be reduced by a contribution from the beneficiary, based on
his or her means.
The following table shows the increase in the number of recipients of the personal
independence allowance between 2002 and 2009 (Source: DREES):
Number of recipients
(in thousands)
At home
In accommodation
Together
December 2002
309
296
605
December 2003
455
337
792
December 2004
509
356
865
December 2005
551
387
938
December 2006
602
406
1,008
December 2007
662
416
1,078
December 2008
689
426
1,115
June 2009
686
431
1,117
As at 31 December 2008, the average monthly amount of the personal independence
allowance paid to elderly people living in a nursing home broken down by IGR and the
portion of expenditure borne by recipients of the personal independence allowance were
as follows (source: DREES, Études et Résultats no. 690, May 2009):
41
Monthly amount per recipient resident in a nursing home (in euros)
Total dependency
fee
Portion borne by the
Conseil Général paid in
respect of the APA
IGR 1 and 2
547
396
151
IGR 3 and 4
335
195
140
Weighted average
460
313
146
Portion paid by the
recipient*
*The personal independence allowance (APA) paid by the Conseil Général covers the difference between the
dependency charge related to the recipient’s IGR and the contribution paid by the recipient, the latter generally
being the dependency charge applied by the facility to people assessed as being in IGR categories 5 and 6.
In nursing homes nationally, the personal independence allowance covers an average of
68% of the daily dependency rate charged by the host facility (source: DREES, Études et
résultats no. 690, May 2009).
In addition, legislative and regulatory changes in terms of the fee schedule (see Chapter
8 “Regulatory environment”) and assistance enable certain people living in nursing
homes, depending on their financial resources, to receive several types of assistance to
cover the cost of care, including social assistance, housing benefits and tax rebates.
Social assistance and housing benefits
Article L.113-1 of the Code d’Action Sociale et des Familles (Social and Family Action
Code) also states that “any person aged 65 without sufficient means may… be placed…
in a facility”. This placement may be in a private facility, if the facility chooses to operate
under an agreement covering recipients of social assistance. In this case, the price of
accommodation is set jointly with the Conseil Général. The facility may request a total or
partial authorisation, i.e., applicable to solely one portion of its beds. In this case, it signs
an agreement with the Conseil Général laying down the scope of the authorisation and
the charges.
Social assistance may also contribute to the costs of an elderly person’s accommodation
in a facility with which no such agreement has been signed, if the elderly person has
stayed in that facility as a paying resident for at least five years and his or her resources
are no longer sufficient to pay the fees for his or her maintenance. However, under these
circumstances, the cost is capped at the cost of accommodation at a public healthcare
facility offering similar services.
Finally, a social housing benefit (“ALS”) and personal housing benefits (“APL”) may also
be paid to residents under certain conditions, in particular relating to the resident’s
available financial resources.
Tax measures benefiting residents
Residents may receive a tax rebate equal to 25% of dependency costs paid, up to an
annual limit of €10,000, representing a maximum tax rebate of €2,500 per person
accommodated. The cost taken into account is calculated after deduction of any
personal independence allowance received by the resident (Article 199 quindecies) of
the French General Tax Code).
Accordingly, the level of financial resources is not a highly discriminating factor in terms
of the availability of dependency care, since the growing availability of public assistance
provides residents with some degree of solvency.
42
The higher living standards of residents
Pension reform, with the introduction of the minimum old-age allowance (minimum
vieillesse), the higher proportion of people possessing a full pension and the growing
proportion of women who have been active professionally will all have a positive impact
on pensioners’ income over the next 10 to 15 years. In addition, according to INSEE’s
estimates, 76% of retired households own at least one home, compared with a figure of
60% for all households. Among professionally active people over 50 years old, the
proportion of households that own at least one home stands at 72%. Generally speaking,
the period between 50 and 65 years old is when French households either buy their first
property or buy properties to let with a view to building up a portfolio or earning additional
income for their retirement (source: INSEE, “Enquête Logement 2002” (Housing
survey)).
As a result, the income of those aged 85 or over is set to increase by 50% between 2000
and 2020. In parallel, the portfolio income of people aged 80 or over is also expected to
increase: the average wealth of people between 80 and 84 years is forecast to increase
from €120,000 to €250,000 over the next 15 years (source: Etude LEK, 2006).
7.4.4
Regulatory barriers to entry conducive to concentration in the sector
Given the strict regulatory framework within which participants in the dependency care
market have to operate, in terms of both the post-acute and psychiatric and the longterm care sectors (see Chapter 8 “Regulatory environment in France”), the Medica group
believes that the dependency care market is characterised by a number of barriers to
entry that benefit existing operators with the credentials, expertise and financial strength
required to adapt their capacity in terms of their medical capabilities and the greater
specialisation of demand. The opportunities for organic growth in the sector are thus
relatively few and far between owing to the complexity involved in obtaining new permits.
Under the current system, it is up to operators to take the initiative of seeking a permit to
set up a new facility. With effect from 1 January 2010, a new system overseen by the
Agences Régionales de Santé (“ARS”, Regional Health Agencies) provides for the
organisation of invitations to tender for projects, which will be mandatory for all projects
soliciting public funds either in full or in part in the French dependency care market (see
Chapter 8 “Regulatory environment in France”).
The future system of invitations to tender for projects, which will be overseen by the ARS
at the regional level, rather than at departmental level, with regard to both the long-term
care and post-acute and psychiatric sectors, should continue to benefit participants with
the profile, financial strength and expertise required to meet the obligations entrusted to
them by the regulatory authorities. The Medica group, which has already been
successful following an invitation to tender for a project in Gamaches that was launched
using the system to be run from 2010 by the ARS. The group believes that the costs and
expertise in quality programme management that need to be devoted to presenting plans
in response to these invitations to tender and participate successfully in the selection
process and subsequently to honour the undertakings given to the regulatory authorities,
automatically reduce the scope for new entrants to establish themselves in the
marketplace. These constraints are set to favour a relatively modest number of
participants comprising the leading players in the private commercial sector that are
already present in the market and possess commensurate experience and resources.
43
7.5
A still fragmented market providing scope for consolidation
The dependency care market is highly fragmented, both in terms of the facilities able to
look after patients with short-term or long-term dependency care needs, and in terms of
the main players. These participants vary widely by size and structure, and include
participants in the public sector and private commercial sector as well as non-profit
associations. Despite this high level of fragmentation, a trend towards concentration has
emerged in the private commercial sector benefiting larger participants.
7.5.1
Long-term dependency care in France (long-term care sector)
Broad range of structures providing long-term dependency care in France
The Medica group operates in the long-term dependency care market principally through
its nursing homes (see chapter 16.1 “The long-term care sector: long-term dependency
care in France”).
This said, long-term care facilities for the elderly are varied and meet a range of
dependency care needs depending on the degree of dependency of patients.
Facilities may be classified as follows:

residences for the dependent elderly (nursing homes). These facilities provide
accommodation, catering and healthcare services for the elderly. They have
entered into a tripartite agreement or are still considered medical facilities as they
have a treatment unit and can therefore treat the highly dependent (primarily IGR
1 and 2);

home nursing care services assist the dependent at home and provide medical
care for the elderly while maintaining them in a familiar environment. These
services delay their institutionalisation (primarily IGR 2 to 4);

homes and service residences, offering elderly residents, tenants or home owners
collective services (meals, housecleaning, laundry, primarily IGR 5); and

residences for the elderly or retirement homes (primarily IGR 5 and 6) and longstay care units, which are intended to accommodate able-bodied or invalid elderly
requiring medical supervision and recuperative care. They are primarily in the
hospital sector (primarily IGR 1 and 2) and account for an increasingly large
proportion of dependency care capacity.
A still fragmented market, shaped by major players from the private commercial sector
and harbouring consolidation opportunities
Facilities offering long-term dependency care are managed by a large number of
operators, diverse in nature and size, from the private commercial sector, non-profit
sector and public sector.
While the overall capacity of the market, i.e., 471,102 beds, is primarily in the public
sector (around 49.3% of the number of beds available at year-end 2007, compared with
28.8% in the non-profit private sector and 21.9% in the private commercial sector), most
of the development in recent years has come in the private commercial sector, which has
recorded growth at a far stronger rate than the public sector (17.4% over the 2003-2007
period compared with 5.6% in the public sector (source: DREES, Études et Résultats,
no. 689, May 2009, data at year-end 2007). As a result of their generally larger financial
resources, private commercial sector groups are more readily able to invest in better
44
medical treatment facilities and to expand the accommodation capacity of nursing
homes.
According to DREES research, almost half the beds created over the 2003-2007 period,
i.e., around 15,300 beds, were added in the private commercial sector (source: DREES,
Études et résultats no. 689, May 2009).
Competition in the private commercial sector is primarily between two main categories of
participant:

the major listed groups and other market participants with a bed capacity of over
6,000; and

smaller, independent groups or entities that are principally owned by their directors
or founders.
The following chart shows the accommodation capacity in the number of beds of the top
15 private commercial operators in France in 2008 (source: Mensuel des Maisons de
Retraite, 31 December 2008) 16 :
Top 15 private commercial operators in 2008
12000
10678
10169
< 3,000 beds
10000
8612
< 1,000 beds
7780
8000
6296
Number of beds in 2008
6000
Number of beds
4000
2059 2054
Private commercial operators
16
1199 1123
886
861
Residalya
1425
Groupe A Plus Santé
Mieux Vivre
Colisée Patrimoine
Emera
Le Noble Age
Groupe Imbert
Domus VI
Médica France
Dolcéa
Korian
Orpéa
0
SGMR
1482
2000
Sociétés Didier Ger...
2281
SAS Oméris
2441
The method used to calculate the number of beds adopted by the Mensuel des Maisons de Retraite leads to a different
value for the Medica group’s nursing home capacity, which stood at 7,308 as at 31 December 2008.
45
In 2008, only the top five operators managed more than 3,000 beds and ten or so groups
operate between 800 and 3,000 beds. The top 15 players together account for 60% of
the private commercial sector (source: Mensuel des Maisons de Retraite, December
2008). In spite of the emergence of five major national players in the private commercial
sector, the market still remains fairly fragmented since it still features 800 individual
facilities and has seen signs of consolidation. The five major private commercial
operators referred to above accounted for close to 42% of the total accommodation
capacity in the private commercial sector at year-end 2007, up from around 34% at yearend 2003 (sources: Mensuel des Maisons de Retraite, December 2003 and 2008).
The following chart shows the market share of the various participants in the long-term
dependency care market in France:
Breakdown of nursing home beds in France
Non-profit
28.78%
Other private commercial
57.7%
Private commercial
21,9%
Domus VI
6.1%
Médica
7.6%
Public
49.34%
7.5.2
Dolcéa
8.4%
Korian
9.9%
Orpea
10.4%
Short-term dependency care in France (post-acute and psychiatric sector)
The short-term dependency sector treats various ailments and, as a result, includes a
variety of healthcare institutions for rehabilitation and recuperative care services,
physical and rehabilitative medicine, and psychiatric care. The Medica group is active in
the post-acute and psychiatric sector, primarily through rehabilitation and recuperative
care facilities (see section 16.2 “Post-acute and psychiatric sector: short-term
dependency care”).
A fragmented short-term dependency care market, characterised
specialisation, shaped by major players from the private commercial sector
by
greater
As at 31 December 2007, rehabilitation and recuperative care services capacity of more
than 95,000 beds was available in France for patients requiring short-term dependency
care (source: DREES, Etudes et Résultats, no. 691, May 2009), including around 39,600
beds in the public sector (42%), 30,200 beds in the non-profit sector (32%) and 25,300
beds in the private commercial sector (27%). In addition, in the psychiatric sector, France
had a capacity as at 31 December 2007 of around 57,000 beds, including around 38,300
in the public sector (67%), 7,574 beds in the non-profit sector (13%) and 11,024 beds in
the private commercial sector (19%). The rehabilitation and recuperative care segment
of the post-acute and psychiatric sector is even more fragmented than the long-term care
sector. These facilities are managed by a very large number of participants of very
46
different sizes from the private commercial sector, the non-profit sector and the public
sector.
The following chart shows the principal players in the private commercial sector active in
rehabilitation and recuperative care and psychiatric care in France and their capacity in
terms of the number of beds they operate (source: companies).
4000
3471
3500
3000
2500
2000
2650
2034
1833
1839
1949
1500
Rehabilitation and
recuperative care
910
1000
Psychiatric beds
367
500
0
La Générale de
Santé
ORPEA CLINEA
KORIAN
MEDICA
The landscape of the French commercial post-acute and psychiatric sector remains
heavily marked by small facilities owned by one or more doctors or their families and still
appears to be more fragmented than the long-term care sector. The vast majority of
facilities are still independent and a round of concentration is underway, owing notably to
the general trend towards greater specialisation of facilities, leading to the conversion of
multi-disciplinary facilities into centres specialising in care for particular conditions. The
goal of this specialisation is to generate higher revenue per bed.
47
The following charts show the market share of the various participants in the short-term
dependency care sector (rehabilitation and recuperative care and psychiatric facilities) in
France.
Breakdown of nursing home beds in France
Non-profit
0.3
57.7%
Private commercial
21,9%
Domus VI
6.1%
Médica
7.6%
Dolcéa
8.4%
Public
0.5
Korian
9.9%
Orpea
10.4%
Breakdown of rehabilitation and recuperative care and psychiatric
Non-profit
facilities in France
24.8%
58.6%
Private commercial
23.9%
Medica
6.4%
Korian
9.8%
Public
51.3%
Orpea
14.6%
48
Générale de santé
10.6%
8
REGULATORY ENVIRONMENT IN FRANCE
8.1
The long-term care sector
8.1.1
Nursing home permits
Creation, conversion or extension of a facility
Pursuant to Article L.313-1 of the French Code de l’action sociale et des familles
(“CASF” Social and Family Action Code), the creation, conversion or extension of a
nursing home requires prior authorisation, issued jointly by the relevant government
authority (i.e., the DDASS) and the President of the Conseil Général, after seeking the
consultative opinion of the elderly person section of the Comité Régional de
l’Organisation Sociale et Médico-Sociale (“CROSMS”, Regional Social and Long-Term
Care Organisation Committee). It is required for projects leading to the creation,
conversion or extension of capacity exceeding 30% of the initial capacity authorised or to
over 15 authorised beds, places or beneficiaries.
The government agency (DDASS) and the President of the Conseil Général have full
authority to act because the services provided by the nursing home are likely to be paid
for in part by the state or Assurance maladie and, in part, using departmental social
assistance.
The following chart illustrates the current process for requesting a permit to create a new
facility:
5. Favourable opinion
Operators
1.
DDASS
3. Opinion
1.
2. Completeness
Conseil Général
4. Consultative opinion
CROSMS
4. Consultative opinion

DDASS: Direction départementale de l’action sanitaire et sociale (Departmental Medical and Social
Service Directorate)

CROSMS: Comité régional de l’organisation sociale et médico-sociale (Regional Social and Long Term
Care Organisation Committee)
Initial authorisation may be granted when the project of creating a facility is compatible
with the objectives and meets the social and long-term care needs stated in the Schéma
Gérontologique Départemental (“SGD”, Departmental Gerontological Plan). Their
purpose, under the provisions of Article L.312-4 of the CASF, is to assess the nature,
level and trends in social and long-term care needs of the population, prepare
quantitative and qualitative analysis of existing social and long-term care capacity and
identify the possibility of and targets for the development of this capacity over a
maximum period of five years at departmental level. The SGDs may also provide for the
49
multi-year scheduling of facilities and services that need to be created, converted or
removed.
Once the CROSMS has submitted its opinion to the regulatory authorities (DDASS and
Conseil Général), the authorisation may be refused solely for financial reasons because
the permit application has to be compatible with the regional and departmental budgets
of the Assurance Maladie system in the year in which the project is examined (even if it
is not to be implemented until a later date).
In such cases, the application is given a priority classification at department level.
This classification is made specifically based on the project’s ability to meet the priorities
outlined in the SGD. The orders of priority set in the previous year may be altered if the
applications carry a higher degree of priority. The project is also submitted to the PRIAC.
The PRIAC (Programme Interdépartemental d’Accompagnement des handicaps et de la
perte d’autonomie, Interdepartmental programme to assist with disabilities and the loss
of independence) is a budgeting system for each region that sets the regional and
interdepartmental priorities for the creation, extension and conversion of facilities or
services at the regional level over a three-year period.
Each year, PRIAC’s analysis is used by the Caisse Nationale de Solidarité pour
l’Autonomie (National Independence Solidarity Fund) to negotiate and allocate
Assurance maladie credits and government credits by setting the regional and
departmental allocations. The goal is to foster a rebalancing of long-term care capacity
across the entire country.
This said, to reconcile the needs of the department in terms of medicalised beds and
financing requirements, the DDASS has been able since 2005 to make an authorisation
decision using deferred financing. This is critical to authorising a project scheduled to be
implemented after the year in which the application is submitted. An advance allocation
is then set aside by region and department.
In addition, an operating permit issued for nursing homes subject to signature of a
tripartite agreement with the DDASS and the Conseil Général (see section 8.1.3 below
“Fee schedule under tripartite agreements”), as well as an inspection ensuring
compliance with the organisational and operating rules outlined in Articles D.312-156 to
D.312-161 of the CASF. These rules require in particular:

the presence of a coordinating physician. Among other duties, he or she is
responsible, with the care team, for developing the care plan, giving an opinion on
admissions, assessing residents’ state of dependency, and ensuring that best
geriatric practices are followed;

creation of a plan establishing organisational details in the event of medical or
weather-related crises; and

the availability of air-conditioned premises for residents.
Operating permits are valid for fifteen years. They may be granted solely with the
consent of the relevant competent authorities (DDASS and Conseil Général). Similarly,
any material change in activity, installation, organisation, management or operation of a
facility or service requiring a permit must be brought to the attention of the authorities.
50
Once it expires, the permit may be renewed, depending exclusively on the outcome of
the external assessment carried out no later than two years prior to the renewal date
(see the description in section 8.1.2 below “Evaluation of nursing homes”).
The hospital reform law concerning patients, health and regions
To decompartmentalise the health system, enhance its oversight and its organisation,
the government plans to set up Agences Régionales de Santé (“ARS”, Regional Health
Authorities) from 2010, with the agencies due to be fully in place by 1 July 2010 at the
latest.
The goal of the ARS will be to strengthen the regional tier for the oversight of market
participants and the planning of healthcare provision across the regions. They will also
be instrumental in the formation of closer ties between the post-acute and psychiatric
and long-term care sectors, which is critically important, and with effect from 1 July 2010
at the latest will replace the DDASS the government’s competent authority in terms of
the prior authorisation of nursing homes (the Conseil Général will continue to issue joint
permits together with the ARS).
The introduction of this law also provides for the development of competition, with the
systematic arrangement of calls for tender for projects. These calls for tender for projects
will be mandatory for all projects that will make use of public funds, either in full or in
part.
The following flowchart illustrates the calls for tender for projects applicable to
applications for permits, extensions or conversions submitted no later than 1 July 2010:
Operators
1. Invitation to tender
ARS
2. Consultation
CSAPSMS
Conseil général
Selected
operator
CSAPSMS: Commission de Sélection des Appels à Projets Sociaux et Médico-Sociaux (Selection Committee
for Invitations to Tender for Social and Long-Term Care Projects)
Some of the invitations to tender for projects are to be reserved for the presentation of
experimental or innovative projects complying with a stripped-down set of specifications.
The new procedure also provides for the involvement of a consultative committee for
invitations to tender projects notably made up of service users, who will give their opinion
on projects.
51
8.1.2
Evaluation of nursing homes
All nursing homes are subject to an assessment that has two stages:

a self-assessment, the results of which must be reported every five years to the
authorities that issued the permit; and

an external assessment, which is conducted during the seven years following
issuance of the permit and no later than two years prior to its renewal by external
and independent agencies, which have sole responsibility for renewals of the
permit every 15 years. The assessment bodies approved by the ANESM have to
comply with a set of specifications set by government decree safeguarding their
independence and listing the assessment methodology (procedure, successive
stages, interpretation and publication of the results).
To support this obligation and promote the assessment programmes and
recommendation of best practices, the social security financing law for 2007 set up the
ANESM, which supervises the assessment (organisation of procedures, references and
best practice recommendations) and issues the permits to the assessment bodies.
8.1.3
Fee schedule under tripartite agreements
The number of nursing homes accommodating elderly residents satisfying the loss of
independence criteria laid down in Article L.232-2 of the CASF and thus qualifying for the
personal independence allowance (APA), including the weighted average IGR (GMP) 17 ,
stands at over 300, and they were due to have signed no later than 31 December 2007 a
tripartite agreement with the Conseil Général and the relevant government authority.
Those that have failed to do so no longer qualify as having nursing home status and
have no longer been able to accommodate the dependent elderly since 1 January 2008
or to look after the beneficiaries of social assistance.
The tripartite agreement provides for nursing home rates to be broken down into three
components:
The nursing home rate: sum of three components
Proportion of the
total rate (average
recorded)
Who sets the rate?
Accommodation rate
Treatment rate
Dependency rate
70%
20%
10%
The entry rate is set freely
by the facility
The DDASS, according to
the dependency and
conditions of each resident
18
(IGR 1-4 and Pathos ) and
qualitative treatment criteria
(Article L.314-2-1 of the
CASF)
The Conseil Général,
based on the dependency
level of each resident
(Article L.314-2-2 of the
CASF)
17
The GMP is the average level of dependency of a facilities’ residents. This indicator determines the level of the funds
that will be granted to the facility in connection with the treatment and dependency allowances. The GMP is on a scale
of between 70 (lowest level of dependency) and 1000 (highest level of dependency).
18
The Pathos system, which was designed in partnership with the Syndicat National de Gérontologie Clinique (French
national syndicate of clinical gerontology) and the Service Médical de la Caisse Nationale d’Assurance Maladie (medical
department of the CNAM) and complements the AGGIR matrix, can be used to conduct a cross-sectional analysis of the
treatment needs required on a resident by resident basis.
52
The nursing home rate: sum of three components
Accommodation rate
Who pays in a
nursing home?
Treatment rate
The residents (or the
Conseil Général for “social Assurance Maladie
assistance” beds)
Dependency rate
The Conseil Général with
the APA (personal
independence allowance)
and the remainder by the
residents
Accommodation rate
A daily rate for accommodation, which includes all general nursing home administration,
reception, catering, maintenance and social event services in the nursing home which
are not linked to the dependency of the residents cared for, the level of which is set
freely by the facility subject to a cap on annual increases for residents present, is fixed
each year by the French ministry of finance. These costs are charged to the resident,
except in specific cases where residents receive social assistance. For the latter, the
service charges are set jointly with the Conseil Général in connection with the social
assistance agreement provided for in Article L.342-3-1 of the CASF (see section 7.4.3
“Market solvency supported by the public finances, various social and tax subsidies and
the increase in patients’ living standards” above).
Treatment rate
This rate is set by the DDASS at the suggestion of the Conseil Général and the Caisse
Régional d’Assurance (regional health insurance fund), and covers any medical and
paramedical services required to treat a resident’s ailments. The rate is paid directly to
the facilities by the Assurance maladie (national health insurance), as part of an overall
budget amount, according to the level of medical care provided at each facility.
Since 2008, the treatment allowances of facilities seeking to renew their tripartite
agreement or with a GMP of over 800 have been reassessed to take into account the
weighted average Pathos rating (PMP), an indicator reflecting the technical level of the
treatment provided. 19 Complementary allocations have also been granted to facilities to
finance medical systems since 1 August 2008. The list of small medical devices, medical
supplies and the list of medical equipment subject to depreciation qualifying as “medical
systems” is defined in a decree dated 30 May 2008. However, the cost of medicines is
primarily billed to residents directly. In this regard, medicines are due to be transferred
back to the treatment rate in 2011.
Dependency rate
A daily dependency rate set by the Conseil Général after seeking the opinion of the
DDASS, which encompasses all the assistance and monitoring required to perform basic
daily tasks and which are not related to treatment. This charge is paid by residents, who
depending on their level of dependency and income may qualify for the APA (personal
independence allowance), as described in section 7.4.3 “Market solvency supported by
the public finances, various social and tax subsidies and the increase in patients’ living
standards”.
19
The PMP is an indicator that can be used to assess the resources required to perform the treatment. This indicator
complements the GMP in defining the level of facilities’ treatment allocation under their tripartite agreements.
53
8.1.4
Draft decree concerning the fee schedule applicable in nursing homes
The Social Security Financing bill for 2009 has changed the fee schedule for nursing
homes, which, effective 1 January 2010, will be subject to a so-called “resource-based”
and “need-based” fee schedule.
The draft implementing decree for this reform, which will be introduced in accordance
with the revised Article L.314-2 of the CASF, entails a change in the system of treatment
and dependency rates and implements postcontrols to verify that undertakings given
under tripartite agreements have been honoured by facilities.
The reform is due to be introduced progressively. The new reform is expected to be
applied to facilities as and when they enter into or renew their tripartite agreements or
multi-year targets and resources contracts.
Trends in the treatment rate
As far as the fee schedule for nursing homes is concerned, the draft implementing
decree for the 2009 social security financing law provides for a consolidation of treatment
charges based on a broader pricing equation that notably includes, in addition to current
practice, the compensation of physicians practising at the facility, biological and
radiological tasks and psychologists.
This pricing equation should make it possible to switch from the “historical” pricing based
on the enforceability of facilities’ charges to a pricing structure determined in advance
based on the level of treatment required for the residents in facilities’ care.
This broader fee structure for treatment would be set on an annual basis and/or based
on an assessment of the average level of dependency and needs in terms of “required
treatment” of a facility’s residents using a Pathos “cross-sectional analysis”.
These arrangements are also intended to harmonise gradually the calculation of
treatment allocations across the length and breadth of France.
Trends in the dependency rate
The decree would also give rise to an overall dependency-related flat-rate charge
replacing the current fee structure. This flat-rate charge would cover exactly the
expenditure incurred in each facility, with the President of the Conseil Général having the
option of gradually bringing the amount into line by using a department-wide standard as
a benchmark.
Budgetary and control arrangements
In return for the greater freedom given to facilities in the setting of their charges, the draft
decree also provides for a postcontrol mechanism to verify that the undertakings given
under tripartite agreement are honoured properly.
8.2
Post-acute and psychiatric sector: rehabilitation and recuperative care and
psychiatric care
Post-acute and psychiatric facilities are still supervised by the Agences Régionales de
l’Hospitalisation (“ARH”, Regional Hospital Agencies), which will be replaced with effect
from 1 July 2010 by the Agences Régionales de Santé (“ARS”, Regional Health
Authorities), which will be the future point of contact for public hospitals, private clinics
54
and nursing homes. They will provide unified management of the regional health system,
by bringing together all the bodies responsible for regional health policies.
8.2.1
Authorisation of post-acute and psychiatric facilities
Creation of post-acute and psychiatric facilities
Rehabilitation and recuperative care and psychiatric facilities are health institutions
governed by the Code de la santé publique (“CSP”, public health code). Their creation
and the installation of certain items of major equipment are subject to prior clearance by
the ARH, which is issued after the Comité régional de l’organisation sanitaire (regional
social organisation committee) has been consulted, to projects meeting the population
health needs identified in the Schéma régional d’organisation sanitaire (“SROS”, regional
medical plan) defined by the ARH director and which are compatible with the objectives
set therein.
The permits, which are granted subject to the positive outcome of a compliance
inspection, are contingent upon honouring commitments concerning expenditure paid for
by the Assurance Maladie system and the volume of business and, secondly, the
performance of an assessment; they may be withdrawn or suspended should facilities
fail to honour these commitments or breach the applicable legislation and regulations.
The permits, which represent a permit to operate and provide the reimbursable
treatments provided to social security beneficiaries, are issued for a period of five years
and they are renewed subject to an assessment, the results of which are sent to the
ARH 14 months ahead of the permit expiry date. Based on the outcome of this
evaluation, the renewal may take place automatically, where appropriate, if the ARH
does not require the permit holder one year ahead of the permit expiry date to submit a
renewal application in line with the initial procedure (filing of a folder, opinion of the
CROS, decision by the ARH).
Improved standards required of rehabilitation and recuperative care facilities
Two decrees dated 17 April 2008 altered the terms of establishment applicable to
rehabilitation and recuperative care activities, as well as the technical terms of operation
of these facilities. Pursuant to the revised Article R.6123-118 of the Code de la santé
publique (“CSP”, public health code), the goal of rehabilitation and recuperative care
activities is to prevent or mitigate the functional, physical, cognitive, psychological or
social consequences of patents’ deficiencies or limitations in their abilities and to
promote their rehabilitation and reintegration into society. Where appropriate, this
includes actions carried out for diagnostic or therapeutic purposes.
In accordance with this reform, any authorised rehabilitation and recuperative care
facility must be in a position to perform the following:

medical treatment, physical therapy and rehabilitation;

preventive and therapeutic educational measures;

preparation and support for reintegration into family, social, school or professional
life.
Pursuant to this new regime, all facilities performing rehabilitation and recuperative care
will have to resubmit new permit applications. The first window for submitting
applications will open until late November 2009 and the final applications will have to be
55
submitted by late April 2010. Facilities will then have a period of two years from their
authorisation to satisfy the new conditions set in Articles R.6123-118 to 126 of the CSP
and the new operating rules laid down in Articles D.6124-177-1 et seq. of the said code.
Under these permits, facilities may conduct specialised activities, wholly or in part, while
complying with a set of specifications; there are nine specialised fields: musculoskeletal
system; nervous system; cardiovascular; respiratory; digestive, metabolic and endocrine
system; onco-haematological conditions; burn victims; addictive behaviour; and elderly
persons with multiple conditions; dependent or at risk of dependency.
In any event, every rehabilitation and recuperative care facility retains its local duty in
terms of multi-disciplinary rehabilitation and must therefore be in a position to
accommodate patients in this field. In this respect, the Objectifs Quantifiés de l’Offre de
Soins (“OQOS”, quantified objectives of the care offering) should determine a total
number of days, leaving facilities that have opted for specialisation with a free choice to
set their provision of multi-disciplinary and specialised rehabilitation care services.
8.2.2
Certification 20
Article L.6113-3 of the CSP states that healthcare facilities must undergo assessment
pursuant to an external certification procedure. The procedure is carried out by
professionals independent of the healthcare facility and its regulatory authorities.
In particular, this procedure is implemented by the OHA, which conducts an independent
assessment of the quality of a facility or, as appropriate, of one or more services or
activities at a facility. It takes into account criteria and standards covering procedures,
best clinical practices and the results of the facility’s various services and activities.
8.2.3
Multi-year targets and resources contracts
In addition, Article L.6114-1 of the CSP provides for the introduction within three months
of the issuance of the permit grant of a multi-year targets and resources contract to be
agreed with the Director of the competent ARH for a maximum period of five years.
These agreements notably determine the strategic priorities of the facilities based on the
SROS (regional medical plans), define a number of qualitative objectives (quality and
safety of treatment) and quantitative objectives (care treatment) set for the facility and
include the timetable for the certification procedure (see section 8.2.2 “Certification”
above). The agreement also defines the rates applicable to the treatment services
provided by the facility.
This type of agreement also stipulates the financial penalties applicable in the event that
the facility fails to meet the commitments in part or in full. In the event of a serious
breach by the healthcare institution, the agreement may be terminated by the ARH
(Article L.6114-1 of the CSP). This penalty is set by the Executive Commission of the
Agence Régionale d’Hospitalisation (“ARH”, Regional Hospital Agency) following an onsite inspection.
At the date of this reference document, the Medica group had not received any penalty
or fine.
20
Formerly called “accreditation”.
56
8.2.4
Fee schedule
The fee rates for treatment and hospital services remain set, in accordance with Articles
L.162-22-1 et seq. and R.162-21 et seq. of the Code de la sécurité sociale (“CSS”,
French social security code) by the ARH through supplemental targets and resources
pricing contracts based on the previous charges to which a growth rate is applied based
on the Objectif Quantifié National (“OQN”, National Quantified Objective) covering
psychiatric and rehabilitation and recuperative care activities. This Objective represents
the annual expenditure allowance for treatment covered by the French Social Security
system. It is defined by the ministers responsible for health and social security, the
economy and the budget according to the ONDAM (National Health Insurance Spending
Target) set by the social security financing law. Based on the OQN, the government
determines the average national trend and the average trend in each region, as well as
the maximum and minimum changes in the service fee growth rates, which may be paid
to facilities by regional agencies. The rates applicable to each facility are then set by the
ARH director under pricing agreements supplementing the multi-year targets and
resources contracts. The Social Security authorities thus pay a daily rate for each patient
treated.
The TAA (tarification à l’activité, activity-based pricing) fee schedule will base the
allocation of resources granted to the post-acute and psychiatric facilities on the volume
and nature of the activity measured, primarily by the PMSI (see section 8.2.5 “Medical
information system programme”). An analysis of the administrative and medicoeconomic information provided by the PMSI is used to classify the stay of each patient in
a Groupe de Morbidité Dominante (“GMD”, Dominant Morbidity Group), in turn
associated with a rate that is binding on the Social Security system. The accommodation
fee rates are thus calculated on this grouping of “comparable patients” from a medical
standpoint and in terms of the resources that need to be committed, with weightings to
reflect the intensity of care.
Costs other than for healthcare, in particular those for comfort-related services (such as
individual, private room, television and telephone services) are paid directly by the
patient, and may be covered by complementary or mutual insurance.
8.2.5
Medical information system programme
Healthcare facilities are obliged to conduct an analysis of their activities (Article L.6113-7
of the CSP). To this end, they appoint a doctor responsible for the medical information,
who receives from his colleagues all the personal medical data required for this analysis.
This entails the implementation of information systems covered by a medical information
system programme (PMSI) notably taking into account the conditions and treatment of
patients with a view to improving, understanding and assessing the business and its
costs and encouraging improvement of the treatment offered and setting up a more
appropriate fee schedule. The PMSI will serve as the basis for the future activity-based
pricing structure for post-acute and psychiatric facilities.
Once anonymised, the data gathered is sent to the technical hospital data agency, which
conducts statistical processing to produce a quantitative and qualitative description of the
business. All this data is used to produce SROS (regional medical plans), multi-year
targets and resources contracts, epidemiological research and also studies facilitating
the internal management of facilities.
57
8.3
Other regulations
8.3.1
Facilities open to the public (Etablissements recevant du public)
Nursing homes, as well as rehabilitation and recuperative care and psychiatric facilities
are subject to the regulations applicable to facilities open to the public that appear in
Articles L.111-8 and R.123-2 et seq. of the Code de la construction et de l’habitation
(CCH, French construction and habitation code). To this end, buildings must be fitted
and operated in a manner preventing the risk of fire and panic (design, fittings, building
materials and elements, safety notices, special equipment, etc.). Before they can open to
the public, buildings must obtain a permit issued by the authority that granted the
building permit, once the measures taken have been verified by a safety commission.
8.3.2
Waste
Nursing homes, as well as post-acute and psychiatric facilities, produce treatment waste
carrying the risk of infection, and they are obliged to meet conditions concerning the
storage and handling of this waste (maximum storage time, separation from other waste,
use of single-use packaging and receptacles conforming to technical safety standards).
Nursing homes and post-acute and psychiatric facilities are obliged to ensure that this
waste carrying the risk of infection is disposed of properly by using the services of a
provider that collects it and disposes of it through incineration or disinfection-based pretreatment.
58
9
PRESENTATION OF THE MARKET IN ITALY
9.1
Ageing of the population in Italy
Overall ageing of the population 65 and older
Italy currently has approximately 12 million people aged over 65 according to ISTAT
(Istituto Nazionale di Statistica), compared with approximately 10.7 million in France
according to INSEE as at 1 January 2009. The proportion of people aged 65 and over
makes Italy one of the countries with the largest proportion of elderly people in the world,
and one of the most rapidly ageing populations. In 2002, 18.5% of the Italian population
consisted of people aged over 65 (source: ISTAT website, 2004 figures), compared with
only 16% in France in 2000 (source: INSEE “Projections de population pour la France
métropolitaine à horizon 2050” (Population projections for mainland France in 2050), July
2006). In 2009, the proportion of the total Italian population aged over 65 now stands at
20% (source: INED, Population et Sociétés no. 458).
The proportion of people aged over 65 is expected to continue growing, reaching
20 million in 2050 (compared with only about 18.3 million in France), representing 33.0%
of the population compared with just 26.2% in France (source: ISTAT - 2007 figures).
The following chart illustrates the demographic projections of the population aged over 65
years old in Italy over the 2005-2050 period in thousands of inhabitants (source: ISTAT 2007 data):
PROJECTION OF THE POPULATION AGED 65 AND
OVER IN ITALY BETWEEN 2005 AND 2050
22,000
19,454
20,000
20,355
18,054
18,000
16,441
15,018
16,000
13,256
14,000
12,000
20,241
14,058
12,216
11,379
10,000
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
This growth in the elderly sections of the population is in particular attributable to
increased life expectancy. The life expectancy of Italians at birth is the highest in Europe
and one of the highest in the world: men live for an average of 78.9 years, while women
live for an average of 84.4 years (source: ISTAT “L’Italie en chiffres”, 2009).
Note that 28% of the population aged over 65 lives in the regions of Lombardy, Piedmont
and Liguria (regions in which the Medica group is present).
59
Growth in “extreme ageing” and in the population of “very elderly”
As in France, the growth in the population will be even stronger in the most elderly
sections of the population.
According to the demographic trends for 2005-2050 projected by ISTAT showing the
growth in the population and assuming that recent demographic trends continue, the
country would have a population in 2050 of around 62 million people, close to 12.5 million
of whom would be over 75 years old. By this date, the number of people aged over 75
would thus have more than doubled by comparison with 2005.
The following chart illustrates the demographic projections of the population aged over 75
years old in Italy over the 2005-2050 period in thousands of inhabitants (Source: ISTAT 2007 data):
PROJECTION OF THE POPULATION AGED 75 AND OVER
IN ITALY BETWEEN 2005 AND 2050
14,000
12,498
11,543
12,000
10,314
9,193
10,000
7,916
8,000
6,762
8,465
7,226
6,037
6,000
5,265
4,000
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
This increase in the population of “very elderly” will be even more marked by 2050 among
people aged 85 and over.
60
The following chart illustrates the demographic projections for the population aged over
85 years old in Italy over the 2005-2050 period in thousands of inhabitants (Source:
ISTAT - 2007 data):
PROJECTION OF THE POPULATION AGED 85 AND OVER
IN ITALY BETWEEN 2005 AND 2050
5,500
4,682
4,750
4,019
3,602
4,000
3,304
3,250
2,694
2,367
2,500
1,750
2,894
2,026
1,623
1,156
1,000
2005 2010 2015 2020 2025 2030 2035 2040 2045 2050
In 2050, Italy is projected to have close to 4.7 million people aged over 85 years old
(representing an annual growth rate in this segment of the population of 3.2% over the
2005-2050 period), i.e., 7.8% of the total population (source: ISTAT - 2007 data).
In addition, 27% of the population aged over 85 is concentrated in the regions of
Lombardy, Piedmont and Liguria (regions in which the Medica group is present) (source:
ISTAT - 2007 data).
9.2
Increased dependency
Italy has many of the same characteristics as other European countries. While the
proportion of dependent people in Italy aged over 65 has reached 20.5% (source: Censis,
Italian research institute, July 2005), the proportion of dependent people over 80 stands
far higher at 47.5%.
As in France, this is likely to increase the number of dependent elderly in Italy owing to
the higher prevalence of dependency in the higher age brackets.
9.3
Small proportion of the elderly living in homes
One characteristic that sets apart the market in Italy from that of France is the low
proportion of people living in specialised facilities compared to other European countries,
i.e., around 2.7% of people 65 and older compared with 5.4% in the UK and 6.1% in
France. This difference is attributable to two factors: the limited capacity in the public
sector and major role played by families in the care of their senior members, particularly
in southern Italy.
The rapid ageing of the population, the growing increase in dependency that it engenders
and the lower proportion of elderly people in nursing homes than in other European
countries mean that the market in Italy has very substantial growth potential.
61
In addition, the following chart shows the expenditure linked to the long-term care and
home assistance sector grew by 265% between 1995 and 2009 to reach €11.3 billion in
2009 (source: Italian health ministry 2004; estimates based on ministry data).
Expenditure on long-term care and home care
(billions of euros)
12.0
11.3
10.3
10.0
9.5
8.7
8.0
8.0
6.5
6.0
6.0
4.0
6.8
7.3
3.1
3.5
3.9
4.1
1997
1998
4.1
4.4
2.0
0.0
1995
9.4
1996
1999 2000
2001
2002
2003
2004 2005
2006
2007
2008
2009
The capacity of specialised facilities accommodating the dependent elderly
As in the French market, the total capacity of care facilities for the elderly is far lower than
the level of demand. It is even more fragmented than the French market and there are
major regional disparities.
In 2005, the market in Italy had an accommodation capacity of around 340,000 beds in
total, of which just 95,734 were in RSAs 21 , which represents around 150 RSA beds per
100,000 inhabitants.
Number of beds in the market in Italy
The following chart shows trends in the number of beds in Italy over the 2000-2005
period (source: ISTAT - 2005 data):
83,144
71,359
73,565
2000
2001
2002
95,734
87,919
87,360
2003
2004
2005
Most of the care capacity is concentrated in northern regions of Italy, which in 2005
accounted for close to 77% of the RSA capacity (i.e., 73,688 beds in 2005). The regions
21
Residenza Sanitaria Assistenziale per Anziani - the equivalent of a nursing home (long-term care facility) in France.
62
of Lombardy, Piedmont and Liguria, in which the Medica group is present, alone boast
almost 62% of the total RSA capacity in Italy, or around 59,492 beds in 2005 (source:
ISTAT - 2005 data).
Around 45% of the RSA beds are managed by the public sector, 35% by the non-profit
sector and 20% by the private sector (ISTAT report “Assistenza residenziale in Italia:
regioni a confronto”). In the two major regions of Lombardy and Piedmont, the private
commercial sector represents respectively 15% and 25% of available care capacity.
The structure of capacity is highly fragmented, with a large number of medium-sized
participants. The private commercial sector encompasses few highly organised privatesector companies, in spite of the recent emergence of multi-regional players, such as
HSS, Arkimedica, Segesta (Korian group) and Medica (via Aetas).
Number of beds per player in 2008
The following chart shows the accommodation capacity in the number of beds of the
principal private commercial operators in Italy during 2008 (source: companies):
3,832
2,750
2,495
1,418
1,265
582
HSS
Arkimedika
Segesta (Korian)
Aetas (Medica)
La Villa
Orpea
The following chart shows the market share held by the various participants in the market
in Italy:
Breakdown of RSA beds in 2005
Non-profit
35.0%
La Villa
6.6%
Other private commerciaux
38.6%
Aetas (Medica)
7.4%
Segesta (Korian)
13%
Private Commercial
20.0%
Arkimedika
14.4%
Public
45.0%
63
HSS
20.0%
10
REGULATORY ENVIRONMENT AND FINANCING IN ITALY
The regulatory environment and financing of the Medica group’s activities in Italy are
structured around a system of permits (conventions) planned by the regions
10.1
Regulations
At regulatory level, the authorisation and accreditation concepts were introduced in the
law of 14 January 1997.
To obtain a permit for an RSA facility 22 , the national regulations prescribe minimum
structural and organisational requirements (such as the structure, organisation and
technological equipment) for public- and private-sector nursing homes that, if met, lead to
issuance of a permit. A single facility cannot, for example, have more than 120 beds.
The accreditation process makes it possible for an RSA facility to qualify for public health
insurance benefits. Once accreditation has been obtained, the RSA receives payment
from the regional health insurance authorities. A RSA facility is subject to the standards
outlined by the region from an organisational and structural standpoint.
Each region can then adopt its own rules which may be, if it so desires, more restrictive
than the national guidelines.
The permit system (the French equivalent of the convention) is thus planned by regions,
then implemented by the local ASLs 23 .
Facilities are controlled in particular by the regulatory authorities through surprise
inspections.
10.2
Financing at regional level
Since the constitutional decentralisation law was passed in 2001, responsibility for all
social policy in Italy, including long-term care policy, has been transferred to the regions,
which exercise exclusive control over such matters.
From the time a facility is accredited, it has two sources of income:

treatment: financed by the local ASLs;

accommodation: covered, depending on the resident’s status, by the local
authorities and by mutual insurers.
The accommodation rate is set freely by facilities.
22
Residenza Sanitaria Assistenziale per Anziani - the equivalent of a nursing home (long-term care facility) in France.
23
Aziende Sanitari Locali – Italian regulatory authorities
64
DAILY RATE
TREATMENT
(approximately 50%)
ACCOMMODATION
(approximately 50%)
Paid by local
authorities
Paid by
residents
65
Paid by mutuals
or
local authorities
11
COMPETITIVE ADVANTAGES
The Medica group believes that its primary competitive strengths are as follows:
A leading player in a fragmented market characterised by high barriers to entry
The Medica group is a leading player in the dependency care market in France and Italy.
With a total of 144 facilities possessing a capacity of 11,042 beds as at 31 December
2008, the Medica group now ranks as the number three operator in the French care
sector given its presence in both the long-term care and post-acute and psychiatric
sectors and as the number two French operator in Italy.
The highly regulated nature of the markets in which the Medica group operates, and in
particular the system of prior authorisation, represents a genuine barrier to entry for new
entrants in what is a still highly fragmented private commercial and non-profit sector
harbouring major consolidation opportunities. Against this backdrop, the size of the
Medica group and, in particular, its presence throughout France and in regions among
the most prosperous in Italy, together with its experience and expertise both in dealing
with local authorities and administrations and in handling acquisitions, places the group in
an ideal position to participate in the consolidation of the sector.
Substantial geographic coverage in the principal population centres of France and
Italy
The Medica group has a strong presence in the principal population centres of France
(particularly in the Ile-de-France, Rhône-Alpes and Provence-Alpes-Côte d’Azur regions)
and Italy (Piedmont and Lombardy). In high population density regions, there is strong
demand for facilities specialised in dependency care, and living standards are generally
high.
This presence in regions with substantial growth potential and a high level of solvency is
conducive to the implementation of an ambitious yield management policy. In addition, a
strong regional presence helps to raise the profile and increase the credibility of the
Medica group both vis-à-vis the new ARS in connection with the forthcoming system of
invitations to tender for projects and any target companies.
Significant capabilities in the creation and restructuring of facilities
The Medica group is pursuing an active policy of creating new facilities. It has already
participated successfully in an initial call for tenders for a project in Gamaches launched
in connection with the system that will be run by the ARS starting in 2010, for which it has
received the requisite authorisations to create a nursing home, thereby demonstrating its
ability to rise to the challenges posed by the new selection process.
The Medica group has demonstrated its ability to restructure successfully both in the
post-acute and psychiatric sector, through the pooling and specialisation of activities, and
in the long-term care sector, through the refurbishment and reorganisation of facilities to
deliver a new range of services generating a significant improvement in the revenue of
the relevant facilities.
To execute this strategy, the Medica group possesses a dedicated and experienced team
that is supported by numerous leading operators in the construction and real estate
development sector. As part of the Medica group’s policy of signing long-term contracts,
this team is now part of the post-acute and psychiatric and long-term care department,
66
which itself is responsible for handling permanent relationships with the local authorities
(ARH, DDASS, Conseil Général, etc.).
This team thus enjoys a regular and close relationship with both the local authorities and
with all the participants involved in the process of creating facilities and setting prices for
them.
Controlled acquisition-led growth and integration
Over the past few years, the Medica group has pursued a dynamic policy of acquisitions,
and it has devoted a large part of its investment to such deals. This acquisition strategy
has contributed to a major acceleration in the expansion of the Medica group.
The Medica group has also demonstrated its ability to integrate new facilities within its
existing network. In particular, it demonstrated its proficiency in large-scale acquisitions,
both in France and in international markets, with the Aetas group and its ability to bring
the operating margin of the facilities it acquires rapidly up into line with the profitability
level of its other facilities.
Effective real estate management
As part of its active policy of real estate management, the Medica group has built close
relationships with well-known players in the real estate sector. In line with its expansion
strategy, it relies on these players to help finance the real estate of certain projects. The
diversity and number of these special relationships help to increase the flexibility of the
group’s asset portfolio development. For example, the Medica group demonstrated its
ability to outsource 75% of the beds created or acquired over the 2006-2008 period.
In addition, the Medica group successfully finalised agreements during 2009 as part of its
special relationship with investors extending the maturity of its leases, while introducing
mechanisms protecting against any future increases in rent that are not correlated to
trends in its business.
Lastly, the Medica group is also extremely attentive to the quality of its facilities, which
are designed as real living centres.
The Medica group operates a portfolio of recently constructed or renovated facilities with
modern equipment, enabling it to optimise the number of residents and patients, quality of
care, and the operating margin. The customer satisfaction surveys carried out by the
Medica group in 2008 concerning the living environment of residents showed an overall
customer satisfaction rate of 96%.
A business model generating strong cash flow
The Medica group pursues a model of profitable growth and successfully bolstered its
gross operating profit before real estate transactions to a level ranking among the highest
in the sector, while consistently generating double-digit growth in its revenue, under the
combined effect of the expansion in its scope and its active yield management policy.
For the past three years, the Medica group has also demonstrated its ability to control the
level of recurring and regular maintenance capex, while ensuring that its facilities meet
the highest standards of comfort and safety. This spending represented an average of
€1,130 (before VAT) per bed and p.a., increasing from €10.2 million in 2006 to
€11.8 million in 2007 and €13.6 million in 2008.
67
Accordingly, the operating profitability of the Medica group together with rigorous
management of its investments, enables it to deliver substantial and consistent operating
cash flows.
A proven ability to anticipate regulatory changes and optimise their effects on its
business activities
Given that the objective of the public authorities is to optimise health expenditure, the
policy of encouraging long-term contracts between operators and regulatory authorities
has been stepped up both in the long-term care sector, notably with the Social Security
Financing law for 2009, and in the post-acute and psychiatric sector, with the forthcoming
application of activity-based pricing.
The Medica group believes that the trend is positive for well-organised and effective
operators. To this end, it has developed expertise within its long-term care and post-acute
and psychiatric department, responsible, in particular, for negotiating and renewing
tripartite agreements for nursing homes and multi-year targets and resources contracts
for post-acute and psychiatric facilities. This organisation will enable the Medica group to
have effective representation at the ARS level, when they are set up.
To anticipate emerging trends and maximise the effects on its operations:

the Medica group has entered into tripartite agreements for all its nursing homes
and has already negotiated the renewal with additional financing for approximately
40% of its facilities. In addition, it has entered into negotiations to introduce multifacility multi-year targets and resources contracts at the level of certain
departments in France or at regional level;

in the post-acute and psychiatric sector, the Medica group has already
implemented the PMSI, the basic instrument underpinning the future fee schedule
based on per activity-based pricing, which it uses as a steering tool in order to
measure pathologies and treatment methods within its facilities on a regular basis.
Greater financial flexibility commensurate with its development goals
Beginning from the admission of the Company’s shares to trading on the Euronext Paris
market, the Medica group will have greater financial flexibility in order to finance its
expansion strategy.
The group recently renegotiated its existing bank debt to adapt its financial structure to its
strategy and arranged, subject to the condition precedent of the admission to trading of
the Company’s shares on the Euronext Paris market, a new credit line to finance
acquisitions for a total nominal amount of €80 million.
The Medica group will thus have the ability to raise an additional €134 million to
€164 million in debt. These relatively flexible arrangements enable it to react very nimbly
when it conducts growth-related transactions. In addition, the principal maturity dates for
this debt are in 2014-2015 and also coincide with the maturity date of the vast majority of
the Medica group leases.
In addition, the intention is that the convertible bond issued by the Company in 2006 with
a nominal amount of approximately €174.8 million will be converted fully into shares of
the Company upon its flotation. As part of the flotation plan, the Company is also
considering carrying out a capital increase of approximately €260 million to strengthen its
68
equity base. These transactions will help to reduce substantially the Medica group’s debt
ratios.
Together, these funds will provide a significant boost to the Medica group’s financial
flexibility so that it can pursue its policy of controlled growth.
A recognised range of high-quality services
For many years, the Medica group has been committed to a focus on quality, including in
terms of certifications, tripartite agreements and the introduction of benchmarks for the
quality of services to residents, with an overall satisfaction rate of 96% (source: internal
survey 2008, see section 16.5 “The Medica group: a recognised image”). With 69 nursing
homes having secured the NF Service accreditation (see section 16.6, “Certified quality
and ethical standards”), i.e., 75% of facilities located in France, and a tripartite agreement
rate of 100%, the Medica group believes it is a leading player in the market from a quality
perspective.
Highly qualified, committed and motivated employees
Given the characteristics of the residents of its facilities (ill, elderly, fragile and
dependent), the Medica group decided in 1999 to embark on a continuous improvement
programme for professional practices, which emphasises training for its teams.
The creation of the Medica group’s best practices institute (Institut des Bonnes
Pratiques), as well as the innovative partnerships entered into with universities, such as
Paris XII and Lyon Claude Bernard, gives the Medica group’s employees access to
training that is of a far higher standard than that provided within the sector.
While listening to its employees and carefully monitoring the relevance of its human
resources policy, the Medica group has introduced an annual social barometer conducted
by an independent firm covering all its teams. The survey has revealed that training
represents the leading factor motivating employees and that 90% of respondents enjoy
working at facilities.
In addition, the Medica group believes that the quality and commitment shown by facility
directors represent a key success factor. The Medica group guarantees the level of
performance and commitment of these facility directors, in particular, through their signing
of annual qualitative and objective-based contracts in return for variable bonus payments.
Lastly, the Medica group has successfully retained the principal executives at its
functional and operational departments that underpin the expertise and leadership of the
business.
A stable management team with experience within the sector and proven expertise
The members of the Medica group’s management team possess over 10 years of
experience in the dependency care sector and are heavily involved in the sector’s trade
organisations. They have demonstrated their ability both to identify and carry out
acquisitions by successfully harnessing integration synergies between small or larger
new facilities within the Medica group and to pursue the Medica group’s strategy of
organic growth by creating new facilities.
69
12
STRATEGY
The Medica group is pursuing a strategy of controlled growth to establish its position as a
key participant in the dependency care sector in France and Italy and bolster its operating
profitability. This growth strategy aims to meet the growing needs of the population of
dependent individuals in France and Italy, where the Medica group is present. Against
this favourable backdrop, the Medica group does not intend to alter its sector and
geographical mix substantially.
This strategy is based on the following principal drivers:
Pursue strong organic growth through a dynamic policy of creating and
restructuring facilities, while shoring up the operational profitability of its facilities
Pursue an active policy of creating facilities
The Medica group intends to improve the active policy of creating nursing homes that it
has been pursuing for several years by leveraging the presence it has established across
all the regions of mainland France, its 100% tripartite agreement rate and the certified
quality of its facilities. These three factors will help to bolster its credibility, notably vis-àvis the authorities that issue operating licences.
The Medica group will capitalise on the profile, greater financial strength and expertise
that it boasts as a leading player in order to implement its projects under the future
system of invitations to tender for projects to be organised by the ARS at regional level.
In the post-acute and psychiatric sector in France and in line with the regional health
policies, the Medica group will seek to submit applications to create new facilities or to
have facilities specialise identified by the SROS (regional medical plans) currently being
revised and implementation of the reform of post-acute and psychiatric facilities.
Pursue a dynamic restructuring policy
In line with its quality objectives, the Medica group intends to implement initiatives each
year to enhance the quality of accommodation offered by its infrastructure and to
restructure facilities. These initiatives should help to maximise the operating margin of the
relevant facilities, particularly in the post-acute and psychiatric sector insofar as they
generally lead to an increase in the accommodation capacity and treatment of more
severe conditions, leading to higher revenue. They will also help to enhance the appeal
and thus bolster the profitability of all its facilities.
Boost the profitability of facilities thanks to a dynamic sales and marketing policy
The Medica group is pursuing a dynamic sales and marketing policy based on yield
management in order to maximise sales per bed and per day.
In the long-term care sector, the Medica group intends to continue pursuing the
development of sales and marketing tools to maximise the sales efficiency of each
facility. This approach should also help to improve the overall occupancy rate of the
Medica group’s facilities.
Concerning fee rates, in the long-term care sector, the Medica group will capitalise on its
knowledge of the market and local competitive fabric, and on the quality of its facilities, to
optimise the price positioning of its residence services and its yield management, in
particular with new residents. In the post-acute and psychiatric sector, the Medica group
70
will seek to increase care for residents suffering from more severe conditions requiring
more specialised treatment in return for higher daily charges.
In addition, the Medica group will continue to develop its range of related services for its
residents and patients.
Pursue a policy of selective acquisitions in order to bolster its presence in regions
with high population density and high incomes
The Medica group intends to pursue a policy of selective growth through acquisitions
depending on the market opportunities arising both in France and Italy. This policy will
capitalise on the Group’s recognised expertise in making acquisitions and integrating
them and on its size, which puts it in prime position to participate in the consolidation of a
fragmented sector with genuine barriers to entry.
In addition to the strict profitability criteria determined by senior management, the
acquisition policy will take into account the accretive nature of investments, the location of
the facilities targeted and their positioning in terms of their range of treatment,
accommodation capacity and development potential.
In Italy, the Medica group already represents a major player in the long-term care sector,
with a presence in regions with high population density and gross domestic product
above the national average. It intends to leverage its development and successful
integration experience to pursue its strategy of selective growth.
Maintain an active policy of real estate management to optimise the portfolio
structure and financial flexibility
The Medica group intends to pursue an active real estate management policy to
capitalise notably on the close relationships forged with a diverse range of investors from
the private sector (listed real estate companies), the private-public sector or social
housing sector, as well as greater financial flexibility in connection with its IPO project.
The Medica group will continue to adopt a pragmatic approach in terms of the ownership
of real estate assets in order to maintain an ownership ratio of fully-owned and leased
facilities of around one-third, which strikes a good compromise between portfolio
appreciation and the financial flexibility required for its future development.
Continue to pursue a highly demanding, quality-driven approach in its business
activities in line with recognised ethical values
The Medica group is highly attentive to the quality of its facilities and to the level of
accommodation and treatment services, as well as to the satisfaction of its residents and
compliance with strict ethical standards. The Medica group will seek to promote the
highest medical, safety and ethical standards to support its position as a key participant in
the dependency care sector. In this respect, it will continue to pursue the bold approach
towards the certification of its facilities that it has already been implementing for several
years and the development of employee training, which have put it at the forefront of best
practices in this area. The Medica group believes that this focus on quality will further
enhance the appeal of its facilities and therefore contribute to their development and
performance.
71
Retain and strengthen a first-class team of operational managers and experts
The operating and financial performance and future growth of the Medica group are
contingent upon the integration of new talent and its ability to recruit, train and retain
employees with the experience and skills required by the specific features of its sector of
activity.
The Medica group has already implemented a certain number of initiatives, such as:

the creation of university training programmes for its existing or future facility
directors;

intensive management training sessions for the management teams at its facilities;

the formation of best practices expert groups run by the Medical and Quality
department; or

the proactive management of key employees identified as being high-potential
employees.
The Medica group places special emphasis on the training and qualification level of its
teams and intends to pursue investments creating value that help to retain and motivate
its teams.
In addition, beyond the participation of its two senior managers and shareholders, the
Medica group wanted to make it possible for these senior executives and indeed all its
employees to own an indirect shareholding in the Company notably via the Medica
group’s corporate mutual fund, to which close to 850 employees subscribed upon its
creation in 2008.
72
13
TREND INFORMATION
Size of the capital increase
In connection with the planned IPO, the Company intends to carry out a capital increase
of approximately €260 million, the proceeds of which will be used to implement its
expansion strategy, as well as to repay part of its existing debt, while helping to enhance
its financial flexibility.
Objectives
The Medica group believes that it operates in a buoyant and resilient market
characterised by steady and predictable growth in demand resulting, in particular, from
demographic trends in the French and Italian dependency care markets.
The Medica group believes that its proven ability to implement an effective yield
management strategy gives it robust organic growth potential in both the long-term care
sector and the post-acute and psychiatric sector.
The Medica group can continue to improve its yield in a number of different ways,
including, in particular:

a policy of selective restructuring of facilities aimed at overhauling their fee
positioning;

a policy of capitalising on its post-acute and psychiatric segment through a
selective policy of specialisation;

adjustments to its nursing home rates based on the specific characteristics of local
markets; and

the sale of additional services.
In addition, due to the strong positioning of its network of facilities in France and Italy, the
experience of its teams and its ability to come to terms with regulatory changes, the
Medica group boasts significant expertise in securing permits for new facilities, which will
be a crucial factor given the context of the implementation of the new ARS authorities and
of invitations to tender for projects.

For instance, the Medica group has already participated successfully in an initial
invitation to tender for a project in Gamaches (Picardy) launched by the DDASS
and the Conseil Général of the Somme department on 22 January 2009
concerning the creation of an 80-bed nursing home. To this end, the Group’s postacute, psychiatric and long-term care department put together a project team
comprising Cirmad (a subsidiary of the Bouygues group), a regional social housing
organisation and an architect specialised in the construction of nursing homes.

Similarly, the Medica group is also behind the project to create the future Neuilly
Plaisance (Ile-de-France region) healthcare complex comprising a 118-bed nursing
home and an 80-bed rehabilitation and recuperative care facility, which it will run
and which will be accompanied by a specialised residence for the disabled to be
run by a non-profit private organisation. This project was put together in
conjunction with Sogéprom, the real estate development subsidiary of the Société
Générale group. The joint permit for the nursing home was secured on 10 August
73
2009 and the authorisation to proceed was given by the ARH’s executive
commission on 22 September 2009.
Lastly, owing to its size and experience of achieving controlled expansion through
acquisitions, the Medica group can potentially play a major role in the consolidation of the
dependency care sector, which will be enhanced by the planned capital increase, as this
will provide it with strong financial flexibility.
Taking all these factors into account, and given the 2009 forecast of approximately €480
million of annual revenue (see Chapter 14 “Profit forecasts and estimates” of this
reference document), the Medica group aims to generate a CAGR in its consolidated
revenue of approximately 13% to 15% p.a. over the 2010-2012 period, with at least
double-digit growth during the 2010 financial year, owing both to its policy of organic
growth and its strategy of controlled expansion through acquisitions, both of which help to
create value.
The Medica group has concrete potential for the organic and acquisition-led growth
supporting this business plan: 45 facilities 24 have been identified, representing a total of
3,286 beds, broken down as follows:

1,927 beds to be created 25 ,

849 beds to be restructured,

510 beds to be acquired 26 .
To maximise its flexibility in terms of expanding its asset portfolio, where appropriate, the
Medica group is pursuing a controlled policy of outsourcing property development for
facilities to be built or acquired. At the current stage of development of these projects, the
Medica group has the ability to outsource 50% of the relevant property complexes.
Taking these factors into account, the Medica group plans to invest approximately €220
million between 2010 and 2012, depending on the opportunities arising in the market, in
pursuit of its organic and acquisition-led growth objectives.
This policy will be implemented while paying particular attention to the value creation
potential of any acquisitions. The Medica group will carefully select and review the
various acquisition opportunities that it identifies and focus on targets that help to harness
the following sources of growth:

the potential for revenue growth through implementation of its proven yield
management strategy;

the potential for restructuring its care capacity, where appropriate, in tandem with
its other facilities in the same region;

the potential for margin improvement through reductions in operating costs and a
more effective staff organisation, while complying with its best practices; and
24
Including 11 facilities in the Ile de France region, 9 in the PACA region, 4 in the Pays de Loire, 3 in each of the following
regions: Midi Pyrennées and Rhône Alpes, 2 in each of the following regions: Normandie, Picardie, Centre, ChampagneArdennes, Nord-Pas de Calais, Poitou-Charentes, and 1 in each of the following regions: Alsace, Aquitaine, and 1 in
Italy.
25
Number of beds for which a permit is currently being sought.
26
Number of beds in facilities currently the object of a preliminary acquisition agreement.
74

the potential for appreciation in the underlying real estate assets.
The Medica group intends to continue pursuing its rigorous policy of controlling operating
costs for all of its business activities, which should contribute to its target of an EBITDAR
margin in 2012 in line with the levels recorded during the 2006 to 2008 financial years.
The Medica group will benefit during the 2010-2012 period from €66 million in tax loss
carryforwards from its consolidated tax group. These tax losses may be carried forward
indefinitely and set off against future taxable income (see section 20.1, “Overview –
Corporate taxes”).
The Medica group also intends to continue reducing its working capital requirements. The
efforts made over the first nine months of 2009 are expected to have a lasting effect over
the next few years given the measures implemented in both the long-term care sector
and the post-acute and psychiatric sector.
Based on its strong ability to generate cash flow, the Medica group plans to pay out an
annual dividend of approximately 20% of its consolidated net profit attributable to equity
holders of the parent following the shareholders’ general meeting called to approve the
financial statements for the financial year ending 31 December 2010, while maintaining
its ability to finance its expansion.
The objectives summarised above do not represent forecasts, but are merely objectives
taken from the Medica group’s strategic goals and action plan. They are based on data
and assumptions that the Medica group considers reasonable. These data and
assumptions are likely to change or be modified due to uncertainties arising in particular
from investment opportunities and the economic, financial, competitive and regulatory
environment. In addition, the occurrence of certain risks described in Chapter 5 “Risk
factors” of this reference document would have an impact on the Medica group’s activities
and on its ability to meet these objectives. In addition, the attainment of these objectives
implies the successful execution of the strategy presented in Chapter 12 “Strategy” of this
reference document.
The Medica group has not made any commitments or given any guarantees concerning
the attainment of the objectives presented in this chapter and does not undertake to
publish or disclose any amended or updated information.
75
14
PROFIT FORECASTS AND ESTIMATES
Assumptions
The Medica group compiled its projections for 2009 based on the interim consolidated
financial statements for the nine-month period ended 30 September 2009 and the
following assumptions:

continued pursuit of its business activities and an unchanged occupancy rate,
given the acyclical profile of its operations and the predictable nature of the market
in which it operates;

no change in its margins, given their historically stable level;

no change in the level of its working capital requirement;

completion of its real estate outsourcing project, i.e., the transaction in progress
with a value of approximately €8 million described in section 20.5 “Liquidity and
capital resources” of this reference document; and

no major changes in the scope of its business activities.
The projections presented below are based on data, assumptions and estimates that the
Medica group’s management considers reasonable. These data, assumptions and
estimates could change or be modified due to uncertainties arising in particular from the
economic, financial, accounting, competitive and regulatory environment. In addition, the
occurrence of certain risks described in Chapter 5 “Risk factors” of this reference
document could have an impact on the business activities, financial condition and results
of operations of the Medica group and its ability to meet its objectives. The Medica group
does not make any commitments or provide any guarantees concerning the attainment of
the projections in this chapter.
These projections were based on the accounting principles adopted by the Medica group
for the preparation of the consolidated financial statements for the nine-month period
ended 30 September 2009 and excluding the impact of the planned capital increase in
connection with the Company’s IPO project.
Projections for the financial year ended 31 December 2009
Based on the assumptions above, the Medica group estimates its revenue for the
financial year ended 31 December 2009 at approximately €480 million and its yield
(revenue per bed per day) at approximately €118. 27
The relative weight of revenue contribution made by business activities in France and
Italy is likely to remain broadly stable.
The level of the EBITDAR (EBITDA excluding rental expense) and EBITDA margins is
likely to remain essentially consistent with that recorded in the consolidated financial
statements for the nine-month period ended 30 September 2009.
27
The yield, which is defined as revenue per bed per day (for facilities open only part of the year, only the number of days
these facilities are open is used), is an important management indicator for the Medica group, reflecting its ability to
maximise the returns generated by its facilities. The manner in which yield is calculated facilitates comparisons between
years, independent of changes in the number of beds it manages.
76
The redemption value of the syndicated loan, finance leases and other debt (excluding
the convertible bonds) net of cash is likely to stand at approximately €590 million as at
31 December 2009, excluding the impact of the capital increase.
77
CONSTANTIN ASSOCIES
114, rue Marius Aufan
92532 LEVALLOIS-PERRET
Patrick GRIMAUD
17, rue du Sergent Bauchat
75012 – PARIS
MEDICA (formerly OBO 1 S.A.S.)
Société Anonyme (joint-stock company)
39, rue du Gouverneur Général Félix
Eboué
92130 - ISSY-LES-MOULINEAUX
STATUTORY AUDITORS’ REPORT ON THE PROFIT FORECASTS OF MEDICA
(FORMERLY OBO1) FOR THE 2009 FINANCIAL YEAR
To the Chairman of the Board,
In our capacity as Statutory Auditors and in accordance with EU Regulation N° 809/2004,
we hereby report on the profit forecasts for the company MEDICA SA (formerly OBO1) for
the 2009 financial year which are included in section 14 of the reference document dated
9 December 2009.
In accordance with the requirements of EU Regulation N° 809/2004 and relevant CESR
guidance, management is responsible for the preparation of these forecasts, together
with the material assumptions on which they are based.
It is our responsibility to provide an opinion on these forecasts, in terms defined by
Appendix 1, paragraph 13.2 of EU Regulation N° 809/204
We conducted our work in accordance with French professional standards. This work
consisted of assessing the procedures implemented by management for the preparation
of the profit forecasts and performance of such procedures as to enable us to assess
whether the basis of accounting applied is consistent with the accounting policies used
for the preparation of the historical data of Medica SA (formerly OBO1) presented in the
“Document de base” (reference document). Our work also consisted of collecting
information and making the necessary enquiries in order to obtain reasonable assurance
that the profit forecasts have been properly prepared on the basis of the assumptions
stated.
It should be noted that actual profits are likely to differ from the profit forecasts since
anticipated events frequently do not occur as expected and their variations could be
material. Consequently, we do not express any opinion on the possibility that such event
will occur.
In our opinion:

the profit forecasts have been properly prepared on the basis stated;

the basis of accounting applied in the preparation of these profit forecasts is
consistent with the accounting policies used by Medica SA (formerly OBO1)
presented in the “Document de base”.
78
This report is intended for the sole purpose of the registration of the “Document de base”
with the French Financial Markets Regulatory Authority (AMF) and, if applicable, the
public offering in France and in the other countries of the European Union in which a
prospectus, including the “Document de base” approved by AMF, would be notified, and
may not be used for any other purpose.
Levallois-Perret and Paris, 9 December 2009
The Statutory Auditors
CONSTANTIN ASSOCIES
PATRICK GRIMAUD
Jean Paul SEGURET
79
15
HISTORY AND DEVELOPMENT OF THE COMPANY
15.1
Company name
The corporate name of the Company is Medica (formerly known as OBO1).
15.2
Trade and Companies Registry
The Company is registered in the Nanterre Trade and Companies Registry under number
421 896 408.
15.3
Date of incorporation and life of the Company
The Company was incorporated on 16 February 1999 for a period of 99 years as a
société anonyme (limited liability company). It then changed its legal form to become a
société par actions simplifiée (simplified limited liability company) in 2006, before being
converted into a société anonyme again on 9 November 2009 (see section 15.6
“Company history and reorganisation”).
15.4
Head office, legal form and governing law
The Company’s head office is located at 39 rue du Gouverneur Général Félix Eboué,
92130 Issy-les-Moulineaux (France).
Tel.: +33 1 41 09 95 20.
The Company is a société anonyme registered in France with a board of directors,
governed notably by the provisions of the French Commercial Code.
15.5
Organisation chart of the Medica group
The Company is a holding company with operational activities that encompasses all of
the management bodies of the Medica group.
As a decision-making and executive body, the Company plays a key economic role within
the group, performs management, financing and consulting activities for its subsidiaries
and leads the management of the operating activities.
Since 1 January 2007, it has also acted as the head of the consolidated tax group.
The functional departments are pooled at Medica France, with operational management
of the facilities being performed in France by the numerous operational subsidiaries and
in Italy by Aetas SpA (hereinafter “Aetas”).
80
81
15.6
Company history and reorganisation
History 28
The Medica group’s first nursing home was founded in 1968 by Pierre Burel. From 1970
until the end of the 1990s, the Medica group was run by its founder and pursued a growth
strategy based on the acquisition or construction in France of a total of 23 facilities,
principally nursing homes, but also rehabilitation and recuperative care facilities.
In June 1999, Société Centrale Immobilière de la Caisse des Dépôts (“SCIC”), a
subsidiary of Caisse des Dépôts, acquired the Medica group from its founder. SCIC
acquired Société de Développement et de Participation Financière (“SDFI”), which at the
time was the top company in the Medica group and which owned Medica France SA,
which itself controlled all the Group’s subsidiaries. The Medica group’s total capacity then
amounted to nearly 2,500 beds at 24 facilities.
The group’s capacity, as well as its revenue, increased substantially between 2000 and
2001, rising from 2,469 beds (€69.8 million in consolidated revenue) to 5,247 beds
(€108 million in consolidated revenue), owing in particular to the acquisition of EIS
(Qualisanté group), which gave it 2,223 additional beds. Following the integration of the
Qualisanté group, the Medica group had an accommodation capacity of 5,503 beds and
recorded consolidated revenue of €159.7 million in 2002.
In 2003, several investment funds managed by Bridgepoint Capital SAS (“Bridgepoint”)
and by Alpinvest acquired the Medica group, after gaining a favourable opinion from the
Commission des Participations et des Transferts (French privatisation committee). The
acquisition was carried out in the form of a Leveraged Buy-Out (“LBO”) financed in part
through bank debt.
In 2003, the Medica group also acquired the Doyennés Europe group, thereby increasing
its capacity by 1,345 beds.
In the year ending 31 December 2003, the Medica group recorded consolidated revenue
of €209.9 million and EBITDAR of €47.1 million, with a capacity of 7,225 beds under
operation. In 2004, the Medica group had an accommodation capacity of 7,464 beds and
recorded consolidated revenue of €233.2 million and EBITDAR of €56.9 million.
Subsequently, it continued to expand its activities in France and during June 2005 and
purchased a 60% interest in the share capital and voting rights of Aetas, an Italian
company that at the time operated a network of ten nursing homes with a total of 681
beds in Italy. During the 2005 financial year, the Medica group had an accommodation
capacity of 8,311 beds and recorded consolidated revenue of €272.7 million and
EBITDAR of €72.2 million.
Until August 2006, the Medica group’s top holding company was Société Financière
Medica “SFM” (formerly called Medica SA) 29 .
The Medica group considered a plan for an IPO of the Company in 2006. At the time, the
objectives presented to the market in 2006 were as follows:

revenue of approximately €310 million for 2006;
28
The consolidated revenue of the Medica group for the 2000-2003 financial years is presented under French GAAP.
29
See “Reorganisation” below.
82

a CAGR in its consolidated revenue of 13% to 15% p.a. over the 2006-2008
period;

investments in growth through acquisitions of €60 million; and

an operating margin (i.e., operating profit from ordinary activities /revenue) of 14%;
In August 2006, the funds advised by BC Partners acquired, via TBU-3 International, an
interest of 87.71% in the Medica holding company (previously called OBO1). This new
holding company of the Medica group now owns 100% of the share capital and voting
rights of Société Financière Medica (“SFM”). As at 31 December 2006, the Medica group
had 124 facilities and 9,643 beds across France and Italy and recorded revenue of
€324.8 million for 2006.
In July 2008, the Medica group also exercised an option to buy the remainder of the
share capital of its Italian subsidiary, the group’s only activity outside France.
With 144 operational facilities boasting an accommodation capacity of 11,042 beds, this
growth policy enabled the Medica group to record revenue of €448.8 million in the year
ending 31 December 2008.
At the date of this reference document, the Medica group has continued to pursue
controlled growth by prioritising expansion of its business activities through selective
geographical development predicated, in particular, on the demographic needs of
sectors, together with an active sales and marketing policy based on yield management.
Reorganisation
At the ordinary general meeting on 29 June 2009, at which shareholders approved the
financial statements for the financial year ended on 31 December 2008, it was noted that
the loss for financial year reduced shareholders’ equity to half the level of its share
capital. As a result, at the extraordinary general meeting convened on 12 October 2009,
shareholders voted to continue operations and not to wind up the Company.
With a view to the admission of the shares to trading on the Euronext Paris market, the
extraordinary shareholders’ general meeting voted on 9 November 2009 to reconstitute
the shareholders’ equity by means of a decrease in the share capital of €105,228,162
and conversion of the Company into a société anonyme with a board of directors.
At the same time, a decision was made to effect the following name changes: OBO1
became Medica in accordance with the decision of the annual shareholders’ general
meeting on 9 November 2009 and Medica SA became Société de Financement de
Medica (“SFM”), in accordance with the decision of the annual shareholders’ general
meeting on 9 November 2009.
83
Before 9 November 2009
After 9 November 2009
OBO1 (SAS)
Medica (SA)
Medica
Société de Financement
de Medica (SFM)
Medica France
Medica France
84
16
DESCRIPTION OF BUSINESS ACTIVITIES
The Medica group, which is primarily active in France, provides services both in the longterm care sector in which it provides long-term dependency care, and in the post-acute
and psychiatric sector, in which it provides short-term dependency care. The Group also
operates in the long-term care sector in Italy.
During 2008, the Medica group derived over 70% of its revenue from the long-term care
sector (including close to 60% in France and over 10% in Italy) and approximately 30%
from the post-acute and psychiatric sector.
Key figures for the Medica group’s business over the 2006-2008 period
EBITDAR (EBITDA excluding
rental expenses)
Revenue
Number of beds
(in millions of euros)
2006
2007
2008
2006*
2007
(12month
s)**
Post-acute
and
psychiatric
sector,
France
1,754
2,019
2,316
78.7
106.4
134.8
18.8
26.0
32.6
Long-term
care,
France
6,827
7,278
7,308
218.6
239.3
266.9
61.9
65.5
73.9
1,062
1,358
1,418
27.6
39.0
47.2
6.0
10.2
11.9
9 643
10 655
11 042
324.8
384.7
448.8
86.7
101.7
118.4
Italy
TOTAL
2008***
2006*
2007 (12
months)**
2008***
* Pro forma.
** Restated.
*** Corrected.
Geographical breakdown of facilities
Through its acquisitions and its organic growth (see section 15.6 “Company history and
reorganisation”), the Medica group has successfully built up a diversified geographical
network of facilities across all principal regions of France, as well in four regions of Italy.
85
The following map shows a geographical breakdown of the Medica group’s facilities in
France and Italy by category:
SSR sector
EHPAD sector
The Medica group’s facilities are located in 21 of the 22 administrative regions in France
(metropolitan France, excluding Corsica), with a particularly strong presence in three
regions accounting alone for approximately 46% of French GDP (source: Eurostat, 2006):
Ile-de-France, Rhône-Alpes and Provence-Alpes-Côte d’Azur. The Medica group has also
been present in Italy since 2005, principally in two regions of northern Italy, i.e., Piedmont
and Lombardy, where GDP per capita is among the highest in the country (source:
http://europa.eu).
16.1
The long-term care sector: long-term dependency care
The Medica group is a major player operating principally in the long-term care sector in
which it provides long-term dependency care for the elderly. This care is primarily
delivered in nursing homes, although the Medica group also has a residence service.
Long-term care facilities accommodate the dependent elderly, for whom it is difficult to
provide adequate home care due to their physical or psychological condition. The longterm dependency care within these facilities draws inspiration from both the hospital and
hotel sectors. These facilities offer high-end hotel and catering services geared to this
86
type of dependency, as well as providing medical and paramedical care for residents
according to their degree of dependency and the conditions, from which they suffer.
The long-term care sector generated consolidated revenue of €314.1 million,
approximately 70% of consolidated Medica group’s revenue in 2008.
(a)
Facilities
As at 31 December 2008, the Medica group had 89 long-term care facilities in
France, representing total capacity of 7,308 beds. In Italy, through its subsidiary
Aetas, the Group operated 18 facilities in the long-term care sector, with capacity
of 1,418 beds.
The table below gives the locations of and number of beds at the Group’s longterm care facilities as at 31 December 2008:
Facility
Town/City
Department
Mulhouse Filature
Mulhouse
Haut-Rhin
Region
Alsace
Sector
Long-term care,
France
Total Alsace
Sanilhac R Automne
Notre-Dame de Sanilhac
Dordogne
Aquitaine
Trélissac Le Moulin
Trelissac
Dordogne
Aquitaine
Clermont-Ferrand
Puy de Dôme
Auvergne
Grentheville
Calvados
Basse Normandie
Dijon Grands Crus
Aiserey
Côte d’Or
Burgundy
Dijon
Côte d’Or
Burgundy
Dinard
Ille et Vilaine
Brittany
St Malo R Automne
Saint-Malo
Ille et Vilaine
Brittany
Sarzeau R Automne
Sarzeau
Morbihan
Brittany
Bourges Printemps
Bourges
Cher
Centre
Vierzon Portes Sologne
Vierzon
Cher
Centre
La Riche Plessis
La Riche
Indre-et-Loire
Centre
St Avertin Vencay
Saint-Avertin
Indre-et-Loire
Centre
Orléans
Loiret
Centre
Long-term care,
France
Long-term care,
France
Long-term care,
France
Reims Europe
Sermaize Les Jardins
Vaivre Lac
Rugles Risle
Chalons-en-Champagne
Marne
Reims
Marne
Sermaize-les-Bains
Marne
Vaivre-et-Montoille
Rugles
Haute Saone
Eure
87
30
96
70
81
70
221
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Total Centre
Chalons R Automne
30
126
Total Brittany
Orléans Baron
96
30
Long-term care,
France
Long-term care,
France
Total Burgundy
Dinard R Automne
67
96
Long-term care,
France
Total Basse Normandie
Aiserey Oucherotte*
76
143
Long-term care,
France
Total Auvergne
Grentheville Sacré Cœur
100
100
Long-term care,
France
Long-term care,
France
Total Aquitaine
Clermont L’Oradou
Beds
Long-term care,
Champagne-Ardenne
France
Long-term care,
Champagne-Ardenne
France
Long-term care,
Champagne-Ardenne
France
Total Champagne-Ardenne
Long-term care,
Franche Comté
France
Total Franche Comté
Long-term care,
Haute Normandie
France
90
104
89
89
111
483
63
97
58
218
78
78
44
Facility
Le Havre Porte Océane
Town/City
Le Havre
Department
SeineMaritime
Region
Haute Normandie
Sector
Long-term care,
France
Total Haute Normandie
Champceuil Séréna*
Quincy Aubergerie
Clamart Bel Air
Rueil Mapi
Sceaux St Charles
Champcueil
Essonne
Ile de France
Quincy sous Sénart
Essonne
Ile de France
Clamart
Rueil-Malmaison
Sceaux
Paris St Simon
Paris
Paris Amandiers
Paris
Cesson Parc aux Chênes
Cesson
Le Mée La Ferme
Le Mée-sur-Seine
Pontault Aubergerie
Pontault Combault
St Pierre Chaintréauville
Saint-Pierre-les-Nemours
Bondy Mapi
Bondy
Rosny Mapi
Rosny-sous-Bois
Hauts-deSeine
Hauts-deSeine
Hauts-deSeine
Ile de France
Ile de France
Ile de France
Paris
Ile de France
Paris
Ile de France
Seine-etMarne
Seine-etMarne
Seine-etMarne
Seine-etMarne
Seine-SaintDenis
Seine-SaintDenis
Seine-SaintDenis
Ile de France
Ile de France
Ile de France
Ile de France
Ile de France
Ile de France
Le Bourget Mapi
Le Bourget
Argenteuil Cottage
Argenteuil
Val d’Oise
Ile de France
Sarcelles Mapi
Sarcelles
Val d’Oise
Ile de France
La Varenne Saint Hilaire
Val de Marne
Ile de France
Chatou
Yvelines
Ile de France
Clairefontaine Clairefont.
Clairefontaine
Yvelines
Ile de France
Louveciennes Clairefontaine
Louveciennes
Yvelines
Ile de France
Poissy
Yvelines
Ile de France
Narbonne
Aude
La Varenne J Neptune
Chatou Mapi
Poissy Mapi
Ile de France
Laxou R Automne
Vandoeuvre R du Charmois
Bar le Duc Mélèzes
Laxou
Vandœuvre-les-Nancy
Bar-le-Duc
Mazères R Gaston de Foix
Mazères
Toulouse Côte Pavée
Toulouse
Tarbes Carmel
Cahuzac Maison
d’Emilienne
Bruay R d’Automne
Lille Ste Thérèse
Neuville R Automne
Tarbes
Cahuzac
Meurthe-etMoselle
Meurthe-etMoselle
Meuse
Ariège
HauteGaronne
HautesPyrénées
Tarn
Bruay sur l’Escaut
Nord
Lille
Nord
Neuville-Saint R
Nord
88
Long-term care,
France
Total Languedoc Roussillon
Long-term care,
Lorraine
France
Long-term care,
Lorraine
France
Long-term care,
Lorraine
France
Total Lorraine
Long-term care,
Midi-Pyrénées
France
Long-term care,
Midi-Pyrénées
France
Long-term care,
Midi-Pyrénées
France
Long-term care,
Midi-Pyrénées
France
Total Midi-Pyrénées
Long-term care,
Nord-Pas-de-Calais
region
France
Long-term care,
Nord-Pas-de-Calais
region
France
Nord-Pas-de-Calais
Long-term care,
Languedoc Roussillon
123
167
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Total Ile de France
Narbonne Les Pins
Beds
48
81
100
96
60
127
124
20
200
75
69
115
114
114
80
156
78
112
80
102
124
2,075
85
85
75
85
64
224
80
80
93
70
323
68
89
74
Facility
Town/City
La Baule Corallines
La Baule
Nantes R d’Automne
Nantes
Nantes Ranzay
Nantes
Department
LoireAtlantique
LoireAtlantique
LoireAtlantique
Le Mans R Automne
Le Mans
Sarthe
Apremont Verger*
Apremont
Vendée
Fontenay Fils d’Argent
Fontenay-le-Comte
Vendée
Les Sables R Automne
Les Sables d’Olonne
Vendée
Lamorlaye Clairefontaine
Angoulins Le Môle
Ars R Automne
Pons Marie d’Albret
St Georges R Automne
Coulon Ebaupin*
Niort Venise Verte
Chasseneuil Clairiere
Le Cannet Clairefontaine
Nice Les Palatines
Lamorlaye
Angoulins-sur-Mer
Ars-en-R
Pons
Saint-Georges de Didonne
Deux-Sèvres
Niort
Deux-Sèvres
Chasseneuil-du-Poitou
Vienne
Le Cannet
Nice
Aubagne
Marseille Le Baou
Marseille
Marseille Les 4 Trèfles
Marseille
Roquebrussane Provencale
CharenteMaritime
CharenteMaritime
CharenteMaritime
CharenteMaritime
Coulon
Aubagne Hermitage
St Chamas Alcides
Oise
Saint Chamas
La Roquebrussanne
AlpesMaritimes
AlpesMaritimes
Bouches-duRhône
Bouches-duRhône
Bouches-duRhône
Bouches-duRhône
Var
Bourg en Bresse Brou
Bourg-en-Bresse
Ain
Curtafond Cortefredone*
Curtafond (Poliat)
Ain
Villars R Automne
Villars-les-Dombes
Ain
Chedde
Haute-Savoie
Saint-Étienne
Loire
Grézieu J Hestia
Grézieu-la-Varenne
Rhône
Lyon R Automne
Lyon
Rhône
Lyon HCR
Lyon
Rhône
Lyon Berthelot
Lyon
Rhône
Oullins
Rhône
Passy Myrtilles
St Etienne R Automne
Oullins C Bernard EHPAD
89
Region
region
Sector
France
Nord-Pas-de-Calais region
Long-term care,
France
Long-term care,
Pays de la Loire
France
Long-term care,
Pays de la Loire
France
Long-term care,
Pays de la Loire
France
Long-term care,
Pays de la Loire
France
Long-term care,
Pays de la Loire
France
Long-term care,
Pays de la Loire
France
Total Pays de la
Loire
Long-term care,
Picardie
France
Total Picardie
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Long-term care,
Poitou-Charentes
France
Total Poitou-Charentes
Provence Alpes Côte
Long-term care,
France
d’Azur
Long-term care,
d’Azur
France
Long-term care,
d’Azur
France
Long-term care,
d’Azur
France
Long-term care,
France
d’Azur
Long-term care,
d’Azur
France
Long-term care,
d’Azur
France
Total Provence Alpes Côte d’Azur
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Long-term care,
Rhône-Alpes
France
Rhône-Alpes
Long-term care,
Pays de la Loire
Beds
231
85
70
86
74
30
47
70
462
80
80
100
70
61
75
33
86
79
504
80
65
94
90
90
109
75
603
90
30
61
103
86
95
80
114
110
75
Facility
Town/City
Department
Pollionay
Rhône
Rhône-Alpes
Oullins
Rhône
Rhône-Alpes
Chambéry Fontaine
Chambéry
Savoie
Rhône-Alpes
Esserts Blay Vernay*
Esserts Blay
Savoie
Rhône-Alpes
Pollionay Aurelias*
Oullins C Bernard Foyer de
Vie
Region
Sector
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Long-term care,
France
Total Rhône Alpes
Total
*Facilities specialising in the care of residents suffering from Alzheimer’s disease or related conditions.
Facility
Bologna I Platani
Town/City
Department
Bologna
n/a
Region
Emilia Romagna
Arma di Taggia
n/a
Liguria
Genova San Begnigo
GENOVA
n/a
Liguria
Retorbido Le Torri
Retorbido
n/a
Lombardy
Vidigulfo Villa Antea
Vidigulfo
n/a
Lombardy
Milano Ippocrate
Milano
n/a
Lombardy
Monza
Monza
n/a
Lombardy
Sector
Long-term care,
Italy
Rozzano
n/a
Lombardy
Long-term care,
Italy
Long-term care,
Italy
Bra
n/a
Piedmont
Canzo Croce di Malta
Canzo
n/a
Piedmont
Caresanablot I Roveri
Caresanablot
n/a
Piedmont
Gattico
n/a
Piedmont
Novi Ligure
n/a
Piedmont
Oleggio RSA
Oleggio
n/a
Piedmont
Verbania San Rocco
Verbania
n/a
Piedmont
Baceno
n/a
Piedmont
Buttigliera d’Asti
n/a
Piedmont
Cilegio
n/a
Piedmont
Gattico RSA
Novi Ligure Amedeo
Baceno
Buttigliera d’Asti
Cilegio
Beds
100
80
40
61
90
276
121
120
60
87
60
60
43
60
60
60
20
20
530
1,418
The following table shows trends in the proportion of residents classified in
categories IGR 1 to 4 in the Medica group’s nursing homes in France during the
past four years:
90
24
668
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Total Piedmont
Total
Percentage of residents classified
in IGR 1 to 4 (as a percentage)
86
120
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Long-term care,
Italy
Total Lombardy
Bra M. Francone
25
100
Total Liguria
Rozzano RSA
80
1,059
7,308
Total Emilia
Romagna
Arma di Taggia Le Palme
Beds
2006
2007
2008
30 September 2009
83%
84%
85%
85%
The average age of residents at the Medica group’s nursing homes in France was
86 in 2009.
(b)
Harmonious living environments
Residents are accommodated in facilities with medical provision designed to serve
as genuine living spaces in which catering is tailored to the needs of each resident.
High-quality accommodation
At the Medica group’s nursing homes in France, most of the accommodation
comprises private rooms (94% as at 31 December 2008), with a number of
facilities also offering apartments. Resident rooms contain functional
equipment geared to any disabilities and can be fitted with additional
equipment and services at residents’ request upon signature of the
accommodation contract (servicing of personal belongings, availability of a
telephone line or television, etc.). Each room has an emergency call system
to provide greater security and better support for residents. Numerous
communal areas promote the development of social life within each of the
facilities.
The aim of the Medica group is to care for its residents without changing
their habits and to create genuine living spaces through a personalised way
of life that involves families in line with its commitments and its quality
benchmark (see section 16.6 “Certified quality and ethical standards”).
Families are constantly involved in this process with the objective of
enhancing the elderly person’s well-being and ensuring he or she adapts
well to their new home. To encourage acceptance of their new living
environment, residents at the Medica group’s nursing homes are able to
personalise their living space by bringing furniture and personal items with
them. Residents’ expectations in relation to social, religious and cultural
matters are also taken into consideration.
Catering geared to tastes and special requirements
In accordance with its commitments focused on the quality of services and
respect for its residents (see section 16.6 “Certified quality and ethical
standards”), the Medica group pays particular attention to the quality of
catering within its facilities.
Since 2004, these catering services have been provided directly by teams
present in nursing homes in France. At each facility, the chef prepares on
site all three daily meals and an afternoon snack in conjunction with a
dietician and places particular emphasis on serving personalised meals
geared to the medical needs and degree of dependency of each resident. A
menu committee has been put in place, with customers and their families
invited to join.
(c)
Varied events promoting exposure to the external world and the exercise of
residents’ mental faculties
The Medica group’s facilities are designed to serve as true living spaces, which
allow residents to enjoy a social life through the regular organisation of events to
encourage contact with and exposure to the outside world. The Medica group
91
places special emphasis on the creation of innovative events to help exercise the
mental faculties of its residents through socio-cultural, cognitive, physical or
manual activities. For instance, the Medica group entered into a partnership
agreement in 2008 with Nintendo in order to equip its nursing homes with Wii video
game consoles, an initiative for which it was awarded the Trophée du Grand Age
(Senior Trophy) in April 2009.
A large range of activities is offered on a daily basis (light gymnastics, memory
games, art therapy workshops, etc.) depending on the interest, desires and
initiatives of residents.
(d)
Dependency and medical treatment
Care for dependent people in long-term care facilities in France is delivered by a
group of professionals who treat dependency -and age-related conditions, notably
comprising general practitioners, geriatric specialists and psychologists.
The treatment plan is designed by the medical team under the authority of the
coordinating physician. It includes regular medical supervision with consistent
treatment geared to patients’ needs, an assessment of dependency care,
conditions, pain and nutrition requirements. It also includes a relational dimension.
All patient records are now electronic.
As required by French regulations, a geriatric physician specialist coordinates care
at each nursing home, in particular by establishing a care plan which factors in
each resident’s degree of dependency. In order to tailor resident care to their
needs more effectively, some of the Medica group’s facilities have also specialised
in the treatment of Alzheimer’s disease sufferers. Facilities are integrated with the
existing post-acute and psychiatric and social network. They place great emphasis
on contacts and the signature of partnerships with the hospital world, as well as
nearby nursing homes and post-acute and psychiatric facilities.
16.2
Post-acute and psychiatric sector: short-term dependency care
Post-acute and psychiatric facilities accommodate patients suffering from one or more
illnesses, who are referred following treatment in a short-stay facility or by a local
emergency care service. The facilities house patients for several weeks and provide highquality accommodation and catering services with the aim of continuing active treatment
in order to maximise the functional capacity of patients and facilitate their integration back
into family, social and professional life.
The Medica group has decided to specialise certain of its facilities to meet public health
needs as effectively as possible in the regions in which it operates. Some of its postacute and psychiatric facilities have the ability to provide care for a diverse range of
conditions. These notably encompass rheumatology, orthopedic, cardiovascular and
respiratory diseases, neurological (including Echirolles and Monfavet-Avignon), nutritional
(treatment of diabetes or obesity) conditions or even patients in a chronic vegetative
state. Others are equipped to provide rehabilitative care for geriatric patients over 75
years old with multiple conditions and a high level of dependency (including
Louveciennes and Pollionay).
In addition, so that it can care for patients requiring psychiatric attention (principally major
depressive conditions, eating disorders, stress-related nervous conditions, anxiety and
depression and addiction-linked disorders, primarily alcohol), or special care for stroke or
92
brain trauma victims, a certain number of the Medica group’s facilities are dedicated to
these conditions.
Post-acute and psychiatric facilities accounted for approximately 30% of the Medica
group’s consolidated revenue for the 2008 financial year, amounting to nearly €135
million.
Facilities
As at 31 December 2008, the Medica group operated 37 post-acute and
psychiatric facilities in France, with a total capacity of more than 2,316 beds
offering short-term dependency care. In 2008, approximately 24,000 people were
treated in the Medica group’s facilities, with an average stay of approximately 30
days.
The table below describes the facilities in the post-acute and psychiatric sector and
their capacity as at 31 December 2008.
Facility
Guebwiller Solisana
Town/City
Guebwiller
Department
Haut-Rhin
Caubeyres La Paloumère
Caubeyres
Lot et Garonne
Region
Alsace
Total Alsace
Aquitaine
Sector
Psychiatric
Post-acute
and
psychiatric
Total Aquitaine
Hurigny La Roseraie
La Varenne St Sauveur
Sens Sainte Colombe
Hurigny
Saône-et-Loire
Burgundy
Varennes St
Sauveur
Saône-et-Loire
Burgundy
Saint Denis les Sens
Yonne
Burgundy
Louveciennes
Yvelines
Ile de France
Brive-la-Gaillarde
Corrèze
La Jonchère
Haute-Vienne
Castelmaurou
Haute-Garonne
Midi-Pyrénées
Nailloux Lou Castel
Saint Léon
Haute-Garonne
Midi-Pyrénées
Saussens Clinique
Saussens
Haute-Garonne
Midi-Pyrénées
Labarthe sur Lèze
Haute-Garonne
Midi-Pyrénées
Barbazan Debat
Hautes-Pyrénées
Midi-Pyrénées
Cahuzac
Tarn
Midi-Pyrénées
Jonchère St Maurice
Castelmaurou Montvert
Labarthe Val des Cygnes
Barbazan Pietat
Cahuzac Centre Médical
Limousin
Limousin
Total Limousin
Jarnac
Charente
Poitou-Charentes
Jarnac Villa Bleue
Jarnac
Charente
Poitou-Charentes
93
50
63
65
65
Post-acute
and
psychiatric
Psychiatric
Post-acute
and
psychiatric
Post-acute
and
psychiatric
Post-acute
and
psychiatric
Post-acute
and
psychiatric
Psychiatric
Post-acute
and
psychiatric
Total MidiPyrénées
Jarnac Maison Blanche
50
163
Post-acute
and
psychiatric
Total Ile de France
Brive St Jean Lez Cèdres
55
55
Post-acute
and
psychiatric
Post-acute
and
psychiatric
Post-acute
and
psychiatric
Total Burgundy
Louveciennes CVS
Beds
60
60
81
30
111
62
40
80
100
40
111
433
Post-acute
and
psychiatric
Psychiatric
35
36
Facility
St Pierre Château de Mornay
Town/City
Department
Saint Pierre de l’Isle
Charente-Maritime
Gréoux-les-Bains
Alpes de Haute
Provence
Contes
Alpes-Maritimes
Peypin en Provence
Bouches-du-Rhône
St Remy de
Provence
Bouches-du-Rhône
Marseille Les Pins
Marseille
Bouches-du-Rhône
Briançon Montjoy
Briançon
Hautes Alpes
Cogolin Clinique du Golfe
Cogolin
Var
La Crau Bois St Joseph
La Crau
Var
Carpentras CMV
Carpentras
Vaucluse
Avignon Les Cyprès
Montfavet
Vaucluse
Ménerbes Les Garrigues
Ménerbes
Vaucluse
Gréoux Le Verdon
Sclos La Pinède
Peypin Le Colombier
St Remy Alpilles
Bourg en Bresse Arbelles
Bourg-en-Bresse
Ain
Neuville CCN
Neuville
Ain
Thueyts Condamine
Thueyts
Ardèche
Plateau Assy Chênes
Plateau d’Assy
Haute-Savoie
Echirolles La Grange
Échirolles
Isère
Montrond Alma Santé
Montrond les Bains
Loire
Montrond Psychiatrique
Montrond les Bains
Loire
Lyon
Rhône
Pollionay
Rhône
Lyon Les Lilas
Pollionay Presles
Region
Sector
Post-acute
Poitou-Charentes
and
psychiatric
Total Poitou-Charentes
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Provence Alpes
Psychiatric
Côte d’Azur
Provence Alpes
Psychiatric
Côte d’Azur
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Post-acute
Provence Alpes
and
Côte d’Azur
psychiatric
Total Provence Alpes Côte d’Azur
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Rhône-Alpes
Psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Post-acute
Rhône-Alpes
and
psychiatric
Total Rhône Alpes
Total
Beds
67
138
80
42
87
71
80
59
50
81
45
82
40
717
52
47
44
63
80
48
70
52
118
574
2,316
The average age of residents at the Medica group’s rehabilitation and recuperative
care facilities in France stood at 73 years in 2009 and 47 years for residents of its
psychiatric facilities.
94
Physiotherapy and re-enablement facilities geared to integrating patients back into social
and professional life
The Group’s facilities are geared to the development of diseases (including long
illnesses, chronic diseases or trauma and their effects), which require the support
and monitoring of convalescent patients who have previously resided in a shortstay specialist clinic. The Medica group’s facilities work in close cooperation with
the hospital sector.
Facilities with medical provision delivering personalised treatment plans
Treatment of patients in post-acute and psychiatric facilities is provided by multidisciplinary medical teams. The Medica group has access to a significant number
of practitioners in complementary specialities, particularly geriatric specialists, reeducators, physiotherapists, occupational therapists, psychologists, speech
therapists and pharmacists, facilitating a personalised treatment plan for each
patient.
Since short-term dependency care in post-acute and psychiatric facilities has
become increasingly technical owing to the shorter length of short-stay hospital
admissions, the Medica group has equipped itself with the resources it needs to
contend with this trend in the sector, installing high-quality infrastructure to facilitate
residents’ return to independence, notably including:
physiotherapy rooms;
spa pools;
occupational therapy rooms (re-education and rehabilitation through physical
activity and especially handicrafts).
16.3
A sales and marketing policy focused on maximising yield
The Medica group pursues an active sales strategy directed at potential customers and
prescribers with the aim of building up its revenue and maximising its facilities’ occupancy
rate and yield.
A sales policy targeting prescribers (hospital or clinic social assistants, doctors, mayor’s
offices)
Special emphasis is placed on this aspect in the Paris region, a geographical region
representing a major source of potential customers, according to the Medica group.
Accordingly, a team of professionals is specifically tasked with finding new customers in
the Paris region. In other regions, operational directors and directors of facilities pursue
an active sales policy, which also targets potential customers and prescribers.
Facilities generally enter into local agreements as part of their normal business activities,
including with certain prescribers. To capitalise on their specialisation, the Medica group’s
post-acute and psychiatric sector facilities have entered into agreements with local
hospitals under which the facility undertakes to accommodate patients, reserving a
number of places for them, and to care for them in a manner appropriate to their
condition. Certain facilities in the long-term care sector have also entered into partnership
agreements, particularly with hospitals, local authorities, local information and
coordination centres (CLIC, primarily non-profit associations whose objective is to
centralise information about spaces available in nursing homes).
95
During 2008, of the 19,000 people who contacted the Medica group, 53% had been
advised in advance by a prescriber. 40% visited a Medica group nursing home and 29%
of them were admitted.
The average period of time it takes to process an application, from the first contact to
admission, stands at 19 days.
Generally speaking, the Medica group aims to integrate its network within the local
environment and aims to find innovative ways of expanding locally and also of developing
this type of public-private partnership, notably in the field of psychiatric care.
The Medicom platform
The Medica group has developed Medicom, a CRM-based intranet platform, to organise
its customer and potential customer and prescriber records and information on
competitors in a structured manner. The statistics produced from this database are used
to define the sales and marketing policy both nationally and locally, to target the most
profitable communication measures and to share best practices. The daily flow of
prospective customers is tracked to measure and compare on a permanent basis the
performances of each team and to define without delay any action plans necessary.
In addition, to manage very rapidly the allocation of beds and related services according
to demand from prescribers and patients, the Medica group has introduced an advanced
bed planning tool. Like Medicom, this tool makes it possible to track incoming and
outgoing flows very accurately in real time. It also lists prescribers and makes it possible
to assess referrals from both a quantitative and qualitative standpoint.
A dedicated call centre
Lastly, with a view to meeting the needs of its prescribers and future customers as
effectively as possible, the Medica group supports the activities of each of its facilities at a
national level by running an information and advice hotline (available seven days a
week), with a specific unit dedicated to emergency accommodation.
A pricing policy geared to local markets
In the long-term care sector in France, accommodation rates, which accounted for
approximately 66% of the Medica group’s revenue in this sector in 2008, are set freely for
new residents. For existing residents, however, price increases are controlled by order of
the French Ministry of Finance. As a result, the Medica group adapts its accommodation
pricing policy to the specific features of the local care market. The Medica group conducts
market research, so that its prices can be adapted to local conditions, competitive factors
and the facility’s services. It also provides additional services (such as television,
hairdressing and beauty services), which should help boost its revenue. These pricing
policies are revised at least once annually for each facility with a view to making
permanent adjustments.
In the post-acute and psychiatric sector, daily treatment rates, which accounted for
approximately 81% of the division’s revenue in 2008, are set by the ARH. The Medica
group also offers its patients services (private room, private phone line, personalised
press service, laundry service, television, etc.) charged in addition to care that helps to
boost revenue per occupied bed. These services generated around 19% of 2008
revenue (see section 20.1.2 “Principal factors affecting the Group’s business activities,
results of operations and principal line items in the financial statements”).
96
16.4
An active policy of real estate management, a means of developing the Medica
group, together with a strong track record of acquisitions
The Medica group is pursuing an active policy of real estate management based on the
creation of facilities in order to pursue expansion in line with its strategic objectives and to
maintain and enhance consistently the quality of its infrastructure and services, while
complying with the various standards in force, notably safety standards. This policy is
underpinned by an unwavering emphasis on quality through the optimised location and
design of real estate complexes, while seeking to differentiate itself through marketing.
The Medica group also has a strong track record of acquiring and integrating new
facilities.
As at 31 December 2008, the Medica group operated a portfolio of 144 facilities
specialised in dependency care in France and Italy, representing a total surface area of
close to 580,000m2 in net habitable space.
Real estate assets operated by the Medica group as at 31 December 2008:
Number of
facilities
%
Number of
beds
Net habitable space
2
(m )
Total real estate assets held
50
34.7%
3,619
178,800
Wholly-owned real estate assets
23
16%
1,562
81,400
Real estate assets held under
finance lease
27
2,057
97,400
Real estate assets rented
94
65.3%
7,423
398,400
Total Medica group
144
100%
11,042
577,200
18.7%
The Medica group believes that its facilities represent coherent, modern and wellserviced real estate complexes reflecting the latest trends in the sector, in particular, in
terms of safety, treatment and quality of accommodation.
Approximately 60% of the facilities are located in towns with over 50,000 inhabitants,
preferably in a central location providing prime access to prescribers and residents’
families, within three major geographical areas, i.e., Île-de-France, Rhône-Alpes and
Provence-Alpes-Côte d’Azur.
In addition, in accordance with its quality objectives, the Medica group has carried out
specific operations to upgrade, improve the quality and enhance the appearance of the
hotel accommodation at its facilities across the country. These transactions aim to identify
and implement the requisite measures to make the facilities more welcoming and
pleasant for residents and their families, capture the attention of visitors as part of a more
commercial approach and enhance working conditions for employees.
In this respect, the Medica group invested around €10.2 million in 2006, €11.8 million in
2007 and €13.6 million in 2008 for all maintenance, safety, quality improvement and hotel
accommodation enhancements of its portfolio of facilities, i.e., approximately €1,130 per
bed p.a.
97
Over 96% of its customers are satisfied with the quality of life in the facility that houses
them (source: INIT 30 , “Nursing Home Satisfaction Survey 2008”). In France, the Medica
group offers its customers, in particular, private rooms (94% of the total) in nursing
homes and 50m2 in net habitable space per bed.
16.4.1
Real estate assets held
As at 31 December 2008, the Medica group has full ownership of approximately 35% of
its portfolio, which comprises a total of 11,042 beds operated. The Medica group kept this
mix stable over the 2006-2008 period insofar as it believes that it strikes a good
compromise between portfolio appreciation and the financial flexibility required for its
development. In addition, it is worth stating that the Medica group owns only one asset
under a finance lease in Italy.
Ownership of these facilities breaks down relatively evenly between wholly-owned
facilities (23), the debt for which has almost been entirely repaid, and facilities under
finance leases (27), the outstanding amount of which stood at €34.8 million as at
31 December 2008.
The vast majority of these leases expire in 2015, providing the Medica group with the
opportunity of acquiring real estate assets for a token amount.
The following table shows the expiry date of the leases for the Medica group’s facilities
(position as at 31 December 2008 based on 27 leases at that date):
Expiry date
Number of real estate leases
2009
4
2010
1
2011
4
2012
4
2013
4
2014
4
2015
2
2016
2
2017
1
After 2017
1
Total
27
The value of all the assets located in France was assessed by independent appraisers,
with the final valuation of the assets held in full ownership or under finance leases
amounting to €270 million, representing a ratio per m² of €1,510 (source: Expertises
Galtier conducted in October 2009).
The valuation method adopted by the expert is a profitability-based appraisal. This
method consists in capitalising potential income from the building (rental value) at a rate
determined in relation to the rates in the local market according to the particular
30
Created in 1995, INIT is a marketing research institute specialised in making the most of customer capital (satisfaction
and loyalty).
98
characteristics of the building. The rental value is calculated by reference to the revenue
that the facility is likely to generate in normal operating conditions based on the daily rate
and occupancy rate. The average rate of return projected by the appraiser stands at
7.4%.
16.4.2
Real estate complexes leased
The remaining facilities in the Medica group’s portfolio, i.e., approximately 65%, are
operated under commercial leases running for periods generally between 9 and 12 years.
The Medica group’s six principal lessors own directly or indirectly 55% of the buildings
leased by the Medica group. These are three listed property companies (Gecimed,
Société de la Tour Eiffel and WP Carey) and three family-owned companies.
The Medica group’s commercial leases generally include a mechanism for indexation of
rents. Any change in the relevant indices upon which rent is based has an impact on the
level of rental expense. Most of the Medica group’s commercial leases in France were
indexed until 31 December 2008 to the cost of construction index (“CCI”), which is
published by INSEE.
Since the beginning of 2009, the Medica group has finalised negotiations with its principal
lessors, notably in connection with implementation of Article L.145-39 of the French
Commercial Code, which states in particular that, should the commercial lease carry an
escalator clause, an adjustment may be requested each time that rent is increased or
decreased under this clause by more than a quarter by comparison with the rate that was
previously set contractually.
These agreements enabled the Medica group to reduce its real estate costs on
renegotiated leases by 9% (full-year impact on an annual basis in 2009) and extend the
residual maturity of these commercial leases.
The following table shows the expiry date of the leases for the Medica group’s facilities
(position as at 31 December 2008 based on 94 commercial leases at that date and as at
30 September 2009 after renegotiation):
Commercial leases
As at 31 December 2008
As at 30 September 2009
2009
0
-
2010
9
4
2011
3
2
2012
6
5
2013
5
4
2014
30
7
2015
10
7
2016
3
2
2017
10
7
After 2017
18
59
Total
94
97
99
These renegotiations also paved the way for protective mechanisms to be put in place,
notably the switchover of 41% of the Medica group’s commercial leases to indexation
based on the commercial rent index (“ILC”) with a cap as opposed to rent adjustments
unrelated to trends in the Medica group’s business activities. In previous years, it had
experienced hefty rises owing to the steep increase in the CCI (see also section 20.1.2
“Principal factors affecting the Group’s business activities, results of operations and
principal line items in the financial statements”, “External charges”):
Indexation
% of the total
Cost of construction
index
16.4.3
As at 30 September 2009
66
70%
21
22%
Commercial rent
index with a cap
-
-
40
41%
Accommodation rate
with a cap
-
-
6
6%
Other (notably
unindexed annuities)
11
12%
13
13%
Total France
77
82%
80
82%
Italy
17
18%
17
18%
Real estate assets
rented
94
100%
97
100%
1
1
% of the
total
Indexation reflecting 75% of changes in the inflation-linked ISTAT index.
Plans to create and restructure facilities and acquisitions policy
New facility creation projects
Projects leading to the creation of facilities are implemented by dedicated teams
responsible for obtaining the requisite permits. These teams are notably supported in the
regions by leading players in real estate construction and development (such as
Bouygues Immobilier, Nexity, Sogeprom – Immobilier Société Générale, etc.) and by
public-private companies.
The Medica group has drawn up an extremely precise set of real estate specifications to
meet the operational budget constraints for each new facility project, as well as to
optimise the use of space in order to deliver high-quality accommodation, optimum
working conditions for employees and a building compliant with hygiene and safety
standards in the sector.
The Medica group has already planned ahead in this set of specifications for changes
related to the new recommendations in Alzheimer’s Plan, notably including:

the ability to diversify care arrangements (temporary stays, permanent stays,
daytime stays);

the creation of special Unités d’Hébergement Renforcé units (“UHRs”, Reinforced
Care Accommodation units), the goal of which is to provide around-the-clock care
for elderly patients affected by severe disorders linked to Alzheimer’s disease or a
related condition.
100
Where the Medica group decides that it does not want to carry the burden of financing the
real estate for a project, it possesses close relationships with private investors, including
listed property companies (Gecimed, Société de la Tour Eiffel, WP Carey), public-private
companies and social housing companies.
It may also work with one of the leading operators in terms of selling nursing homes
under a joint ownership plan to private investors looking to benefit from the related tax
incentives. For instance, the Scellier/Bouvard law enables a non-professional investor to
acquire one or more rooms leased to an operator and to qualify as a non-professional
lessor of furnished property and thus benefit from the related tax incentives, such as a
reduction in income tax and VAT repayments.
The Medica group opened 89 beds in 2006 (1 new facility) and 437 in 2007 (6 new
facilities).
Facility restructuring projects
The Medica group regularly restructures facilities, usually to enhance the comfort, safety
and also the appeal of recently acquired facilities as part of its yield management policy.
In the post-acute and psychiatric sector, these transactions may give rise to restructuring
and/or extensions or combinations of existing facilities to meet a need stated by the ARH.
These operations are thus accompanied by a new definition of the conditions treated and
negotiations under the multi-year targets and resources contract to adjust rates upwards.
For example, in the post-acute and psychiatric sector, the facilities specialised in
neurology in Avignon and Echirolles, the facility specialised in neurology and
orthopaedics in Bourg-en-Bresse and the facility specialised in geriatrics in Louveciennes
were designed after such restructuring. In the long-term care sector, the Medica group
completely restructured a facility in Champcueil acquired following the failure of the nonprofit organisation that previously managed it, increasing its capacity from 48 to 94 beds
through the creation of a unit specialising in care for patients afflicted with Alzheimer’s
disease.
Acquisition-led growth
As part of its policy of controlled expansion, the Medica group continued to pursue a
policy of selective acquisitions in both France and Italy until year-end 2008. The Medica
group thus acquired 1,212 beds in 2006 (20 facilities), 789 beds in 2007 (8 facilities) and
387 beds in 2008 (8 facilities).
More specifically, over the past three years, the Medica group has devoted more than
€118 million to acquisition-led growth.
2006
Acquisitions of subsidiaries
38.9
31.1
42.2*
2.2
0.0
4.2
41.1
31.1
46.4
Acquisitions of business franchises
Total acquisitions
2007
2008
* including €14.7 million paid in connection with the acquisition of the remainder of the shareholding in Aetas
SpA (40%).
In line with its real estate strategy, the Medica group transferred ownership to property
investors of 75% of the beds created or acquired over the 2006-2008 period.
101
16.5
The Medica group: a recognised image
Satisfied customers
As part of its quality policy, the Medica group has conducted an annual satisfaction
survey of residents and their families at facilities accommodating the dependent elderly in
order to measure and verify adoption of the quality programme implemented and to
identify customer expectations. This survey is carried out by INIT Satisfaction, an
independent marketing research firm specialised in satisfaction measurement studies.
During 2008, based on the 4,008 questionnaires returned by residents and families (38%
residents, 62% families), the survey showed at national level an overall satisfaction rate
among customers of 96%, with a staff appreciation rate of 98%. From a commercial
perspective, the survey also showed a satisfactory quality of telephone response
(97.5%), visitor welcome (96.8%) and living environment (96%).
Satisfied employees
During 2009, INIT Satisfaction carried out a social barometer study of the Medica France
group’s employees.
The anonymous survey gave the 2,953 employee respondents a chance to have their say
about their working environment. The survey revealed that 90% of the employees
surveyed liked working at their facility and that 96.9% of respondents liked their jobs.
Sector awards
Since 2007, the activities of the Medica group have been rewarded with several trophies
awarded by professionals in the dependency care sector:

On 27 April 2009, the Medica group landed the 1st Trophée du Grand Age award
as one of eight nominees in the “nursing home initiative” category for introducing
Wii games consoles at all its facilities. The prize is intended to promote and reward
the best initiatives or innovations improving the elderly’s quality of life.

The Medica group was nominated on 1 December 2008 in the French Senate in
the Governance of facilities and departments category of the Trophée Direction(s)
for its social barometer. This award is intended to reward initiatives in the social
and long-term care sector linked to the management team, human resources
management and workplace organisation enabling organisations to adjust their
positioning and adapt their operations to changes in the sector.

In March 2007, the Medica group received first prize in the innovation in on-the-job
training category of the healthcare human resources management awards for
having launched a qualification-based training programme linked to Alzheimer’s
disease, in conjunction with Institut INFA and France Alzheimer.
Recognition in trade publications
The Medica group came at the top of the rankings of the facilities presented in the “Guide
de la dépendance” (Dependency care guide). Overall, 76% of the Medica group’s
facilities scored between 8/10 and 10/10. No Medica group facilities received a mark of
below 7/10.
102
16.6
Certified quality and ethical standards
More than in other sectors of activity, treatment of the ill, elderly, frail or dependent
requires significant commitment and effort to set quality standards.
A culture of care and respect
Treatment of the ill, elderly, frail or dependent requires significant commitment and effort
to achieve continuous improvement professional practices.
Medica’s quality policy has its roots in respect for individuals, their dignity and their
individuality. It is based on compliance with the Charte des droits et libertés de la
personne âgée dépendante (Charter of Rights and Freedoms for the Dependent Elderly)
and the Charte de la personne accueillie (Charter of Persons in Care). The Charter of
Rights and Freedoms for the Dependent Elderly was drafted by the Fondation Nationale
de Gérontologie (National Gerontology Foundation). It determines objectives for
maintaining the dignity of dependent elderly people and protecting their rights.
In healthcare facilities, employees must act under the Charte du patient hospitalisé
(Charter of hospitalised patients), annexed to the ministerial circular no. 95-22 of 6 May
1995, which aims to make widely known the essential rights of patients staying in
healthcare institutions, as set forth in French law, decrees and circulars. This charter is
given to each patient upon his/her arrival, together with a leaving questionnaire, as part of
the welcome pack.
This culture of care and respect is common to all Medica’s companies and is underpinned
by ethical values and compliance: respect for the resident or patient, his/her history,
dignity and individuality, respect for the resident’s or patient’s relationships with his/her
close family and friends, quality of the living environment, good treatment, transparency,
safety of individuals and property, sustainability of services, competency of caregivers,
and continuous improvement.
Since 1999, the Medica group has ensured that all its facilities have been firmly
committed to a quality assurance programme. The first stage led by the Medical and
Quality department consisted in having all teams record their professional practices in the
Medica Best Practices Guide. This Best Practices Guide covers all of its business
activities: accommodation and catering, quality of care (medical information channels,
confidentiality, provision of drugs), dependency care, hygiene and safety, organisation of
social life, human resources, administrative and financial services and asset portfolio.
Harmonised procedures within the Medica group are thus applicable at both long-term
care and post-acute and psychiatric facilities. While each facility retains its autonomy, it
operates within the framework of the Medica group-level procedures, which facilitate the
transfer of skills and sharing of experience among facilities. This harmonisation of
procedures, systems and support facilitates the sharing of skills and of experience
between facilities. It also represents the fundamental pillar of its risk management policy
that is common to all its facilities. The Medica group also attaches particular importance
to training employees thoroughly in these procedures, with a view to harmonising the
quality of services offered across all facilities.
NF certification achieved by the Medica group’s nursing homes
Since 2006, the Medica group has endeavoured to adopt a genuine programme of
continuous improvement by referring to the NF X 50-058 norm “Etablissements
103
d’hébergement pour personnes âgées : cadre éthique et engagements de service”
(Facilities accommodating elderly people: ethic framework and service commitments) and
the NF 386 certification rules concerning nursing homes. 31
The NFX 50-058 norm satisfies the concept of care and respect and the transparency
needs of nursing homes. Its aim to safeguard “quality of service, an individualised
welcome and a clear contractual relationship as well as compliance of the service with
the commitments set forth in the standard”. It defines the ethical framework and general
principles governing the service, the facility’s life plan and the resident’s personal life
plan. Designed based on the needs and expectations of the elderly, the standard
endeavours to handle two major challenges for elderly people living in nursing homes,
i.e., how to maintain their independence and how to maintain their social life.
The NF Service certification achieved by the Medica group is the result of an active
programme pursued by senior management and the commitment shown by each nursing
home director. Accordingly, each facility commits to a quality monitoring process based
on self-assessment, while regularly undergoing inspections by AFNOR. A quality of
service evaluation is based on regular self-inspections, an annual internal assessment
and an annual external assessment by corporate departments and on a representative
sample of facilities.

Self-inspections
Compliance by facilities with service-related commitments is verified at least once
every year by the relevant staff using business line-specific self-inspection forms
provided to them. Any deviations observed during self-inspections are addressed
through an improvement plan that is implemented and followed up by the director
of the facility responsible for the certification.

Annual internal assessment
The Medical and Quality department performs an annual internal assessment of
each facility. These internal audits facilitate verification of compliance with servicerelated commitments and cover all the arrangements contained in the NFX 50-058
norm and the NF 386 certification rules. The organisation of the internal audit is
overseen by the Medical and Quality department, which draws up the audit
programme and designates the auditors. Any deviations observed during an
internal audit are addressed by an improvement plan implemented by the director
of the facility.
The Medical and Quality department ensures that implementation of the action
plan is followed up (see section 16.8 “Organisation of the Medica group”).

External assessment
The Medica group currently has 69 NF Service-certified nursing homes,
representing 75% of its facilities in France. The accreditation of its facilities has
made the Medica group a pioneer in the ANEMS external assessment process. It
also enhances the credibility of the Medica group when it comes to gaining permits
to create new facilities.
31
The NFX 50-058 norm published in February 2003 backing up the standard, via the service certification rules of NF 386
version 2 published in the Journal Officiel (JO) on 17 December 2008.
104
A certification audit is conducted by AFNOR systematically when the facility is
presented for certification of its services. This audit helps to verify the level of
knowledge and commitment shown by all the facility’s professional staff. It covers
the activities and quality of the services delivered and draws on an observation of
practices in the field.
Certified post-acute and psychiatric facilities
The healthcare professionals working at the Medica group’s post-acute and psychiatric
facilities are subject to the accreditation system (V2-V2007 certification) that is gradually
to be replaced from January 2010 by V2010 certification. The V2007 and V2010
certifications developed by the Overall Health Authority (HAS) are very close to the ISO
9001 accreditation system, which is well known in the industrial and service world.
The certification of healthcare facilities is a mandatory step that aims to make a
contribution towards the improvement in the care of patients in hospitals and clinics. It
consists in a self-assessment every four years, followed by an inspection by external
healthcare professionals (appraisers) at the facility, and includes a follow-up system that
aims to commit the facility’s staff to a long-term quality programme. Certification assesses
not only the quality management system, but also specific aspects of the way in which
care is organised.
The Medica group’s 37 post-acute and psychiatric facilities, i.e., all of the group’s postacute and psychiatric facilities, are V1-accredited. Of the ten aspects analysed, the
management of facilities and sectors of activity, patient records and human resources
management represent three key strengths of Medica’s certified facilities. As at
30 September 2009, 56% of the post-acute and psychiatric facilities were already V2
certified.
In addition to regulatory obligations, the Medica group has decided to develop a fullyfledged quality and risk management programme, which should help to improve services
delivered to patients by having the entire staff of its facilities participate. In addition to the
regulatory obligations, certification helps to reinforce adoption of these goals among the
teams. According to a study conducted in 2009 by INIT Satisfaction for the Medica
group, 92% of the Group’s employees believe that certification is crucial for the Medica
group’s reputation.
16.7
Training and qualification of teams
The Medica group places special emphasis on training and qualifications among its
teams through a training programme that meets the needs of its staff in real time by
enhancing their ability to care for changing levels of dependency.
16.7.1
Professional training within the Medica group
The performance of the Medica group is predicated on the quality and commitment
shown by its employees. That is why the Medica group endeavours to develop the skills
of its teams, thereby increasing the contribution made by each individual to the Group’s
qualitative and business objectives.
According to the 2009 social barometer produced by INIT Satisfaction, training represents
the leading motivation factor for staff at the Medica group’s facilities. Training in the
Medica group has always been highly instrumental in retaining and motivating its teams.
It represents a genuine management tool and source of value creation.
105
During 2008, the Medica group devoted 3.5% of its gross payroll charges to professional
training for its employees, i.e., close to double the obligatory level of 1.82% set under the
Convention Collective de l’Hospitalisation Privée (private, for-profit hospitals collective
agreement (the “CCU”)).
This investment helped to deliver close to 117,000 hours of courses, i.e., an average of
22.5 hours per employee (on a permanent full-time equivalent basis at year-end 2008).
This training is notably provided by the Institut des Bonnes Pratiques (Best practices
institute), which trained close to 2,900 employees during 2008 (source: Institut des
Bonnes Pratiques’ 2008 educational and financial review). At the same time, 374
employees received training that led to a qualification, compared with 402 in 2007 and
376 in 2006.
This major effort by the Medica group has ranked it among the most active businesses in
the sector. Industry-wide, only 30% of employees had access to training during 2008
(source: FORMAHP report 32 2008).
16.7.2
Institut des Bonnes Pratiques (Best practices institute)
The Medica group created the Institut des Bonnes Pratiques at the beginning of 2003, a
training centre dedicated exclusively to all the Medica group’s employees and a vehicle
for promoting best practices and employee development, which enhances the quality of
service through various training courses.
The Institut des Bonnes Pratiques now has permanent trainers, who are primarily
responsible for delivering medical and ethical courses at facilities, such as support for the
elderly in the final stages of their life, the fundamentals of gerontology, the prevention of
the risk of abuse, family/team relationships and stress management.
The Institut des Bonnes Pratiques also brings in outside experts (law firm concerning the
responsibilities of facility directors, hotel professionals concerning restaurant service) and
other external experts (Ecole Lenôtre for chef training, France Alzheimer for training
specific to nursing staff, HEC and Euromed Marseille management training, Bureau
Veritas for electrical certification, etc.) in order to provide a wide variety of training
courses for its employees.
16.7.3
Training partnerships
The goal of providing high-quality care for customers, while facilitating the internal
development of staff, has prompted the Medica group to forge specific partnerships in
order to help its teams gain qualifications. Several courses leading to the award of
diplomas are offered to teams:

Facility management
The degree and master’s degree courses in facility management were set up and
organised in conjunction with the Université de Paris XII and the Institut National
de la Formation et d’Application in order to oversee the training of all the directors
of Medica’s facilities.
32
Organisme paritaire collecteur agréé (OPCA, joint commission for collective training) of post-acute and psychiatric and
long-term facilities with commercial status representing the central player in the training policy of private post-acute and
psychiatric and long-term facilities.
106
Established in January 2005, these degree courses are intended to educate future
Medica group nursing home directors. In 2006, they were opened up to external
candidates who possess two years of post-secondary education (Baccalauréat +2
years of post-secondary education) or whose work experience is considered
sufficient. A team of trainers consisting of university staff, Medica group executives
and external advisers (lawyers, external consultants) aims to help current and
future nursing home directors to carry out their duties.

Specialised and novel courses leading to the award of diplomas
Medico-psychological assistant diploma with specialisation in treatment of
Alzheimer’s disease
The Medica group worked with the Institut National de Formation et d’Application
(Université Paris XII) to set up this project and also with the France Alzheimer
association as an expert in the field. In particular, it aims to help their care teams
specialise, while enabling them to gain state-recognised diplomas that will enhance
the care they can offer to disoriented elderly residents.
University diplomas in care coordination for the elderly
This training course was designed in conjunction with Université Claude Bernard in
Lyon and aims to help students acquire and develop knowledge about the
phenomenon of ageing from a biological, psychological and socio-economic
perspective.
16.8
Organisation of the Medica group
The Medica group’s organisational structure is based on two principles:

independent management of each facility by a director responsible for the
operating budget, personnel management, local sales policy and the
implementation of harmonised and centralised Group-level procedures common to
all facilities; and

central management of all facilities to provide functional support and to establish
and monitor targets.
Facility directors represent senior management in all their dealings with customers,
employees and regulatory authorities. They implement and coordinate facility planning
and ensure compliance with regulations. They also organise human resources and local
sales campaigns.
Central management is organised vertically and horizontally, with operational
management covering sectors by geographical area or business segment, in each case
supported by departments.
The principal senior executives have over 10 years of service with the Medica group and
their average age is 46.
107
Operational and functional organisation chart
Jacques Bailet
Chairman and CEO of
Medica
Operations, France
and Italy
Christine Jeandel
Deputy Chief Executive
Officer
Human Resources
Medical and Quality
Alexandra Devic
Didier Armaingaud
Assets
Long-term care (6)
and post-acute and
psychiatric care (2)
Marketing and
Customer Service
Finance
Mathieu Fabre
Legal and Tax Affairs
Accounting and
Consolidation
Post-acute, psychiatric
and long-term care,
responsible for
development
Information Systems
Purchasing
Operations
Eight directors of operations are responsible for the centralised management of the six
geographical regions in the long-term care sector and two more perform the same role in
the post-acute and psychiatric sector. They oversee facility directors, monitor operation of
the facilities and implementation of the Medica group’s standards and procedures.
Human Resources
This department provides assistance to the facilities mainly in terms of labour law,
recruitment and training. It manages the payroll and reporting obligations for the entire
Medica group. It handles relationships with employee representatives and oversees
internal communication, while regularly measuring (notably by means of the social
barometer) the effectiveness of its policy.
Medical and Quality
This department launched and oversees the quality programme in both the long-term care
and post-acute and psychiatric sectors. Backing up the facilities in terms of developing best
practices and assessments, it is responsible for ensuring the continuous improvement in
quality of the Medica group’s operations.
Post-Acute, Psychiatric and Long-Term Care
This department represents the Medica group vis-à-vis all the regulatory and pricingrelated bodies (Conseils Généraux, DDASS, ARH, etc.). To this end, it has a team that is
tasked with obtaining new permits for the creation of nursing homes and post-acute and
psychiatric facilities.
Marketing and Customer Service
This department oversees the sales and marketing activities, analyses performances and
proposes the action plans required in connection with the Medica group’s yield
108
management policy. It has a team of salespeople geared to marketing newly opened
facilities.
Assets
The department is responsible for the general upkeep and safety of all the buildings and
equipment operated by the Medica group. It directly oversees major projects, notably
including the construction and rehabilitation of a facility.
Finance
All the services relating to this department handle the preparation of budgets, management
control and the production of interim and annual financial statements. It handles all the
accounting functions and maintenance of information systems centrally. It ensures the
production of financial and management reporting required to measure the performance of
the Medica group as a whole and of each of its operating sites.
16.9
Management information system
The effective management of the Medica group requires appropriate information control.
The Medica group has deployed an information system, which satisfies the needs of the
Medica group through two types of platforms:

applications platforms delivering software to the various Medica group businesses
(sales management, via Médicom (see section 16.3 “A sales and marketing policy
focused on maximising yield”), invoicing, accounting and payroll);

infrastructure platforms delivering services such as e-mail, file-sharing, intranet and
internal directories.
An automatic back-up system has also been implemented. See section 5.2 “Risks
specific to the Medica group - information system-related risks” regarding information
system-related risks and particularly loss of data.
Finally, in its post-acute and psychiatric sector facilities, the Medica group has set up a
medical information system programme (the “PMSI”) as required by applicable
regulations (see Chapter 8 “Regulatory environment in France”). A medical information
department, consisting of one physician and one technician, has been created for this
purpose.
Facilities have IT tool systems gathering and compiling the various pieces of required
information, which are then sent to the appropriate regulatory authorities. The physician
visits the various facilities regularly, and training and coordination sessions are held with
professionals twice a year at each site. The medical information system programme is
already widely used as a management tool both in facilities and by senior management.
16.10
Purchasing and subcontracting
The Medica group has firmly committed itself to a permanent process of coordinating and
optimising its purchases via a dedicated department. The total amount of the Medica
group’s purchases and external charges (excluding real estate leases) during 2008
exceeded €100 million, i.e. more than 22% of consolidated revenue.
A Purchasing Department has managed the Medica group’s purchases since 2001. The
role and objectives of this unit go well beyond the duties of a “traditional” purchasing
department, since it acts as a genuine supplier listing and pre-approval unit responsible
109
for monitoring suppliers’ quality, streamlining costs, Group buying procedures and
integrating new facilities into the Group. The principal duties of the Purchasing
department are:

The centralisation of sourcing, negotiation and database and market price
list administration tasks for each listed supplier. All this information is distributed
to operational staff via Mediged, the group’s document management system, as
well as via internal communication campaigns to raise awareness among all the
Group’s employees. Management of these functions by the purchasing department
enables facilities to focus on their core business, which remains caring for
residents and patients, as well as ensuring that each facility enjoys the best
possible terms for all of its purchases.

Implementation of a centralised purchasing policy to safeguard the best
possible terms for all the Medica group’s purchases over the long term (food
purchases, laundry subcontracting, prescription drugs, medical equipment, etc.);

The conversion of pricing negotiations into operating profit, notably by:
the implementation of best practices drafted jointly with suppliers to eliminate
waste, a major source of overspending;
the production of price-based, but also volume-based budgets, on the basis of
which, in certain cases, the Group’s suppliers may commit to performance
levels, in certain cases;
The installation of command and control systems enabling each member of staff to
see his/her consumption in relation to the Medica group’s norms and also
enabling the purchasing department to understand the reasons for
overspending;
the implementation of remedial action at facilities with the logistical support of
suppliers;
the sharing of best practices between facilities, for example the introduction of a
therapeutic handbook designed by pharmacists, physicians and facility
directors to select the range of drugs with the best efficacy/price profile.
All the products and services required by the Medica group for its dependency care
business are freely available on the market. As a result, the Medica group does not
believe that it is dependent on any supplier or subcontractor.
The Medica group has relationships with several suppliers, primarily including:
France

Medirest, through its central purchasing unit Servivest, for food (long-term care
sector), and direct outsourcing for post-acute and psychiatric facilities;

Elis for the rental and maintenance of bed and table linen;

Hartmann laboratories for incontinence products and medical devices and
equipment;

Legoff for maintenance products.
110
During the 2008 financial year, purchases made from the Group’s principal suppliers in
France amounted to €27.7 million, i.e. approximately 6.9% of the Medica group’s
consolidated revenue in France.
Italy
The Medica group has been present in the Italian dependency care market since 2005
through its Aetas subsidiary (see section 15.6 “Company history and reorganisation”).
Prior to this acquisition, the Punto Service workers’ cooperative provided Aetas with all
the staff required to operate its Italian facilities (excluding management and
administration).
Following the acquisition, the Medica group decided to retain this organisation, as it is
customary practice in Italy and the Group considered it to be the most effective method
for its operations in Italy.
The cost to the Medica group of these services is proportional to the occupancy rate at
the facilities and, as a result, a drop in occupancy does not necessarily lead to a drop in
margins. Almost 90% of the services are thus contracted out directly to Punto Service in
Italy.
16.11
Research and development, patents and licences
The Medica group’s core business is the care of dependent persons in its facilities. To
this end, the Medica group does not engage in research and development activities, nor
does it hold any patents.
The Medica name is protected by a trademark, notably in France and Italy.
Medica has also registered a number of brands, logos and domain names.
The Medica group believes that neither its business nor its profitability is dependent on
such trademarks, patents or licences.
111
17
EMPLOYEES
17.1
Employees of the Company
General presentation of employees in France
With close to 6,240 employees in France and 70 in Italy 33 (full-time equivalent) in its
facilities as at 31 December 2008, the Medica group represents a major player in the
dependency care market in terms of the size of its workforce.
Each of the facilities is managed by a facility director, who plays a key role in Medica
group’s organisation. Facility directors act as the representatives of the Medica group’s
senior management in each facility, in particular with the regulatory authorities. They are
responsible for the commercial development of their business and have the objective of
ensuring optimum occupancy rates through regular contact with families and prescribers.
They make sure that they balance their budgets by monitoring financial indicators
(maximisation of revenue and margins), manage their teams and promote positive
employee relations.
Each year facility directors commit to an objectives contract defining additional
compensation in the form of bonuses that they can earn. This contract takes into account
business targets based on the level of each facility’s revenue and its profitability in terms
of EBITDAR (EBITDA excluding rental expense) and qualitative objectives, such as the
level of customer satisfaction or the relevance of the quality programme.
The facility directors have a wide variety of profiles: close to 20% of them come from the
care sector, and over 80% of them are graduates with either a bachelor’s or master’s
degree. At the same time, the Medica group pursues a policy of training for both existing
directors and key employees at facilities. The Medica group constantly nurtures and
trains a talent pool of around ten “junior” directors, who hold deputy positions or act as
temporary replacements.
As at 31 December 2008, the average length of service of permanent staff was 5 years,
with 23% of employees possessing between five and nine years of service and 16% over
ten years of service.
In addition, the Medica group emphasises professional experience as part of its
recruitment policy. Accordingly, as at 31 December 2008, the average length of service in
the sector of new Medica group employees stood at 8.5 years.
To optimise the efficacy of its recruitment, the Medica group introduced a web platform
during 2008, accessible at each of its sites, called Medi-CV. This system facilitates the
common management of all job applications sent to the Medica group at all its sites by
whatever means (internet access, letter, visit, telephone, etc.). Since Medi-CV was
created in 2008, the Medica group has handled over 19,000 applications and selected
close to 5,500 CVs, including 230 nurses and 482 qualified nursing assistants.
The Medica group ensures that its new employees receive a warm welcome and
introduced an induction procedure, backed up by a welcome handbook and an integration
guide for each employee, as well as a management guide for new facility directors.
33
It should be noted that most of the employees working at the facilities in Italy are provided by the Punto Service workers’
cooperative (see section 16.10 “Purchasing and subcontracting”).
112
The Medica group also places a great deal of importance on listening to its employees.
Each year, it commissions INIT Satisfaction, an independent firm, to conduct a social
barometer. An internal newsletter is now sent to the home of each employee on a
quarterly basis. Lastly, an intranet and Mediged, a document management system, which
can be accessed at all facilities, provide employees with the information they need. This
information is kept up to date on a regular basis.
Breakdown of employees
The table below shows a breakdown of the Group’s employees (full-time equivalents) by
function as at 31 December 2006, 2007 and 2008 34 :
Headcount
Headcount
Headcount
As at 31 December
As at 31 December
As at 31 December
2008
2007
2006
Administration and logistics
812.8
685.6
574.0
Coordination and social
assistants
96.6
88.6
72.8
1,344.2
1,192.7
906.4
91.3
90.5
59.3
2,513.6
2,536.6
2, 354.2
Kitchen staff
410.4
352.1
303.8
State-registered nurses
793.5
715.0
580.0
Physicians
107.2
112.4
95.0
Psychologists
40.3
38.2
31.4
Pharmacists
30.3
26.4
19.5
6,240.2
5,838.1
4,996.5
Function
Qualified nursing assistants and
medico-psychological assistants .
Medical auxiliaries
Social life organisers
TOTAL
The table below shows the distribution of employees (full-time equivalents) by type of
facility as at 31 December 2006, 2007 and 2008:
Headcount
Headcount
Headcount
At 31 December
At 31 December
At 31 December
2008
2007
2006
Long-term care sector
4,244.2
4,034.6
3,653.2
Post-acute and psychiatric sector
1,742.8
1,566.7
,.163.6
Head office and facility directors
253.2
236.7
197.7
6,240.2
5,838
5,014.5
Category of facility
TOTAL
The table below shows the distribution of employees by category of employment contract
as at 31 December 2006, 2007 and 2008:
34
These figures include employees on permanent contracts and those on fixed-term contracts working full and part-time on
a full-time equivalent basis as at 31 December 2006, 2007 and 2008.
113
Fixed-term
Permanent
Headcount as at 31 December 2008
(as a %)
17%
83%
(as a %)
16%
84%
(as a %)
16%
84%
COLLECTIVE BARGAINING AND COMPANY-LEVEL AGREEMENTS
The Medica group’s facilities in France are subject to the private, for-profit hospitals
collective agreement (the “CCU”) dated 18 April 2002 (Journal Officiel n° 3307). The CCU
replaces and supersedes the five previous collective agreements (“Convalescence clinics
and facilities for the elderly”, “Private hospitals”, “Private for-profit hospitals”, “Facilities for
children and adolescents” and “Recuperative care and re-enablement (private
facilities)” 35 ). The CCU applies to all diagnostic, care and functional rehabilitation facilities
(with or without residential accommodation), as well as all facilities for the handicapped
and elderly.
The CCU is supplemented by an appendix dated 10 December 2002 containing specific
provisions for long-term care facilities for the elderly, in force since 1 January 2003.
The CCU contains provisions in respect of the exercise of union rights, employment
contracts, working hours, details on breaks for employees working in shifts or at night,
contractual compensation, which is based on points applied to coefficients taken from
classification lists under the agreement. Such points and lists are generally renegotiated
and re-evaluated on an annual basis for each branch of the profession.
The CCU stipulates a minimum guaranteed level of pay in the post-acute and psychiatric
sector. This minimum pay is not applicable in the long-term care sector. Finally, it
provides for certain allowances in specific cases, such as working at night, on Sundays or
holidays, with length of service taken into account either in the calculation of the
coefficient attributed in the post-acute and psychiatric sector or through a bonus in the
long-term care sector.
With regard to personal insurance, the CCU establishes levels of cover which apply to
non-work related illnesses and travel accidents. It states that an employment contract
may be suspended for a fixed maximum period, beyond which the employer may
terminate the employment contract if it appears essential to replace the sick employee,
but that the employee will have priority in recruitment for a year.
The CCU also stipulates that employees continue to be paid in the event of disability, and
defines a death benefit and educational allowance.
The Medica group has negotiated this insurance cover for its employees through its
broker, Dexia Prévoyance, allowing it to receive the best financial terms and recognised
service quality.
35
In addition, certain other agreements remain in force, notably including the agreement of 27 June 2000 on the reduction
and adjustment of working hours in the private hospital sector and the long-term care, post-acute and psychiatric sector
and the supplemental agreement of 8 November 2000, as well as the agreement of 15 February 1996 on on-the-job
training.
114
With respect to the collective bargaining agreements, the Medica group signed an
agreement with its representatives concerning annual pay negotiations and working
conditions during 2006, 2007 and 2008. Numerous other agreements were also signed
over the same period, notably including:
17.2
A.
the implementation of a single CHSCT (Comité d’Hygiène de Sécurité et des
Conditions de Travail, i.e. a hygiene, safety and working conditions committee) in
2004, that led to supplemental agreements being signed in 2006 and 2009;
B.
forward jobs and skills planning, with a “senior”-related agreement in 2008;
C.
the promotion of employment for the disabled in 2008; and
D.
the employment of seniors during 2009.
Profit-sharing
The Company has introduced a profit-sharing agreement at its primary subsidiaries for
employees who have been employed by the Group for more than three or six months.
This profit-sharing is calculated based on the net profit of the relevant subsidiaries and
takes into account the length of service and compensation of each employee.
During 2008, the Medica group set up a Group Savings Plan (“GEP”). This system
comprises three investment vehicles, notably including the Groupe Medica France
corporate mutual fund, which is invested in Medica shares (formerly OBO1), the holding
company for the Medica group. The two additional vehicles are the Arcancia label
Sécurité and Arcancia Label Equilibre et Solidaire corporate mutual funds, both managed
by SGAM. During the first subscription period in 2008, around 850 employees subscribed
to units in the Groupe Medica France corporate mutual fund.
17.3
Group Works Committee
The Medica group has set up a Group Works Committee within Medica France SA, a
body providing representation of employees at the level of the Medica group.
The Group Works Committee, which was formed on 3 July 2006, represents a body
fostering dialogue between employee representatives and management right across the
Medica group in France and providing information to promote discussions and
consultation. The Group Works Committee does not replace the employee representation
bodies specific to each business within its scope, which retain all of their roles and
powers.
115
18
ADMINISTRATIVE, MANAGEMENT, AND SUPERVISORY BODIES AND
SENIOR MANAGEMENT
18.1
Composition and operation of management and control bodies
At the date of this reference document, the Company is a société anonyme with a board
of directors. A summary of the principal provisions of the Articles of Association that the
Company plans to adopt, subject to the condition precedent of its shares being listed for
trading on Euronext Paris, relating to the board of directors, in particular its method of
operation and authority, as well as a summary of the principal provisions of the internal
regulations of the board of directors that the Company plans to implement can be found
in section 29.2.2 “Provisions of the Articles of Association concerning the administration
and management bodies – Internal regulations of the board of directors”.
18.1.1
Board of directors
Within the framework of the plan to list the Company’s shares for trading on Euronext
Paris, the Company is planning to appoint, from the date its shares are first listed, three
independent members for a term of three years (until the end of the general shareholders’
meeting to approve the financial statements for the year ending 31 December 2013).
The table below shows the composition of the board of directors at the date of registration
of this reference document and the offices held by the Company’s board members over
the last five years.
Name or
corporate name
of member
Age
Jacques Bailet
58
Date term
expires
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Principal
function in
Company
Primary appointments or
functions outside the Company
over the last five years
Chairman and
Chief Executive
Officer
- Chairman of the board of
directors, Managing Director and
Director of Medica France
- Chairman of OBO1
directors of Aetas
- Chairman of the management
board of SDFM
- Representative of Medica
France, manager of Topaze
France, manager of Les Pins
France, manager of La Rochette
France, manager of CCN
France, manager of CMA
France, manager of La Roche
Samuel
- Director of Projenor
- Chairman of Les Quatre Trèfles
116
Name or
corporate name
of member
Age
Date term
expires
Principal
function in
Company
France, member of the
supervisory board of Invamis
- Representative of SIF, director
of Qualisanté
directors of Qualité et Santé
Suisse
- Co-manager of Gestion de
Maison de Retraite
- Manager of the Institut des
Bonnes Pratiques
directors of Projenor
- Representative of Medica SA,
manager of Société Civile
d’Investissement Groupe Medica
- Representative of Medica SA,
manager of Société Civile
d’Investissement Groupe Medica
II
- Manager of Istar Industries
André FrançoisPoncet
50
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Director
- Director of Picard Surgelés SA
- Director of Picard Groupe
(formerly OBO2) SA
- Member of the supervisory
board of OBO1 SAS
board of Medica SA
- Director of Climatique de Super
Cannes SCI
- Manager of Bauches 7 SCI
- Manager of BC-European
Capital VIII-35 SC
- Chairman of LMBO Europe SAS
- Director of Elifin SA
- Director of Novalis SAS
- Director of OBO8 SAS
Jean-Baptiste
Wautier
40
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
Director
- Chairman of the supervisory
board of OBO1 SAS
board of Medica SA
- Chairman of OBO7 SAS
Capital VIII-35 SC
117
Name or
corporate name
of member
Age
Date term
expires
Principal
function in
Company
2015
Capital VIII-37 SC
- Director of TBU-3 International
SA
board of BDR Thermea Group BV
- Manager of BC Partners Sarl
- Chairman of OBO1 SA (before
conversion into SAS)
Denis Villafranca
37
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Director
board of Medica SA
board of OBO1 SAS
- Director of Amadelux
Investments SA
- Director of Amadeus
International Sarl
- Director of Amadeus IT Group
SA
- Director of WAM Acquisition SA
- Director of OBO6 SA
- Chairman of OBO5 SAS
- Director of OBO4 SA
- Manager of BC Partners Sarl
- Manager of BC European
Capital VIII-36 SC
- Director of Areka SAS
- Director of Polyconcept Holding
SA
- Director of Polyconcept Holding
BV
- Director of Serafina Holding Ltd
- Director of Serafina Acquisition
Ltd
- Director of OBO1 SA (before
conversion into SAS)
118
Name or
corporate name
of member
Age
Guy de Panafieu
66
Gilles Cojan
55
Principal
function in
Company
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Independent
1
director
board of IDI
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Independent
1
director
Date term
expires
board of Métropole Télévision
(M6)
- Member of the board of directors
of Sanef
board of Gras Savoye
board of HBI
board of Elior
- Representative of Avenance on
the board of directors of Elior
Finance
- Director of MyChef
- Director of Elichef Holding
- Director of Latinoamericana
Duty Free
- Director of Areas
- Director of Operadora
AeroBoutiques
- Director of Textiles Deor
- Director of Aero Boutiques
Servicios
- Manager of ORI Investissements
- Chief Executive Officer of
Sofibim
- Chief Executive Officer of Octant
Partenaires
Bagatelle Investissement et
Management
- Director of El Rancho
- Director of Elior UK Limited and
Avenance Plc
- Director of Digby Trout
Restaurants Ltd
- Director of Elior Holland Ltd
- Director of Elior Nederland BV
- Director of Eliance Restaurants
Ltd
119
Name or
corporate name
of member
Age
Date term
expires
Principal
function in
Company
- Representative of Avenance
Enseignement et Santé, director
of Eliance Belgium
- Director of Hold and Co
Avenance
Eliance
board of Santoline SAS
- Director of Dufry AG
board of Santoline SAS
- Director of Dufry AG
Catherine Soubie
44
Ordinary general
shareholders’
meeting to
approve the
financial
statements for
the year ending
31 December
2013
Independent
1
director
- Deputy Chief Executive Officer
of Rallye
- Director of Mercialys
- Permanent representative of
Euris SAS on the board of
directors of Rallye
Casino, Guichard-Perrachon on
the board of directors
Matignon Sablons on the board of
directors of Groupe Go Sport SA
- Director of the Euris Foundation
- Manager of EURL Bozart
directors of Groupe Go Sport
- Director of Groupe Go Sport
Miramont Finance et Distribution
on the board of directors of
Groupe Go Sport
- Managing director of Morgan
Stanley
1
These three independent directors will be appointed subject to the condition precedent of the effective
listing of the Company’s shares for trading on Euronext Paris.
120
Information about members of the board of directors
Jacques Bailet, 58, has a degree from the École des Hautes Études Commerciales.
After employment in financial institutions, he joined Caisse des Dépôts et Consignations
(CDC) in 1989, where he was an executive for 14 years. This experience enabled him to
enter into general management of both commercial companies and local government
(collectivités territoriales). He has been Chief Executive Officer of Medica France since
1999. He is also Vice-Chairman of Synerpa (Syndicat National des Etablissements et
Résidences privées pour Personnes Agées) and a director of FHP (Fédération de
l’Hospitalisation Privée).
André François-Poncet, 50, has a degree from the École des Hautes Études
Commerciales and an MBA from Harvard Business School. He began his career at
Morgan Stanley in 1984 in New York, followed by London and lastly Paris, where he was
managing director of Morgan Stanley France. He joined BC Partners in 2000.
Jean-Baptiste Wautier, 40, has a degree from the Institut d’Etudes Politiques de Paris
and from the Université de Paris-Dauphine. He began his career in 1993 at auditing firm
Arthur Andersen in Paris, moving to investment bank Morgan Stanley in London in 1997,
where he was involved in a number of deals (M&A, issues) on behalf of French
companies. In 2000, he joined investment fund Industri Kapital in London, heading up the
team in charge of investments in France until 2005, when he left to join BC Partners.
Denis Villafranca, 37, has a degree from the École des Hautes Études Commerciales
and an MBA from Harvard Business School. He began his career as a strategy
consultant at Bain & Company in Europe where he was involved in devising strategic
plans, development projects and operational improvements on behalf of international
groups. He joined BC Partners in 1999.
Guy de Panafieu, 66, has an arts and economics degree from the Institut d’Etudes
Politiques de Paris. Formerly an Inspecteur des Finances, from 1968 to 1982 he held a
variety of positions at the French Finance Ministry in external trade and international
economic relations. He was technical advisor on international economic issues to the
President of the French Republic from 1978 to 1981. He was chairman of the BULL group
from 1997 to 2001. He worked at Lyonnaise des Eaux from 1983 to 1997 in a variety of
management positions, lastly as Chairman and Chief Executive Officer. He is senior
advisor to Calyon Corporate and Investment Bank, Chairman of the India Committee of
MEDEF international and Vice-Chairman of BIAC (OECD Business and Industry Advisory
Committee).
Gilles Cojan, 55, has a degree from the École Supérieure des Sciences Économiques et
Commerciales. From 1978 to 1986, he was treasurer of pharmaceuticals group Servier.
He then joined Banque Transatlantique, becoming Chief Executive Officer of subsidiary
GTI France. In 1990, he became head of Finance and Treasury at Valeo. In 1992, he was
appointed Chief Financial Officer at Elitair (renamed Elior in 1998). In 2001, he was
promoted to member of the Executive Committee and Chief Executive Officer of Elior
International, and then appointed Chief Executive Officer of the Elior Group in charge of
international activities and strategy in December 2003. Since September 2007, he has
been Chief Executive Officer of Octant Partenaires and of SOFIBIN, a major shareholder
of the Elior Group. He is also a member of the Strategy Committee and sits on the
Executive Committee of the Elior Group, where he is in charge of strategy and
partnerships.
121
Catherine Soubie, 44, has a degree from the École Supérieure de Commerce de Paris,
She began her career in 1989 at Lazard in London and then in Paris, where she was
notably Head of Financial Affairs. She then held a variety of management positions at
Morgan Stanley in Paris, notably Managing Director. She joined Rallye in 2005 as Deputy
Chief Executive Officer.
18.1.2
Executives/Senior managers
At the registration date of this reference document, the positions of Chairman of the
Board of Directors and Chief Executive Officer of the company are held by Jacques
Bailet. The position of Deputy Chief Executive Officer is held by Christine Jeandel.
The Company’s principal executives are:
Jacques Bailet: see section 18.1.1 “Board of directors” above.
Christine Jeandel has a master’s degree in economic and social administration from the
Université de Paris II - Panthéon - Assas and a degree in urban development from IEP
Sciences Po Paris. She started her career in property development and management at
the CDC group and has been Managing Director of Medica France since 1999. She is
also a director of Synerpa (Syndicat National des Etablissements et Résidences privées
pour Personnes Agées), FORMAHP 36 and UNCPSY (Union Nationale des Cliniques
Psychiatriques Privées).
Alexandra Devic holds a master’s degree in law and a D.E.A. in medical law from the
Université de Paris VIII. Having served in various capacities in Medica France’s human
resources department since 1994, she has been the Company’s Director of Human
Resources since 2004. She is a member of the social commission for the private hospital
industry.
Didier Armaingaud is a medical doctor with a specialisation in gerontology. He began
his career at Assistance Publique-Hôpitaux de Paris as manager of La Collégiale, the
long-term department at Hotel-Dieu hospital. In 1994, he was appointed coordinating
physician by a private family group of retirement homes, which in 1999 became Medica
France. He was appointed Medica France’s Medical Director in 1999.
Mathieu Fabre holds a master’s degree in management and a DESS from Université
Paris IX Dauphine. He began his career in 1997 at brokerage Aurel Leven before moving
to investment bank Close Brothers. He joined the Medica group in 2004, at first as
Financial Controller, then as Finance Director.
No familial relationship exists among the members of the Company’s board of directors
and other principal executives.
To the Company’s knowledge, none of the members of its board of directors, nor any of
the Company’s principal executives, has been convicted of fraud over the last five years.
None of these members has been a senior manager of a company which has declared
bankruptcy, entered into receivership or been liquidated over the last five years, and none
has been incriminated and/or publicly sanctioned by a statutory or regulatory authority
(including designated professional bodies). None of these members has been prevented
36
An OPCA (Organisme paritaire collecteur agréé, joint body authorised to collect financial resources for training) for longterm care and post-acute and psychiatric care facilities with commercial status, constituting the central body in training
policy for private long-term care and post-acute and psychiatric care facilities.
122
by a court from acting as a member of the administrative, management or supervisory
body of an issuer, or from involvement in the management or conduct of the affairs of an
issuer during the last five years.
18.2
Board of directors and senior management conflicts of interest
There are no potential conflicts of interest between the duties of the members of the
Company’s board of directors, executives and senior managers and their private
interests.
123
19
CORPORATE GOVERNANCE
The Company is a société anonyme with a board of directors. The Chairman of the board
of directors organises and directs the work of the board and reports to the shareholders’
annual general meeting.
Subject to the condition precedent of the Company’s shares effectively being listed for
trading on Euronext Paris, the board of directors shall consist of seven members,
including three independent members, in accordance with the rules established by the
board of directors in its internal regulations.
19.1
Appointments of members to executive and management bodies
Information about the terms of members of the board of directors may be found in section
18.1.1 “Board of directors”.
19.2
Information on service contracts between members of the board of directors and
the company or its subsidiaries
No agreement has been entered into between members of the board of directors and the
Company or its subsidiaries providing for the granting of benefits.
19.3
Committees of the board of directors
The board of directors may establish committees, whose composition and authority it
determines, and whose purpose is to assist the board.
An audit committee and a compensation and appointments committee will be created to
this end. The rules governing their operation shall be set out in the internal regulations of
the Company’s board of directors.
These committees do not disqualify the board of directors itself, which retains sole legal
decision-making power. In its area of competence, each committee makes proposals and
recommendations, offers opinions as required, and reports back to the board of directors.
To that end, it may carry out or commission all studies liable to inform the board of
directors’ discussions. Each committee may as necessary decide to invite any person of
its choice to meetings. Committee chairmen shall report to the board of directors on their
committee’s work.
Committees will consist of at least three members, being individual directors or standing
representatives of corporate directors or observers, appointed by the board of directors.
Members will be appointed personally and may not be represented.
Members of these committees will receive specific compensation awarded by the board
of directors on the recommendation of the compensation and appointments committee.
124
Audit Committee
The audit committee will consist of three members, at least of two whom are independent
members appointed by the board of directors from among members experienced in
finance and management. The chairman of the board of directors may not be a member
of the audit committee.
The audit committee’s main tasks are to oversee:

the preparation of the Company’s financial documents;

the effectiveness of internal control and risk management systems;

legal control of the annual financial statements and, if applicable, the consolidated
financial statements by the statutory auditors;

the independence of the statutory auditors.
Compensation and appointments committee
The compensation and appointments committee will consist of three members, including
at least one independent director. The committee will meet at least twice a year and in
any event prior to approval of the agenda for the shareholders’ annual general meeting,
to review proposed resolutions to be submitted to the annual general meeting.
The tasks of the compensation and appointments committee include the following:

With respect to appointments:
to examine and make proposals to the board of directors regarding candidates for
the members of the board of directors, managing director, chairman of the
board, and members and chairman of the audit committee. For this purpose,
the committee must assess the skills, knowledge and experience required,
specify their tasks and assess the time to be devoted to fulfilment of this
role;
to review proposals submitted by interested parties, including management and
shareholders;
to periodically assess the functioning of the board of directors; and
to annually review on an individual basis each director’s status in respect of the
criteria for independence set forth in the internal regulations of the board of
directors.

With respect to compensation of the chairman and executives, the compensation
and appointments committee:
reviews all forms of compensation, including benefits in kind, insurance and
pensions, received from any company in the Medica group or its
subsidiaries;
reviews and makes proposals to the board of directors regarding the compensation
of the chairman, managing director and deputy managing directors, and
particularly regarding the variable component of that compensation. For this
purpose, the committee establishes rules for setting this variable component,
ensuring that these rules are consistent with the annual management
125
performance assessment and the Company’s medium-term strategy. The
committee also verifies that these rules are applied effectively; and
ensures that the Company meets its obligations in terms of transparency of
compensation. For this purpose, the committee prepares an annual report
which is presented for the board’s approval and intended to be included with
the annual report. The committee ensures that all information relating to
compensation required by law is clearly and fully presented in the annual
report.

With respect to board members’ compensation, the compensation and
appointments committee:
makes proposals on the distribution of directors’ fees; and
makes recommendations on possible compensation to members of the board
which undertake specific tasks.

With respect to warrant or share option plans and any other form of compensation
in shares or compensation indexed or linked to shares, the compensation and
appointments committee:
discusses general policy on the benefit of such systems and submits proposals on
this subject to the board of directors;
reviews the information on this subject provided in the annual report and to the
shareholders’ annual general meeting;
submits proposals to the board of directors on choices to be made between the
forms allowed by law and gives reasons for this choice, as well as its
consequences; and
prepares board decisions relating to such systems, including wage-based savings,
for the benefit of any executive or employee of the group or employees of
the Company or its subsidiaries.
During its first 12 months, the committee will review the implementation of shareholding
scheme for the Company’s managers.
Ad hoc committees
As well as permanent committees, the board of directors will be able to set up one or
more ad hoc committees, particularly committees responsible for conflicts of interest,
whose composition and procedures are determined by the board.
19.4
Limitations on management authority
The Company intends for the board of directors to introduce a number of procedures
meant to limit the authority of the Company’s senior executives into its internal
regulations.
Other than prior approvals expressly required by law, in particular Articles L.225-35 and
L.225-38 of the French Commercial Code, the board of directors has decided to require
its prior approval of:

the annual budget;
126
19.5

any decisions requiring the prior approval of the lenders or which, without such
prior approval, would constitute or could constitute a case of mandatory early
repayment; and

any acquisitions or asset sales of 20 million euros or more.
Information regarding the board of directors
Throughout the year, the board of directors carries out such verification and controls as it
deems necessary. Each director receives all documents and information needed to carry
out these tasks.
The chairman of the board of directors sends a monthly activity report to the board
members and communicates the following information at least once a quarter: a report on
the business of the Company and its principal subsidiaries, including in particular figures
for revenue and results; a report on investments and divestitures; a report on
indebtedness and the lines of credit available to the Company and its principal
subsidiaries; a report on the agreements specified in Article L.225-39 of the French
Commercial Code concluded during the previous quarter; and a list of employees of the
Company and its principal subsidiaries.
In addition, the chairman of the board of directors informs board members of any disputes
or significant events.
Every six months, the board of directors reviews off-balance sheet commitments.
19.6
Corporate governance declaration
For purposes of transparency and public information, the Company has initiated a
general review relating to corporate governance practices, particularly with a view to the
listing of its shares for trading on Euronext Paris.
The Company intends to follow principles of corporate governance such as the MEDEF
and AFEP corporate governance code for listed companies, to the extent that these
principles will be compatible with the organisation, the size, the resources and the equity
structure of the Company, especially within the framework of preparing the report of the
chairman of the board of directors as required by Article L.225-37 of the French
Commercial Code.
However, Jacques Bailet - an employee of the Company since joining the Medica group
and Chairman and Chief Executive Officer of the Company following the Company’s
recent change of status to société anonyme with a board of directors - will keep his
employment contract with the Company. This contract will be suspended for the duration
of his term of office, without calling into question the aims of the said corporate
governance code for listed companies, namely protecting the company’s interests.
Mr Bailet’s employment contract, dated 1 February 1989, the date on which he joined
Caisse des Dépôts et Consignations. From June 1999, his employment contract was
transferred to various entities in the Medica group, and since August 2006, the date on
which his employment contract was transferred to Medica SA (currently known as Société
de Financement de Medica), it has never been terminated. Given her length of service
with the Medica group and the existence of a hierarchical relationship, Mrs Jeandel has
kept her employment contract since her appointment as Deputy Chief Executive Officer.
The principles set forth are those of the document entitled “Le gouvernement d’entreprise
des sociétés cotées” (“Corporate governance for listed companies”), which can be found
127
on the MEDEF website, www.medef.com. The Company has a copy of the code at its
registered office that is permanently available to the members of its governing bodies.
As a non-publicly traded simplified limited liability company (société par actions
simplifiée), the Company was not subject of the requirements of Article L.225-37 of the
French Commercial Code to publish a report on its composition and the organisation and
preparation of the work of the board of directors and its internal control and risk
management procedures.
The internal control rules adopted within the Medica group are defined by senior
management, which for their implementation relies in particular on the Operations
Management, Financial Control, Legal and Tax, Accounts and Consolidation, IT, and
Medica and Quality departments. These rules are based primarily on the AMF’s internal
control reference guidelines for small and midcap companies of 9 January 2008 and aim
in particular to ensure:

the observance of applicable laws and regulations by the Medica group’s
subsidiaries and facilities;

correct application of directives, policies and internal procedures, as well as best
practices set by senior management;

safeguarding of the Medica group’s assets;

the reliability and sincerity of financial information and financial statements
provided to company bodies and published;

prevention and control of identified risks resulting from the Medica group’s
activities; and

optimisation of operations.
As at 2010 and as long as the Company’s shares are listed for trading on Euronext Paris:

the Chairman of the board of directors shall prepare - in accordance with Article
L.225-37 of the French Commercial Code - a report on the compositions and
conditions for preparing and organising the work of the board of directors and its
committees, as well as the internal control and risk management procedures
implemented by the Company;

the board of directors will organise a discussion on its procedures once a year. It
will conduct an assessment of its own procedures, which will be assigned to the
independent directors on the initiative of the Chairman of the board of directors.
128
20
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
20.1
Overview
The Medica group
The Medica group, a key participant in the French short-term and long-term dependency
care market, operates primarily in two business segments:

the long-term care sector, which includes nursing homes (“EHPAD”); and

the post-acute and psychiatric sector, which includes short-term dependence
medical facilities, offering rehabilitation and recuperative care services (“SSR”) as
well psychiatric services.
The Medica group operates in France and, since 2005, also operates in Italy. As at
31 December 2008, it operated 89 long-term care facilities in France and 18 long-term
care facilities in Italy (8,726 beds including 7,308 in France and 1,418 in Italy), and 37
post-acute and psychiatric care facilities in France (2,316 beds), representing total
capacity of 144 facilities and 11,042 beds. As at 30 September 2009, the Medica group
operated 92 long-term care facilities in France and 18 long-term care facilities in Italy
(8,980 beds including 7,552 in France and 1,428 in Italy), and 37 post-acute and
psychiatric care facilities in France (2,317 beds), representing total capacity of 147
facilities and 11,297 beds.
In 2008, the Medica group generated consolidated revenue of €448.8 million, of which
more than 89% was in France, and consolidated operating profit from ordinary activities
of €60.6 million. During the nine-month period ended 30 September 2009, the Medica
group generated consolidated revenue of €356.7 million and consolidated operating profit
from ordinary activities of €48.6 million.
The discussion and analysis which follows should be read in conjunction with this
reference document as a whole. This includes in particular the Company’s pro forma
consolidated financial statements for the 12-month period ended 31 December 2006, the
restated consolidated financial statements for the 12-month period ended 31 December
2007 and the notes thereto, the corrected consolidated financial statements for 2008 and
the interim consolidated financial statements for the period from 1 January to 30
September 2009 and 2008 and the notes thereto, as presented in Chapter 25 “Financial
information regarding the issuer’s assets, financial position and results of operations” of
this reference document.
Notice
calculation of interest on the syndicated loan arranged in August 2006 in the context of
applying the amortised cost method under IAS 39. This error affects the consolidated
financial statements for the 12-month financial year ended 31 December 2008 and the
20-month financial year ended 31 December 2007 approved by the shareholders’ general
meeting and filed with the clerk of the Nanterre Commercial Court. This has no impact on
changes in cash and cash equivalents. Those financial statements are not included in this
document. Corrected financial statements for the 2007 (20 months) and 2008 financial
129
years were approved by the board of directors on 3 December 2009 and are the subject
of a statutory auditors’ report in accordance with CNCC standard NEP 9010 “Audit within
the framework of due diligence procedures relating directly to the work of the statutory
auditors”.
A reconciliation of the key indicators for the consolidated financial statements as
published for the (20-month) financial year ended 31 December 2007 and the financial
year ended 31 December 2008 to the same key indicators as corrected is provided in
Note 2.3 to the condensed interim consolidated financial statements to 30 September
2009.
The condensed interim consolidated financial statements for the nine-month period
ended 30 September 2009 include for comparison purposes information from 1 January
to 30 September 2008, as well as the condensed financial statements for the year ended
31 December 2008. In accordance with IAS 8 “Accounting Policies, Changes in
Accounting Estimates and Errors”, the condensed financial statements for the year ended
31 December 2008 presented for comparison purposes have been corrected as if the
error had been corrected at the start of the first period presented.
Consolidated financial statements
In August 2006, a number of funds advised by BC Partners acquired, through a jointlyowned company called TBU-3 International, an 87.71% stake in the holding company
now called Medica (formerly OBO1), which owns 100% of the share capital and voting
rights of Société de Financement de Medica (formerly Medica SA), parent company of
the Medica group.
As OBO1’s financial year began on 1 May 2006 and ended on 31 December 2007, the
first consolidated financial statements of OBO1 were therefore prepared as at
31 December 2007, covering a period of 20 months.
In order to provide a comparison with the corrected consolidated financial statements as
at 31 December 2008:

pro forma financial information has been prepared for 2006 to take account of the
change of the Medica group’s legal structure following the LBO in August 2006, as
stated in the section “Basis for pro forma financial information” below;

restated consolidated financial information has been prepared for the year ended
31 December 2007 to reduce the 2007 financial year to 12 months.
Pro forma financial information for 2006 has been audited and subject to a statutory
auditors’ report in accordance with EU Regulation No 809-2004 related to pro forma
information.
The restated consolidated financial information for the 12-month period ended 31
December 2007 provided in the reference document has been audited and subject to a
statutory auditors’ report in accordance with CNCC standard NEP 9010 “Audit within the
framework of due diligence procedures relating directly to the work of the statutory
auditors”.
The corrected consolidated financial statements for 2007 (20 months) and 2008 as
provided in the reference document have been the subject of an audit and report by the
statutory auditors in accordance with CNCC standard NEP 9010 “Audit within the
130
framework of due diligence procedures relating directly to the work of the statutory
auditors”.
Basis for the 2006 pro forma financial statements
This consolidated pro forma data for the period from 1 January 2006 to 31 December
2006 was prepared in accordance with the following conventions in order to illustrate the
effects that the integration of Medica into the scope of OBO1 would have had on the
income, expenses, assets and liabilities of the OBO1 group as if this transaction had
occurred on 1 January 2006 and if the financial period of OBO1 had begun on 1 January
2006 and ended on 31 December 2006:

Historical financial data used as a basis to prepare the pro forma consolidated
financial data of OBO1 from 1 January to 31 December 2006 include:
historical financial data (balance sheet and income statement) of Medica SA
extracted from the consolidated accounts of Medica SA for the financial
period from 1 January to 31 December 2006. These consolidated accounts
were certified by the statutory auditors on 30 April 2007;
historical financial data of OBO1 compiled from the interim parent company
accounts of OBO1 covering the period from 1 May 2006 to 31 December
2006, as included in the statutory parent company accounts for the 20-month
financial period from 1 May 2006 to 31 December 2007. The statutory parent
company accounts of OBO1 were certified by the statutory auditors on 23
April 2008;

the scope is identical to the one used in the consolidated accounts of Medica SA
for the financial period from 1 January 2006 to 31 December 2006;

the accounting principles and methods applied to prepare the pro forma
consolidated income statement and balance sheet were compliant with the
accounting methods of the OBO1 group described in the explanatory notes to the
Medica group’s financial statements for the year ended 31 December 2007 in
accordance with the International Financial Reporting Standards (IFRS) as adopted
by the European Union;

for a period of 12 months, financial expenses were recognised in relation to the
acquisition debt contracted by OBO1 for the acquisition of Medica as well as the
new debt contracted by Medica; these two transactions are considered as having
been completed on 1 January 2006. The capitalised portion of additional interest
was added to debt, and the portion considered as a cash outflow was deducted
from cash at hand;

the goodwill on acquisition generated by the acquisition of Medica by OBO1,
calculated on the basis of the equity of the Medica group on 30 June 2006, was
recognised in goodwill pending appropriation on 31 December 2006. The
appropriation of this goodwill, made in the accounts closed on 31 December 2007,
has not been retrospectively integrated into the 2006 pro forma consolidated
financial data. Furthermore, even if the pro forma consolidated data were prepared
as if the acquisition had taken place on 1 January 2006, the goodwill was
calculated on the basis of the Medica group’s consolidated equity on 30 June 2006
to ensure consistency with the goodwill recognised in the consolidated accounts of
131
OBO1. As a result, the consolidated earnings of MEDICA as at 30 June 2006 were
recognised contra to pro forma consolidated equity on 31 December 2006.
By their very nature, the 2006 pro forma consolidated financial statements describe a
hypothetical situation and are not necessarily representative of the financial position or
performance that may have been observed had the acquisition taken place prior to the
actual date.
Basis for the 2007 restated 12-month financial statements
The restated consolidated financial statements covering the period from 1 January 2007
to 31 December 2007 have been derived from OBO1’s historic consolidated financial
statements in order to provide an indication of what the Company’s consolidated income,
expenses, cash flow and assets and liabilities would have been if the financial year
included only the 12 months from 1 January 2007 to 31 December 2007, in accordance
with the following conditions:

the scope is identical to the one retained in the consolidated accounts of OBO1 for
the period from 1 May 2006 to 31 December 2007;

the selected accounting period corresponds to a period of 12 months from 1
January 2007 to 31 December 2007;

the restated financial data are prepared in a form compatible with the accounting
methods of the OBO1 group described in the explanatory notes to the Medica
group’s corrected financial statements for the year ended 31 December 2007 in
by the European Union;

the restated income statement is derived from the 2007 (20 months) corrected
consolidated financial statements of OBO1, including the correction of an error
related to the calculation of interest on the syndicated loan described in note 2-3
which was also addressed in an audit report by the statutory auditors, from which
were deducted the expenses and income for the period from 1 May 2006 to 31
December 2006 for OBO1 and from 1 July 2006 to 31 December 2006 for Medica
SA and its consolidatedsubsidiaries; expenses and income for the period from 1
May 2006 to 31 December 2006 for OBO1 are included in the statutory parent
company statements closed on 31 December 2007, covering a period of 20
months, certified by the statutory auditors on 23 April 2008; expenses and income
for the period from 1 July 2006 to 31 December 2006 for Medica SA and its
consolidated subsidiaries are included in the statutory consolidated statements
closed on 31 December 2006, covering a period of 12 months, established
according to IFRS as adopted by the European Union, certified by the statutory
auditors on 30 April 2007;

the consolidated balance sheet remains unchanged with the exception of income
and reserves; net income for the period from 1 May 2006 to 31 December 2006 for
OBO1 and from 1 July 2006 to 31 December 2006 for Medica SA and its
consolidated subsidiaries is restated in reserves;

the restated consolidated cash flows are derived from the restated (20 months)
2007 consolidated accounts of OBO1, which was addressed in an audit report by
the statutory auditors on 3 December 2009, from which is deducted the cash flow
132
for the period from 1 May 2006 to 31 December 2006 for OBO1 and from 1 July
2006 to 31 December 2006 for Medica SA and its consolidated subsidiaries.
The Medica group’s principal accounting principles
The Medica group’s consolidated financial statements, as well as the restated
consolidated financial statements for 2007 and the pro forma consolidated financial
statements for 2006, have been prepared in accordance with IFRS as adopted in the
European Union.
The preparation of the financial statements in accordance with IFRS requires the
management of the Medica group or its subsidiaries to make estimates and apply certain
assumptions that impact the amounts of assets and liabilities recorded in the
consolidated balance sheet, information relating to these assets and liabilities, the
amounts of expenses and income on the income statement and commitments relating to
the accounting period. Management is also required to exercise its judgement when
applying the Medica group’s accounting methods.
The accounting methods set forth below require the use of estimates and management’s
judgement. Details of the Medica group’s accounting methods are given in part 2 of the
notes to the 2008 and 2007 consolidated financial statements in Chapter 25 “Financial
information regarding the assets, financial condition and results of the Issuer” of this
document.
Intangible assets
Goodwill
Goodwill represents the excess acquisition cost over the fair value of the Medica group’s
share of the net identifiable assets acquired by the subsidiary on the date of acquisition.
The goodwill linked to the acquisition of subsidiaries is booked under “intangible assets”.
The goodwill booked separately is not amortised. It is subject to an annual impairment
test and is booked at cost minus accumulated impairment losses. Goodwill impairment
losses are not reversible.
Goodwill is allocated to the cash-generating units or groups of cash-generating units
liable to benefit from the business combination having given rise to the goodwill.
Operating licences
In France, the operation of the Medica group’s retirement homes and follow-up care
centres is subject to permits which must be requested from the authorities for both the
set-up and extension of the facilities. Permits are granted for a period of 15 years in the
long-term care sector and five years in the post-acute and psychiatric care sector, which
gives them an indeterminate life with regard to IFRS. Operating procedures in Italy are
similar.
Only the permits acquired either directly or via a business combination are booked as
intangible assets. These permits are valued on their acquisition according to a method
established by the Medica group based on their annual cash-generating capacity.
Operating permits are therefore not amortised and are subject to annual impairment
tests.
133
Estimated impairment of indefinite-term intangible assets
The Medica group tests goodwill and permits for impairment annually. The recoverable
amounts from the cash-generating units or groups of cash-generating units to which
those intangible assets are linked have been determined according to the going concern
value or fair value minus selling costs. The method used by the group to calculate the
going concern value is based on the discounting of the future cash flows that will be
generated by the continuous use of the assets tested over a period of 10 years and
possible sale at the end of this period. The discounting is done at a rate corresponding to
the average weighted cost of capital and the Medica group’s debt.
For permits, the impairment test is done for each facility using different assumptions
depending on whether they concern retirement homes or those providing post-acute and
psychiatric care. As for goodwill, it is impairment tested at the level of the two business
segments: long-term care or post-acute and psychiatric care.
Financial liabilities
Bank debt
Bank debt is initially booked at its fair value, which corresponds to the amount received,
net of issuing costs. After the initial booking, the debt is valued at its amortised cost,
using the effective interest rate method, which takes account of all issuing costs; any
difference between the proceeds (net of transaction costs) and the reimbursement value
is booked to the income statement over the duration of the loan using the effective
interest rate method.
Convertible bonds
For convertible bond issues, the compound financial instrument is split between a liability
component and an equity component on initial booking.
The fair value of the liability component upon issuance is determined by discounting
contractual future cash flow, using the market rate applicable to a bond that would have
been issued by the Company under the same conditions but without the conversion
option. The liability component is then valued on the basis of the amortised cost.
The value of the equity component is determined upon issuance as the difference
between the fair value of the liability component and the fair value of the bond issue. The
value of the conversion option is not re-examined in subsequent fiscal years.
The issuing costs are split between the liability component and the equity component
based on their respective book values at the time of the issue.
Derivative instruments
The Medica group’s derivative instruments comprise primarily interest rate hedging
contracts. These instruments are initially booked at their fair value, which is subsequently
adjusted. This is calculated as the discounted value of estimated future cash flows.
Valuations of the Medica group’s derivative instruments are provided by its banks.
The Medica group’s derivative instruments comprise simple interest rate hedging
contracts (fixed rate swaps and caps). These hedging contracts have been taken out to
cover clearly identified liabilities, with similar nominal values and based on identical
interest rates (3-month Euribor), as well as identical maturities (quarter). However, as the
Company had not documented the effectiveness of these instruments up to the balance
134
sheet date for the financial year ended 31 December 2008, it has not applied hedge
accounting in relation to its consolidated financial statements up to this date.
As at 1 January 2009, the Medica group has decided to apply cash flow hedge
accounting and produced the documentation required by IAS 39. Beginning on this date,
the effective portion of the change in fair value of the hedging instrument is recognised in
equity, while the change in value of the ineffective portion is recognised in profit or loss.
In addition, expenses and income relating to interest rate hedges, previously presented
as other financial income and expenses, are now included in cost of net debt as at
1 January 2009.
As hedge accounting has not been applied retroactively, changes in the fair value of
derivative instruments and expenses and income relating to interest rate hedges are kept
under other financial income and expenses in the financial statements prior to 1 January
2009.
Provisions
Provisions for risks such as legal actions are booked when the Medica group is bound by
a legal or implicit obligation stemming from past events, making it more probable than not
that an outflow of resources embodying economic advantages will be required to settle
the obligation and a reliable estimate can be made of the amount of the obligation. The
amount of the provision recognised is the closest estimate of the expense required to
settle the obligation, discounted if necessary on the closing date.
135
20.1.1
Key figures
The following tables present the Medica group’s key figures, including its operations in
each of the long-term care sector and the post-acute and psychiatric care sector for the
periods ended 30 September 2006, 2007, 2008 and 2009:
2006
2007
2008
2008
2009
12 months
(pro forma)
12 months
(restated)
12 months
(corrected)
9 months
(30 September)
9 months
(30 September)
Revenue
324.8
384.7
448.8
333.0
356.7
297.3
345.7
401.7
298.0
319.5
France as a %
91.5%
89.9%
89.5%
89.5%
89.6%
218.6
239.3
266.9
198.2
213.8
of which long-term care as a %
67.3%
62.2%
59.5%
59.5%
59.9%
78.7
106.4
134.8
99.8
105.8
24.2%
27.7%
30.0%
30.0%
29.6%
27.6
39.0
47.2
35.0
37.2
Italy as a %
8.5%
10.1%
10.5%
10.5%
10.4%
86.7
101.8
118.4
88.7
94.6
26.7%
26.5%
26.4%
26.6%
26.5%
80.7
91.5
106.5
79.7
85.8
France as a % of revenue
of which post-acute and psychiatric in
millions of euros
EBITDAR (EBITDA excl. rental expense)
27.1%
26.5%
26.5%
26.7%
26.9%
61.9
65.5
73.9
54.5
58.1
of which long-term care as a % of revenue
28.3%
27.4%
27.7%
27.5%
27.2%
18.8
26.0
32.6
25.2
27.7
23.9%
24.4%
24.2%
25.2%
26.2%
6.0
10.2
11.9
9.0
8.8
Italy as a % of revenue
21.6%
26.3%
25.2%
25.8%
23.8%
57.2
66.9
78.3
58.6
62.7
17.6%
17.4%
17.5%
17.6%
17.6%
44.1
47.3
60.6
47.0
48.6
13.6%
12.3%
13.5%
14.1%
13.6%
of which post-acute and psychiatric in
millions of euros
of revenue
EBITDA
136
Cost of net debt
37
-52.3
-59.5
-67.1
-49.9
-48.0
-4.5
-5.9
-22.7
-3.8
0.6
-0.62
-0.81
-3.11
-0.52
0.09
Net profit attributable to equity holders
38
of the parent
Earnings per share
in euros
For the purposes of this paragraph:
Revenue includes mainly services provided and treatments. Revenue is recognised as
services are delivered (see section 25.3 “Corrected consolidated financial statements for
the 12 months ended 31 December 2008, note 2.6).
EBITDA corresponds to gross operating profit, i.e., operating profit from ordinary
activities before depreciation and provisions (see section 25.3 “Corrected consolidated
financial statements for the 12 months ended 31 December 2008”, note 2.6).
Operating margin is the ratio of operating profit from ordinary activities to consolidated
revenue. EBITDA and operating profit from ordinary activities are intermediate balances
calculated and presented in the Medica group’s consolidated full-year financial
statements.
However, the Medica group internally monitors EBITDA before property costs (“EBITDA
excluding rental expense” or EBITDAR), which corresponds to consolidated gross
operating profit before rental expense (only property rentals, excluding equipment
rentals). The Medica group’s management believes that this figure is more representative
of the group’s operating performance in its business sector, as it allows for a comparison
of the profitability of the group’s facilities independently of their real estate policy. This
indicator also facilitates comparison of the Medica group’s performance with that of its
competitors, in that all listed French operators in the sector use a similar ratio in their
financial communications.
Organic growth, excluding acquisitions, comprises the establishment and restructuring of
facilities and development of yields. Revenue generated by a given facility over one
month is included in organic growth if the facility was already part of the Medica group’s
scope of consolidation during the same month in the previous year.
37
Since 1 January 2009, changes in the fair value of derivative products have been recognised in equity (for the effective
portion), and income and expense arising from the interest-rate hedges have been recognised in the cost of gross debt
(see section 20.1.2 “Principal factors affecting results of operations and principal line items in the financial statements”).
38
Net profit attributable to equity holders of the parent reflects, in particular, a cost of net debt and other financial income
and expense linked to existing net debt. This debt comprises convertible bonds, which are to be converted ahead of the
Company’s IPO, and bank loans, which are to be repaid in part. Bank debt will be partially repaid from the proceeds of
the capital increase at the time of the IPO (see section 20.5 “Liquidity and capital resources – Debt”).
137
20.1.2
Principal factors affecting the Group’s business activities, results of operations
and principal line items in the financial statements
A - Principal factors affecting results of operations
The principal factors which the Medica group believes affect its results of operations are
presented below.
CHANGES IN SCOPE OF CONSOLIDATION
Acquisitions
As part of its controlled expansion strategy, the Medica group endeavours to carry out
acquisitions in both the long-term care sector and the post-acute and psychiatric care
sector. Acquisitions carried out have included both large groups and independent
facilities.
Since 2006, acquisitions have included mainly independent facilities.
The Medica group acquired 20 facilities in 2006, including five long-term care facilities in
France, 11 post-acute and psychiatric care facilities and four long-term care facilities in
Italy.
It acquired eight facilities in 2007, including three long-term care facilities in France, four
post-acute and psychiatric care facilities and one long-term care facility in Italy.
It acquired eight facilities in 2008, including one long-term care facility in France, five
post-acute and psychiatric care facilities and two long-term care facilities in Italy. For
example, the Medica group acquired the following facilities in France in 2008: Caubeyres
La Paloumère (post-acute and psychiatric care), Hurigny La Roseraie (post-acute and
psychiatric care), La Varenne St Sauveur (post-acute and psychiatric care),
Castelmaurou Montvert (post-acute and psychiatric care), Verdon in Gréoux Les Bains
(long-term care) and Grentheville Sacré Cœur (long-term care). In Italy, the Medica group
acquired the Buttigliera d’Asti and San Begnino facilities.
The Medica group has not made any acquisitions so far in 2009.
In the majority of cases, operating margins at facilities or groups of facilities acquired are
below that of the Medica group. Nevertheless, after completing each acquisition, the
Medica group implements a policy intended to raise the profitability level of each acquired
facility as it becomes integrated within the Medica group. This involves:

a more aggressive yield management policy with the aim of making facilities more
attractive and therefore increasing revenue per bed;

analysis of workforce organisation, with the objective of generating savings on
personnel expenses;

a policy of reducing other external costs and purchasing, particularly by generating
economies of scale through the central Medica group purchasing unit.
Establishment and restructuring of facilities
In parallel with its strategy of controlled growth through acquisitions, the Medica group
has implemented a policy of establishing new facilities and restructuring existing facilities
to improve operating margins.
138
The Medica group opened nine facilities over the period from 2006 to 2009 (to 30
September): seven long-term care facilities and two post-acute and psychiatric care
facilities. It also undertook restructuring works at six post-acute and psychiatric care
facilities and restructured two long-term care facilities.
Such establishment and restructuring of facilities have had a short-term negative effect
on operating margins due to a temporary reduction in occupancy rates at long-term care
facilities and, in the case of some restructurings, a reduction in revenue due to the
temporary closure of the facility in question. Nonetheless, such restructurings are
intended to and, for the most part, do lead to an increase and optimisation of operating
margins at the relevant facilities. This is particularly true in the post-acute and psychiatric
care sector, where restructuring generally leads to greater specialisation of facilities and
the ability to care for more serious ailments due to increased medical treatment
structures, making it possible to charge higher daily rates.
Disposals
The Medica group did not make any disposals of operating companies from 2006 to 2009
(to 30 September).
CHANGES IN OCCUPANCY RATES
Occupancy rates at the group’s facilities have a direct influence on sales of services. In
the long-term care sector, occupancy rates influence revenues from “accommodation”
and “care” services. In the post-acute and psychiatric care sector, occupancy rates
influence revenues from “daily rates”, while optimisation of the use of private rooms
affects revenues from “related services”.
The occupancy rate is defined as the ratio of the number of days actually billed to the
number of billable days for facilities open for more than 12 months. The number of
billable days is the number of beds multiplied by the total number of days in the year, with
the exception of facilities open for only part of the year, for which only the number of days
in operation is used for the calculation.
Over the period from 2006 to 2009 (to 30 September), the occupancy rate at the Medica
group’s facilities increased by 1.1 percentage points to an average of 96.7% across both
business segments.
Occupancy rate 2006 to 2009 (to 30 September 2009):
2006
2007
2008
2008
(30 September)
2009
(30 September)
France
95.7%
97.0 %
96.7 %
96.9 %
96.8 %
Italy
94.6%
96.1%
96.6%
96.6 %
95.7 %
Medica
group
95.6%
96.9%
96.7%
96.8 %
96.7 %
In Italy, the Medica group demonstrated its capacity for integration and managing its
geographical diversification over the period, keeping occupancy rates at a high level
despite the decline observed over the first nine months of 2009.
139
CHANGES IN PRICING
Long-term care sector in France
The table below shows the contribution of accommodation, dependency care (see section
8.1.3 “Fee schedule under tripartite agreements”) and treatment fees to the Medica
group’s consolidated revenue in millions of euros from 2006 to 2009 (to 30 September).
2006
(pro forma)
12 months
%
millions
of euros
%
millions of
euros
%
Accommodation
152.8
70%
162.8
68%
177.1
66%
Dependency care
21.4
10%
24.3
10%
26.1
10%
Treatment
40.0
18%
47.2
20%
58.2
22%
4.3
2%
5.0
2%
5.5
2%
218.6
100%
239.3
100%
266.9
100%
1
Long-term care sector
France consolidated
revenue
Other services correspond to additional accommodation services provided by long-term care facilities (in particular, dining
services, television rentals, and maintaining personal effects).
9 months
2008
(30 September)
2009
(30 September)
millions of
euros
%
millions of
euros
%
Accommodation
133.0
67%
137.9
64%
Dependency care
19.6
10%
20.8
10%
Treatment
41.5
21%
51.6
24%
4.2
2%
3.5
2%
198.2
100%
213.8
100%
Other services
1
Long-term care sector France
consolidated revenue
1
2008
(corrected)
millions
of euros
Other services
1
2007
(restated)
Other services correspond to additional accommodation services provided by long-term care facilities (in particular, dining
services, television rentals, and maintaining personal effects).
Treatment revenues accounted for 18% of long-term care revenues in France in 2006,
20% in 2007, 22% in 2008 and 24% for the nine months ended 30 September 2009. This
reflects the impact of the signature and renewal of tripartite agreements, as well as the
inclusion of medical equipment and supplies in rates as at August 2008. Not including
medical equipment and supplies, treatment revenues would have represented 23% of
long-term care consolidated revenues in France for the nine months ended 30 September
2009.
The Medica group believes that increases in fee rates for dependency care and treatment
resulting from changes in healthcare policies necessarily have a positive impact on
consolidated revenue, but are relatively neutral in terms of operating profit from ordinary
activities. In fact, fee rates are set for five years by the regulatory authorities in France
(on conclusion of a tripartite agreement) and re-evaluated in January of each year. They
are primarily intended to finance upgrades of medical treatment structures and the
recruitment of caregivers and dependency care staff in care facilities. The positive impact
of this increase on the Medica group’s revenue is therefore likely to be offset by a
generally matching increase in purchasing, external costs and personnel expenses. By
140
contrast, an increase in the amount paid as an APA allowance has no impact on
consolidated revenue, though it does help strengthen the solvency of the Medica group’s
residents.
Potential for growth in accommodation fees for residents already present within the
Medica group is limited, given that increases are defined on an annual basis by the
French Ministry of Finance. The table below shows fee re-valuations since 2006:
Journal Officiel decree
Year
Increase in accommodation fees
for existing residents
Decree of 30 December 2005
(JO 31/12)
2006
+2.60%
2007
+2.40%
2008
+2.20%
2009
+3.0%
(JO 22/12)
(JO 26/12)
(JO 7/01 and 30/01)
However, an increase in accommodation fee rates, which the Medica group is free to set
for new residents (subject to the fee rates proposed being appropriate in light of local
competitive conditions, the services offered and the solvency of residents and their
families) does offer potential for growth in both consolidated revenue and operating profit
from ordinary activities.
The Medica group also pursues an active policy to adapt its fees to the extent possible to
specific requirements and local competition.
In the post-acute and psychiatric sector, rates include a daily treatment rate
(approximately 80% of the Medica group’s consolidated post-acute and psychiatric sector
revenue in 2008) and rates for miscellaneous accommodation-related other services
(accounting for approximately 20% in 2008).
The table below shows how daily rates and other services contributed to the Medica
group’s consolidated revenue in millions of euros and varied as a percentage of
consolidated post-acute and psychiatric sector revenue between 2006 and 2009 (to 30
September):
12 months
Daily treatment rates
Other services
1
Post-acute and
psychiatric sector
consolidated
revenue
1
2006
(pro forma)
2007
(restated)
2008
(corrected)
in millions
of euros
%
in millions
of euros
%
in millions
of euros
%
66.8
85%
87.8
83%
109.7
81%
11.9
15%
18.6
17%
25.1
19%
78.7
100%
106.4
100%
134.8
100%
Other services include, in particular, private room accommodation.
141
2008
(30 September)
9 months
in millions of
euros
%
in millions of
euros
%
Daily treatment rates
81.4
82%
84.0
79%
1
18.4
18%
21.7
21%
Post-acute and psychiatric
sector consolidated revenue
99.8
100%
105.8
100%
Other services
1
2009
(30 September)
Other services include, in particular, private room accommodation.
Daily treatment rates are established in targets and resources contracts which each
facility signs for a period of five years. These rates are intended to finance a patient care
plan to which is attached a staff organisation chart, and for which the regulatory
authorities approve a certain level of operating margin. These rates are generally reevaluated on 1 May of each year.
The table below shows the development of daily treatment rates (as a percentage of
consolidated revenue) from 2006 to 2009:
2006
1
2
3
1
2007
1
2008
2
2009
3
Recuperative care
2.2%
2.2%
1.0%
1.5%
Functional rehabilitation
1.9%
1.9%
1.0%
1.5%
Psychiatry
2.5%
2.5%
1.7%
1.5%
Source: French Ministry of Health.
Source: Decree of 27 February 2008.
Source: Decree of 3 April 2009.
Regional Hospital Agencies or “ARH” (and Regional Health Agencies or “ARS” as at
1 January 2010) determine a guideline rate for all facilities, which can be adjusted if
necessary to promote a particular type of specific care at a local level. Changes in these
rates lead to a corresponding increase or decrease in the Medica group’s consolidated
revenue, with multiyear targets and resources contracts having been signed for virtually
all post-acute and psychiatric care facilities. The Medica group has sought to enhance its
post-acute and psychiatric care facilities’ level of specialisation with a view to converting
multi-disciplinary facilities into specialist centres offering care for specific ailments,
thereby giving the group the potential to generate higher revenue per bed as a result of
higher daily rates given the generally higher level of medical treatment required at
specialist centres.
Revenue from other services includes primarily:

making a private room available;

access to a private telephone line;

a personalised press service;

a laundry service;

dining and accommodation for guests.
These services, accompanied by appropriate fees set freely by the Medica group, enable
each team to optimise revenue per occupied bed. By focusing on this policy, the Medica
142
group increased its revenue from €11.9 million in 2006 to €25.1 million in 2008,
representing average growth of 45% a year, while revenue from daily rates increased by
28% a year. Over the first nine months of 2009, this revenue amounted to €21.7 million,
an increase of 18% compared to the first nine months of 2008, while revenue from daily
treatment rates rose by 3% over the same period.
Italy
In Italy, the regions assume control and financing of facilities through ASLs (Aziende
Sanitari Locali) by means of accreditation agreements. This system is heavily
decentralised and the composition of revenue may vary from one facility to another
according to its geographical location and the terms of its accreditation agreement. For
the Medica group’s accredited facilities in Italy, rates may be broken down into
accommodation and service fee rates (between 50% and 60% of an average facility’s
rates) and treatment rates (the remainder). Accommodation fee rates are generally set
freely by the facilities, while treatment rates are set by ASLs and re-evaluated each year.
Between 2006 and 2009 (to 30 September), the breakdown of revenue between
accommodation and treatment remained stable:

accommodation revenue accounted for 55% of the sector’s revenue;

treatment revenue accounted for 44%, with the remainder generated by related
services.
CHANGES IN YIELD
Yield is the revenue per bed per day. For facilities open only part of the year, only the
number of days these facilities are open is used in the calculation. Yield is an important
management indicator for the Medica group. The manner in which yield is calculated
allows for comparison from year to year, independent of changes in the number of beds.
The Medica group’s yield management policy aims to maximise the revenue generated
by its facilities. As the scope of its activities is limited by the number of permits it holds,
the Medica group has adopted management practices aiming to obtain the highest yield
possible for each available capacity unit, i.e., for each authorised bed, in both the longterm care sector and the post-acute and psychiatric sector.
In order to optimise the yield per bed, the Medica group endeavours in particular to adapt
the rates practiced at its long-term care facilities according to the characteristics of each
facility’s local market, to enhance the value of its post-acute and psychiatric care activities
through a targeted policy of specialisation, to develop sales of related services, and to
optimise its occupancy rate.
143
The table below shows the development of the yield between 2006 and 2008:
Yield
(in euros)
TOTAL
2006
(pro forma)
2007
(restated)
2008
(corrected)
98.8
104.5
111.5
The Medica group’s yield increased from €98.8 in 2006 to €111.5 in 2008, representing
improvement of 13% over the period and average growth of 6.2% a year.
The yield improved further over the period from 30 September 2008 to 30 September
2009, rising by 5.4% from €110.8 as at 30 September 2008 to €116.8 as at 30 September
2009.
Yield
(in euros)
2008
(30 September)
2009
(30 September)
110.8
116.8
TOTAL
B – Principal items in the financial statements
PURCHASES USED IN THE BUSINESS
The table below shows purchases used in the business in absolute terms and as a
percentage of consolidated revenue from 2006 to 2009 (to 30 September):
2006
(pro forma)
2007
(restated)
2008
(corrected)
2008
(30 September)
2009
(30 September)
Purchases used in the business
16.0
18.5
20.4
15.6
17.4
(percentage of
revenue)
4.9%
4.8%
4.6%
4.7%
4.9%
Purchases used in the business in France
15.9
18.4
20.3
15.5
17.3
(percentage of
revenue)
5.3%
5.3%
5.1%
5.2%
5.4%
This item includes in particular purchases of food by long-term care facilities,
representing more than half of the Medica group’s total purchases used in the business in
144
2008 39 , purchases of medicines (primarily for post-acute and psychiatric sector facilities)
and maintenance products. Purchases in Italy are insignificant because most purchases
are made directly by subcontractors.
EXTERNAL COSTS
External costs include costs such as subcontracting, purchases not added to inventory
and rental expense in absolute terms and as a percentage of consolidated revenue from
2006 to 2009 (to 30 September).
External costs (excluding rental expense)
The table below shows the development of external costs:
2006
(pro forma)
2007
(restated)
2008
(corrected)
2008
(30 September)
2009
(30 September)
Group external costs (excluding rental expense)
(in millions of
euros)
(percentage of
revenue)
58.1
71.2
81.6
60.3
64.3
17.9%
18.5%
18.2%
18.1 %
18.0 %
France external costs (excluding rental expense)
(in millions of
euros)
(percentage of
revenue)
40.5
46.8
51.5
38.0
39.9
13.6%
13.5%
12.8%
12.8 %
12.5 %
External costs (excluding rental expense) represent a significant portion of consolidated
revenue. They include in particular subcontracted services (catering for post-acute and
psychiatric care facilities, cleaning, linen rental and maintenance, and the provision of
human resources and equipment for facilities in Italy).
This item also includes purchases not added to inventory (mainly energy, water and
miscellaneous supplies costs), fees paid to third parties and the cost of equipment rental
and maintaining the group’s facilities.
Lastly, this item includes temporary staff costs, which decreased from 4.5% of total
external costs excluding rental expense in 2006 to 2.9% in 2008, as a result of the
group’s staff recruitment and loyalty policy.
For the nine months ended 30 September 2009, external costs (excluding rental
expense) represented 18.0% of the Medica group’s consolidated revenue.
39
Approximately €11.2 million in 2008
145
Rental expense
Rental expense (property rent) are the third-largest cost item for the Medica group. The
table below shows rental expense in absolute terms and as a percentage of consolidated
revenue from 2006 to 2009 (to 30 September):
2006
2007
2008
2008
2009
(pro forma)
(restated)
(corrected)
(30 September)
(30 September)
(in millions of
euros)
29.5
34.8
40.0
30.1
31.9
(percentage
of revenue)
9.1%
9.1%
8.9%
9.0%
8.9%
Rental expense
Rental expense (France)
(in millions of
euros)
26.5
30.5
34.4
25.9
27.6
(percentage
of revenue)
8.9%
8.8%
8.6%
8.7%
8.6%
The Medica group’s commercial leases generally include a mechanism for indexation of
rents. Any change in the relevant indices upon which rent is based has an impact on the
level of rental expense. Until 31 December 2008, most of the Medica group’s commercial
leases were indexed to the cost of construction index (CCI) with no upward or downward
limit. Since the start of 2009, the group has finalised renegotiations with its main lessors,
which have allowed for the adoption of more protective mechanisms, including in
particular the indexation of 41% of its commercial leases to the commercial rent index
(“ILC”) with a cap (see section 16.4.2 “Real estate complexes leased”).
A change in these indices leads to a matching change in rental expense borne by the
Medica group. Between 2006 and the second quarter of 2009, the CCI rose sharply
relative to the average increase in the ILC since its creation:
146
CCI and ILC
CCI
% change year-onyear (Q/Q-4)
ILC
% change year-onyear (Q/Q-4)
2006 Q1
1,362
+7.24
2006 Q2
1,366
+7.05
2006 Q3
1,381
+8.06
2006 Q4
1,406
+5.56
2007 Q1
1,385
+1.69
2007 Q2
1,435
+5.05
97.45
-
2007 Q3
1,443
+4.49
98.07
-
2007 Q4
1,474
+4.84
98.90
-
2008 Q1
1,497
+8.09
100.00
-
2008 Q2
1,562
+8.85
101.20
+3.85
2008 Q3
1,594
+10.46
102.46
+4.48
2008 Q4
1,523
+3.32
103.01
+4.16
2009 Q1
1,503
+0.40
102.73
+2.73
2009 Q2
1,498
-4.10
102.05
+0.84
Source: INSEE
This increase notably resulted in a rise in like-for-like rents of 6.6% between 2006 and
2007 and 4.1% between 2007 and 2008. However, the year-on-year increase in rental
expense is mainly due to the effect of the larger scope of consolidation.
TAXES AND SIMILAR PAYMENTS
The table below shows taxes and similar payments in absolute terms and as a
percentage of consolidated revenue from 2006 to 2009 (to 30 September):
2006
(pro forma)
2007
(restated)
2008
(corrected)
2008
(30 September)
2009
(30 September)
Taxes and similar payments
(in millions of
euros)
20.1
25.5
27.7
21.9
21.7
(percentage of
revenue)
6.2%
6.6%
6.2%
6.6%
6.1%
Taxes and similar payments in France
(in millions of
euros)
18.5
23.5
25.1
20.1
19.6
(percentage of
revenue)
6.2%
6.8%
6.2%
6.7%
6.1%
This item includes in particular all taxes on wages or group sales (including nonrecoverable VAT, payroll tax, business tax, property tax, training tax). The signature of
tripartite agreements in the long-term care sector in France has led to an increase in
147
consolidated revenue not subject to VAT and therefore to an increase in non-recoverable
VAT and payroll tax. Despite these unfavourable trends, the Medica group was able to
contain the growth of this line item at a level similar to revenue growth.
CHANGES IN PERSONNEL EXPENSES
The Medica group’s business requires a large and highly qualified workforce. The
majority of the staff working in its facilities are salaried employees of the Medica group.
Nonetheless, a small proportion of staff are employed under temporary contracts or as
subcontractors (particularly catering and cleaning services, together with human
resources and equipment for group facilities in Italy). Temporary contract and
subcontracting costs are recorded as external costs in the income statement (see below).
personnel expenses currently represent the largest cost for the Medica group.
The table below shows personnel expenses in absolute terms and as a percentage of
consolidated revenue from 2006 to 2009 (to 30 September):
2006
2007
(pro forma)
2008
(restated)
2008
(30 September)
2009
(30 September)
(corrected)
(in
millions
of
euros)
% of
consolidated
revenue
(in
millions
of
euros)
144.1
44.4%
168.1
43.7%
201.8
47.7%
165.7
47.9%
199.2
% of
consolidated
revenue
(in
millions
of
euros)
(in
millions
of
euros)
% of
consolida
ted
revenue
(in
millions
of
euros)
% of
consolida
ted
revenue
45.0%
147.0
44.2%
158.7
44.5%
49.6%
145.2
48.7%
% of
consolidated
revenue
Medica group
Personnel
expenses
Medica group in France
Personnel
expenses
141.8
156.9
49.1%
At constant staff, changes in personnel expenses were due to three principal factors:

personnel expenses in France increased more rapidly than consolidated revenue
during the last three financial years, particularly in the long-term care sector. This
was due to tripartite agreements, which led to the installation of increased medical
treatment structures at the facilities and therefore the recruitment of treatment staff
(particularly nurses and nurse’s aides), who generally commanded higher salaries.
All of the Medica group’s long-term care facilities had signed a tripartite agreement
as at 31 December 2008 and 40% of facilities that have already signed
agreements renewed their agreements;

the increase in personnel expenses was also due to a re-evaluation of gross
monthly wages as a result of a rise in the base value used to calculate wages. In
the long-term care sector, the base value increased by 1.3% on 1 January 2006,
1.1% on 1 July 2006, 3.0% on 1 April 2007, 1.8% on 1 April 2008 and 1.1% on 1
April 2009. In the post-acute and psychiatric sector, the base value also increased
by 0.9% on 1 July 2006, 1.2% on 1 July 2007, and 0.7% on 1 July 2008. There has
not been any change as yet for 2009;

in accordance with the provisions of the long-term care annex to the collective
bargaining agreement applicable to private for-profit hospitals, gross monthly
wages are increased by 1% per year of service.
148
Due to the way in which the Italian facilities run by the Medica group are managed, with
nearly all human resources and equipment being provided by the Punto Service workers’
collective, the Medica group’s personnel expenses in Italy represent a very small
proportion of revenue.
COST OF NET DEBT AND OTHER FINANCIAL INCOME AND EXPENSES
Cost of net debt
Cost of net debt corresponds to financial charges at the nominal interest rate, income and
expenses relating to interest rate hedges, income on cash and cash equivalents and the
effect of the amortised cost accounting method on borrowings.
Cost of net debt at the nominal interest rate comprises:

the cost of the convertible bonds issued by the group in 2006 and which
comprises solely fixed-rate capitalised interest;

the cost of the syndicated loan, bank debt and leases, comprising mainly
capitalised interest (mezzanine loan) and partly interest paid in the course of the
year. These debts are mainly at floating rates.
The Medica group has adopted a hedging policy with the aim of protecting itself against
changes in interest rates by taking out interest rate hedges that enable it exchange
Euribor for an average fixed rate of approximately 3.7%. These hedges meant that the
Medica group was able to hedge approximately 89% of its bank loans and leases as at
31 December 2008.
Income and expenses relating to hedging instruments correspond primarily to cash flows
that the Medica group receives or pays out in relation to the interest rate hedges obtained
in 2006. Such income and expenses are included in cost of net debt only since 1 January
2009.
The effect of amortised cost corresponds to the impact of the amortised cost method on
the convertible bonds and the syndicated loan. This effect includes in particular the
depreciation of issue costs. During the preparation of its condensed interim consolidated
financial statements for the nine-month period ended 30 September 2009, the Medica
group identified an error in the calculation of interest on the syndicated loan, and more
specifically, the effect of amortised cost relating to the syndicated loan (see section 20.1
“Overview – The Medica group – Notice”). This error affects the consolidated financial
statements for the 12-month financial year ended 31 December 2008 and the 20-month
financial year ended 31 December 2007. This has no impact on changes in cash and
cash equivalents. The information provided and discussed in this section is taken from
the financial statements corrected for this error presented in Chapter 25 “Financial
information regarding the assets, financial condition and results of operations of the
Issuer” with the reports of the statutory auditors on these corrected accounts.
149
The table below shows these components of cost of net debt for 2006 (pro forma), 2007
(restated) and 2008 (corrected), and figures to 30 September 2008 (nine months) and
2009 (nine months):
2006
(pro forma)
2007
(restated)
2008
(restated)
2008
2009
(30
September)
(30
September
)
(9 months)
(9 months)
Financial charges at nominal interest rate
Convertible bonds
17.6
18.1
20.1
14.7
16.1
Bank loans and leases
37.2
42.8
48.2
36.2
22.7
(Income)/expenses relating to hedging
instruments
9.3
Effect of amortised cost on borrowings
-2.0
-1.3
-0.9
-0.8
0.0
Gross financial charges
52.7
59.5
67.4
50.1
48.1
Income on cash and cash equivalents
-0.4
0.0
-0.3
-0.2
0.0
Cost of net debt
52.3
59.5
67.1
49.9
48.0
As at 1 January 2009, income and expenses relating to interest rate hedges previously
included in “other financial income and expenses” are now included in gross financial
charges, in relation to the application of hedge accounting. In order to provide a
comparison, cost of net debt is shown after hedging*:
*
2006
(pro forma)
2007
(restated)
2008
(restated)
2008
(30 September)
(9 months)
2009
(30 September)
(9 months)
Cost of net debt
52.3
59.5
67.1
49.9
48.0
(Income)/expenses relating
to hedging instruments
0.6
-1.1
-3.6
-2.7
-
Cost of net debt after
hedging
53.0
58.4
63.5
47.2
48.0
Cost of debt after taking into account expenses paid and proceeds received from interest rate hedges.
The increase in cost of net debt after hedging from €53.0 million to €63.5 million over the
last three years is closely linked to the increase in net debt relating to the implementation
of the group’s policy of carrying out acquisitions by drawing on ACF and RCF credit
facilities.
Cost of net debt rose from €47.2 million as at 30 September 2008 to €48.0 million as at
30 September 2009. This relative stability reflects the effectiveness of the interest rate
hedges in places, as well as the limited increase in the Medica group’s net debt.
As part of the proposed listing of its shares on Euronext Paris, the Medica group is
planning to change its debt structure. This will reduce its financial charges significantly,
principally because of the planned €260 million capital increase and the conversion of
convertible bonds into shares (see section 20.5 “Liquidity and capital resources –
Restructuring of debt and related changes”).
Other financial income and expenses
Until 31 December 2008, other income and expenses comprised principally the change
in fair value of hedging instruments, which was not recognised using hedge flow
150
accounting, as well as income and expenses relating to interest rate instruments. The
change in fair value of interest rate instruments was recognised in the income statement
in the amount of €4.7 million in 2006 (pro forma), €5.2 million in 2007 (restated) and
-€25.2 million in 2008 (corrected). Details of changes in income and expenses relating to
derivative instruments are given above.
Since 1 January 2009, derivative instruments are recognised using cash flow hedge
accounting. The change in fair value of these instruments is now recognised directly in
equity (for the effective portion). The income and expenses on interest rate hedging are
recognised in cost of net debt. For this reason, other financial income and expenses for
the first nine months of 2009 come to just €0.1 million.
CORPORATE TAXES
Medica (formerly OBO1), the head of the tax consolidation group since 1 January 2007,
had tax loss carry-forwards of around €66 million as at 31 December 2008. These tax
loss carry-forwards do not expire and are deductible from future taxable profits.
151
Detailed income statement (2006-2009 at 30 September)
2008 (30
Sept)
2009 (30
Sept)
9 months
9 months
2006
12 months
(pro forma)
324.8
2007
12 months
(restated)
384.7
2008
12 months
(corrected)
448.8
333.0
356.7
Group external costs (excluding rental expense)
Personnel expenses
Other operating income and expenses
EBITDAR (EBITDA excl. rental expense)
as a % of revenue
-16.0
-58.1
-20.1
-144.1
0.2
86.7
-18.5
-71.2
-25.5
-168.1
0.3
101.8
-20.4
-81.6
-27.7
-201.8
1.0
118.4
-15.6
-60.3
-21.9
-147.0
0.5
88.7
-17.4
-64.3
-21.7
-158.7
-0.0
94.6
Rental expense
-29.5
EBITDA
as a % of revenue
57.2
Amortisation and provisions
-13.1
as a % of revenue
44.1
-1.6
Results of operations
as a % of revenue
42.5
Income from cash and cash equivalents
Cost of gross debt
Cost of net debt
as a % of revenue
0.4
-52.7
-52.3
Income (loss) of equity affiliates
4.0
-
Pre-tax income
as a % of revenue
-5.8
Income tax
1.7
4.1
10.0
1.1
2.9
Earnings after tax
-4.2
-5.6
-22.4
-3.5
0.9
Net profit attributable to equity holders of
the parent
as a % of revenue
-4.5
in millions of euros
Revenue
26.5%
26.7%
-34.8
26.4%
-40.0
66.9
-19.7
-1.8
0.0
-59.5
-59.5
0.3
-67.4
-67.1
4.4
-9.6
-15.0%
-5.9
-1.4%
152
-15.0%
-2.0
-1.4%
-3.8
-5.1%
-13.5%
0.1
-0.2
-4.7
-7.2%
-22.7
-1.5%
13.0%
0.0
-48.1
-48.0
-1.1
-
-32.4
-2.5%
-1.8%
46.2
13.9%
0.2
-50.1
-49.9
-22.8
-0.1
13.6%
-2.4
46.4
12.9%
-15.5%
-16.1%
48.6
14.1%
-0.6
57.7
11.8%
17.6%
-14.1
47.0
13.5%
-2.9
45.5
13.1%
62.7
17.6%
-11.6
60.6
12.3%
26.5%
-31.9
58.6
17.5%
-17.8
47.3
13.6%
-30.1
78.3
17.4%
17.6%
26.6%
-0.6%
0.6
-1.1%
0.2%
20.2
Comparison of interim periods (nine months) ended 30 September 2008 and 30
September 2009
Consolidated revenue
The Medica group’s consolidated revenue increased by more than 7.1% from €333.0
million for the nine-month period ended 30 September 2008 to €356.7 million for the ninemonth period ended 30 September 2009. This increase of €23.7 million was as a result
of:

primarily an increase of €19.6 million relating to the Medica group’s organic growth,
equal to consolidated revenue growth of 5.9%; and

an increase of €4.1 million in consolidated revenue relating to changes in the
scope of consolidation in 2009 compared with 2008, with the consolidation over
nine months of acquisitions carried out in 2008.
The Medica group achieved organic growth of 5.9% over the first nine months of 2009 as
a result of:

the ramp-up of facilities established in 2009;

revaluations of various services provided by the Medica group (accommodation
fees for the long-term care sector and related services for the post-acute and
psychiatric sector); and

the revaluation of treatment contributions and dependency care fees in the longterm care sector and daily rates in the post-acute and psychiatric sector.
EBITDAR (EBITDA excluding rental expense)
The Medica group’s EBITDAR rose by 6.7% to €94.6 million for the nine-month period
ended 30 September 2009 compared with €88.7 million over the first nine months of
2008. This increase of €5.9 million relates to the following sectors:

Long-term care in France: +€3.6 million;

Post-acute and psychiatric care: +€2.5 million;

Italy: -€0.2 million.
As a percentage of consolidated revenue, EBITDAR remained stable at 26.5% of revenue
for the nine-month period ended 30 September 2009 compared with 26.6% over the first
nine months of 2008 (see section 20.1.2 “Principal factors affecting the Group’s business
activities, results of operations and principal line items in the financial statements” for an
explanation of the principal factors impacting EBITDAR).
153
Revenue and EBITDAR by business line
2008
30 September
2009
30 September
198.2
213.8
Revenue
Total (in millions of euros)
EBITDAR
54.5
58.1
Total (% of revenue)
27.5%
27.2%
Consolidated revenue from long-term care activities in France rose by €15.6 million to
€213.8 million for the nine-month period ended 30 September 2009, compared with
€198.2 million for the nine-month period ended 30 September 2008. This represents an
increase of 7.9%, mainly as a result of organic growth in the sector.
Long-term care activities in France achieved organic growth of 7.8% over the first nine
months of 2009, as a result of:

the ramp-up of the two facilities established in 2009;

growth in accommodation revenues due to a 3.0% increase in daily
accommodation rates over the first nine months of 2009, as well as the Medica
group’s revaluation of its accommodation rates applied to new residents, for which
it is free to set rates; and

the increase in treatment and dependency care rates in the long-term care sector
over the period corresponding to the signature of tripartite agreements or the
renewal of such agreements. A total of 19 agreements were signed or renewed
during the first nine months of 2009. Since August 2008, medical equipment and
supplies (mainly medicalised beds, nutriments and dressings) have been included
in treatment rates and have also resulted in an increase in treatment revenues.
The inclusion of medical equipment and supplies resulted in an increase in
treatment revenues of approximately €1.0 million for the nine-month period ended
30 September 2008 and around €4.5 million for the nine-month period ended 30
September 2009.
EBITDAR rose by 6.6% from €54.5 million for the nine-month period ended
30 September 2008 to €58.1 million for the nine-month period ended 30 September 2009
due to revenue growth of 7.9% and slight deterioration in EBITDAR margin from 27.5%
for the first nine months of 2008 to 27.2% for the first nine months of 2009 (see section
20.1.2 “Principal factors affecting the Group’s business activities, results of operations
and principal line items in the financial statements” for an explanation of the principal
factors impacting EBITDAR margin).
154
2008
30 September
2009
30 September
Revenue
99.8
105.8
EBITDAR
25.2
25.2%
27.7
26.2%
Consolidated revenue from post-acute and psychiatric care activities rose by €6.0 million
from €99.8 million for the nine-month period ended 30 September 2008 to €105.8 million
for the nine-month period ended 30 September 2009, equal to growth of 6.0% broken
down as follows:

an increase of €2.7 million relating to the Medica group’s organic growth, equal to
revenue growth of 2.7%; and

an increase of €3.3 million in revenue relating to the full-year consolidation of
acquisitions carried out in 2008 (five facilities).
The Medica group achieved organic growth of 2.7% in 2008 as a result of:

the increase in daily rates by the Regional Hospital Agency within the framework of
targets and resources contracts as at 1 May 2009 (between 1.00% and 2.36%
depending on the region and facilities’ activities);

growth in additional services: the Medica group generated consolidated revenue of
€21.7 million during the nine-month period ended 30 September 2009, partly due
to related services (including private rooms), compared with €18.4 million during
the nine-month period ended 30 September 2008.
EBITDAR rose by 9.9% to €27.7 million over the first nine months of 2009 compared with
€25.2 million over the first nine months of 2008 due to revenue growth of 6.0% and
improvement in EBITDAR margin to 26.2% for the nine-month period ended 30
September 2009 compared with 25.2% for the nine-month period ended 30 September
2008. This increase in EBITDAR margin relates primarily to improvement in the
profitability of the existing scope of consolidation, as well as the “catch-up” effect of
facilities consolidated in the course of 2008.
Long-term care sector in Italy
2008
30 September
2009
30 September
Revenue
35.0
37.2
EBITDAR
9.0
25.8%
8.8
23.8%
Consolidated revenue from long-term care activities in Italy rose by €2.2 million from
€35.0 million in the nine-month period ended 30 September 2008 to €37.2 million in the
155
nine-month period ended 30 September 2009, an increase of 6.2%. This €2.2 million
increase in revenue breaks down as follows:


an increase of €0.7 million in revenue relating to changes in the scope of
consolidation in 2009 relative to 2008, with, in particular, the consolidation over
nine months of two facilities acquired in 2008.
Despite a drop in the occupancy rate at long-term care facilities in Italy from 96.6% in
2008 to 95.7% at end-September 2009, the Medica group managed to achieve organic
growth of 4.3% in 2009 due to fee revaluations, particularly accommodation fees.
EBITDAR declined by 2.3% to €8.8 million in the nine-month period ended 30 September
2009 compared with €9.0 million in the nine-month period ended 30 September 2008 due
to revenue growth of 6.0% and deterioration in EBITDAR margin to 23.8% for the first
nine months of 2009 compared with 25.8% for the first nine months of 2008. This
corresponds to the effect over nine months of the increase in subcontracting costs in late
2008. In 2008, the workers’ cooperatives industry in Italy signed a three-year amendment
to its collective bargaining agreement, resulting in an increase in salaries in the sector,
which were passed on by subcontractors to the Medica group.
EBITDA and operating profit from ordinary activities
The Medica group’s EBITDA increased by 7.0% between 30 September 2008 and 30
September 2009 to 17.6% of consolidated revenue, stable in relation to the year-earlier
period, rising from €58.6 million to €62.7 million. Over the same period, property costs
rose by 6.1%, mainly due to like-for-like growth of 3.2%, with the remainder
corresponding to rental costs for facilities established over the period for which the
Medica group does not own the building, as well as the consolidation over nine months of
facilities acquired in 2008.
Operating profit from ordinary activities rose from €47.0 million in the nine-month period
ended 30 September 2008 to €48.6 million in the nine-month period ended 30 September
2009, which represents an increase of 3.4%. Over the first nine months of 2009,
operating profit from ordinary activities amounted to 13.6% of consolidated revenue,
compared with 14.1% in the year-earlier period. This fall of 0.5% is due to the fact that:

depreciation charges increased by 9.5% from €12.6 million in 2008 to
€13.8 million in 2009 due to changes in the scope of consolidation, acquisitions
of properties and the establishment of new facilities; and

provisions represented an expense of -€0.3 million for the nine-month period
ended 30 September 2009 compared with income of €1.0 million for the ninemonth period ended 30 September 2008, mainly as a result of the reversal of
provisions following the end of the legal dispute with tax authorities concerning
the OBO1 VAT credit.
Other income and expenses
Other income and expenses represented an expense of -€0.7 million for the nine-month
period ended 30 September 2008 compared with -€2.4 million for the nine-month period
ended 30 September 2009. This corresponds primarily to restructuring costs relating to
provisions for the temporary or permanent closure of facilities. This item can vary
156
significantly from one quarter to the next due to the implementation date of restructuring
measures. While other income and expenses represented an expense of -€0.6 million for
the nine-month period ended 30 September 2008, the final amount for the year ended 31
December 2008 was €2.9 million.
Cost of net debt and other financial income and expenses
Cost of net debt after hedging increased by €0.8 million from €47.2 million in the ninemonth period ended 30 September 2008 to €48.0 million in the nine-month period ended
30 September 2009. This stability was principally due to flows generated by instruments
to manage interest rate risks and hedges put in place in 2006. While financing costs at
the nominal interest rate fell from €50.9 million to 30 September 2008 to €38.8 million to
30 September 2009 as a result of lower interest rates, financial income and expenses
relating to interest rate hedges represented an expense of €9.3 million to 30 September
2009 compared with income of €2.7 million to 30 September 2008.
Other financial income and expenses represented income of €0.1 million for the ninemonth period ended 30 September 2009 compared with an expense of €1.1 million for
the nine-month period ended 30 September 2008. During the first nine months of 2008,
this item was impacted by an expense of €3.0 million corresponding to changes in the fair
value of derivative instruments, as well as income of €2.7 million corresponding to income
and expenses relating to hedging instruments. The Medica group adopted cash flow
hedge accounting on 1 January 2009, as a result of which the change in fair value of
eligible instruments was recognised in equity for the nine-month period ended 30
September 2009 rather than in the income statement, and income and expenses relating
to hedging instruments were recognised under cost of net debt.
Income tax
The Medica group reported a tax gain of €2.9 million for the nine-month period ended 30
September 2009 compared with €1.1 million in the corresponding period of 2008. This is
mainly due to the recognition of deferred taxes previously not recognised by the Medica
group.
Net profit
Net profit (Group share) came to €0.6 million in the nine-month period ended 30
September 2009, compared with a net loss of -€3.8 million in the nine-month period
ended 30 September 2008. This improvement relates primarily to growth in pre-tax profit
from -€4.7 million for the nine-month period ended 30 September 2008 to -€2.0 million for
the nine-month period ended 30 September 2009.
20.3
Comparison of years ended 31 December 2008 (corrected) and 31 December 2007
(restated)
The Medica group’s consolidated revenue rose by nearly 16.7% from €384.7 million in
2007 to €448.8 million in 2008 reflecting:


an increase of €31.3 million in revenue resulting from changes in the scope of
consolidation in 2008 compared with 2007, with in particular the consolidation of
157
acquisitions carried out in 2008 (revenue of €13.6 million in 2008) and the full-year
consolidation of facilities acquired in 2007 (additional revenue of €17.8 million in
2008).

the ramp-up of facilities established in 2007;

revaluations of the various services provided by the Medica group (accommodation
fees for the long-term care sector and related services for the post-acute and
psychiatric sector);

and the revaluation of treatment contributions and dependency care fees in the
long-term care sector and daily rates in the post-acute and psychiatric sector.
EBITDAR rose by 16.3% to €118.4 million in 2008 from €101.8 million in 2007. This
relates to the following sectors:

Long-term care in France: +€8.4 million

Post-acute and psychiatric care: +€6.6 million

Italy: +€1.7 million
As a percentage of consolidated revenue, EBITDAR remained stable, at 26.4% of
revenue in 2008 compared with 26.5% in 2007 (see section 20.1.2 “Principal factors
affecting the Group’s business activities, results of operations and principal line items in
the financial statements” for an explanation of the principal factors impacting EBITDAR
margin).
2007
12 months (restated)
2008
12 months (corrected)
Revenue
239.3
266.9
EBITDAR
65.5
27.4%
73.9
27.7%
Consolidated revenue from long-term care activities in France rose by €27.6 million from
€239.3 million in 2007 to €266.9 million in 2008, equal to growth of 11.5%, broken down
as follows:


consolidation in 2008 compared to 2007, with in particular the consolidation of a
facility acquired in 2008 and the full-year consolidation of three facilities acquired in
2007.
158

the continuing ramp-up of facilities established from 2007 to 2008 (four facilities
established in France in 2007);

growth in accommodation revenues thanks to a 2.2% increase in daily
accommodation rates for 2008 and the Medica group’s revaluation of its
accommodation rates applied to new residents, for which it is free to set rates;

and lastly the increase in treatment and dependency care rates in the long-term
care sector over the period corresponding to the signature of tripartite agreements
or the renewal of such agreements. A total of 15 agreements were signed or
renewed in 2008. As at August 2008, medical equipment and supplies (mainly
medicalised beds, nutriments and dressings) are included in treatment rates and
have also resulted in an increase in treatment revenues. The inclusion of medical
equipment and supplies resulted in an increase in treatment revenues of around
€2.5 million to 31 December 2008.
EBITDAR rose by 12.8% from €65.5 million in 2007 to €73.9 million in 2008 due to
revenue growth of 11.5% and improvement in EBITDAR margin from 27.4% in 2007 to
27.7% in 2008 (see section 20.1.2 “Principal factors affecting the Group’s business
activities, results of operations and principal line items in the financial statements” for an
explanation of the principal factors impacting EBITDAR margin).
2007
2008
Revenue
106.4
134.8
EBITDAR
26.0
24.4%
32.6
24.2%
Consolidated revenue from post-acute and psychiatric care activities in France rose by
€28.4 million from €106.4 million in 2007 to €134.8 million in 2008, equal to growth of
26.6%, broken down as follows:


consolidation in 2008 relative to 2007, with in particular the consolidation of
acquisitions carried out in 2008 (five facilities) and the full-year consolidation of
facilities acquired in 2007 (four facilities).

the continuing rapid ramp-up of facilities established in 2007 (two facilities opened
in 2007);

depending on the region and facilities’ activities);
159

growth in additional services: the Medica group generated consolidated revenue of
€25.1 million in 2008, partly thanks to related services (including private rooms),
compared with €18.6 million in 2007.
EBITDAR rose by 25.4% to €32.6 million in 2008 compared with €26.0 million in 2007
due to revenue growth of 26.6% and despite slight deterioration in EBITDAR margin to
24.2% in 2008 compared with 24.4% in 2007.
Italy
2007
2008
Revenue
39.0
47.2
EBITDAR
10.2
26.3 %
11.9
25.2 %
Consolidated revenue from activities in Italy rose by €8.2 million from €39.0 million in
2007 to €47.2 million in 2008, equal to growth of 21.0%. This €8.2 million increase in
revenue breaks down as follows:


consolidation in 2008 relative to 2007, with in particular the consolidation of
acquisitions of two facilities in 2008 and the full-year consolidation of the facility
acquired in 2007.
The 5.0% organic growth achieved by the group in 2008 relates primarily to the increase
in the occupancy rate for facilities in Italy from 96.1% to 96.6% over the period.
due to revenue growth of 21.0% and despite deterioration in EBITDAR margin to 25.2%
in 2008 compared with 26.3% in 2007, because of the increase in subcontracting costs.
In 2008, the industry-wide workers’ cooperative in Italy signed a three-year amendment to
its collective bargaining agreement, resulting in an increase in salaries in the sector,
which were passed through Punto Service to the Medica group.
The Medica group’s EBITDA increased by 17% from €66.9 million in 2007 to €78.3 million
in 2008 and from 17.4% to 17.5%, respectively, of consolidated revenue. This was
achieved despite a sharp 14.9% increase in rental expense from €34.8 million in 2007 to
€40.0 million in 2008, broken down as:

10.8% as a result of the establishment and acquisition of facilities over the period;

4.1% as a result of the revaluation of rents, mainly due to the indexation of
commercial leases.
Operating profit from ordinary activities rose from €47.3 million in 2007 to €60.6 million in
2008, which represents an increase of 28.1%. In 2008, operating profit from ordinary
160
activities amounted to 13.5% of consolidated revenue, compared with 12.3% in 2007.
However, 2007 was subject to exceptional provisions, a large proportion of which were
written back in 2008 following the favourable outcome of a legal dispute with the tax
authorities concerning a demand for VAT repayment of €2 million, as well as a provision
for the risk of payroll taxes of €1.5 million.
Depreciation charges also increased from €15.1 million in 2007 to €17.2 million in 2008
due to changes in the scope of consolidation, acquisitions of properties and the
establishment of new facilities.
Other income and expenses increased from -€1.8 million in 2007 to -€2.9 million in 2008.
This corresponds to restructuring costs relating to temporary closures of facilities,
representing an amount of €2.5 million in 2008.
Cost of net debt after hedging increased from €58.4 million in 2007 to €63.5 million in
2008. This increase was mainly due to the increase in cost of net debt resulting from the
implementation of the group’s acquisition policy (by drawing on the ACF and RCF credit
facilities).
In addition, other financial income and expenses (excluding income and expenses
relating to interest rate hedges) represented an expense of -€26.4 million in 2008
compared with income of €3.3 million in 2007. This was mainly due to the change in the
value of derivative instruments used for interest rate hedging, the full impact of which was
recognised in the income statement in the amount of €5.2 million in 2007 and -€25.2
million in 2008.
Income tax
The Medica group reported a tax benefit of €3.8 million in 2008 compared with
€4.1 million the previous year.
Net profit
Net profit (Group share) came to -€22.7 million in 2008 compared with -€5.9 million in
2007. This decline in net profit was mainly due to the change in the value of derivative
instruments used for interest rate hedging, the full impact of which was recognised in the
income statement (expense of €25.2 million in 2008 compared with income of €5.2 million
in 2007).
20.4
Comparison of years ended 31 December 2006 (pro forma) and 31 December 2007
(restated)
The Medica group’s consolidated revenue rose by €59.9 million from €324.8 million in
2006 to €384.7 million in 2007. This was due to:

an increase of €27.8 million resulting from the Medica group’s organic growth,
equal to revenue growth of 8.6%; and

consolidation in 2007 compared with 2006, with in particular the consolidation of
acquisitions carried out in 2007 (revenue of €13.0 million in 2007) and the full-year
161
consolidation of facilities acquired in 2006 (additional revenue of €19.1 million in
2007).
The group achieved organic growth of 8.6% in 2007 as a result of:

an increase in the overall occupancy rate for its facilities from 95.6% to 96.9%;

the rapid ramp-up of new facilities established between 2006 and 2007;

revaluations of the various services provided by the group (accommodation fees
for the long-term care sector and related services for the post-acute and psychiatric
sector);

the revaluation of treatment contributions and dependency care fees in the longterm care sector and daily rates in the post-acute and psychiatric sector.
EBITDAR rose by 17.5% to €101.8 million in 2007 from €86.7 million in 2006 (see section
20.1.2 “Principal factors affecting the Group’s business activities, results of operations
and principal line items in the financial statements” for an explanation of the principal
factors impacting EBITDAR margin). This increase breaks down as follows between the
different sectors:

Long-term care in France: +€3.6 million

Post-acute and psychiatric care: +€7.2 million

Italy: +€4.3 million
EBITDAR expressed as a percentage of consolidated revenue deteriorated slightly from
26.7% in 2006 to 26.5% in 2007.
2006
12 months
(pro forma)
2007
12 months
(restated)
Revenue
218.6
239.3
EBITDAR
61.9
28.3%
65.5
27.4%
Consolidated revenue from long-term care activities in France rose by €20.7 million from
€218.6 million in 2006 to €239.3 million in 2007, equal to growth of 9.5% broken down as
follows:


consolidation in 2007 compared to 2006, in particular the consolidation of
162
acquisitions carried out in 2007 (255 beds) and the full-year consolidation of
facilities acquired in 2006 (307 beds).

the rapid ramp-up of new facilities established between 2006 and 2007 (one facility
opened in 2006 and four opened in 2007);

growth in accommodation revenues due to a 2.4% increase in daily
accommodation rates for 2007 and the Medica group’s revaluation of its
accommodation rates applied to new residents;

the increase in treatment and dependency care rates in the long-term care sector
over the period corresponding to the signature of tripartite agreements for certain
facilities or the renewal of such agreements. A total of 14 agreements were signed
or renewed in 2007.
EBITDAR for long-term care facilities rose by 5.8% to €65.5 million in 2007 compared
with €61.9 million in 2006 due to revenue growth of 9.5% and despite slight deterioration
in EBITDAR margin to 27.4% in 2007 compared with 28.3% in 2006. This slight
deterioration is mainly due to the ramp-up of new facilities established over the period,
and in particular acceleration in the recruitment of care staff within the framework of the
signature and renewal of tripartite agreements.
2006
12 months
(pro forma)
2007
12 months
(restated)
Revenue
78.7
106.4
EBITDAR
18.8
23.9%
26.0
24.4%
Consolidated revenue from post-acute and psychiatric care activities in France rose by
€27.7 million from €78.7 million in 2006 to €106.4 million in 2007, equal to growth of
35.2% broken down as follows:


consolidation in 2007 compared to 2006, in particular the consolidation of
acquisitions carried out in 2007 (four facilities) and the full-year consolidation of
facilities acquired in 2006 (11 facilities).

the rapid ramp-up of facilities established (two facilities opened in 2007);

depending on the region and facilities’ activities).
163

growth in revenue from related services: the Medica group generated consolidated
revenue of €18.6 million in 2007 compared with €11.9 million in 2006.
due to revenue growth of 35.2% and improvement in EBITDAR margin to 24.4% in 2007
from 23.9% in 2006.
Italy
2006
12 months
(pro forma)
2007
12 months
(restated)
Revenue
27.6
39.0
EBITDAR
6.0
21.6%
10.2
26.3%
Consolidated revenue from activities in Italy rose by €11.4 million from €27.6 million in
2006 to €39.0 million in 2007, equal to growth of 41.3%, which can be broken down as
follows:


consolidation in 2007 compared to 2006, in particular the consolidation of a facility
acquired in 2007 and the full-year consolidation of four facilities acquired in 2006.
The 4.0% organic growth achieved by the group in 2007 relates primarily to the increase
in the occupancy rate for long-term care facilities in Italy from 94.6% to 96.1% over the
period.
EBITDAR rose by 70% to €10.2 million in 2007 compared with €6.0 million in 2006 due to
revenue growth of 41.3% and significant improvement in EBITDAR margin to 26.3% in
2007 from 21.6% in 2006, in line with EBITDAR margin for long-term care activities in
France. This reflects the positive impact of acquisitions carried out between 2006 and
2007 of recently established facilities offering high EBITDA margin.
The Medica group’s EBITDA increased by 17% from €57.2 million in 2006 to €66.9 million
in 2007 and from 17.6% to 17.4%, respectively, of consolidated revenue. This was
achieved despite a sharp 18.3% increase in property costs from €29.5 million in 2006 to
€34.8 million in 2007, broken down as:

11.7 % as a result of the establishment and acquisition of facilities over the period;
and

6.6% as a result of the revaluation of rents, mainly due to the indexation of
commercial leases.
Operating profit from ordinary activities rose from €44.1 million in 2006 to €47.3 million in
2007, which represents an increase of 7.3%. In 2007, operating profit from ordinary
activities amounted to 12.3% of consolidated revenue, compared with 13.6% in 2006.
164
Deterioration in operating margin was mainly due to the increase in depreciation charges
and provisions from €1.6 million in 2006 to €4.6 million in 2007, which corresponds to a
provision for a legal dispute with the tax authorities concerning a demand for VAT
repayment of €2 million (written back in 2008 following the favourable outcome to this
dispute), as well as a provision for the risk of payroll taxes of €1.5 million.
Depreciation charges also rose from €11.4 million in 2006 to €15.1 million in 2007, of
which €1.2 million relates to the allocation of a portion of goodwill to property assets at
the end of 2007.
Other income and expenses increased from -€1.6 million in 2006 to -€1.8 million in 2007.
This corresponds primarily to costs incurred in relation to the closure of facilities during
renovations.
Cost of net debt after hedging rose from -€53.0 million in 2006 to -€58.4 million in 2007,
mainly due to the increase in debt relating to the implementation of the group’s
acquisition policy (by drawing on the ACF and RCF credit facilities).
Other financial income and expenses (excluding income and expenses relating to interest
rate hedges) decreased from income of €4.6 million in 2006 to income of €3.3 million in
2007. A large proportion of this income was due to the change in value of derivative
instruments used for interest rate hedging, the full impact of which is recognised in the
income statement.
Income tax
The Medica group reported a tax benefit of €4.1 million in 2007 compared with
€1.7 million the previous year. This increase was due to the reduction in pre-tax profit
from -€5.8 million in 2006 to -€9.6 million in 2007.
Net profit
Net profit (group share) came to -€5.9 million in 2007 compared with -€4.5 million in
2006. This decline was mainly due to higher cost of net debt as described above.
165
20.5
Liquidity and capital resources
Cash flow statement
2007
2008
(restated) (corrected)
2008
(30 Sept)
2009
(30 Sept)
46.9
99.6
69.3
60.6
Cash flow from (used in) investing activities
-50.1
-86.0
-72.3
-33.1
Cash flow from (used in) financing activities
10.0
-16.1
-6.4
-29.5
2007
2008
2008
(30 Sept)
2009
(30 Sept)
Cash and cash equivalents at beginning of year
17.3
24.2
24.2
21.6
Cash and cash equivalents at end of year
24.2
21.6
14.8
19.6
6.8
-2.5
-9.4
-2.0
Net increase/(decrease) in cash
2007
2008
2008
(30 Sept)
2009
(30 Sept)
Total consolidated net income
-5.6
-22.4
-3.5
0.9
Elim. of profit from associates
0.0
0.1
0.0
0.2
Elim. of depreciation and provisions
17.0
18.7
11.0
12.7
Elim. of revaluation gains/losses (fair value)
-4.2
25.5
3.3
-0.6
1.3
-0.1
-0.1
0.0
Elim. of tax charge (income)
-4.1
-10.0
-1.1
-2.9
Elim. of cost of net debt
59.5
67.1
49.9
48.0
Cash flow before cost of net debt and tax
64.0
79.0
59.5
58.3
Impact of change in inventories and work in
progress
0.0
-0.2
0.0
-0.1
Impact of change in trade receivables
3.9
-5.2
-9.4
3.3
Impact of change in trade payables
3.9
3.2
2.5
0.4
Impact of change in other receivables and payables
-11.2
16.8
9.8
-0.7
Tax paid
-13.5
6.0
7.0
-0.7
46.9
99.6
69.3
60.6
Elim. of gains on asset sales and dilution profits
and losses
(restated)
Cash flow before cost of net debt and tax increased from €64.0 million in 2007 to
€79.0 million in 2008. The change in cash flow relates primarily from the Medica group’s
EBITDA growth, rising from €66.9 million in 2007 to €78.3 million in 2008. If financial
166
income and expenses relating to hedging instruments had been reclassified under cost of
net debt, cash flow would have amounted to €62.8 million to 31 December 2007 and
€75.3 million to 31 December 2008.
Cash flow from operations totalled €46.9 million in 2007 and €99.6 million in 2008. This
increase relates to the development of cash flow before cost of net debt and tax, cash
flow relating to trade receivables and the impact of two economic factors linked to
changes in other receivables and payables and tax paid.
Trade receivables generated positive cash flow of €3.9 million in 2007 compared with
negative cash flow of -€5.2 million 2008, mainly due to the opening of a new facility in
Echirolles in late 2007, which temporarily resulted in an increase in receivables towards
Caisse d’Assurance Maladie (-€2.2 million). Despite this increase in 2008, trade
receivables relative to pre-tax revenue remained at a low level of 29 days of sales
outstanding in 2008 compared with 28 days of sales outstanding in 2007.
In the long-term care sector in France, residents (or their families) pay for accommodation
fees (apart from social assistance fees, which are paid for by the Conseil Général) and
dependence care fees payable at the start of the month. In approximately half of all
cases, these payments are made by direct debit. Treatment fees are paid directly by the
Caisse d’Assurance Maladie by direct transfer to the facility, generally at the end of the
month.
In the post-acute and psychiatric care sector in France, the Caisses d’Assurance Maladie
pay for the majority of daily rates within a variable time frame, averaging 15 days after the
facility sends its invoice. Patients and possibly their mutual insurance company pay for
associated accommodation services. The payment time for mutual insurance companies
varies considerably, from 15 days to one month from the invoice date. Patients pay at the
end of their stay at the latest.
The decline in other receivables and payables of €11.2 million in 2007 corresponds to
down payments on purchases of property, plant and equipment, intangible assets and
financial assets. These purchases were settled and/or consolidated in 2008 and resulted
in the cancellation of receivables relating to disbursements and an outflow of €16.8
million.
Furthermore, in 2007, due to the change in the scope of tax consolidation, each Medica
group company made down payments on tax due individually. In total, the Medica group
paid €13.5 million in tax in 2007. In 2008, the Medica group obtained repayment of down
payments made in 2007 in the amount of €9.7 million. A number of structures outside the
scope of tax consolidation, including the Aetas group in Italy, made down payments and
paid their corresponding tax.
Comparison of the nine-month periods ended 30 September 2009 and 30 September
2008
Cash flow before cost of net debt and tax came to €58.3 million in the nine-month period
ended 30 September 2009 compared with €59.5 million in the nine-month period ended
30 September 2008. If financial income and expenses relating to hedging instruments
had been reclassified under cost of net debt for the nine-month period ended 30
September 2008 (as is the case for the nine-month period ended 30 September 2009),
cash flow would have come to €56.8 million in 2008 compared with €59.5 million the
167
following year. This difference relates to the increase in the Medica group’s EBITDA,
which rose from €58.6 million in 2008 to €62.7 million in 2009.
Cash flow from operations totalled €60.6 million for the nine-month period ended
30 September 2009 compared with €69.3 million for the nine-month period ended
30 September 2008. This reduction is mainly due to the fact that the financial statements
for the nine-month period ended 30 September 2008 were impacted by non-recurring
items.
Trade receivables generated positive cash flow of €3.3 million for the nine-month period
ended 30 September 2009 as a result of general improvement in management of
receivables at group level and more specifically in the post-acute and psychiatric care
sector. In 2009, the Medica group adopted a proactive policy of reducing its trade
receivables, particularly in the post-acute and psychiatric care sector, by speeding up the
invoicing and recovery process. In the long-term care sector in France, the Medica group
has also adopted a policy of extending direct debits in order to reduce administrative
costs and the amount of trade receivables. As at 30 September 2009, trade receivables
for the Medica group as a whole represented 25 days of pre-tax revenue, five days less
than as at 30 September 2008.
During the nine-month period ended 30 September 2009, the Medica group paid out €0.7
million as payment of corporate tax, while during the nine-month period ended 30
September 2008 it obtained repayment of €7.0 million due to the change in the scope of
tax consolidation.
2007
(restated)
2008
2008
2009
(corrected) (30 September) (30 September)
Impact of changes in the scope of
consolidation
-31.1
-42.2
-42.2
-9.4
Purchases of property, plant and equipment
-26.7
-38.4
-24.2
-22.0
Purchases of intangible assets
-0.2
-5.9
-5.0
-0.7
Purchases of financial assets
-0.6
-0.1
0.0
0.0
Change in loans and advances given
-2.1
0.1
-1.1
-3.0
Disposals of property, plant and equipment and
intangible assets
10.7
0.3
0.2
2.0
-50.1
-86.0
-72.3
-33.1
(restated)
Cash flow used in investing activities reflects the Medica group’s expansion by means of
acquisitions and the establishment of new facilities, rising from -€50.1 million in 2007 to
-€86.0 million in 2008.
Changes in the scope of consolidation includes newly consolidated subsidiaries following
the acquisitions carried out by the Medica group as part of its strategy of controlled
growth. This item rose from €31.1 million in 2007 to €42.2 million in 2008. The Medica
group acquired eight facilities in 2007: four post-acute and psychiatric care facilities, three
168
long-term care facilities in France and one long-term care facility in Italy. The amount of
changes in the scope of consolidation in 2008 includes the acquisition of the remaining
40% of Aetas Spa for a total of €14.7 million. The remainder corresponds to the
acquisition of four post-acute and psychiatric care facilities.
Purchases of property, plant and equipment include:

maintenance expenditure, covering investment in the renovation, improvement and
refurbishment of its facilities. This represented a total of €11.8 million in 2007 and
€13.6 million in 2008;

property investments as part of the acquisition of business assets and within the
framework of the establishment of new facilities - particularly in relation to off-plan
purchases and restructuring works. The Medica group invested a total of
€14.9 million in 2007 and €24.8 million in 2008. The increase in purchases of
property, plant and equipment in 2008 corresponds primarily to disbursements
relating to off-plan contracts for Evrecy and Franconville, representing €8.7 million.
Purchases of intangible assets correspond chiefly to purchases of the business assets of
care facilities. In 2008, the Medica group acquired the business assets of two long-term
care facilities in Italy and two long-term care facilities in France.
Sales of property, plant and equipment and intangible assets correspond mainly to the
sale of existing property assets or those under construction. In 2007, the Medica group
sold the Mazères building to property investment company Gecimed, as well as off-plan
contracts for Villemonble, La Roche sur Yon and Castera Verduzan representing a total
of €10.7 million.
2008
Cash flow used in investing activities during the nine-month period ended 30 September
2009 reflects the slowdown in acquisitions over the first nine months of the year, which
represented €33.1 million compared with €72.3 million for the nine-month period ended
30 September 2008. This was mainly due to the reduction in the impact of changes in the
scope of consolidation from €42.2 million for the nine-month period ended 30 September
2008 to €9.4 million for the nine-month period ended 2009. As the group did not acquire
any new facilities in 2009, changes in the scope of consolidation correspond chiefly to
earn-out payments on acquisitions in Italy and France.
During the nine-month period ended 30 September 2009, purchases of property, plant
and equipment included maintenance expenditure, which represented an expense of €9.5
million, as well as property investments as part of the establishment and renovation of
facilities, which represented an expense of €12.6 million, including €6.8 million paid in
relation to off-plan purchase agreements for Evrecy and Franconville.
When it establishes new facilities, the Medica group is sometimes required to pay
guarantee deposits to lessors upon signing new leases. During the nine-month period
ended 30 September 2009, the group paid out close to €3.0 million in respect of loans
and advances granted.
During the nine months ended 30 September 2009, the Medica group sold land for €2.0
million to an external investor that will build a new facility in Quint Fonsegrives on behalf
of the Medica group. This new post-acute psychiatric care facility will have capacity of
169
120 beds, combining the operations of two of the Medica group’s existing facilities in
Saussens and Saint Léon.
Cash flow from (used in) financing activities
Proceeds from new borrowings
2007
(restated)
2008
2008
2009
95.0
47.5
43.3
11.5
Repayment of borrowings
-47.8
-20.8
-17.8
-12.3
Net financial charges paid
-37.3
-42.6
-31.7
-28.5
0.0
-0.2
-0.2
-0.1
10.0
-16.1
-6.4
-29.5
Dividends paid to minority shareholders
Cash flow from (used in) financing
activities
(restated)
Cash flow from financing activities increased by €10.0 million in 2007 and decreased by
€16.1 million in 2008. This is due to the large number of acquisitions carried out in 2007,
reflecting the Medica group’s strategy to adjust its financial resources to its expansion
policy.
The Medica group therefore drew on its ACF and RCF — as defined and presented
below — intended to finance acquisitions and the establishment of new facilities.
At the same time, the Medica group repaid some of its bank debt and non-refinanced
debt in August 2007 (particularly leases). Furthermore, as a result of the renegotiation of
its bank debt in July 2007, the Medica group repaid a portion of its bank debt in the
amount of €34.0 million and obtained two credit lines for the same amount but at a lower
nominal interest rate.
Net financial charges paid include in particular the payment of interest expenses relating
to bank loans and leases. The Medica group paid interest charges of €37.3 million in
2007, rising to €42.6 million in 2008, mainly as a result of the increase in net debt.
2008
Cash flow used in financing activities rose from -€6.4 million for the nine-month period
ended 30 September 2008 to -€29.5 million for the nine-month period ended
30 September 2009. This is mainly due to the reduction in new drawings on the group’s
ACF and RCF credit facilities in 2009 compared with the previous year. The Medica group
continued to pay financial expenses of €28.5 million for the nine-month period ended
30 September 2009, below the previous year’s level. If financial income and expenses
relating to hedging instruments had been reclassified under cost of net debt for the ninemonth period ended 30 September 2008 (as is the case for the nine-month period ended
30 September 2009), interest paid would have represented €29.0 million 2008.
Repayment of borrowings decreased from €17.8 million in 2008 to €12.3 million in 2009
as the group repaid €6.0 million of the RCF credit facility in 2008.
170
2007
(restated)
2008
2008
2009
Cash and cash equivalents at beginning of
year
17.3
24.2
24.2
21.6
Cash and cash equivalents at end of year
24.2
21.6
14.8
19.6
6.8
-2.5
-9.4
-2.0
The Medica group’s cash and cash equivalents increased by €6.8 million in 2007 and
decreased by €2.5 million in 2008. As at 30 September 2009, cash and cash equivalents
decreased by €2.0 million relative to 30 December 2008.
Debt
The Medica group has two types of debt: a convertible bond issued in 2006 and a
syndicated bank loan (see note 17 of the notes to the consolidated financial statements
for the 12-month period ended 31 December 2008) and property finance leases.
However, the convertible bond is intended to be converted into shares and the terms of
the syndicated loan are to be changed when the Company’s shares are listed for trading
on Euronext Paris. This syndicated loan will be partly repaid with the proceeds of the
capital increase planned in connection with the IPO.
The Medica group’s bank debt is measured at fair value in the balance sheet upon initial
recognition, which corresponds to the amount received, net of issue costs. After initial
recognition, borrowings are stated at amortised cost using the effective interest rate
method.
Convertible bond
The Medica group issued a convertible bond with a face value of €174.8 million in August
2006. In the Medica group’s consolidated balance sheet, this financial instrument has
been split into a liability component and an equity component. In addition, interest relating
to the bond is capitalised at a rate of 10% (nominal rate).
The table below shows the development of outstandings relating to this bond over the last
three years, with a breakdown between the portion recognised on the balance sheet as a
liability (including capitalised interest) and the portion recognised as equity, and after the
cumulative impact of amortised cost:
171
Redemption value of
convertible bond
Capitalised interest
Convertible bond (equity
component)
Cumulative impact of amortised
cost
Convertible bond (liability
component after impact of
amortised cost)
As at
31 December
2006
As at
31 December
2007
As at
31 December
2008
As at
30 September
2009
181.7
199.9
219.9
236.1
6.9
25.1
45.1
61.2
-74.6
-74.6
-74.6
-74.6
3.9*
-7.7
-9.8
-11.0
111.0
117.6
135.5
150.5
* Including pro forma effect (see section 20.1 “Overview – Basis for the 2006 pro forma financial statements).
Syndicated loans and finance leases
On 9 August 2006, in order to refinance its existing bank debt, the Medica group obtained
a syndicated loan of €447.3 million from a banking syndicate headed by The Royal Bank
of Scotland, as well as financing for acquisitions of €150 million and a revolving credit
facility of €25 million. A portion of this debt was restructured in July 2007: part of the
syndicated loan was repaid early, financed by a new syndicated loan for the same
nominal amount.
The table below presents the Medica group’s syndicated loans and finance leases and
other debts over the last three years, showing separately the redemption value of
borrowings, as well as the cumulative impact of amortised cost:
As at
31 December
2006
As at
31 December
2007
As at
31 December
2008
As at
30 September
2009
Redemption value of
syndicated loans and other
debts
519.1
575.3
613.7
623.6
Cumulative impact of
amortised cost
-9.2*
-12.2
-11.0
-9.8
Total bank debt (after impact
of amortised cost)
509.9
563.1
602.6
613.7
* Including pro forma effect (see section 20.1 “Overview – Basis for the 2006 pro forma financial
statements”).
The redemption value of syndicated loans and other debts increased by €94.6 million
from €519.1 million in 2006 to €613.7 million in 2008, mainly as a result of drawings on
the ACF (Acquisition Credit Facility) and RCF (Revolving Credit Facility) of the syndicated
loan in the amount of €101.1 million with a view to financing acquisitions and the
establishment of new facilities over the period. As a portion of interest on the mezzanine
loan is capitalised, this also resulted to a lesser extent in an increase in bank debt.
Over the same period, the Medica group repaid a portion of the debt that had not been
refinanced (€11.1 million).
Through 30 September 2009, the redemption value of syndicated loans and other debts
increased by nearly €10.0 million. This slight increase corresponds primarily to the
drawing on the RCF credit facility in relation to financing the establishment of new
172
facilities (financing properties for the Evrecy and Franconville facilities). The Medica
group has initiated the process of selling the Evrecy property within the framework of the
Scellier/Bouvard tax incentive law, which will enable it to repay €8 million of the RCF
credit facility.
The majority of the Medica group’s syndicated loans are at variable rates (Euribor) plus a
margin of 1.75% to 4.0%. In addition, the mezzanine loan is subject to capitalised interest
at a fixed rate of 4.625%.
The aforementioned syndicated loans require the Medica group to comply with a number
of restrictive clauses and financial ratios that it has always respected. The main ratios are
set out contractually, tested quarterly and audited each year by the Medica group’s
statutory auditors.
A. Ratio A: ratio of “net debt” (bank debt and leases net of cash and cash equivalents at
the end of the year) to “adjusted EBITDA” (operating profit from ordinary activities for
the year plus depreciation charges and provisions net of reversals and adjusted for
acquisitions carried out during the year).
B. Ratio B: ratio of “adjusted EBITDA” to “net interest” (cost of net debt at the nominal
interest rate excluding capitalised interest on the bond and mezzanine loan).
C. Ratio C: ratio of “cash flow” (adjusted EBITDA plus cash flow from operations and
cash flow from investing activities excluding investments relating to acquisitions,
establishments of facilities and restructuring, and lastly cash and cash equivalents at
the end of the year) to “debt service” (net interest plus bank loan and lease
repayments).
The table below shows the development of these financial ratios applicable to the Medica
group’s syndicated loan between 2006 and 2008:
2006
(pro forma)
2007
(12 months
restated)
2008
(corrected)
Ratio A actual
Ratio A requirement
8.1x
<10.3x
7.5x
<9.2x
7.4x
<8.3x
Ratio B actual
Ratio B requirement
2.2x
>1.4x
1.9x
>1.5x
2.0x
>1.7x
Ratio C actual
Ratio C requirement
1.2x
>1.0x
1.8x
>1.0x
1.6x
>1.0x
Restructuring of syndicated loan and related changes
As part of the proposed listing of the Company’s shares for trading on Euronext Paris, the
Medica group plans to implement the clauses contained in the documentation relating to
its syndicated loan, i.e., the Senior Loan Contract and Subordination Agreement, in order
to adapt its financial structure to the status of a listed company and its development
strategy (see Chapter 12 “Strategy”).
The Medica group sent the Senior Loan Contract Agent a letter dated 20 October 2009
requesting consents and amendments in order to seek the senior lenders’ approval of
certain proposed changes to the existing documentation. The proposed changes intend
primarily to:
173
(i)
present the legal operations preceding the IPO to the senior lenders;
(ii)
clarify some of the terms of the Senior Loan Contract and Subordination
Agreement, which will apply after the IPO; and
(iii)
to allow the Medica group to benefit from a new financing facility for acquisitions.
As the terms of the letter were agreed by the senior lenders on 5 November 2009, they
constitute an amendment to the Senior Loan Contract, and an amendment to the
Subordination Agreement has been agreed between all of the parties concerned.
However, these changes will only come into effect once the Company’s shares are
effectively listed for trading on Euronext Paris.
The new financial terms of the syndicated loan are as follows, it being specified that the
mezzanine loan of a nominal amount of €92 million and subject to interest at Euribor
+8.625% will be repaid in full if the Company’s shares are listed for trading on Euronext
Paris:
Tranche
Nominal interest rate
(%)
Maturity
Amount as at 30 September 2009
1
Tranche A
Euribor + 2.00%
2013
20.6
Tranche B
Euribor + 3.00%
2014
162.2
Tranche C
Euribor + 3.25%
2015
162.3
RCF
Euribor + 2.00%
2013
16.4
ACF1
Euribor + 2.25%
2015
105.1
Total
466.6
1 This syndicated loan would be partly repaid after the Company’s IPO in the following order of priority: tranche C, tranche B and
tranche A.
Subject to the Company’s shares being listed for trading on Euronext Paris, existing loans
modified as a result of the amendment and the new loans mentioned above will require
the Medica group to comply with a number of restrictive clauses and financial ratios:
-
ratios A and B as described above must be below 5x and above 2.4x respectively
and ratio C will be abolished. Observance of these ratios will be verified on a halfyearly basis rather than quarterly;
-
the Medica group will be able to pay out dividends, provided that its bank loan ratio
after the payment of such dividends remains below 4.5x;
-
the change of ownership clause will require the funds or vehicles advised by BC
Partners to hold a stake in the Company of at least 33 1/3% until 30 January 2011
and then of at least 20% until 30 September 2012.
In addition, on 9 November 2009, the Medica group obtained a new credit facility for
acquisitions from BNP Paribas, Credit Suisse International, The Royal Bank of Scotland,
Calyon and HSBC of a total principal amount of €80 million (“ACF2”). This credit facility
may only be used once the Company’s shares are effectively listed for trading on
Euronext Paris and, as of this date, it will be subject to the aforementioned restrictions
and financial ratios.
174
In the event of a drawing on the new ACF2 (subject to nominal interest at Euribor +3.5%),
the Medica group will be required to provide the lenders of the new ACF2 exclusively with
guarantees secured against the assets purchased using this drawing.
This change in debt structure could prompt the Medica group to restructure its
corresponding interest rate hedging. The Medica group could thereby settle part of the
value of its hedging instruments that appear on the balance sheet as at September 2009.
The Medica group would therefore benefit from additional debt capacity of €134 million on
the basis of the new ACF2 credit facility and the undrawn ACF1 and RCF credit facilities.
Valuation of net debt/EBITDA ratio as at 31 December 2009
On the basis of the transactions described above and positioning for the planned IPO
(conversion of convertible bond, restructuring of the existing syndicated loan), and on the
basis of the following assumptions:

a €260 million capital increase as part of the listing of the Company’s shares for
trading on Euronext Paris;

costs valued at approximately €17 million relating to the capital increase and debt
restructuring; and

a redemption value of the syndicated loan finance leases and other debts, net of
cash and cash equivalents estimated as at 31 December 2009 at approximately
€590 million (see section 14 “Profit forecasts and estimates”);
the Medica group estimates, positioning itself for the planned IPO, that its net debt can be
estimated at approximately €347 million as at 31 December 2009.
On the basis of the aforementioned assumptions and the generation of EBITDA as
estimated in section 14 “Profit forecasts and estimates” for the financial year ended 31
December 2009, the net debt/EBITDA ratio would be 4.1 as at 31 December 2009.
Subject to the provisions of the financing documents and the ratio mentioned above, the
Medica group will have flexibility of €30 million from the proceeds of the planned capital
increase which would not be required to be used to pay down existing debt.
Valuation of adjusted net debt/ EBITDA ratio as at 31 December 2009
On the basis of operations described under “Valuation of net debt/EBITDA ratio as at
31 December 2009”, the restated net debt/ EBITDA ratio is defined as follows:

Adjusted net debt is equal to net debt less theoretical property debt.

Theoretical property debt is defined according to the appraisal value of the group’s
properties (see section 16.4.1 “Real estate assets held”) subject to a coefficient of
70%.

Adjusted EBITDA is equal to EBITDA less theoretical rental expense.

Theoretical rental expense is equal to the appraisal value of the group’s properties
subject to a coefficient of 7.4%, i.e., the average yield applied by the appraiser.
On the basis of these assumptions and the estimates provided in section 14 “Profit
forecasts and estimates”, the ratio as at 31 December 2009 would be 2.3.
175
Off-balance sheet commitments
The majority of the group’s off-balance sheet commitments included in the financial
statements correspond to guarantees given to banks in relation to the bank
documentation renegotiated in July 2007.
Commitments given
Off-balance sheet commitments include guarantees given to banks, commitments relating
to operating leases and preliminary sales and investment agreements. The table below
summarises the group’s guarantees and operating leases for 2007, 2008 and the ninemonth period ended 30 September 2009:
31 December
2007
(restated)
31 December
2008
(corrected)
2009
(30
September)
Guarantees
549.7
493.6
496.9
Operating leases
230.9
249.6
395.4
32.2
32.6
23.8
Preliminary sales and investment
agreements
The amount of guarantees decreased from €549.7 million in 2007 to €493.6 million in
2008 due to adjustments to off-balance sheet commitments in order to reflect
commitments given in respect of the syndicated loan.
Guarantees
The amount of guarantees given corresponds primarily to guarantees given to financial
institutions in relation to the syndicated loan obtained in August 2006, as well as
guarantees given to finance leasing organisations. The table below details the
guarantees given in 2007, 2008 and the nine-month period ended 30 September 2009:
2007
31
December
(restated)
Guarantees given to lenders
Pledging of business assets to finance leasing
organisations
Guarantees given to finance leasing
organisations
2008
31
December
(corrected)
2009
(30
September)
520.2
465.6
465.2
20.1
14.7
13.6
4.6
6.3
5.9
2.4
2.4
Pledging of shares to lenders
Pledging of business assets to lenders
3.6
4.3
4.0
Pledging of mutual funds to lenders
0.3
0.3
0.3
Mortgaging of property to lenders
0.0
0.0
5.4
Commitment concerning transparent
companies
0.9
0.0
0.1
549.7
493.6
496.9
Total guarantees
176
Operating leases
The Medica group operates some of its facilities under commercial leases, which
generally have terms of nine to 12 years. These contracts include indexation and renewal
clauses. The table below shows total future minimum payments in respect of irrevocable
operating leases for 2007, 2008 and the nine-month period ended 30 September 2009:
2007
(restated)
Less than 1 year
2008
(corrected)
2009
(30 September)
37.6
42.0
43.7
124.3
139.3
163.9
More than 5 years
69.1
68.3
187.8
Total operating leases
231
249.6
395.4
Between 1 and 5 years
Since the balance sheet date for the financial year ended 31 December 2008, the Medica
group has finalised renegotiations with its main lessors. These agreements have enabled
the Medica group to reduce related property costs and extend the remaining life of these
commercial leases.
Preliminary acquisition and investment agreements
The Medica group has signed preliminary acquisition and investment agreements in
relation to its development projects (establishment and acquisition of facilities). The table
below summarises preliminary sales and investment agreements for 2007, 2008 for the
nine-month period ended 30 September 2009:
2007
(restated)
Preliminary sales and investment
agreements
2008
(corrected)
32.2
2009
(30
September)
32.6
23.8
Of preliminary sales and investment agreements for the nine-month period ended
30 September 2009, €13.6 million corresponds to property investment commitments, in
particular, in relation to current off-plan sales agreements, and €10.2 million corresponds
to preliminary agreements to acquire facilities.
Commitments received
The Medica group benefits from asset and liability guarantees from sellers primarily in
relation to its acquisitions. These asset and liability guarantees are summarised in the
table below for 2007, 2008 and the nine-month period ended 30 September 2009:
2007
(restated)
2008
(corrected)
2009
(30
September)
Asset and liability guarantees received relating
to purchases of securities
8.9
9.6
8.8
Asset and liability guarantees given relating to
disposals of securities
-
-
-
177
21
CASH AND CASH EQUIVALENTS
As at 30 September 2009, the Medica group had cash and cash equivalents of
€22.6 million, including €22.0 million in liquid assets and €0.6 million invested in mutual
funds (organismes de placement collectif en valeurs mobilières), primarily money market
funds (société d’investissement à capital variable) with sensitivity to interest rate risk of
0.25 or less and historic 12-month volatility close to zero.
The main source of the Medica group’s liquidity is cash flow from operations and in
particular the high level of cash flow generated by its activities. This high level of cash
flow allows it to finance some of its investments and pay interest and principal on its
debt. Between 2006 and 2009, the Medica group also drew on its acquisition credit
facilities and revolving credit facilities to finance acquisitions.
178
22
COMPENSATION AND BENEFITS
22.1
Interests and compensation of members of the board of directors and executives
Until 9 November 2009, the Company was a société par actions simplifiée with a
supervisory board.
2007
12 months
(restated)
(in euros)
Amount due
2008
12 months
(corrected)
Amount paid
Amount due
Amount paid
Fixed compensation
J. Bailet
200,000
200,000
200,000
200,000
C. Jeandel
163,333
163,333
170,000
170,000
J. Bailet
115,000
100,000
115,000
115,000
C. Jeandel
100,000
70,000
100,000
100,000
J. Bailet
-
-
-
-
C. Jeandel
-
-
-
-
-
-
-
-
-
-
-
-
J. Bailet
3,223.08
3,223.08
3,223.08
3,223.08
C. Jeandel
2,272.20
2,272.20
2,272.20
2,272.20
J. Bailet
318,223.08
313,223.08
318,223.08
318,223.08
C. Jeandel
265,605.20
235,605.20
272,272.20
272,272.20
Variable compensation
Exceptional compensation
Directors’ fees
J. Bailet
C. Jeandel
Benefits in kind
40
TOTAL
40
In accordance with the terms of their employment contract, Mr Jacques Bailet and Mrs Christine Jeandel benefited from
the use of a company car.
179
Corporate
officers
J. Bailet
Employment
contract
Supplementary
pension scheme
Yes
Yes
Yes
41
No
No
No
Compensation or
benefits due or
potentially due
relating to the
cessation or change
of functions
Yes
Yes
42
No
Compensation
relating to noncompetition
clause
Yes
No
No
43
Start of term of
office
9 November 2009
End of term of
office
Shareholders’
general meeting to
approve the
financial
statements for the
year ended 31
December 2015
Mr Bailet is also a shareholder of the Company (see section 29.1.5 “Breakdown of the
share capital and voting rights”).
These amounts will be submitted to the compensation and appointments committee.
22.2
Total provisions for payment of pensions, retirement provision and other benefits
Total provisions for additional post-employment payments amount to €66,468 and
€60,242 as at 31 December 2008 and 31 December 2007, respectively.
41
Mr. Bailet’s employment contract is suspended during the term of his appointment.
42
His employment contract grants him, upon termination of the employment contract (other than for gross negligence), an
indemnity package equivalent to 18 months’ reference salary (calculated on the average of the fixed and variable elements
of his salary over 24 months preceding termination of employment contract), annual bonus included.
43
A no-compete indemnity equal to 30% of his last fixed monthly salary payable for 12 months from the effective date of
the termination of the contract.
180
23
PRINCIPAL SHAREHOLDERS
23.1
Majority shareholder
In August 2006, the funds advised by BC Partners acquired, through a jointly-owned
company called TBU-3 International, an 87.71% stake in the holding company now called
Medica (formerly OBO1), which owns 100% of the share capital and voting rights of
Société de Financement de Medica (formerly Medica SA), parent company of the Medica
group (see section 15.6 “Company history and development”). Details of the Medica
group’s shareholding structure are provided in section 29.1.5, “Breakdown of the share
capital and voting rights” of this reference document.
23.2
Voting rights of the majority shareholder
The majority shareholder does not possess any special voting rights.
23.3
Statement relating to the control of the Company by the majority shareholder
At the date of this reference document, the Company is majority-owned by the funds
advised by BC Partners (see section 29.1.5, “Breakdown of the share capital and voting
rights”). In view of the transactions planned as part of the proposed listing of the
Company’s shares on Euronext Paris (conversion of preference shares and convertible
bonds issued in 2006 (see sections 29.1.5, “Breakdown of the share capital and voting
rights” and 29.1.6 “Other securities conferring rights to the share capital”); public offer and
institutional placement by means of the issuing of new shares), the stake held by the
funds advised by BC Partners will be automatically reduced.
For purposes of transparency and public information, the Company has implemented a
series of measures based primarily on the recommendations of the MEDEF and AFEP
corporate governance code for listed companies. In particular, these measures shall
include the creation of the audit and compensation and appointments committees, as
described above, which include independent members in order to prevent conflicts of
interest and to ensure respect for fiduciary duties (see section 19.3 “Board of directors
committees”).
23.4
Agreement relating to the control of the Company
At the date of this reference document, to the knowledge of the Company, no agreement
exists the implementation of which could result in a change of control.
181
24
RELATED-PARTY TRANSACTIONS
24.1
Related-party transactions
The Medica group is organised as a group of facilities, each with a director responsible
for an operating budget, personnel management, and implementation of a local sales
strategy and procedures, which are harmonised and centralised at the Medica group level
and common to all facilities.
However, to enable management centralisation for these various entities and benefit from
synergies created by centralised management, the Medica group’s head office provides
some services to its various facilities, which are then re-billed to those facilities (see
section 16.8 “Organisation of the Medica group” above).
A cash management agreement has also been introduced at the Medica group level.

Network costs
The Medica group provides certain management-related services to its facilities,
particularly relating to corporate, administration, finance, accounting, legal
and IT matters. Amounts re-billed for these services are calculated on the
basis of an annual budget per bed and are adjusted to the actual amount at
the end of each financial year. During the financial year ended 31 December
2008, these network costs amounted to €1,130 per operated bed,
representing an annual total of approximately €12 million.

Re-invoicing of costs for seconded staff
A significant majority of facility directors is employed by the Medica group through
a dedicated legal entity (Medica France Direction et Services) and seconded
to the various facilities for which they are responsible.
As a result, the Medica group re-invoices its subsidiaries for the wages of these
facility directors and personnel based on actual cost.
During the financial year ended 31 December 2008, €8.6 million in such costs were
re-billed.

Re-billing of rent and related costs
Although the Medica group does not own the majority of its facility buildings,
certain buildings are owned as a freehold through Société Civile Immobilière
or Société en Nom Collectif property companies.
As a result, the Medica group re-bills operators directly for the rents and related
property taxes on these facilities. During the financial year ended 31
December 2008, these internal property charges amounted to approximately
€11 million.

Cash management agreement
A cash management agreement was signed on 30 June 2001 between the
Company and 19 of its subsidiaries, and extended on 29 November 2005 to
all Medica group subsidiaries. This cash management agreement offers two
options. Each subsidiary may deposit its surplus cash into a current account
with Medica France, and in return may borrow funds in the form of a short-
182
term current account advance. Similarly, subsidiaries may make loans or
advances to each other.
These loans or advances carry interest at the average monthly money market rate
based on EONIA (Euro Overnight Index Average) (“T4M”), representing the
monthly EONIA average as published at the beginning of the following
month by the Fédération Bancaire Française (French Banking Federation),
plus 100 basis points, until the loan is fully repaid.
The cash management agreement was concluded for an initial period of one year.
It will automatically renew each year unless terminated by any of the parties
on 15 days notice.
No agreements have been signed between the Company and TBU-3 International.
183
24.2
Statutory auditors’ special reports on regulated agreements for 2008 and 2007
24.2.1
Statutory auditors’ special report on regulated agreements for the 12-month period
ended 31 December 2008
Patrick GRIMAUD
75012 - PARIS
CONSTANTIN ASSOCIES
92300 – LEVALLOIS-PERRET
OBO 1
Société par Actions Simplifiée (simplified joint-stock company)
39, rue du Gouverneur Général Félix Eboué
____
STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED
RELATED-PARTY AGREEMENTS AND COMMITMENTS
Year ended 31 December 2008
To the shareholders,
In our capacity as Statutory Auditors of your company, we hereby report to you on
regulated related-party agreements and commitments.
In accordance with Article 14 of the Articles of Association, we have been notified of the
related-party agreements and commitments referred to in Article L. 227-10 of the French
Commercial Code, which occurred during the financial year.
The terms of our engagement do not require us to identify such other agreements and
commitments, if any, but to communicate to you, based on information provided to us, the
principal terms and conditions of those agreements and commitments brought to our
attention, without expressing an opinion on their usefulness and appropriateness.
It is your responsibility to assess the interest involved in respect of the conclusion of
these agreements and commitments for the purpose of approving them.
We performed those procedures which we considered necessary to comply with
professional guidance issued by the national auditing body (Compagnie nationale des
Commissaires aux comptes) relating to this type of engagement. These procedures
consisted in verifying that the information provided to us is consistent with the
documentation from which it has been extracted.
184
With the subsidiary MEDICA SA in which Mr. Jacques BAILET, Chairman of your
company, is also an executive
Loan agreement
Your company has signed a loan agreement with MEDICA SA (as a borrower). In the
course of the financial year, four cash advances were granted to MEDICA SA from
September to December 2008. At 31 December 2008, the total cumulative amount of
these advances amounts to 6,700,000 euros and represents the purpose of the loan
agreement.
This loan bears interest at the average rate of the monetary market (AR4 calculated on
the basis of the EONIA) +1. It was signed for an initial period expiring at 31 December
2008, period extended until the full repayment of the loan.
For this period, no refund occurred and the recognised interest income amounted to
€39,233 on December 31, 2008.
Paris and Levallois-Perret, 30 April 2009
Patrick GRIMAUD
CONSTANTIN ASSOCIES
Jean Paul SEGURET
185
24.2.2
Statutory auditors’ special report on regulated agreements for the 20-month period
ended 31 December 2007
CONSTANTIN ASSOCIES
26, rue de Marignan
75008 – PARIS
Patrick GRIMAUD
22, boulevard de la Bastille
75589 PARIS CEDEX 12
STATUTORY AUDITORS’ SPECIAL REPORT ON REGULATED
RELATED-PARTY AGREEMENTS AND COMMITMENTS FOR THE
YEAR ENDED 31 DECEMBER 2007
OBO 1 S.A.S.
To the shareholders,
In our capacity as statutory Auditors of your company, we hereby report to you on
regulated related-party agreements and commitments.
In accordance with article 14 of the Articles of Association, we have been notified of
related-party agreements and commitments described in Article L. 227-10 of the French
Commercial Code.
The terms of our engagement do not require us to identify such other agreements and
commitments, if any, but to communicate to you, based on information provided to us, the
principal terms and conditions of those agreements and commitments brought to our
attention, without expressing an opinion on their usefulness and appropriateness.
It is your responsibility, pursuant to article 14.1 of the Articles of Association, to assess the
interest involved in respect of the conclusion of these agreements and commitments for
the purpose of approving them.
We conducted our audit in accordance with professional standards applicable in France.
These procedures consisted in verifying that the information provided to us is consistent
with the documentation from which it has been extracted.
186
WITH THE SUBSIDIARIES OF YOUR COMPANY IN WHICH MR. JACQUES BAILET,
CHAIRMAN OF YOUR COMPANY, IS ALSO AN EXECUTIVE
Agreements entered into on 9 August 2006:

Senior Facilities Agreement
The Company’s acquisition of the Medica group was in particular financed by debt,
especially by the signing, on 9 August 2006 of a Senior Facilities Agreement, of French
law agreement entitled “EUR 530,300,000 Senior Facilities Agreement” entered into
between the Company, The Royal Bank of Scotland pIc and Calyon (the “Senior Facilities
Agreement”).
The Company joined as a Borrower and Guarantor to the Senior Facilities Agreement.
The Senior Facilities Agreement amounting to a total of €530,300,000 in principal
especially makes the provision for an acquisition financing line and a revolving credit
financing line.
When it signed up to the Senior Facilities Agreement, the Company made a commitment
that its subsidiaries would comply with a number of commitments defined in the Senior
Facilities Agreement (joint and several liability) and granted sureties and guarantees to
the lending banks as Senior Finance Documents.

Intra-group loan agreement between OBO1 S.A.S. and MEDICA S.A.
Signature of an intra-group loan agreement worth a principal of €68,442,980 between the
Company as a lender and MEDICA S.A. as the borrower. This loan is remunerated at the
one-year Euribor rate and raised by a margin of 2.50% a year.
The outstanding amount due at 31 December 2007 was €52,246,769.24. The interests
linked to this loan amount to €5,393,789.24.

lntercreditor Agreement
The Company adhered to the Intercreditor Agreement between OBO1 S.A.S. and the
parties to the Senior Facilities Agreement.
This agreement governs the arrangements between the creditors regarding the order of
priority of debtholders, especially in the event of Default (as defined by the Senior
Facilities Agreement) of borrowers.
Agreement signed on 6 July 2007:

Amendment to the Senior Facilities Agreement of 9 August 2006: the Senior
Amendment and Restatement Agreement
In the context of the debt restructuring of the Medica group, on 6 July 2007, a number of
amendments were made to the Senior Facilities Agreement by way of amendment,
concerning:

the reimbursement of Tranche D of the Senior Facilities Agreement by drawing on
Tranches B and C of the Senior Facilities Agreement, which would have been
previously raised by €17,000,000 each;

the decline of the margins applicable to the different tranches of the Senior
Facilities Agreement; and
187

the easing of certain terms and conditions of the Senior Facilities Agreement.
WITH MR JACQUES BAlLET, CHAIRMAN OF YOUR COMPANY

Employment agreement of Mr. Jacques Bailet
Mr. Jacques Bailet, Chairman of your Company, is also Development Director in the
Company. In this capacity, he received total compensation for the year ended of
€463,212.
Paris, 23 April 2008
CONSTANTIN ASSOCIES
Patrick GRIMAUD
Jean Paul SEGURET
188
25
FINANCIAL INFORMATION REGARDING THE ASSETS,
CONDITION AND RESULTS OF OPERATIONS OF THE ISSUER
FINANCIAL
25.1
Condensed interim consolidated financial statements as at 30 September 2009 44
Warning
The Group is presenting for the first time condensed interim consolidated statements form
the period from 1 January 2009 to 30 September 2009. For comparative purposes these
accounts include data from 1 January to 30 September 2008 as well as condensed
statements for the 12-month year ended on 31 December 2008.
During the preparation of their interim condensed consolidated financial statements as at
30 September 2009, the MEDICA Group identified an error in the calculation of the
financial interests on the syndicated loan, arranged in August 2006. This error affects the
consolidated financial statements prepared for the years ended on 31 December 2008
and 31 December 2007, approved by the shareholders’ general meeting.
Pursuant to IAS 8 “accounting policies, changes in accounting estimates and errors”, the
accounts for the 12-month financial period ended on 31 December 2008 presented for
comparative purposes were restated as if the error had been corrected on the first day of
the first period presented. The impacts of the corrections are described in Note 2-2.
Data regarding the period from 1 January to 30 September 2008 were prepared solely for
the comparative data requirements of the consolidated condensed interim accounts at 30
September 2009 subsequent to the identification of the error described above.
44
The condensed interim consolidated financial statements at 30 September 2009 were subject to a limited review by the
statutory auditors.
189
Consolidated Income Statement
In thousands of euros
9 month period closed on
Notes
30.09.2009
30.09.2008
31.12.2008
356,692
332,984
448,814
(17,389)
(15,579)
(20,445)
(96,175)
(90,335)
(121,577)
(21,656)
(21,936)
(27,650)
(158,733)
(147,035)
(201,790)
(17)
531
988
62,721
58,629
78,341
(13,789)
(12,632)
(17,227)
(332)
1,018
(530)
Current operating income
48,600
47,015
60,583
(2,375)
(595)
(2,908)
46,225
46,420
57,676
29
177
295
(48,069)
(50,108)
(67,415)
(48,040)
(49,931)
(67,120)
85
(1,148)
(22,782)
(241)
0
(144)
(1,971)
(4,659)
(32,371)
2,908
1,129
9,980
Net income (loss)
936
(3,529)
(22,391)
Group share
630
(3,786)
(22,688)
Minority share
306
257
297
7,286,040
7,286,040
7,286,040
0.09
(0.52)
(3.11)
4.2
Revenue
4.3
External expenses
4.4
Personnel expenses
EBITDA
Depreciation and amortisation
4.5
Other operating revenues and expenses
4.6
Cost of gross financial indebtedness
Cost of net financial indebtedness
4.7
Other revenues and interest expenses
Pre-tax income
4.8
Income taxes
Average number of shares (*)
Group share of consolidated net income per share (in
euros)
190
Combined comprehensive income statement
30.09.2009
30.09.2008
31.12.2008
936
(3,529)
(22,391)
Net income (loss)
Other elements of the comprehensive income statement:
(7,505)
Change in fair value of financial instruments
Deferred taxes on fair value of financial instruments
2,502
Total gains and losses directly recognised in equity
(5,003)
Comprehensive loss for the year
(4,067)
(3,529)
(22,391)
Including group share
(4,373)
(3,786)
(22,688)
306
257
297
30.09.2009
31.12.2008
Including minority interests
Consolidated Balance Sheet
Notes
ASSETS
Goodwill
4.9
353,034
349,836
Intangible assets
4.10
482,871
482,519
Tangible assets
4.11
307,862
294,951
0
131
17,375
14,478
1,718
1,697
276
561
1,231
0
0
1
1,164,366
1,144,173
1,721
1,624
32,655
35,948
1,423
1,864
11,928
12,967
9,408
8,797
Equity method companies
Other financial assets
Available-for-sale assets
Deferred taxes
4.12
Derivative financial instruments
Other non current assets
Total non current assets
Inventories and work in progress
Trade receivables
Tax assets
Other debtors
4.12
0
0
Cash and cash equivalents
4.13
22,552
23,974
79,687
85,174
1,244,052
1,229,347
Total current assets
Total non current assets and asset groups held for sale
Total assets
191
30.09.2009
31.12.2008
116,577
116,577
0
0
(0)
(0)
630
(22,688)
16,816
44,507
134,023
138,396
306
297
2,922
5,829
137,251
144,521
746,341
721,146
4,758
4,308
110
0
7,875
8,619
198,002
204,141
22,222
0
23,671
30,355
1,002,979
968,570
17,836
16,977
746
746
Trade payables
37,377
36,993
Other creditors
47,220
46,029
644
1,346
0
14,165
0
0
103,823
116,256
Notes
LIABILITIES
Capital
Additional paid-in capital
Other reserves
Group income or loss
Consolidated retained earnings
Shareholders’ equity (group share)
Non-Group income or loss
Minority reserves
Total equity
4.14
Borrowings and other debts
Commitments to employees
4.15
Other provisions
Deferred taxes
4.12
Other non current liabilities
Non current liabilities
4.14
Bank loans and advances (< one year)
Provisions (< one year)
Tax liabilities
4.12
Current liabilities
Total Liabilities linked to an asset group held for sale
,
1,244,052
Total liabilities
1,229,347
Consolidated cash flow statement
9 month period
closed on
30.09.2009
9 month period
closed on
30.09.08
Total consolidated net profit
936
(3,529)
Elim. of income or losses of equity affiliates
241
0
Elimination of amortisations and provisions
12,627
11,000
(611)
3,338
(2)
(126)
Elim. of revaluation profits/losses (fair value)
Elim. of disposal results and dilution profits and losses
192
9 month period
closed on
30.09.2009
9 month period
closed on
30.09.08
Cash flow after cost of net debt and tax
13,192
10,683
Elim. of the tax expense (income)
(2,908)
(1,129)
Elim. of the cost of net financial indebtedness
48,040
49,931
Cashflow before cost of net debt and tax
58,325
59,485
(97)
(18)
3,294
(9,396)
375
2,522
Impact of the change in debtors & other creditors
(659)
9,769
Paid taxes
(668)
6,964
Cash flow linked to operational activities
60,569
69,327
Impact of movements in group structure
(9,431)
(42,237)
(22,028)
(24,167)
(708)
(4,958)
(21)
(5)
(2,981)
(1,122)
2,030
179
Disposal of financial assets
(0)
0
Dividends received
(0)
(0)
(33,139)
(72,310)
0
0
11,454
43,295
Redemption of debts
(12,327)
(17,815)
Net financial interests paid
(28,477)
(31,738)
0
0
(113)
(153)
(29,463)
(6,410)
Cash flow statements
(2,032)
(9,393)
Cash and marketable securities at beginning of period
21,636
24,152
Cash and marketable securities at close of period
19,604
14,759
(2,032)
(9,393)
Impact of the change in inventories and work in progress
Impact of the change in trade receivables
Impact of the change in trade payables
Acquisition of property, plant and equipment
Acquisition of intangible assets
Acquisition of financial assets
Change in loans and advances granted
Disposal of tangible and intangible assets
Cash flow linked to investment activities
Capital increase
Loan issues
Dividends paid to group shareholders
Dividends paid to minorities
Cash flow linked to financing activities
193
Statement of changes in consolidated equity
Equity on 31.12.07
Capital
116,577
Additional
paid-in
capital
0
Consolidate Consolidated
d reserves income (loss)
55,306
Share
Share
Group
Minority
5,899
TOTAL
(7,203)
164,680
158,781
2,304
2,304
2,304
55,306
(4,899)
166,984
161,085
5,899
(4,899)
4,899
0
0
0
Capital increase
0
0
0
Capital reduction
0
0
0
(153)
(153)
0
(153)
82
82
0
82
0
0
0
Effect of the correction of
the calculation of the
syndicated loan interest rate
(cf. note 2.2)
Equity corrected as at
31/12/2007
116,577
0
Assignment of the
income/loss for the
previous period
Dividends paid
Changes in scope
Other changes
(71)
Transactions with
shareholders
(71)
Income/loss for the period
(3,529)
(3,529)
Change in the fair value of
financial instruments
0
Other changes in the
comprehensive income
statement
0
Elements of the
statement
(71)
(3,786)
257
(3,529)
(3,529)
(3,786)
257
Equity on 30/09/2008
116,577
0
50,337
(3,529)
163,384
157,298
6,086
116,577
0
48,033
(10,019)
154,591
148,465
6,216
2,304
(12,372)
(10,068)
(10,068)
50,337
(22,391)
144,521
138,396
6,126
(22,391)
22,391
0
0
0
Capital increase
0
0
0
Capital reduction
0
0
0
(113)
0
(113)
Effect of the correction of
the calculation of the
syndicated loan interest rate
(cf. note 2.2)
Equity corrected as at
31/12/2008
Assignment of the
income/loss for the
previous period
Dividends paid
116,577
0
(113)
194
Capital
Additional
paid-in
capital
Changes in scope
Other changes
Transactions with
shareholders
Consolidate Consolidated
d reserves income (loss)
Group
Minority
(3,092)
0
(3,092)
0
0
0
0
(3,205)
(3,205)
0
(3,205)
936
630
306
(5,003)
(5,003)
0
936
(5,003)
0
Other changes in the
statement
Elements of the
statement
Equity as at 30/09/09
Share
(3,092)
Change in the fair value of
the financial instruments of
consolidated entities
Share
TOTAL
116,577
0
(5,003)
936
(4,067)
(4,373)
306
19,739
936
137,251
134,023
3,228
195
1.
General information
In August 2006, on the advice of BC Partners, several investment funds acquired through
the intermediary of TBU3 International, 87.7% of MEDICA, the holding company (formerly
OBO1). MEDICA holds 100% of the capital and the voting rights of Société Financière
MEDICA “SFM”, (formerly MEDICA SA), parent company of the MEDICA group.
The company’s extraordinary general meeting of 9 November 2009 also decided to
convert MEDICA (formerly OBO1) into a société anonyme (joint-stock company) with a
board of directors.
The MEDICA group is domiciled in France, its head office is located at 39, rue du
Gouverneur Général Félix Eboué in Issy Les Moulineaux, 92130.
The MEDICA group has been primarily present in France and in Italy since 2005, with a
total of 147 institutions for a reception capacity of 11,297 beds at 30 September 2009.
The group’s consolidated financial statements were finalised by the board of directors of 3
December 2009. They are expressed in thousands of euros, unless otherwise indicated.
2.
Accounting rules and methods
2.1
Basis of financial statement preparation Base
The consolidated accounts of the MEDICA Group were prepared in accordance with the
International Financial Reporting Standards (IFRS) reference system as adopted in the
European Union.
The standards and interpretations used to prepare the consolidated financial statements
are those reported in the European Union Official Journal (EUOJ), summarised on the
website
of
the
European
Commission
at
the
address
below:
http://ec.europa.eu/internal_market/accounting/ias_fr.htm#adopted-commission.
The Group has drafted for the first time condensed interim consolidated financial
statements for the period from 1 January 2009 to 30 September 2009.
It presents for comparison, data regarding the period from 1 January to 30 September
2008. These accounts were prepared solely for the purpose of comparison and were
therefore not published as they were.
The interim consolidated financial statements at 30 September 2009 are drafted in
accordance with IAS34 “Interim financial information” which allows the presentation of
selected notes to the financial statements. These condensed consolidated financial
statements must be read together with the consolidated accounts for fiscal 2008,
approved by the general meeting, provided information given in notes 2-2 and 2-3 is
taken into consideration.
The accounting methods selected to prepare the consolidated accounts as at
30 September 2009 of the MEDICA Group are identical to those retained for the year
ended 31 December 2008, subject to the changes detailed in Note 2.3 and the error
correction presented in Note 2.2.
196
2.2
Application of standard IAS8 “Accounting Policies, Changes in Accounting
Estimates and Errors”
The Group identified in the period closed on 30 September 2009 an error in the
calculation of financial interests on the syndicated loan.
Pursuant to IAS 8 “accounting policies, changes in accounting estimates and errors”, the
accounts for the 12-month financial period ended on 31 December 2008 presented in
comparative were restated as if the error had been corrected on the first day of the first
period presented.
The condensed interim accounts at 30 September 2008 were directly drafted after the
discovery of the calculation error and did not require restatement.
Transition from published accounts to corrected accounts:
Condensed consolidated income statement as at 31 December 2008
2008 published
Correction of the
calculation of the
syndicated loan financial
interests
57,676
2008
corrected
57,676
Cost of net debt
(48,563)
(22,782)
(22,782)
(144)
(144)
Pre-tax income
(18,557)
(67,120)
(13,814)
(18,557)
(32,371)
3,795
6,185
9,980
Net income (loss)
(10,019)
(12,372)
(22,391)
Group share
(10,316)
(12,372)
(22,688)
297
-
297
Income taxes
Minority share
Group share of consolidated net income
per share (in euros)
(1.42)
(3.11)
Condensed consolidated balance sheet as at 31 December 2008
Total assets
2008 published
Correction of the
calculation of the
interests
1,229,347
148,465
Minority reserves
2008
corrected
1,229,347
(10,069)
138,396
297
297
5,829
5,829
Total equity
154,591
(10,069)
144,521
Borrowings and financial debts
706,043
15,103
721,146
Deferred taxes
209,175
(5,034)
204,141
43,283
958,501
197
43,283
10,069
968,570
Current liabilities
Total liabilities
2008 published
Correction of the
calculation of the
interests
2008
corrected
116,256
116,256
1,229,347
1,229,347
The correction of the calculation of the financial interests on the syndicated loan had no
impact on the cash flow of the year ended 31 December 2008.
As additional information, the condensed consolidated financial statement and the
condensed consolidated balance sheet for the period ended 31 December 2007 (20
months) are presented below
Cost of net debt
2007 published
66,681
2007
corrected
66,681
(86,269)
Pre-tax income
Correction of the
calculation of debt
treatments at amortised
cost
3,455
(82,815)
6,953
6,953
(39)
(39)
(12,674)
3,455
(9,220)
5,471
(1,151)
4,320
Net income (loss)
(7,203)
2,304
(4,899)
Group share
(7,552)
2,304
(5,248)
Income tax
Minority share
349
349
(1.04)
(0.72)
Cost of net debt
2007 published
66,681
(86,269)
Pre-tax income
2007
corrected
66,681
3,455
(82,815)
6,953
6,953
(39)
(39)
(12,674)
3,455
(9,220)
5,471
(1,151)
4,320
(7,203)
2,304
(4,899)
Income tax
Net income (loss) before minority
Correction of the
calculation of debt
cost
198
2007 published
Correction of the
calculation of debt
cost
2007
corrected
interests
Group share
(7,552)
Minority share
2,304
(5,248)
349
349
(1.04)
(0.72)
Total assets
2007 published
Correction of the
calculation of the
interests
1,180,163
1,180,163
158,781
Minority reserves
2007
corrected
2,304
161,085
337
337
5,562
5,562
Total equity
164,680
2,304
166,984
669,948
(3,455)
666,493
Deferred taxes
207,216
1,151
208,367
Current liabilities
Total liabilities
45,780
45,780
922,944
(2,304)
92,539
920,640
92,539
1,180,163
0
1,180,163
Bank ratios
The error correction has no impact on the compliance with the bank ratios that the Group
is required to meet. The corrected ratios presented below comply with the “objective”
conditions described in the bank documentation.
Corrected ratios for the year ended 31 December 2008
Financial agreements
EBITDA/net
interests
Net indebtedness/
EBITDA
Cash flow/
Cost of debt
Objective
R1 > 1.65
R2 < 8.30
R3 > 1
Corrected
2.01
7.41
1.60
199
Corrected ratios for the year ended 31 December 2007
Financial agreements
EBITDA/net
interests
Net indebtedness/
EBITDA
Cash flow/
Cost of debt
Objective
R1 > 1.50
R2 < 9.15
R3 > 1
Corrected
1.88
7.51
1.83
2.3
Accounting policies
2.3.1
Change in the IFRS reference system
Standards, Amendments of standards or mandatory application interpretations
since 1 January 2009

IAS 1 revised “Presentation of financial statements”;

IFRS 8 “Operating Segments”;

Amendment to IAS 23 “Borrowing costs”;

Amendment to IAS 32 "Puttable financial instruments and obligations arising on
liquidation”

Amendments to IFRS 2 ”Share-based payments – vesting conditions and
cancellations”;

Improvement of IFRS: Compilation of amendments to the IFRS (except IFRS 5);

IFRIC 11 “IFRS 2 – Group and treasury share transactions”;

IFRIC 13 – Customer loyalty programmes;

IFRIC 14 “The limit on a defined benefit asset minimum funding requirements and
their interact”
IAS 1 revised led the Group to separately report its equity, a comprehensive income
statement comprising income and expense items which are directly recognised in equity
in accordance with the provisions of IFRS standards. The comparative information was
also established.
The application of IFRS 8 “Operating segments” did not cause the Group to revise the
segmentation of its activity for segment reporting requirements, as this segmentation was
compliant with internal reporting. Furthermore, does not include in its internal reporting,
segment-based reporting of its liabilities.
The other amendments and interpretations had no impact on the Group’s financial
statements as at 30 September 2009.
Improvements of IFRS “Compilation of amendments to IFRS” applicable for the financial
years open as of 1 January 2009, contain a modification of standard IAS 1 “Presentation
of financial statements” regarding the “current/non current classification of derivatives”.
The Group carried out a forward looking reclassification of the derivative instruments
which are reported under hedge accounting and for which the maturity of the instrument
exceeds one year.
200
Standards, amendments of standards or interpretations subject to early application
The Group did not apply ahead of schedule any standard, amendment or interpretation
already published by the IASB but not yet adopted by the European Union or not yet
mandatory as of 30 September 2009.
Specifically, the Group did not opt to apply ahead of schedule standards IAS 27 revised
“consolidated and separate financial statements” and IFRS 3 revised “Business
combinations” and IFRS 7 “Improving financial instruments disclosures” amended.
The impacts of these new texts are still being assessed by the Group.
2.3.2
Features specific to the drafting of interim financial statements
During interim closings, the income tax expense is calculated for each of the Group’s tax
entity by applying to the pre-tax income of the interim period the estimated average actual
tax rate for the whole entity for the ongoing year.
2.3.3
Cashflow hedge
The Group documented a variable rate cashflow hedge relationship on its loans by
interest rate swaps, in a forward-looking manner as from 1 January 2009.
In accordance with the prescriptions of standard IAS 39 “Financial instruments –
recognition and measurement” concerning cashflow hedge, hedge accounting is
applicable if:

the hedging relationship is clearly defined and documented on the date of its
implementation;

efficiency of the hedge relationship is demonstrated from its origin, and so long as
it continues: in other words if at the beginning of the hedge and during its entire
duration, the company expects the changes in fair value or the cashflow of the
hedged item to be nearly fully offset by the changes in fair value or the cash flow of
the hedge instrument, and if the actual results is somewhere between 80 and
125%.
Given that the hedged item is not recorded in the balance sheet, the effective portion of
the change in the fair value of the hedge instrument is carried directly as an offsetting
entry to equity. The change in value of the ineffective portion is recognised in income. The
amounts recorded in equity are restated in income when the hedged item has an impact
on income.
As a result, the changes in value of the Group’s derivative instruments, designated in the
hedge relationship of future flows, are no longer recognised in income but in other items
of the comprehensive income.
These instruments are initially recognised at their fair value; they are then re-measured at
their fair value. The fair value is calculated as the discounted value of estimated future
cash flows. The valuations of the MEDICA group’s derivative instruments are provided to
the Group by banks.
2.4
Use of estimates and assumptions
The preparation of financial statements implies that the management of the group carries
out estimates and retains certain assumptions which have an impact on the carrying
201
amounts of certain assets and liabilities, income and expenses together with the data
provided in the Notes.
The Group’s Management revises these estimates and assumptions on a regular basis in
order to ensure their relevance with respect to past experience and the current economic
context. Depending on the change in these assumptions, the items in the future financial
statements may be different from current estimates. The impact of changes in accounting
estimates is recognised in the change period and all the future groups affected.
The main estimates made by Management for preparing the financial statements concern
the measurement of assets (impairment tests), the assumptions retained to calculate
liabilities linked to employee benefits and the valuation of derivatives and other
instruments.
Furthermore, in addition to the use of estimates, Management uses its discretion to
determine the appropriate accounting treatment for certain transactions, pending the
clarification of certain IFRS standards or when the applicable standards do not deal with
the relevant issues.
3.
Scope of consolidation
During the first nine months of fiscal 2009, the Group acquired a certain number of
minority equity interests, they included:

19.33% acquisition of DLS Gestion, raising its stake in that company up to 96.67%,
the company is licensed to run homes for dependent senior citizens (EHPAD);

acquisition of minority interests in MT Santé allowing it to hold 100% of the
Saussens clinic;

acquisition of B2L leading to the 100% ownership of the Val des Cygnes clinic in
Labarthe sur Lèze, in which the Group already had 59.94%.
At the same time, the Group transferred Sci Dls Immo, a company authorised to build a
new EHPAD
Furthermore, MEDICA Group paid earnouts for its equity interest acquisition in the
Ippocrate, an Italian institution and in the Saussens clinic.
The table below presents the impacts of the events described above:
Italy
France
Total
ASSETS
Intangible assets
0
0
0
Tangible assets
0
(2,196)
(2,196)
Other non current financial assets
0
0
0
0
(95)
(95)
Deferred tax assets
0
0
0
0
0
0
Non current assets
0
(2,291)
(2,291)
Inventory
0
0
0
Customers
0
0
0
202
Italy
France
Total
Current tax expense
0
0
0
Other debtors
0
(148)
(148)
0
0
0
0
3
3
Current assets
0
(145)
(145)
0
(6)
(6)
Minority interests
0
3,089
3,089
0
(694)
(694)
0
0
0
Other provisions
0
0
0
(0)
39
39
5,468
(1,686)
3,782
5,468
(2,342)
3,126
0
(117)
(117)
Other provisions (< one year)
0
0
0
Trade payables
0
(8)
(8)
Other creditors
0
2,588
2,588
Current tax expense
0
0
0
0
0
0
0
0
0
Current liabilities
0
2,463
2,463
5,468
768
6,236
LIABILITIES
Deferred taxes
NET ASSET
Italy
France
Total
Impact of changes in the scope of consolidation
on cash flow
Acquired cash and cash
equivalents
Cash paid out for the acquisitions made
Sale price of consolidated securities
Net cash paid out for the acquisitions made
0
3
3
(7,751)
(1,684)
(9,435)
0
1
1
(7,751)
(1,680)
(9,431)
Other cash outflows on entries into scope
consolidation
0
Impact of changes in the scope of consolidation
on cash flow
Intangible assets
203
(7,751)
(1,680)
(9,431)
Italy
France
Total
Administrative authorisations
0
0
0
Other intangible assets
0
0
0
Intangible assets excluding goodwill
0
0
0
Goodwill
2,284
914
3,198
Intangible assets including goodwill
2,284
914
3,198
4.
Notes on the main items in financial statements
4.1
Segment reporting
In accordance with IFRS 8 “Segment reporting” and the operational organisation of the
activity, the information presented are based on the Group’s internal reporting, namely:

the EHPAD – France segment covers homes for dependent senior citizens located
in France, in charge of the case management of long-term dependent patients;

the Healthcare – France segment covers homes specialised in post-op care and
rehabilitation and in psychiatry, in charge of the case management of temporarily
dependent patients;

The Italy covers institutions in charge of the case management of dependent
patients in Italy.
Gross operating income corresponds to the gross operating income excluding real estate
costs.
9,month,period,closed,on
30.09.2009
30.09.2008
31.12.2008
Revenues
EHPAD France
213,777
198,218
266,872
Healthcare France
105,756
99,765
134,790
Italy
37,159
35,000
47,152
Total
356,692
332,984
448,814
EHPAD France
58,073
54,489
73,894
Healthcare France
27,724
25,164
32,606
8,834
9,047
11,866
94,630
88,701
118,366
(31,909)
(30,072)
(40,025)
62,721
58,629
78,341
Gross operating income excluding real estate
Italy
Total Gross operating income excluding Real
estate
Property leasing
Earnings Before Interest Tax, Depreciation,
Amortisation (EBITDA)
204
30.09.2009
31.12.2008
Assets:
EHPAD France
852,887
835,573
Healthcare France
302,896
309,076
88,270
84,698
1,244,052
1,229,347
Italy
Total
4.2
Revenue
With respect to activity for the period, for the first nine months of the year, revenues for
the MEDICA Group jumped more than 7.1% from €333.0 million in 2008 to €356.7 million
in 2009.
This €23.7 million increase can be explained by:

an increase of €19.6 million linked to the MEDICA Group’s organic growth,
representing an increase of 5.9% in revenue; and

€4.1 million increase in revenue due to the full-year integration of the institutions
acquired in 2008. During the first 9 months of 2009, the Group acquired no new
institutions.
The organic growth of the group’s revenue by 5.9% was fuelled by:
4.3

reassessments of the different types of benefits provided by the group
(accommodation rates for the EHPAD segment and related services provided for
the healthcare segment),

the reassessment of health allowances and dependence rates in the EHPAD
segment and the day prices in the healthcare segment,

and lastly, the increased activity of the institutions created in 2009 (one EHPAD
with 116 beds in Villemomble and one EHPAD with 74 beds in Issigeac).
External expenses
30.09.2009
30.09.2008
31.12.2008
Temp staff
(1,540)
(1,770)
(2,356)
Professional Fees
(6,113)
(4,669)
(6,334)
Property leasing
(31,909)
(30,072)
(40,025)
Furniture rental
(4,678)
(4,448)
(6,311)
Maintenance
(4,148)
(3,898)
(5,360)
(32,380)
(29,845)
(40,068)
Inventory purchases
(8,221)
(7,982)
(10,808)
Miscellaneous
(7,185)
(7,652)
(10,315)
(96,175)
(90,335)
(121,577)
Subcontracting
External expenses
205
4.4
Personnel expenses
30.09.2009
End of employment agreement benefits
Social security charges
Retirement expenses – defined benefits schemes & Long
service awards
Personnel expenses
30.09.2008
31.12.2008
(113,418)
(106,021)
(144,810)
(45,077)
(40,673)
(56,524)
(237)
(341)
(455)
(158,733)
(147,035)
(201,790)
6,224
6,064
6,241
80
76
74
6,304
6,140
6,315
End of year staff Full-time equivalent
France
Outside France
Total
4.5
30.09.2009
Earnings from disposals of fixed assets
Costs for closing institutions
30.09.2008
31.12.2008
(7)
126
129
(3,249)
(721)
(2,538)
Costs Corporate Savings Plan
(294)
Negative goodwill
872
Miscellaneous
4.6
8
0
(205)
(2,375)
(595)
(2,908)
30.09.2009
Interest expenses on loans
Interests on lease-financing agreements
Financing cost at nominal rate
30.09.2008
31.12.2008
(36,825)
(48,594)
(65,170)
(1,944)
(2,281)
(3,132)
(38,769)
(50,876)
(68,303)
(48,106)
(50,876)
(68,303),
37
767
888
(48,069)
(50,108)
(67,415)
(9,337)
Expenses and income on rate hedge (*)
Cost of financing after hedging
*c.f.: Note 4.7
206
4.7
30.09.2009
Financial component of the cost of personnel benefit plans
30.09.2008
(212)
31.12.2008
(179)
(238)
2,722
3,631
(193)
(422)
(540)
0
0
53
Effect of discounting liabilities
(68)
(290)
(313)
Change in fair value of derivative instruments
679
(3,048)
(25,187)
0
0
0
(120)
69
(187)
85
(1,148)
(22,782)
Expenses and income on rate hedge
Non-utilisation fees
Income from disposals excluding cash and cash
equivalents
Reversal of provisions for depreciation of financial assets
Since 1 January 2009, the group applies hedge accounting for its cash flows. As a result
the change in fair value of eligible derivative instruments was recognized in equity for
(7.5) million euros, or (5) million euros net of tax. Furthermore, the income and expenses
on interest rate hedges (paid and received) are recorded in the cost of financial debt, for
(9.3) million euros.
Given that this change of policy was not applied to prior years, the fair value changes of
derivative instruments, as well as the income and expenses on interest rate hedges, are
maintained in the item other financial income and expenses at 30 September 2008 and at
31 December 2008,
4.8
Income tax expense
30.09.2009
30.09.2008
31.12.2008
Current tax expense
(407)
(1,252)
(1,770)
Deferred tax expense or income
3,315
2,381
11,750
Income tax expense
2,908
1,129
9,980
The change in the effective tax rate can primarily be explained by the recognition in 2009
of deferred taxes previously not recognized by the group.
4.9
Goodwill
The main movements in goodwill for the period can be analysed as follows:
Net goodwill at beginning of year
Business combinations
EHPAD
France
Healthcare
France
218,286
101,064
489
426
Earnouts
Italy
30,486
349,836
915
2,283
207
Total
2,283
EHPAD
France
Net goodwill at end of year
Healthcare
France
218,774
Italy
101,490
Total
32,770
353,034
4.10 Intangible assets
Net carrying amount
at 31 Dec. 2008
Operating
permits
Software
479,905
1,663
Other
intangible
assets
576
Intangible
fixed assets
in progress
375
Total
482,519
0
Entries into scope
0
141
Acquisitions
39
566
747
Disposals
Advances and down payments
0
550
-550
0
Fixed assets transfers in progress
0
(385)
(10)
(395)
Net carrying amount
at 30 September 2009
480,455
1,420
54
941
482,871
Cost of acquisition
480,455
4,681
74
941
486,152
(3,261)
(20)
1,420
54
Compounded depreciation
Net carrying amount
480,455
(3,281)
941
482,871
4.11 Tangible assets
Net carrying amount at 31.12.08
Land and
buildings
Vehicles,
equipment
and tools
Other
Fixed
assets in
progress
Total
247,554
9,225
19,013
19,159
294,951
Acquisitions
13,435
2,782
3,781
10,645
30,644
Disposals
(1,573)
(2)
(2,656)
(4,232)
1,988
415
(2,503)
0
(108)
(108)
Entries into scope
100
Reclassification
(7,952)
(1,885)
(3,555)
0
(13,392)
Net carrying amount
253,452
10,535
19,339
24,536
307,862
Cost of acquisition
346,136
28,942
57,980
24,536
457,593
(92,684)
(18,407)
(38,641)
Net carrying amount
253,452
10,535
19,339
208
(149,732)
24,536
307,862
Assets recognised as properties taken by the Group in connection with lease-finance
agreements include:
30.09.2009
31.12.2008
Land and buildings
Cost of acquisition
190,018
185,315
(46,720)
(43,983)
Net carrying amount
143,297
141,333
Cost of acquisition
2,929
1,698
(242)
(30)
Net carrying amount
2,686
1,668
Vehicles, equipment and tools
4.12 Derivative financial instruments
MEDICA Group’s derivative financial instruments primarily comprise interest rate hedge
contracts to the extent where a large portion of syndicated loans are at variable rates.
At 30 September 2009, the notional of fixed rate swaps stood at €545 million maturing at
30 June 2011. Since 1 January 2009, these swaps are recognised at cash flow hedges.
The notional for Caps is €500 million with a period planned between 30 June 2011 and 30
June 2013.
Furthermore, the group had subscribed Basis swaps enabling it to swap Euribor 3 months
rate for Euribor 1 month rate for a notional of €437 million and over a period stretching
between 30 June 2008 and 30 June 2009.
The Group documented a variable rate cashflow hedge relationship on its loans by
interest rate swaps, going forward as from 1 January 2009.
Fair value on balance sheet
Suspense
account in
equity
Notional
in EUR
millions
Maturity
date
SWAP
200
06.2011
3.82%
EBEUR.3M
8,666
5,888
(2,778)
SWAP
250
06.2011
3.53%
EBEUR.3M
9,530
5,542
(3,988)
SWAP
95
06.2011
3.77%
EBEUR.3M
4,026
2,671
(1,355)
CAP
500
06.2013
6%
EBEUR.3M
SWAP
437
06.2009
Type of
agreement
Cap or
Swap
rate
Allocation of 2009
changes 2009
EBEUR.1M
reference
rate
30.09.2009
Assets:
Liabilities
1,231
2008 (*)
Assets:
Liabilities
552
EBEUR.3M
In
income
679
616
1,231
22,222
552
14,717
616
679
(*) As at 31 December 2008, the fair value of derivative financial instruments was recognised for
their comprehensive net value under liabilities in the balance sheet, representing €14,165 million.
209
(7,505)
4.13 Cash and cash equivalents
30.09.2009
Cash UCITS
31.12.2008
506
10,864
Cash assets and debit accounts merged into a cash pool
22,046
13,109
22,552
23,974
Bank credit lines and overdrafts
(2,948)
(2,338)
Net cash
19,604
21,636
4.14 Financial liabilities
MEDICA Group has two types of debt: a convertible bond loan issued in 2006 and bank
debt in the form of a syndicated loan and lease purchases.
MEDICA Group issued a convertible bond loan in equities of a nominal amount of €174.8
million in August 2006. Interests due on the convertible bond loan are recognized in
equity.
On 9 August 2006, in order to refinance the existing bank debt, MEDICA Group signed
with a bank syndicate led by The Royal Bank of Scotland, a syndicated loan of €447.3
million together with an acquisition facility of €150 million and a revolving credit facility of
€25 million. In July 2007, a portion of this debt was renegotiated: part of the syndicated
loan was redeemed early and refinanced by a new syndicated loan for an equivalent
nominal amount.
Debt related to buildings financed through lease financing was not refinanced. These
lease finances are generally for a period of 15 years.
30.09.2009
Convertible bond loan
31.12.2008
89,223
90,391
577,942
571,120
1,586
1,811
77,590
57,825
746,341
721,146
14,264
13,796
Other loans and similar current debts
333
390
Accrued interest on loans
291
453
2,948
2,338
17,836
16,977
Total bank loans and financial liabilities
764,178
738,123
Convertible bond loan (equity component)
74,597
74,597
Compounding effect of amortised cost
20,829
20,792
859,604
833,512
Borrowings from credit institutions
Other loans and similar l debts
Total bank loans and non current financial liabilities
Borrowings and debts from current lending institutions
Total bank borrowings and current financial liabilities
Total value of redemption of bank loans and financial liabilities
210
The loans mentioned below are analysed as follows:
Nominal interest rates (%)
Maturity
date
30.09.2009
31.12.2008
236,051
219,923
236,051
219,923
Loan of €174.8 million
10.00% capitalised
2019
Redemption value of
convertible bond loan
Syndicated borrowings
Euribor 3 months + 4.00%
€92 million mezzanine loan
+ capitalised interests
4.625%
2016
108,353
104,715
€30 million loan - TA
2013
20,564
24,336
€40 million loan - TB
2014
39,911
39,911
€105.6 million loan - TB
2014
105,365
105,365
€17 million loan – TB2
2014
16,962
16,962
€40 million loan - TC
2015
39,911
39,911
€105.7 million loan - TC
2015
105,465
105,465
€17 million loan – TC2
2015
16,962
16,962
ACF
2015
105,083
99,426
RCF
2013
16,403
10,728
291
453
,
,
Leases
34,432
34,776
Other bank loans
10,902
12,241
2,948
2,338
Redemption value of
syndicated loans and other
debts
623,553
613,588
Redemption value of bank
loans and financial liabilities
859,604
833,512
Convertible bond loan (equity
component)
(74,597)
(74,597)
Compounding effect of
amortised cost
(20,829)
(20,792),
Total bank loans and financial
liabilities
764,178
738,123
Other loans and similar l debts
211
Net financial debt:
Net financial debt as defined by the group corresponds to the total of financial debts and
bank loans less cash and cash equivalents.
30.09.2009
31.12.2008
764,178
738,123
- Cash and cash equivalents
-22,552
-23,974
Net indebtedness
741,626
714,149
Maturity dates of financial debts:
The redemption value of bank loans and financial liabilities can be analysed by maturity
date as follows:
Less than one Between one and More than five
year
five years
years
% of capital
236,051
236,051
Syndicated loans and other bank loans
6,795
16,673
562,705
586,173
Leases
8,094
19,168
7,170
34,432
Current bank advances
2,948
Total redemption value
2,948
17,836
35,841
805,926
859,604
4.15 Provisions for non-current operations
The other provisions for non-current operations include:
Labour courts
At 31 December 2008
closing of
institutions
Miscellaneous
3,782
1,643
3,194
8,619
631
1,111
489
2,232
-1,022
-1,022
-722
-1,954
,
0
1,940
7,875
- Increase of provisions
- Reversal of unused amounts
- Reversal of amounts used during the
year
-1,216
-17
- Changes in scope
As of 30 September 2009
Total
3,198
2,737
4.16 Off-balance sheet commitments
Commitments given:
30.09.2009
31.12.2008
5,856
6,281
13,641
14,723
Sureties and guarantees
Guarantees given to Finance-Lease agencies
Pledging of business assets for Finance-Lease agencies
212
30.09.2009
31.12.2008
465,219
465,584
Equity pledges given to credit institutions
2,432
2,432
Pledging of business assets to credit institutions
4,007
4,267
320
320
Guarantees given to credit institutions
UCITS pledges given to credit institutions
Mortgage of real estate unit for credit institutions
5,448
Commitment concerning transparent companies
12
18
23,809
32,608
Purchase and investment commitments
Projects acquisition promises (under conditions precedent)
The Group’s commitment with respect to the French law on individual right to training
amounted to 364,932 hours as at 30 September 2009, compared to 230,398 hours at 31
December 2008.
Commitments under operating lease agreements - Position of lessee for the Group
companies
Since the beginning of 2009, MEDICA Group has finalised renegotiations with its main
lessors. These arrangements have allowed MEDICA Group to reduce its property and
other related costs, and extend the residual life span of these commercial leases.
The table below details all the future minimum payments under non cancellable operating
lease agreements:
30.09.2009
31.12.2008
43,700
41,983
Between one and five years
163,892
139,306
More than five years
187,844
68,292
395,437
249,581
Less than a year
Asset and Liability Guarantees:
30.09.2009
Asset and Liability Guarantees received linked to securities acquisitions
Asset and Liability Guarantees given in the context of securities disposals
31.12.2008
8,774
9,632
-
-
4.17 Transactions with related parties
Related parties with a control on the Group:
There is no transaction between MEDICA Group and the shareholders with control over
the Group, including TBU-3 International, except for the compensation for the convertible
bond loan (€16.1 million of financial interests capitalised for the period from 1 January to
30 September 2009 and €20 million for the year ended on 31 December 2008).
The company Medica SA has not paid out any dividend since the acquisition of MEDICA
Group in August 2006.
213
Other information concerning related parties:
No transaction between related parties had a material impact on the financial position and
performance of the Group.
The following amounts were paid to managers as compensation
Short-term benefits (*)
30.09.2009
30.09.2008
31.12.2008
31.12.2007
442
442
590
584
72
65
67
60
Other long-term benefits
-
-
-
-
End of contract benefits
-
-
-
-
Equity-based compensation
-
-
-
-
Post-employment benefits
(*) excluding employer charges
4.18 Post balance sheet events
Legal:
The extraordinary general meeting of OBO1 decided on 9 November 2009 on the
reconstitution of equity by way of reducing the share capital by €105,228,162 and on the
conversion of the company into a “société anonyme” or French law joint-stock company
with a board of directors. Its share capital is now fixed at €11,348,478.
At the same time, a decision was made to change the name of the companies: OBO1 will
now be known as MEDICA in accordance with the decision of the general meeting of 9
November 2009 and MEDICA SA will be known as Société de Financement de MEDICA
(” SFM”), in accordance with the decision of the general meeting of 9 November 2009.
Business activity:
In November 2009, the Group opened a new home for dependent senior citizens
(EHPAD) with 84 beds in Castera Verduzan.
214
25.2
Auditors’ report on the condensed interim consolidated financial statements as at
30 September 2009
CONSTANTIN ASSOCIES
Patrick GRIMAUD
75012 – PARIS
____
Limited review by the auditors
of the condensed consolidated interim financial statements
Period from 1 January to 30 September 2009
To the Chairman,
In our capacity as statutory auditors for MEDICA S.A. (formerly OBO 1 S.A.S.) and in
response to your request, we have carried out a limited review of the condensed interim
consolidated financial statements relating to the period going from 1 January to 30
September 2009 as attached to this report.
We would like to stress that given that MEDICA S.A. (formerly OBO1 S.A.S.) is drafting
condensed interim consolidated financial statements for the first time on 30 September
2009, the information reported for the period from 1 January 2008 to 30 September 2008,
presented for comparison only, were neither audited nor subject to a limited review.
These condensed interim consolidated financial statements were prepared finalised by
the board of directors on 3 December 2009. It is our duty to express an opinion on these
condensed consolidated interim financial statements based on our limited review.
We performed our limited review in accordance with the professional standards
applicable in France. A limited review mostly entails meeting with and talking to the
members of management responsible for the company’s accounts and finances and
implementing analytical procedures. These works are less extensive than those required
for an audit carried out in accordance with the professional standards applicable in
France. As a result, the assertion that overall, the condensed interim consolidated
financial statements, do not contain any material misstatements made in the context of a
limited review is a moderate assertion, less powerful than the assertion made for an
audit.
215
On the basis of our limited review, we noticed no material misstatements likely to
challenge, with respect to IAS 34 – the reference IFRS standard as adopted by the
European Union concerning interim consolidated financial statements, the fact that the
condensed interim consolidated financial statements give a sincere picture of the assets
and financial position of the entity made up of the companies included in the
consolidation as at 30 September 2009, as well as the result of its operations for the
lapsed period.
Without contradicting the opinion given above, we would like to draw your attention to
Note 2-2 to the financial statements describing the potential impact of the correction of
the error regarding the calculation of the syndicated loan’s financial interests on the
consolidated financial statements for the years ended 31 December 2008 and 31
December 2007.
This report is governed by French law. French courts have exclusively jurisdiction to hear
and determine any litigation, claim or dispute that may arise from our reviews described
above and from this report.
CONSTANTIN ASSOCIES
Patrick GRIMAUD
Jean Paul SEGURET
216
25.3
Corrected consolidated financial statements for the 12 months ended 31 December
2008
Warning
During the preparation of their interim condensed consolidated accounts on 30
September 2009, the MEDICA Group (formerly OBO1) identified an error in the
calculation of the financial interests on the syndicated loan, arranged in August 2006. This
error affects the consolidated financial statements drafted for the financial years closed on
31 December 2008 and 31 December 2007, approved by the general meetings of 29
June 2009 and 25 June 2008.
The consolidated financial statements presented in this document reflect the restatement
of the anomaly as if the error had been corrected at the beginning of the first period
presented.
The impact of the corrections is presented in note 2-3.
Notes
2008
2007,12,month
s
2007
Revenue
448,814
557,628
384,700
(20,445)
(26,047)
(18,452)
(121,577)
(154,291)
(105,990)
(27,650)
(36,531)
(25,504)
External expenses
23
Personnel expenses
22
(201,790)
(244,187)
(168,084)
24
988
490
277
78,341
97,062
66,947
(17,227)
(21,828)
(15,072)
(530)
(6,086)
(4,595)
60,583
69,149
47,281
(2,908)
(2,467)
(1,828)
57,676
66,681
45,453
295
407
13
(67,415)
(83,223)
(59,510)
(67,120)
(82,815)
(59,497)
(22,782)
6,953
4,397
(144)
(39)
0
(32,371)
(9,220)
(9,647)
9,980
4,321
4,077
Net income (loss)
(22,391)
(4,899)
(5,570)
Group share
(22,688)
(5,248)
(5,907)
297
349
337
EBITDA
25
26
27
Pre-tax income
28
Income taxes
Minority share
217
Notes
Average number of shares
Group share of consolidated net income per share (in
euros)
30
2008
2007,12,month
s
2007
7,286,040
7,286,040,
7,286,040
(3.11)
(0.72)
(0.81)
Notes
2008
2007
ASSETS
Goodwill
5
349,836
332,765
Intangible assets
6
482,519
458,970
Tangible assets
8
294,951
260,684
131
11
14,478
14,532
9
1,697
1,952
Deferred taxes
19
561
872
10
0
Trade receivables
12
Tax assets
Other debtors
1
1
1,144,173
1,069,776
1,624
1,373
35,948
28,968
1,864
10,573
12,967
25,955
8,797
6,629
10
0
11,022
13
23,974
25,867
85,174
110,386
1,229,347
1,180,162
Total assets
Notes
2008
2007
LIABILITIES
14
116,577
116,577
0
0
Other reserves
0
(0)
(22,688)
(5,248)
44,507
49,757
Capital
218
Notes
2008
2007
LIABILITIES
Total equity – Group share
Minority reserves
Total shareholders’ equity
138,396
161,085
297
349
5,829
5,550
144,521
166,983
17
721,146
666,494
20
4,308
3,441
0
0
Other provisions
21
8,619
7,611
Deferred taxes
19
204,141
208,366
10
0
0
16
30,355
34,728
968,570
920,640
Total Non current liabilities
17
16,977
14,180
20
746
684
Trade payables
15
36,993
33,947
46,029
41,280
1,346
2,447
14,165
0
0
0
116,256
92,538
Other creditors
Tax liabilities
10
Total current liabilities
Total liabilities
0
1,229,347
219
1,180,162
2008
2007
2007,12,mois
(22,391)
(4,899)
(5,570)
144
39
0
18,712
25,527
17,009
25,501
(5,853)
(4,192)
(129)
1,280
1,285
21,837
16,094
8,532
(9,980)
(4,321)
(4,077)
67,120
82,815
59,497
78,978
94,588
63,951
(192)
1,048
(26)
Impact of the change in trade accounts
(5,154)
4,458
3,870
3,223
(4,203)
3,850
16,756
(15,143)
(11,236)
5,954
(17,368)
(13,470)
99,565
63,380
46,939
(42,208)
(442,191)
(31,130)
Acquisition of tangible assets
(38,372)
(31,559)
(26,702)
(5,788)
(2,627)
(222)
(52)
(2,000)
(639)
137
(2,571)
(2,087)
297
11,704
10,713
0
510
2
(0)
(0)
0
(85,986)
(468,733)
(50,065)
(0)
116,593
44
47,476
711,579
95,000
Redemption of debts
(20,835)
(344,245)
(47,807)
(42,583)
(54,397)
(37,252)
(0)
0
(0)
(153)
(25)
(25)
(16,095)
429,505
9,960
0
0
0
(2,516)
24,152
6,834
24,152
0
17,316
21,636
24,152
24,152
(2,516)
24,152
6,834
Paid taxes
Dividends received
Capital increase
Loan issues
Impact of changes in accounting policies
220
Capital
Share
premium
Consolida
ted
reserves
Consoli
dated
income
(loss)
TOTAL
Group
share
Minority
shares
116,549
116,549
0
(5,248)
349
Equity at beginning of year
Capital increase
Capital reduction
116,549
(17)
17
(4,899)
Changes in scope
(25)
5,525
5,569
39
5,531
49,734
49,734
49,734
0
55
55
11
44
166,983
161,085
5,899
0
0
0
Other changes
116,577
0
55,306
(4,899)
Capital increase
0
Capital reduction
Assignment of the income/loss for
the previous period
(4,899)
(25)
45
Equity component of debts
0
(4,899)
(25)
0
4,899
0
0
0
(22,391)
(22,391)
(22,688)
297
(153)
(153)
82
82
0
82
0
0
0
0
Other changes
0
0
0
0
144,521
138,396
6,126
Changes in scope
Equity as at 31.12.08
0
116,577
0
50,337
221
(22,391)
(153)
1.
General information
MEDICA “SFM”, (formerly MEDICA SA), parent company of the MEDICA group.
The company MEDICA (formerly-OBO1) had a financial year beginning from 1 May 2006
and ended on 31 December 2007, therefore it reported statutory consolidated financial
statements on 31 December 2007. The sub-group SFM (formerly-Medica) was
consolidated as from 1 July 2006. Accordingly, the 2007 income statement of the
MEDICA Group (formerly-OBO1) showed 20 months of activity for the parent company
and 18 months of activity for the subsidiaries of the SFM (formerly Medica) sub group.
The second consolidated year of the MEDICA Group (formerly-OBO1) began on 1
January 2008 and ended on 31 December 2008. Accordingly, in order to facilitate the
comparability of fiscal 2008 with 2007, we have presented a “12 month 2007” financial
year corresponding to 12 months of the activity of the MEDICA group (formerly-OBO1)
going from 1 January 2007 to 31 December 2007.
The goodwill generated at the acquisition of SFM (formerly Medica) by MEDICA (formerly
OBO1), was calculated on the basis of the equity of the subgroup SFM (formerly Medica)
on 30 June 2006, earnings included, after cancelling historic goodwill.
MEDICA (formerly OBO1) (“the Company”) and its subsidiaries (“the MEDICA Group”)
(formerly OBO1) are specialised in host structures and medicalised care for dependent
patients of all ages. The group operates in business segments:

The Medico-social segment: homes for dependent senior citizens (EHPAD),
senior citizens’ home (EHPA) and Residential Services, handling the case
management of long-term dependent patients; and

The Health-care segment: medicalised institution that manages temporary
dependence by offering post-op and rehabilitation care (SSR), which encompasses
post-op care and physiotherapy and rehabilitation (MPR), and institutions
specialized in the psychiatric care.
The MEDICA Group (formerly OBO1) is present in France and in Italy. It runs 89 medicosocial institutions (7,308 beds) and 37 health care institutions (2,316 beds) in France,
offering a reception capacity of 9,624 beds. It is also present on the Italian market,
through the subgroup Aetas, with the operation of 18 institutions (1,418 beds) as at 31
December 2008.
At 31 December 2008 the total hosting capacity of the MEDICA Group (formerly OBO1)
totalled 11,042 beds distributed in 144 institutions in France and in Italy.
MEDICA SA (formerly OBO1 SAS) is the holding group of the MEDICA group (formerly
OBO1). It is domiciled in France, its head office is located at “Le Diderot” at 39, rue du
Consolidated financial statements were finalised by the board of directors of 3 December
2009. They are expressed in thousands of euros, unless otherwise indicated.
222
2.
2.1
Basis of financial statement preparation
The consolidated accounts of the MEDICA Group (formerly OBO1) were prepared in
accordance with the International Financial Reporting Standards (IFRS) as adopted in the
European Union.
The standards and interpretations used to prepare the 2008 consolidated financial
statements are those published in the European Union Official Journal (EUOJ),
summarised on the website of the European Commission at the address below:
http://ec.europa.eu/internal_market/accounting/ias_fr.htm#adopted-commission
and
whose application is mandatory to date:
The Group does not apply IAS 14 “Segment reporting”, mandatory for company whose
equity or bond securities are traded on an organised market as well as companies whose
equity or bond securities are being issued on a transferable securities public market.
* IFRIC 11 “IFRS 2 – Group and treasury share transactions” applicable as from
1 January 2008; however according to European regulation the interpretation is
mandatory application for financial years starting from 1 March 2007, or for the group as
from 1 January 2008.
* Amendments to IAS 39 “Financial instruments: recognition and measurements”, and to
IFRS 7 “financial instruments: disclosures” which allow the reclassification of certain
financial instruments.
This amendment had no impact on the Group’s accounts.
Standards, amendments of standards or interpretations subject to early application as of
1 January 2008
The standards and interpretations below were not applied ahead of schedule by the
Group.
* IFRS 8 “operating segments”, applicable for fiscal years which began from 1 January
2009.
* Amendments to IAS 23 “borrowing costs” - applicable for fiscal years which began from
1 January 2009.
* Amendments to IAS 1 “presentation of financial statements”, revision of the presentation
and terminology of certain financial statements - applicable as from 1 January 2009.
* Amendments to IFRS 2 “Share-based payments – vesting conditions and cancellations”
– applicable for financial years which began from 1stJanuary 2009;
* IFRIC 13 “customer loyalty programmes”, applicable for fiscal years which began from
1 January 2008 (applicable from 1 January 2008 for the group).
IFRIC 14 “The limit on a defined benefit asset minimum funding requirements and their
interact” – applicable for fiscal years which began from 1 January 2009.
The Group is currently conducting analysis on the practical consequences of the
application of the texts mentioned above and their application effects in the accounts.
223
Standards, amendments of standards or interpretations not yet backed by the
European Union
The Group did not apply ahead of schedule any standard, interpretation or amendment
already published by the IASB but not yet adopted by the European Union:
* Amendment to IAS 32 and IAS 1 "Puttable financial instruments and obligations arising
on liquidation” - applicable for fiscal years which began on 1 January 2009.
* IFRIC 12 “service concession arrangements”, applicable for fiscal years which began
from 1stJanuary 2008.
* IFRIC 15 “agreements for the construction of real estate” - applicable for fiscal years
which began from 1 January 2009.
* IFRIC 16 “Hedges of a net investment in a foreign operation” - applicable for fiscal years
which began from 1 October 2008.
* IFRIC 17 “Distribution of non cash assets to owners”.
* IFRS 3 “business combinations”, applicable for fiscal years which began from 1 January
2009, or for the group from 1 January 2010.
* Amendment to IAS 27 “Consolidated and separate financial statements”, applicable as
from 1stJuly 2009, or for the Group from 1 January 2010.
* Amendment to IFRS 1 and IAS 27 “cost of an investment” - applicable as from 1January
2009.
* Amendments to IAS 39 “eligible hedged items” applicable for fiscal years which began
from 1 July 2009.
* Annual improvement of the FRS - applicable as from 1 January 2009 with the exception
of IFRS 5 mandatory application amendment for fiscal years which began on 1 July 2009.
Impact on the financial statements of texts published by the IASB on 31 December 2008
and not yet in force in the European Union is now being analysed.
The consolidated financial data is established according to the historical cost principle,
with the exception of available-for-sale financial assets and financial assets and liabilities,
which are measured and carried at their fair value in income (derivative instruments).
2.2
The preparation of financial statements in accordance with IFRS implies that the
management of the group or subsidiaries carries out estimates and retains certain
assumptions which have an impact on the amounts of the assets and liabilities
recognised in the consolidated balance sheet, the information concerning these assets
and liabilities, the amounts of expenses and income in the income statement and the
commitments concerning accounting period.
As these assumptions are uncertain, the real results could be very different. These
assumptions primarily concern:

impairment tests;

provisions for pensions;

the fair value of derivatives and other financial instruments.
224
2.3
Impacts of the correction of the error in the calculation of the syndicated loan’s
financial interests
Transition from published accounts to corrected accounts:
Condensed consolidated income statement as at 31 December 2008:
2008 published
Correction of the
calculation of the
interests
57,676
2008 Corrected
57,676
Cost of net debt
(48,563)
(22,782)
(22,782)
(144)
(144)
Pre-tax income
(18,557)
(67,120)
(13,814)
(18,557)
(32,371)
3,795
6,185
9,980
Net income (loss)
(10,019)
(12,372)
(22,391)
Group share
(10,316)
(12,372)
(22,688)
297
-
297
Income taxes
Minority share
(1.42)
(3.11)
Total assets
2008 published
Correction of the
calculation of the
interests
1,229,347
148,465
Minority reserves
2008 Corrected
1,229,347
(10,069)
138,396
297
297
5,829
5,829
Total equity
154,591
(10,069)
144,521
706,043
15,103
721,146
Deferred taxes
209,175
(5,034)
204,141
43,283
43,283
958,501
Current liabilities
116,256
116,256
1,229,347
1,229,347
Total liabilities
10,069
968,570
impact on the cash flow of the year ended 31.12.08.
225
Cost of net debt
2007 published
Correction of the
calculation of the
interests
66,681
66,681
(86,269)
2007 Corrected
3,455
(82,815)
6,953
6,953
(39)
(39)
(12,674)
3,455
(9,220)
5,471
(1,151)
4,320
Net income (loss)
(7,203)
2,304
(4,899)
Group share
(7,552)
2,304
(5,248)
Pre-tax income
Income tax
Minority share
Group share of consolidated net
income per share (in euros)
349
349
(1.04)
(0.72)
Total assets
2007 published
Correction of the
calculation of the
interests
1,180,163
158,781
Minority reserves
2007 Corrected
1,180,163
2,304
161,085
337
337
5,562
5,562
Total equity
164,680
2,304
166,984
669,948
(3,455)
666,493
Deferred taxes
207,216
1,151
208,367
Current liabilities
Total liabilities
45,780
922,944
45,780
(2,304)
92,539
1,180,163
920,640
92,539
0
1,180,163
226
2.4
Consolidation policy and principles
a)
Subsidiaries
Subsidiaries refer to all the entities for which the Group has the power to control their
financial and operational policies, a power that is generally accompanied by the holding
of more than half of the voting rights. Potential voting rights are taken into account during
the assessment of the control exerted by the Group on another entity when they drive
from instruments likely to be exerted or converted at the time of this evaluation. The
subsidiaries are fully consolidated as from the date on which control is transferred to the
Group. They are consolidated as from the date on which control is no longer exerted.
The acquisition method is used to recognise the acquisition of subsidiaries by the Group.
The cost of an acquisition corresponds to the fair value of the assets remitted, the equity
instruments issued and the liabilities incurred or taken over on the date of the exchange,
plus the costs that can be directly attributed to the acquisition. The acquired identifiable
assets, the identifiable liabilities and the contingent liabilities during a business
combination are initially measured at their fair value on the acquisition date, regardless of
the amount of the minority interests. The surplus of the acquisition cost on the fair value
of the share attributable to the Group in the acquired identifiable net assets is recognized
as goodwill. Where the acquisition cost is less than the fair value of the share attributable
to the Group in the net assets of the acquired subsidiary, the difference is directly
recognised in income (see Note 2.6).
Intragroup transactions, balances and underlying profits resulting from transactions
between group companies are eliminated. The subsidiaries use the same accounting
methods as the Group.
The Group has no ad hoc entity.
b)
Transactions with minority interests
The Group’s policy is to deal with transactions with minority interests in the same way as
transactions with third parties external to the Group. Acquisitions of securities from
minority interests generate goodwill, which represents the difference between the price
paid and the corresponding acquired share of the book value of the net assets.
Pursuant to the arrangements made in 2005 by the Group with the shareholders of the
Italian sub-group Aetas, the Group acquired the said minority interests on 1st July 2008.
The discrepancy between the net position and the purchase price is recorded in goodwill.
2.5
Conversion of foreign currency-denominated transactions
a)
Functional currency and reporting currency for financial statements
The data included in the financial statements of each of the Group’s entities are
measured by using the currency of the principal economic environment in which the entity
carries out its activities (“the functional currency”). The consolidated financial statements
are reported in euros, which is the functional and reporting currency of the Group.
b)
Transactions and balances
The group has no transactions denominated in foreign currency.
227
c)
Group companies
The accounts of the Group’s entities which use a non-euro functional currency are
converted into euros, as follows:
(i)
the asset and liabilities items are converted at the closing price on each balance
date;
(ii)
the income and expenses of each income statement are converted at the average
exchange rate (except if that average is representative of the cumulative effect of
the rates in force on the transaction dates, in which case the income and expenses
are converted at the applicable rates on the transaction dates); and
(iii)
all the resulting exchange gains or losses are recognised as a separate
component of equity.
Where a foreign activity is transferred, these exchange gains or losses initially recognised
in equity are posted to the income statement under losses and profits on sale.
The goodwill and fair value adjustments stemming from the acquisition of an operation
abroad are treated as the assets and liabilities of the activity abroad and converted at the
closing price.
2.6
Financial reporting principles
a)
Income Statement
In order to maintain the legibility required to assess its performance and in accordance
with the option offered by IAS 1, the MEDICA Group (formerly OBO1) has chosen to
maintain the presentation of income statement by nature.
Revenue
The revenue mostly comprises services supplied in the context of the hosting and the
care given to the residents regardless of the origin of the payment.
The income is recognised as and when the services are carried out. The allowances
received in the context of the Tripartite Agreements constitute a revenue item. The
amounts collected and likely to be paid back, on the grounds of a partial use of these
amounts with respect to the commitments taken by the group in the context of the
Agreements, are deducted from the revenue and posted under “Other debts”..
Earnings Before Interest Taxes, Depreciation and Amortisation:
EBITDA corresponds to Earnings before Interest Taxes, Depreciation and Amortisation.
Other operating revenues and expenses:
Non current operations of a significant amount that may have an adverse effect on the
clarity of current operational performance is classified in ”other operating income and
expenses” in accordance with the CNC recommendation adopted on 27 October 2004. It
includes in particular:

the capital gains or losses on sales or significant and unusual depreciation of
assets, tangible or intangible

the restructuring costs resulting from plans of an unusual nature and size disrupt
the clarity of current operating income
228

provisions of very high material significance
Cost of net financial indebtedness:
Cost of net debt includes:

cash and cash equivalents (interest income generated by cash and cash
equivalents, income from the disposal of cash equivalents, income from currency
hedges on cash and cash equivalents);

the cost of the gross financial debt (interest charges on financing transactions,
income from currency hedges on gross financial debt, gains and losses linked to
the extinguishment of debts).
Other revenue and interest expenses:
Other revenues and financial expenses include financial revenues and expenses that are
not operational and are not part of the cost of net debt.
The “Other financial revenues and interest expenses” include where applicable:

financial revenues (dividends, profit on disposal of non consolidated securities,
interest income and income from the disposal of other financial assets (excluding
cash and cash equivalent), profits on trading derivatives (foreign exchange, interest
rate), discounting financial products, positive fair value change of the financial
assets and liabilities measured at fair value, income from interest rate and currency
hedges on previous transactions, other financial income)

the financial expenses (depreciation of non consolidated securities, loss on
disposal of non consolidated securities, depreciation and losses on disposal of
other financial assets (excluding cash and cash equivalent), loss on trading
derivatives (foreign exchange, interest rate), financial expenses for discounting,
negative change in the fair value of financial assets and liabilities measured at fair
value, income or loss from interest rate or currency hedges on previous
transactions, other financial expenses
b)
Balance sheet
Assets and liabilities are classified, according to their nature, into current or non current
items depending on whether their expected recovery or payment date occurs within a
period of twelve months as from the accounts finalization date.
2.7
Intangible assets
a)
Goodwill
Goodwill represents the surplus of the acquisition cost on the fair value of the share
attributable to the Group in the identifiable net assets of the subsidiary on the acquisition
date. The goodwill linked to the acquisition of subsidiaries is included in “intangible
assets”. The goodwill recognised separately is submitted to an annual impairment test
and is recognised at its cost, after deducting aggregate impairment. The loss of value on
goodwill is irreversible. Income derived from the disposal of an entity takes account of the
carrying amount of the goodwill of the sold entity.
Goodwill is allocated to the cash generating units or to groups of cash generating units
likely to benefit from the business combination which led to the goodwill. MEDICA Group
(formerly OBO1) performs impairments tests on the goodwill of each business sector.
229
b)
Operating permits
The operation of retirement homes and post-op care centres is conditional, in France, to
obtaining administrative permits which must be requested for both the creation and the
extension of the institutions. The rules governing these permits are primarily set by the
law n° 2002-2 of 2 January 2002 renovating social and medico-social work and by decree
n°2003-1135 of 26 November 2003 concerning the terms of the permits to create,
transform or extend social and medico-social services institutions. The permits are
granted for a period of 15 years in the medico-social sector and for 5 – 10 years for the
sanitary sector, extendable by tacit agreement, which gives them with respect to the
standards, an indeterminate life span. The operating methods abroad are similar.
Operating permits are therefore not amortised, they are tested annually for impairment.
Only the administrative permits acquired, either directly or through a business
combination are recognized in intangible assets. These permits are measured at
acquisition according to a method defined by the group based on the annual billing
capacity. Where the administrative permits are obtained by the Group due to its own
formalities, they correspond to intangible fixed asset generated internally which do not
meet the criteria defined in paragraph 58 of lAS 38, Intangible assets, to be posted under
assets.
c)
Software
Costs linked to the acquisition of software licenses are registered under assets on the
basis of costs incurred to acquire and set up the relevant software. These costs are
amortised over the estimated useful life of the software (between one and three years).
Costs linked to developing software programs and maintaining their operation are posted
as expenses as and when they are incurred.
2.8
Tangible assets
Property, plant and equipment mainly comprise:

land and constructions, mostly homes for dependent senior citizens, institutions for
post-op care and rehabilitation and offices

the machinery and equipment required for the proper operation of the institutions.
All property, plant and equipment are recorded at their historic cost. The historic cost
comprises all the costs directly attributable to the acquisition of the relevant assets.
Subsequent costs are included in the carrying amount of the asset or where applicable,
recognised as a separate asset if it is probable that the economic benefits related to the
asset will go to the Group and that the cost of the asset can be reliably measured. All
repair and maintenance costs are recognised in the income statement during the period
in which they are incurred.
Land is not amortised. The other assets are amortised according to the straight line
method. Except for special cases, the residual values are zero. Amortisation periods are
based on the estimated useful life of the different categories of fixed assets. The main
ones are:

Constructions: 50 years

Layout of constructions: 5 to 50 years (according to the components)
230

Technical installations: 5 - 10 years

Other (furniture…): 3 - 10 years
Assets acquired with finance leases that result in transferring to the group almost all the
risks and rewards inherent in the ownership of the assets are recognised as fixed assets.
They are recognised under assets and liabilities of the balance sheet for the amounts
equivalent to the fair value of the leased asset or to the value discounted to reflect the
minimum payments if it is less. The corresponding lease obligations are recognized on
the consolidated balance sheet as financial liabilities.
Finance leases where the risks and rewards are not transferred to the group are
classified as operating leases. The payments under operating leases are classified as
expenses using a straight line method.
the losses or profits on the sale of assets are determined by comparing the income from
disposal to the carrying amount of the sold asset. They are recognised in income.
2.9
Impairment of non-financial assets
a)
Impairment of amortised assets
Amortised assets are tested for impairment where due to events or special
circumstances, the recoverability of their carrying amounts becomes doubtful. Impairment
is recognized to match the surplus of the carrying amount over the recoverable value of
the asset. The recoverable value of an asset represents its fair value less the disposal
costs or its value in use, if greater. For the purposes of measuring impairment, the assets
are grouped into cash generating units which represent the least high level generating
separate cash flow. For non financial assets (other than goodwill) that are impaired, the
possible writeback of the impairment is reviewed at each annual or interim reporting date.
b)
Estimated depreciation of indefinite term intangible assets (including goodwill)
The Group submits the goodwill and administrative permits to an annual impairment test.
The recoverable amounts of the cash generating units or groups of cash generating units
to which these intangible assets are attached are determined from the calculations of the
value in use or their fair value less the sale costs. The calculation of the value in use
retained by the group is based on the discounting of the future cash flows which will be
generated by the continuous use of the assets tested during 10 years and their possible
disposal after this period. Discounting is carried out at a rate corresponding to the
average weight cost of the group’s capital and debt.
For the administrative permits, the impairment test is carried out at the level of each
institution with the appropriate assumptions depending on whether they are pension or
care institutions.
Goodwill is tested at the level of each of the two business sectors: medico-social or
helthcare.
2.10 Financial assets and liabilities
IAS 32/39 are applied by the group as from 1 January 2005.
The financial assets defined by IAS 39, include loans and receivables, available-for-sale
assets, transaction securities and assets recognised according to the fair value option.
They correspond to the balance sheet items below: available-for-sale assets, other non
231
current assets, trade accounts and other receivables, derivative financial instruments and
cash and cash equivalent. Management determines the classification of its financial assts
during the initial recognition and reconsiders it, in the conditions prescribed by IAS 39, on
each annual or interim closing date.
The financial liabilities defined by IAS39 include loans recognised at amortised cost and
financial liabilities recognised according to the fair value option. They correspond to the
balance sheet items below: current and non current financial debts, other debts, trade
payables and other liabilities and derivative financial instruments.
2.10.1
Measurement and recognition of financial assets.
a)
Loans and receivables
Loans and receivables are non derivative financial assets with determined or
determinable payments which are not traded on an active market. They are included in
current assets, apart from those whose maturity exceeds twelve months after the closing
date. The latter are classified in non current assets. Loans and receivables are
recognised in the balance sheet under “trade receivables”, “other debtors” and “financial
receivables” according to the nature of the receivables.
b)
Assets held to maturity
Assets held to maturity primarily include deposits and guarantees. They are classified in
non current financial assets.
They are monies paid to lessors to secure rents. The value of these assets is regularly
readjusted when the rents are revised. The impact of the discounting is considered as
immaterial for the group’s accounts. They are tested for impairment in case of an
indication of loss of value. A provision for impairment is recorded when the carrying
amount is greater than the estimated recoverable value.
c)
Available-for-sale financial assets
Available-for-sale financial assets include investment securities of non consolidated
companies. They are included in non current assets, unless the group plans to sell them
within twelve months after the closing date. They are maintained in the balance sheet at
their acquisition cost which the group considers that it represents their fair value, in the
absence of an active market. Impairment is recognized in case of a long term drop in their
value in use. The value in use is determined according to financial criteria such as share
of equity and profitability outlook.
2.10.2
Measurement and recognition of financial liabilities
a)
Long-term loans
Long-term financial debt mostly includes loans from credit institutions, bond loans and
debts resulting from the recognition under assets of the value of finance-leased assets.
Bank loans:
Bank loans are initially recorded at fair value, which corresponds to the amount received,
net of issuance costs.
Subsequent to the initial recognition, the loans are measured at amortised cost, by using
the effective interest rate method, which takes into account all issuance costs; any
232
difference between the income (net of transaction costs) and the repayment value is
recognized in income over the term of the loan according to the effective interest rate.
Convertible bond loans:
For bond loans, the composite financial instrument is separated between a debt
component and an equity component right from their initial recognition. The fair value of
the debt component at issue is determined by discounting future contractual cash flows,
by using the applicable market rate for a bond issue that may have been subscribed by
the company at the same conditions but without a conversion option. The debt
component is then measured on the basis of the amortised cost. The value of the equity
component is determined at issue by the difference between the fair value of the debt
component and the fair value of the bond loan. The value of the conversion option is not
reviewed during subsequent years.
Issuance costs are broken down between the debt part and the equity part on the basis of
their respective carrying amounts at the time of the issue.
b)
Other financial liabilities
With the exception of derivative instruments the other financial liabilities are measured at
amortised cost..
2.10.3
Measurement and recognition of derivative financial instruments and hedging
transactions
Derivative financial instruments are initially recognised at their fair value; they are then
revalued at their fair value. The method for recognising the related profit or loss depends
on the designation of the derivative as a hedging instrument and where applicable, the
nature of the item covered.
The derivative instruments held by the group are therefore considered as derivative
instruments held for trading. They are classified in current assets or liabilities. The
changes in fair value of these derivative instruments are immediately recognised in
income as other financial income and expenses.
2.11 Inventory
Inventories are recognised at their cost price or at their net market value if this is lower.
As they are mostly consumable supplies, they are booked at their purchase cost.
2.12 Trade receivables and other debtors
Trade receivables are initially booked at their nominal value, and then subsequently
measured at their amortised cost using the actual interest rate method, after deducting
provisions for impairment. A provision for impairment of trade receivables is set aside
where there is an objective indicator of the Group’s incapacity to fully recover the
amounts due. The amount of the provision represents the difference between the carrying
amount of the asset and the value of the estimated future cash flows, discounted at the
initial actual interest rate. The amount of the provision is booked in the income statement
as an estimated expense.
The heading “cash and cash equivalents” includes liquid assets, sight bank deposits,
highly liquid short term investments with initial maturities less than or equal to three
233
months (mostly cash UCITS) and the net creditor positions of cash pooling. Bank
overdrafts are posted on the liabilities side of the balance sheet as current financial
liabilities.
2.14 Share capital
Common shares are classified in equity.
The additional costs directly attributable to the issuance of new shares or options are
booked in equity and deducted from issue income, net of taxes.
In the event of sale or subsequent reissue of these shares, the income received, net of
the additional costs directly attributable to the transaction and the related tax impact, are
included in the equity attributable to the shareholders of the Company.
2.15 Deferred taxes
Deferred taxes are booked according to the liability method for the amount of the
temporary differences between the tax base of assets and liabilities and their carrying
amount in the consolidated financial statements. No deferred tax is booked if it arises
from the initial recognition of an asset or a liability linked to a transaction, other than a
business combination, which, at the time of the transaction, affects neither the accounting
income nor the tax income. Deferred taxes are determined using the tax rates (and tax
regulations) that were adopted or nearly adopted on the closing date and which is
supposed to be applied when the concerned deferred tax asset is realized or the deferred
tax liability is settled.
The effect of any change of the tax rate is booked in the income statement with the
exception of changes concerning the items directly booked in equity.
Deferred tax assets and liabilities are offset if the entities are legally entitled to
compensation and are the responsibility of the same tax administration.
Deferred tax assets are not recognised unless the realisation of a future taxable profit,
which will allow the deduction of timing differences, is probable. Their recoverable value
is reviewed at each closing and the booked value reduced in so far as it is no longer
probable that a sufficient taxable profit will be available to allow the use of all or part of
the advantage of this deferred tax asset.
2.16 Employee benefits and long service awards
Retirement allowances
The Group has a legal obligation to pay its employees end-of-career benefits when they
retire. The existence of this scheme has created for the Group a long-term commitment
known as a defined-benefits pension plan as defined by IAS 19 given that it defines the
amount of the pension benefit that will be collected by an employee who retires,
depending, generally on one or several factors, such as age, service record and salary.
The liability booked in the balance sheet under pension plans and other defined benefits
plans corresponds to the discounted value of the obligation linked to the defined benefits
plans at year end as well as the adjustments for actuarial gains and losses and the costs
of non recognised past services. The obligation under the defined benefits plans is
calculated each year by independent actuaries according to the projected credit units
method. The discounted value of the obligation under the defined benefits plan is
determined by discounting the estimated future cash outflows based on the obligation
234
interest rate of tier one companies and whose term is close to the estimate average term
of the concerned retirement obligation.
The actuarial gains and losses, stemming from the adjustments linked to experience and
the modifications of actuarial assumptions and exceeding 10% of the discounted value of
the obligation under the defined benefits plants (corridor), are booked in the income
statement over the term of the expected residual average active life of the concerned
employees.
Costs for past services are immediately recognised in income, unless changes to the
pension plan are subordinated to maintaining the employees in activity over a given
period (the vesting period). In the last case, costs for past services are amortised on a
straight line basis for the vesting period.
In addition, the Group pays contributions to the public or private pension insurance plans
on a mandatory basis. Once the contributions paid, the Group is not bound by any other
payment condition. The contributions are booked in expenses linked to employee benefits
when they are due. Contributions paid in advance are booked under assets in so far as
the payment of an advance results in reducing future payments or a cash refund.
Commitments concerning other long-term benefits:
Other employee and related commitments for which a provision is set aside are mostly
comprised of premium payments on the occasion of the distribution of long-service
awards.
2.17 Provisions
Provisions for risks such as law suits are booked when the Group is bound by a legal or
implicit obligation arising from past events; it is more probable than improbable that an
outflow of resources representative of economic benefits will be required to extinguish the
obligation; and the amount of the provision can be reliably estimated.
The amount booked as a provision represents the best estimate of the expense required
to fully extinguish the current obligation, discounted if necessary, on the closing date.
2.18 Distribution of dividends
Dividend payouts to the Company’s shareholders are booked as a liability in the Group’s
financial statements during the period in which the dividends are approved by the
Company’s shareholders.
2.19 Earnings per share
The group presents basic earnings per share and diluted earnings per share.
The basic earnings per share is computed by dividing the group’s net income for the year
attributable to common shares by the weighted average number of current shares in the
year. The average number of current shares in the year is the number of current common
shares at the beginning of the year, adjusted to reflect the number of common shares
repurchased or issued during the year.
The number of shares used to calculate diluted earnings takes into account the
conversion into common shares of current dilutive instruments at the end of the period.
The diluted earnings are calculated from the group’s net income for the year, corrected by
the financial cost of debt dilutive instruments and their impact on the equity of employees,
235
net of the corresponding tax effect. Where the basic earnings per share is negative, the
diluted earning per share is identical to the basic earnings.
In case of significant non current items likely to disrupt the clarity of earnings per share
and diluted earnings per share, net earnings exclusive of non current items per share is
calculated. The non current elements taken into account for this calculation then
corresponds to all the items included in the lines “other operational income and charges”.
3.
3.1
Financial risk
Through its activities, the Group is exposed to different types of financial risks: market
risks (risk of price fluctuations and currency risk), credit risk, liquidity risk and risk of cash
flow variations due to the change in interest rates. The Group’s risk management
programme, which is focused on the unpredictable nature of financial markets, attempts
to minimise the potentially unfavourable effects on the Group’s financial performance.
Derivative financial instruments are used to hedge certain exposures to risk.
a)
Market risks
Price fluctuation risk
The Group is exposed to the risk price which affects investment securities booked in
available-for-sale assets. However, given the nature of the equity interests, this risk is
considered low by the group.
Currency risks
Given its activity mostly based in France and in the Eurozone, the group’s exposure to
currency risk is nil.
b)
Credit risk
The Group has no significant credit risk concentration. It has implemented policies that
allow it to ensure that its clients have an appropriate credit risk record. For derivative
instruments and the transactions settled in cash, the counterparties are restricted to top
quality financial institutions.
c)
Liquidity risk
A prudent liquidity management plan involves keeping a sufficient level of liquid assets
and securities negotiable on a market, having financial resources thanks to the
appropriate credit facilities and being able to settle its positions on the market. The Group
maintain financial flexibility by managing credit lines opened by not used, via a cash
pooling system set up with its major banks.
d)
Cash flow risk and price risk on interest rate
The Group has no significant assets bearing interest; therefore its earnings and operating
cash are fairly independent of interest rate fluctuations.
The interest rate risk faced by the Group stems from long-term loans. Loans initially
issued at floating rates expose the group to the risk of cash flow over interest rate.
The Group manages its cash flow over interest rate risk by contracting floating vs. fixed
rate swaps. On the economic level, these interest rate swaps result in converting these
floating rate loans into fixed rate loans. Under the interest rate swaps, the Group agrees
236
with third parties to swap, according to defined time intervals, the differential between the
fixed contractual rates and the variable rates calculated by reference to a certain notional
amount.
3.2
Estimating the fair value
The fair value of financial instruments traded on an active market (such as units of cash
UCITS booked under cash equivalent) is based on the market prices at the closing date.
The market prices used for the financial assets held by the Group are the buyer prices in
force on the market on the valuation date.
The fair value of financial instruments not traded on an active market (such as derivatives
traded over the counter and investment securities) is determined with the help of
valuation techniques. The Group uses different valuation techniques and retains
assumptions based on the market conditions existing on the closing date. The fair value
of interest rate swaps is calculated as the discounted value of estimated future cash
flows. The fair value of forward currency contracts is determined with forward currency
rates on the closing date. The valuations of the group’s derivative instruments are
provided to the Group by banks.
The nominal value, less the provisions for impairment, trade accounts and other
receivables, payables and other liabilities is presumed to be close to the fair value of
these items.
4.
Details of the companies included in the scope are provided in Note 36.
The financial year starts from 1 January 2008 and ends on 31 December 2008.
Acquisition of business assets:
Four businesses were acquired during the year:

France:
the Verdon institution in Gréoux Les Bains (EHPAD), October 2007 (not
consolidated in 2007);
the Grentheville Sacré Cœur (EHPAD) institution, January 2008.

Italy:
Buttigliera d’Asti and San Begnino institutions, June 2008;
New creations in the year:
1 newly-created institution was included in the consolidation scope in fiscal 2008:

the Villemomble (93) institution, EHPAD with 116 beds, inaugurated on 19
December 2008,
The Group acquired the assets below during the year:

France:
Caubeyres La Paloumère (healthcare) institution, January 2008;
Hurigny La Roseraie (healthcare) institution, March 2008;
La Varenne St. Sauveur (healthcare) institution, March 2008;
237
the Castelmaurou Montvert institution (healthcare), April 2008
The net assets acquired and the goodwill regarding acquisitions (in aggregate) are
detailed below:
Italy
Amount paid in cash
France
Total
0
27,507
27,507
0
27,507
27,507
(4,959)
15,379
10,420
4,959
12,128
17,087
Direct costs linked to the acquisition
Call
Total acquisition price
Fair value of acquired net assets
Goodwill
The assets and liabilities linked to these acquisitions include:
Italy
France
Total
ASSETS
Intangible assets
2,558
16,018
18,577
10,915
10,915
104
104
240
240
27,278
29,837
59
59
3,689
3,689
167
167
5,953
5,953
143
143
373
373
0
10,385
10,385
(73)
5
(68)
(3,570)
(3,570)
(174)
(174)
Other provisions
(422)
(422)
(844)
(7,182)
(8,026)
(6,600)
(259)
(6,859)
(7,444)
(11,607)
(19,051)
Property, plant & equipment
Deferred tax assets
Non current assets
2,558
Inventory
Customers
Current tax expense
Other debtors
Current assets
Minority interests
LIABILITIES
Deferred tax liabilities
238
Italy
France
Total
(836)
(836)
Trade payables
(1,686)
(1,686)
Other creditors
(8,107)
(8,107)
(53)
(53)
0
(10,681)
(10,681)
(4,959)
15,379
10,420
Acquired cash and cash equivalents
0
(132)
(132)
Cash paid out for the acquisitions made in 2008
0
(27,507)
(27,507)
Net cash paid out for the acquisitions made in 2008
0
(27,639)
(27,639)
Other cash outflows on entries into scope
consolidation (1)
(14,672)
103
(14,569)
consolidation on cash flow
(14,672)
(27,536)
(42,208)
2,558
15,984
18,542
0
34
34
2,558
16,018
18,577
Goodwill
4,959
12,128
17,087
7,517
28,147
35,664
Current tax expense
Current liabilities
NET ASSET
consolidation on cash flow
Intangible assets
(1) the other cash outflows on entries into the scope correspond mostly to the repurchase price for minority shareholders of
Aetas Spa and the recognition of an earnout on an acquisition in 2007 that has not yet been paid.
5.
Goodwill
The main movements in goodwill for the period can be analysed as follows:
Medical-Social
Net goodwill at beginning of the year
88,938
332,765
5,215
12,025
17,240
100
100
(269)
Net goodwill at end of year
Total
243,827
Earnouts
Discounting of AETAS minority debts (1)
Healthcare
248,772
(269)
101,064
349,836
(1) Adjustment of debt following repurchase of the minority interests of the AETAS subsidiary on 1 July 2008.
239
6.
Tangible assets
Net carrying amount at beginning of the year
Entries into scope
Acquisitions
Operating
permits
Software
457,463
1,384
18,542
34
3,900
345
Other
intangible
assets
Intangible
fixed
assets in
progress
0
123
33
1,050
5,328
(32)
(32)
550
636
Reclassification
458,970
18,577
Disposals
Advances and down payments
Total
(736)
(7)
550
(636)
0
(130)
(130)
(743)
Net carrying amount at year end
479,905
1,663
576
375
482,519
Cost of acquisition
479,905
4,540
585
375
485,405
(2,876)
(10)
1,663
576
7.
479,905
(2,886)
375
482,519
Periodic impairment tests
Pursuant to IAS 36 “Impairment of assets”, impairment tests were carried out at the end
of fiscal 2008 on the value of intangible assets with indeterminate useful life (cannot be
amortised) and goodwill. The tests revealed no impairment loss requiring recognition.
Goodwill is assigned to the Groups of Cash Generating Units (GCGU) defined by
business segment to which it is attached.
In accordance with the principle stated in Note 2.9 the carrying amount of each asset
group is compared to its fair value less costs to sell or its value in use defined as equal to
the present cash flow expected to be derived from the asset over 10 years, stemming
from the latest forecasts for each of the groups of cash generating units.
The extrapolation of the 2009 budget over the next nine year is determined by applying a
3% growth rate. These assumptions are based on past experience of Medium Term
Plans, and macro economic data on the health market. This growth rate does not exceed
the average to medium-term growth rate of the Group’s business segments. The Group
retains an exit value by 10 years based on a valuation multiple observed in the context of
the market’s recent transactions. These flows are discounted at a rate of 7.5%, based on
the average weighted cost of the Group’s capital.
These tests did not result in the recognition of impairment on neither goodwill nor permits
over the periods presented.
240
8.
Vehicles,
equipment
and tools
Other fixed
assets
234,290
6,532
17,423
Entries into scope
10,196
224
496
Acquisitions
12,507
4,449
5,233
17,857
40,046
Disposals
(37)
(16)
(14)
(69)
(135)
613
143
313
(1,069)
0
Land and
buildings
Net carrying amount at beginning
of the year
Reclassification
0
Fixed
assets in
progress
Total
2,440
260,685
10,915
130
130
(10,015)
(2,107)
(4,568)
0
(16,690)
247,554
9,225
19,013
19,159
294,951
Cost of acquisition
332,289
25,749
54,098
19,159
431,296
Cumulative depreciation
(84,735)
(16,525)
(35,085)
247,554
9,225
19,013
(136,345)
19,159
294,951
Assets recognised as properties taken by the Group in connection with lease-finance
agreements include:
2008
2007
Land and buildings
Cost of acquisition
185,315
186,074
(43,983)
(40,413)
Net carrying amount
141,333
145,661
Vehicles, equipment and tools
Cost of acquisition
1,698
(30)
1,668
Net carrying amount
9.
Available-for-sale financial assets primarily include acquisitions of minority investment in
non consolidated companies at year end 2006 and year end 2007 (Les parentèles).
10.
The derivative financial instruments of MEDICA Group (formerly OBO1) primarily
comprise interest rate hedge contracts to the extent where a large portion of syndicated
loans are at variable rates.
The group did not elect for hedge accounting, therefore derivative instruments are
considered as derivatives held for trading. They are classified in current assets or
liabilities.
241
At 31 December 2008, the notional of fixed rate swaps was €545 million with a maturity
date at 30 June 2011.
The notional for Caps is €500 million with a period planned between 30 June 2011 and 30
June 2013.
Furthermore, the group had subscribed Basis swaps enabling it to swap Euribor 3 months
rate for Euribor 1 month rate for a notional of €437 million and over a period stretching
between 30 June 2008 and 30 June 2009.
All these derivative financial instruments allow the Group to hedge a large portion of debt
at a variable rate.
These instruments are initially recognised at their fair value; they are then reassessed at
their fair value. The fair value is calculated as the present value of estimated future cash
flows. The valuations of the MEDICA group’s derivative instruments are provided to the
Group by its banks.
Notional
in EUR
millions
Maturity
date
Cap or
Swap rate
Reference rate
SWAP
200
08.2011
3,82%
Euribor 3 mois
3,741
SWAP
250
08.2011
3,53%
Euribor 3 mois
7,281
SWAP
200
06.2011
3,82%
Euribor 3 mois
5,888
SWAP
250
06.2011
3,53%
Euribor 3 mois
5,542
SWAP
95
06.2011
3,77%
Euribor 3 mois
2,671
CAP
500
06.2013
6,00%
Euribor 3 mois
SWAP
437
06.2009
Euribor 1
month
Euribor 3 mois
Type of
agreement
2008 (*)
Assets
Liabilities
Assets
Liabilities
552
616
552
2007
14,717
11,022
0
(*).As at 31 December 2008, the fair value of derivative financial instruments was recognised for their comprehensive net value under
liabilities in the balance sheet, representing €14,165 million.
11.
Financial receivables mostly correspond to security deposits paid in the context of lease
agreements. These deposits are revised annually.
Rents paid in advance are discounted at the rate of 5.5% to their present value. The
short-term portion is classified in other liabilities.
2008
2007
Advances on acquisitions of consolidated securities
106
Advance rents
200
260
14,165
14,267
6
5
14,478
14,532
Guarantee deposits
Miscellaneous
242
12.
Trade accounts, other debtors and other current assets
2008
2007
Trade receivables
37,998
30,762
Less: provision for impairment
(2,049)
(1,795)
Trade receivables - net
35,948
28,968
Accrued expenses
8,797
6,629
Tax and social receivables
5,431
4,969
Accrued income
4,512
2,975
849
6,576
2,175
11,434
21,764
32,584
Advances paid
Other receivables
Debtors and non current assets
During the year ended 31 December 2008, the Group recognised a provision of €732,000
for its impaired receivables. The Group used a provision for impairment of receivables
€194,000 during the financial year ended on 31 December 2008.
The use of reversals of provisions for impairment of receivables is recognised under
“Other operating income and expenses” in the income statement, and deducted from
losses on irrecoverable receivables. The reversals of unused provisions are booked in
diminution of the Depreciation and amortisation for the year.
Prepaid expenses mostly concern rents. Receivable income mostly corresponds to
accrued tripartite allowances as well as the repayments expected from training expenses.
Paid advances mostly concern arrear discounts granted by suppliers.
13.
2008
2007
Cash UCITS
10,864
5,116
13,109
20,751
23,974
25,867
Bank overdrafts and creditor accounts merged into a cash pool
(2,338)
(1,653)
Net cash
21,636
24,214
Cash UCITS primarily comprise money mutual funds (SICAV) with an interest rate risk
sensitivity less than or equal to 0.25 and historical volatility at 12 months, close to zero.
243
14.
Equity
Share Capital:
The capital stock comprises 7,286,040 shares with a nominal value of 16 euros per
share. All the issued shares are fully paid-up
15.
Trade payables and other liabilities
2008
2007
Trade payables
36,993
33,947
Tax and social liabilities
37,220
33,934
5,506
2,840
246
50
2,278
3,639
779
818
46,029
41,280
Down payments received
Debts- payables to fixed asset suppliers
Other debts
Deferred income
All trade payables and other liabilities are due in less than one year.
Accrued income corresponds primarily to a grant received for the creation of the Avignon
institution.
16.
2008
PCA > one year
Residents deposits
2007
4,527
4,041
13,983
11,892
40% repurchase option Italy (AETAS)
14,720
Ippocrate earnout
6,600
“Saint-Simon” lease
3,130
2,888
Other long-term liabilities
2,115
1,187
30,355
34,728
The other non current debts include deposits paid by the residents. Their amount has not
been discounted since repayment is made on average within two to three years following
their payment.
The AETAS Italy debt corresponds to the outstanding 40% call option of minorities. The
purchase was made on 1 July 2008.
Debts concerning the “Saint-Simon” lease correspond to a lease for which the rents are
due in 2012 and 2019 (two components). These debts are discounted at a rate of 5.5%.
244
17.
The MEDICA group (formerly OBO 1) has two types of debt: a convertible bond loan
issued in 2006 and bank debt in the form of a syndicated loan and lease purchases.
The MEDICA group issued a convertible bond loan in equities of a nominal amount of
€174.8 million in August 2006. Interests due on the convertible bond loan are recognized
in equity.
On 9 August 2006, in order to refinance the existing bank debt, the MEDICA group
(formerly OBO1) signed with a bank syndicate led by The Royal Bank of Scotland, a
syndicated loan of €447.3 million together with an acquisition facility of €150 million and a
revolving credit facility of €25 million. In July 2007, a portion of this debt was
renegotiated: part of the syndicated loan was redeemed early and refinanced by a new
syndicated loan for an equivalent nominal amount.
2008
Bond loan
2007
90,391
92,547
571,120
539,243
1,811
2,201
57,825
32,503
721,146
666,494,
13,796
11,820
390
363
453
344
2,338
1,653
16,977
14,180
738,123
680,674
74,597
74,597
20,792
19,904
833,512
775,175
Other loans and similar debts
245
Analysis of loans:
The loans previously mentioned are analysed as follows:
Nominal interest rates
(%)
Maturity
date
2008
2007
2019
219,923
199,869
219,923
199,869
Bond loan
10.00% capitalised
Redemption value of the bond loan
Syndicated borrowings
€92 million mezzanine loan
Euribor + 4.0¨0% +
capitalised interests
4.625%
2016
104,715
99,435
€30 million loan - TA
Euribor + 1.75%
2013
24,336
27,750
€40 million loan - TB
Euribor + 2.00%
2014
39,911
40,000
€105.6 million loan - TB
Euribor + 2.00%
2014
105,365
105,600
€17 million loan – TB2
Euribor + 2.00%
2014
16,962
17,000
€40 million loan - TC
Euribor + 2.50%
2015
39,911
40,000
€105.7 million loan - TC
Euribor + 2.50%
2015
105,465
105,700
€17 million loan – TC2
Euribor + 2.50%
2015
16,962
17,000
ACF
Euribor + 2.00%
2015
99,426
57,500
RCF
Euribor + 1.75%
2013
10,728
12,000
453
344
Leases
34,776
40,202
Other bank loans
12,241
11,122
2,338
1,653
Redemption value of syndicated loans and other debts
613,588
575,306
Redemption value of bank loans and financial liabilities
833,512
775,175
(74,597)
(74,597)
(20,792)
(19,904)
738,123
680,674
246
Net financial debt:
Net financial debt as defined by the group corresponds to the total of financial debts and
bank loans less cash and cash equivalents and marketable securities.
2008
2007
738,123
680,674
(23,974)
(25,867)
Net indebtedness
714,149
654,807
Banking ratios:
With respect to these loans, the group is required to follow a number of usual obligations
in this type of contract. In the event of non compliance between them, the banks may
force the group to totally or partly refund the loan or renegotiate the financing conditions.
The group is thus required to comply with the financial covenants below for the period
from 1 January 2008 to 31 December 2008*:
Financial covenants
EBITDA/net interests
Net indebtedness/
EBITDA
Cash flow/Cost of debt
Objective
R1 > 1.65
R2 < 8.3
R3 > 1
Corrected
2.01
7.41
1.60
* These covenants are gradual over the entire duration of the agreement and are calculated at the level of
MEDICA (formerly OBO1) and its consolidated subsidiaries.
The breakdown of maturity dates for financial debts are indicated below:
Less than
one year an
Bond loan
Between one
and five
years
More than
five years
% of capital
0
0
219 923
219 923
Syndicated bank loans and other bank
debt
6,833
20,564
549,079
576,476
Lease financing
7,806
21,041
5,929
34,776
2,338
Total redemption values
16,977
2,338
41,605
774,930
833,512
Interest rates:
The effective interest rates on the closing dates are detailed below:
In %
2008
2007
Convertible bond loan and syndicated loan
8.39%
10.41%
Lease
5.85%
6.84%
247
Lease:
The discounted value of liabilities linked to lease financing contracts is indicated below :
2008
2007
Less than a year
10,443
9,977
1 - 5 years
24,088
29,758
7,641
11,402
42,171
51,137
7,396
10,935
34,776
40,202
7,806
6,973
26,970
33,229
Future minimum payments under the lease agreements
Future financial expenses linked to finance lease agreements
Financial liabilities linked to finance lease agreements
Short-term debts of lease agreements.
Non current financial liabilities of lease agreements
18.
Analysis of financial assets and liabilities.
Financial assets and liabilities included in the balance sheet headings are the following:
Held for
trading
(swap)
Fair Value Discounted Financial Miscellaneous
Ippocrate receivables liabilities
Financial
earnout
and
at
instruments
payables amortised
cost
Total
Fair Value
Other non current financial
assets
0
0
200
0
14,277
14,478
14,478
0
0
0
0
1,697
1,697
1,697
Trade receivable and related
accounts
0
0
0
0
35,948
35,948
35,948
Other debtors (excluding tax
receivables)
0
0
74
0
8,148
8,222
8,222
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
0
23,974
23,974
23,974
Total financial assets
0
0
274
0
84,044
84,319
84,319
Non-current financial liabilities
0
0
0
574,381
146,765
721,146
721,146
0
6,600
3,130
0
16,097
25,828
25,828
Loans and bank advances
(> 1 year)
0
0
0
3,780
13,197
16,977
16,977
Trade payables
0
0
0
0
33,947
33,947
33,947
Trade receivables
0
0
0
0
45,250
45,250
45,250
14,165
0
0
0
0
14,165
14,165
Total financial liabilities
14,165
6,600
3,130
578,161
255,256
857,312
857,312
Financial debts at amortised cost are those subscribed by MEDICA (formerly OBO1) and
SFM (formerly-MEDICA), including the convertible bond loan.
248
19.
Deferred taxes
The assets and liabilities of deferred taxes are compensated where there is a legally
enforceable right to offset the current assets and liabilities and the deferred assets and
liabilities concern income tax withheld by the same tax authority. The tale below indicates
the amounts after compensation, where applicable:
2008
2007
- Deferred tax assets recoverable after more than 12 months
89
14
- Deferred tax assets recoverable under less than 12 months
471
858
Deferred tax assets
561
872
205,705
208,824
(1,617)
(480)
53
22,
204,141
208,366
(203,580)
(207,495)
Liabilities net of deferred tax
The change in net deferred tax is presented below:
2008
At beginning of year
2007 12
months
2007
(207,495)
0
(201,066)
Change in consolidation scope
(7,785)
(192,920)
(12,791)
Taxes charged to the income statement
11,750
10,224
6,307
(49)
(24,798)
55
(203,580)
(207,495)
(207,495)
Taxes directly charged to equity or goodwill
At close of fiscal period
The change in deferred tax assets and liabilities during the fiscal period, excluding
compensation within the same tax jurisdiction, is detailed below:
Timing differences
As at 1
January
2008
(Debited
from)/credited
to income
statement
Charged to
Change in
Reclassification
At 31
equity or consolidation
December
goodwill
scope
2008
(407)
494
0
(3)
0
84
(148,526)
(157)
(49)
(6,134)
0
(154,866)
Financial debts and instruments
(33,013)
7,755
0
0
0
(25,258)
Revaluation real estate unit
(36,338)
438
(1,665)
1,015
(36,550)
Lease
(8,481)
(1,434)
(298)
(1,015)
(11,228)
Capitalised tax deficits
17,897
4,414
0
243
0
22,554
Retirement allowance
1,375
237
0
73
0
1,685
(207,495)
11,750
(49)
(7,785)
0
(203,580)
Intangibles
Total
249
Deferred tax assets are recognised as deferrable tax losses to the extent where it is
probable that the future taxable profits will be available.
20.
Commitments for retirement and other benefits
2008
2007
Commitments recorded on the balance sheet as:
Retirement benefits
4,974
4,060
80
64
5,054
4,124
Retirement benefits
677
663
Long-service awards
16
12
693
675
Long-service awards
Total
Amount charged to the income statement as:
Total
The amounts recognised on the balance sheet are determined as follows:
2008
Updated value of non financed liabilities
Non-recognised actuarial losses
Liabilities posted on the balance sheet
2007
4,642
4,334
412
(210)
5,054
4,124
The table below indicates the amounts booked in the income statement:
2008
2007
Cost of services rendered
588
658
Financial cost
238
228
Net actuarial loss (gains) posted during the year
(22)
5
15
Cost of past services
Expenses linked to employee benefits
819
891
(126)
(216)
Net expense for the year
693
675
Including personnel expenses
455
447
Including financial expenses
238
228
Paid benefits
Changes in the liability recorded in the balance sheet are indicated hereafter:
2008
Liability at opening of fiscal year
2007
4,124
-
Liabilities taken over during a business combination
236
3,449
819
891
(126)
(216)
Paid benefits
250
2008
including portion less than a year
including portion more than one year
2007
5,054
4,124
746
684
4,308
3,440
The main actuarial assumptions used are as follows:
Assumptions
2008
2007
Discounting rate
6.3 %
5.25%
Future salary increase rate
2.5 %
2.50%
Employees:
60 years
Employees:
60 years
Executives :
62 years
Executive :;
62 years
Retirement age
0 to 8% according 0 to 8% according
to the age of the
to the age of the
employees
employees
Turnover rate
21.
Provisions for non-current operations
Other long-term provisions include:
Labour courts
As at 1 May 2006
Closing of
institutions
Miscellaneous
Total
0
0
0
0
2,422
1,747
3,284
7,453
-878
-277
-548
-1,704
- Reversal of amounts used during the year
-664
-1,242
-236
-2,142
- Changes in scope
1,566
0
2,437
4,003
As of 31 December 2007
2,446
228
4,937
7,611
1,915
1,626
947
4,488
-563
-122
-2,052
-2,737
- Reversal of amounts used during the year
-665
-89
-411
-1,165
- Changes in scope
283
0
138
422
- Reclassification
366
-366
0
3,194
8,619
As of 31 December 2008
3,782
1,643
The provision for shutting down institutions covers the cost of business transfer from
Hermitage institution in Marseille to Aubagne in the new premises.
The balance of other provisions at 31 December 2008 is mainly covered by commercial
litigations. The unused reversals of other provisions follow the favourable outcome of a
dispute with the tax administration concerning a request for VAT refund.
251
After consulting external consultants, management considered that the outcome of these
law suits would not lead to any significant loss in excess of the amounts set aside at
31.12.08.
22.
2008
2007
(144,810)
(178,191)
(122,439)
(56,524)
(65,549)
(45,361)
(455)
(447)
(283)
(201,790)
(244,187)
(168,084)
6,241
5,785
5,785
74
84
84
6,315
5,869
5,869
Retirement expenses – defined benefits schemes & Long
service awards
Personnel expenses
2007 12
months
France
Outside France
Total
Reversals of provisions used for social disputes posted under personnel expenses
totalled €664,000 in 2008.
23.
External expenses
2008
2007
2007 12
months
Temp staff
(2,356)
(3,774)
(2,235)
Professional Fees
(6,334)
(8,367)
(6,040)
Property leasing
(40,025)
(50,463)
(34,837)
Furniture rental
(6,311)
(7,248)
(4,953)
Maintenance
(5,360)
(6,842)
(4,557)
Subcontracting
(40,068)
(48,729)
(33,801)
Inventory purchases
(10,808)
(10,856)
(9,482)
Miscellaneous
(10,315)
(18,012)
(10,084)
(121,577)
(154,291)
(105,990)
External expenses
The amount of Statutory Auditors’ fees in the Accounts in the context of their legal
account auditing engagement for all of the Group’s companies amounted to €563,000. No
fees were paid to consultants or service providers which fall within the work directly linked
to the legal audit engagement concerning the accounts of the Group’s companies.
The sub-contracting item includes €27,533,000 of expenses from Aetas, the Italian
subsidiary, given that almost the entire staff is subcontracted.
252
24.
2008
2007
2007 12
months
Operating subsidies
181
324
217
Profit on trade receivables
330
112
37
Reversal of provisions on trade receivables
215
565
112
(317)
(664)
(166)
Other operating income & expenses
579
153
77
988
490
277
Losses on bad debts
Reversals of provisions on trade receivables only apply to the reversals used. The
reversals of unused provisions are booked in diminution of the Depreciation and
amortisation for each year.
25.
Other operating revenues and expense
2008
2007 12
months
129
(349)
0
103
Costs for closing institutions
(2,538)
(2,078)
(1,759)
Stock market flotation costs
0
(69)
0
Costs Corporate Savings Plan
(294)
0
0
Miscellaneous
(205)
(74)
1,217
(2,908)
(2,467)
(1,828)
Reversal of goodwill in income
26.
2007
(1,285)
2008
2007
2007 12
months
(65,170)
(80,287)
(57,527)
(3,132)
(5,108)
(3,332)
(68,303)
(85,395)
(60,859)
888
2,173
1,349
(67,415)
(83,223)
(59,510)
The effect of amortised cost represents the discrepancy between nominal interest rate
and effective interest rate.
253
27.
2008
(238)
(228)
(163)
3,631
2,572
1,129
(540)
(1,385)
(917)
53
125
188
(313)
(1,332)
(989)
(25,187)
7,317
5,181
0
117
19
(187)
(233)
(52)
(22,782)
6,953
4,397
Income from disposals excluding cash and cash equivalents
Change in value of derivative instruments
28.
2007 12
months
2007
Income tax expense
2008
2007
2007 12
months
Current tax expense
(1,770)
(5,903)
(2,230)
Deferred tax expense or income
11,750
10,224
6,307
9,980
4,321
4,077
Income tax expense
The amount of the Group’s income tax is different from the theoretical amount that would
be obtained from the weighted average tax rate applicable to the profits of consolidated
companies on the basis of the following items:
2008
Pre-tax earnings, share in companies accounted for by the
equity method and earning on goodwill
2007
2007 12
months
(32,227)
(9,284)
(9,647)
33,33%
33,33%
33,33%
(10,741)
(3,095)
(3,215)
1,863
460
605
83
66
66
Non-recognised prior losses charged to the year
(142)
(441)
(295)
Prior losses capitalised or adjusted over the year
(2)
25
0
0
48
0
(673)
(615)
(8)
(28)
(13)
(60)
(37)
(37)
(39)
(60)
445
253
Tax rate
Theoretical tax expense or income
Non taxable income and expenses
Non capitalised losses for the period
3.3% social contribution
Impact of reduced rate taxations
Earnings of companies with transparent tax policies in
minority interests
Tax credits
Non allocated IFA
Tax rate differences on foreign companies
75
254
29.
2008
2007
2007 12
months
Tax savings on acquisition costs of securities
(1,048)
(1,051)
(767)
Recognised tax expense or income
(9,980)
(4,321)
(4,077)
Net depreciation and provisions
2008
Depreciation and amortisation expense for property, plant and equipment
2007
(16,689)
(20,751)
(743)
(604)
(4,488)
(7,453)
Unused reversals on other provisions
2,737
1,704
1,165
2,142
Allowances to provisions for retirement commitments and other benefits
(693)
(675)
Depreciation and amortisation expense for intangible assets
Allowances to other provisions
Reversal of negative goodwill in profit or loss
103
Other reversals
7
Amortization and Depreciation and amortisation in the statement of
cash flow
(18,712)
(25,527)
(16,689)
(20,751)
(743)
(604)
(17,433)
(21,355)
(205)
(500)
Amortisation expense excluding allowances and impairment reversals
for assets in income statement
(17,227)
(20,855)
Including current
(17,433)
(21,828)
0
(27)
Amortisation expenses recognised in the income statement
Amortisation expense of property, plant and equipment
Amortisation expense of intangible assets
Impairment and amortisation expense for fixed assets in income
statement
Including impairment of fixed assets recognised in other operating income
and expenses
Including non current (closing of institutions)
Increases
to
provisions
Revenues
External
expenses
Personnel
expenses
Other operating
income/expenses
Other operational
income/expenses
Other financial
income/expense
s
Miscellaneous
Total
Increases to non current provisions
(2,862)
(1,626)
(4,488)
Impairment expense of receivables
(730)
(2)
(732)
Impairment expense of other receivables
Impairment expense for inventories and work
in progress,
(43)
(43)
(100)
(100)
Increase to retirement commitments
(455)
Rev. of utilized non current provisions
Rev. of non-utilized non current provisions
234
61
(238)
746
89
2,737
1,165
2,737
Rev. of impairments for utilised trade
receivables
Rev. of impairments for non-utilised trade
receivables
(693)
35
194
311
255
(0)
194
1
312
Increases
to
provisions
Revenues
External
expenses
Rev. of impairments for utilised other
receivables
Rev. of impairments for non utilised other
receivables
Total
Other operating
income/expenses
110
Other operational
income/expenses
Other financial
income/expense
s
Miscellaneous
21
157
234
171
291
215
(1,538)
(238)
35
Earnings per share
Net earnings per share is computed by dividing the net income for the year attributable to
the Company’s shareholders by the weighted average number of current shares in the
year, excluding treasury shares acquired by the Company.
2008
Profit attributable to the Company’s shareholders (in
thousands of euros)
2007
2007 12
months
(22,688)
(5,248)
(5,907)
Number of current common shares
1,823,301
1,823,301
1,823,301
Number of current preference shares
5,462,739
5,462,739
5,462,739
(3.11)
(0.72)
(0.81)
Basic earnings per share (€ per share)
31.
Dividends per share
The Group paid no dividend in 2008.
32.
Contingent assets and liabilities
The Group has contingent liabilities linked to bank guarantees and other items occurring
in the usual context of its activities. The Group does not expect these items to result in
significant liabilities.
33.
Total
131
157
(530)
30.
Personnel
expenses
Commitments given:
2008
2007
Guarantees given to Finance-Lease agencies
Pledging of business assets for Finance-Lease agencies
Guarantees given to credit institutions
6,281
4,581
14,723
20,093
465,584
520,169
Equity pledges given to credit institutions
2,432
Pledging of business assets to credit institutions
4,267
3,597
320
320
18
867
32,608
32,222
UCITS pledges given to credit institutions
Projects acquisition promises (under conditions precedent)
256
(1,361)
The Group’s commitment with respect to the French law on individual right to training
amounted to 230,398 hours on 31 December 2008 and totalled 222,260 hours on 31
December 2007.
companies
The table below details all the future minimum payments under non cancellable operating
lease agreements:
2008
Less than a year
Future minimum payments under operating leases
2007
41,983
37,563
139,306
124,258
68,292
69,083
249,581
230,904
2008
2007
Asset and Liability Guarantees received linked to securities acquisitions
9,632
8,902
-
-
Asset and Liability Guarantees given in the context of securities disposals
34.
Related party transactions
There was no transaction between MEDICA Group (formerly OBO1) and the
shareholders with control over the Group, including TBU-3 International, except for the
compensation for the convertible bond loan (€20.0 million for the year ended 31
December 2008, and €25.0 million for the year ended 31 December 2007 (20 months).
The company Medica SA (formerly OBO1 SAS) has not paid out any dividend since the
acquisition of the subgroup SFM (formerly MEDICA) in August 2006.
Other information concerning related parties:
No transaction between related parties had a material impact on the financial position and
performance of the Group.
The following amounts were paid to managers as compensation:
2008
2007 12
months
590
584
67
60
-
-
-
-
-
-
(*) excluding employer charges
257
35.
Recent developments
Significant acquisitions that have occurred since the end of fiscal 2008:
On 1 January 2009, takeover of Maisonnée du Sentier, Alzheimer unit with 12 beds
located in Sceaux (92).
36.
Consolidation scope and methods
Consolidated companies
Currency
2008
Method
% Control
% of
interest
€
FC
parent
-
SFM (formerlyMEDICA)
€
FC
100.00
100.00
SCI CHAMBERY JOURCIN
€
FC
100.00
100.00
SAS LES JARDINS D'HESTIA
€
FC
99.92
99.92
SOCEFI
€
FC
100.00
100.00
SDSA
€
FC
100.00
100.00
SARL LE MOLE D'ANGOULINS
€
FC
100.00
100.00
SARL INVAMURS
€
FC
100.00
100.00
SCI BRUAY SUR ESCAUT
€
FC
100.00
100.00
SCI SAINT GEORGES DE DIDONNE
€
FC
100.00
100.00
SCI LAXOU
€
FC
51.00
51.00
SCI LES SABLES
€
FC
100.00
100.00
SCI LYON GERLAND
€
FC
100.00
100.00
SCI ST MALO
€
FC
100.00
100.00
SCI VILLARS LES DOMBES
€
FC
100.00
100.00
SCI DU MANS
€
FC
100.00
100.00
SCI D'ARS EN RE
€
FC
100.00
100.00
SARL RA DE LILLE STE THERESE
€
FC
100.00
100.00
SARL RA DE LAXOU
€
FC
100.00
100.00
SARL RA DE SAINT MALO
€
FC
100.00
100.00
SARL RA DES SABLES D'OLONNE
€
FC
100.00
100.00
SARL RA DE LYON GERLAND
€
FC
100.00
100.00
SARL RA DU MANS
€
FC
100.00
100.00
SCI DE L'EUROPE
€
FC
100.00
100.00
SCI PIERRE DEBOURNOU
€
FC
99.80
99.80
SNC DE DINARD
€
FC
100.00
100.00
SNC DE L'EUROPE
€
FC
100.00
100.00
MEDICA (formerly OBO1)
Companies acquired in 2007
258
Currency
2008
Method
% Control
% of
interest
SARL SERAPA
€
FC
100.00
100.00
SAS RA DE NEUVILLE ST REMY
€
FC
100.00
100.00
SAS RA DE DINARD
€
FC
100.00
100.00
SARL RESIDENCE DE CHAINTREAUVILLE
€
FC
96.00
96.00
SAS CLINIQUE SOLISANA
€
FC
100.00
100.00
CLINIQUE DU VAL DE SEINE
€
FC
99.71
99.71
SARL CCN
€
FC
100.00
100.00
SARL LES ARBELLES
€
FC
100.00
100.00
SARL CENTRE MEDICAL DES ALPILLES (CMA)
€
FC
100.00
100.00
SARL CENTRE MEDICAL DU VENTOUX (CMV)
€
FC
100.00
100.00
SCI LE SPLENDID
€
FC
100.00
100.00
LES LILAS
€
FC
100.00
100.00
COGOLIN
€
FC
100.00
100.00
SARL BEL AIR
€
FC
100.00
100.00
MEDICA FRANCE
€
FC
100.00
100.00
SARL MF DEVELOPPEMENT
€
FC
100.00
100.00
TOPAZE
€
FC
100.00
100.00
LES PINS
€
FC
100.00
100.00
SCI DE BICHAT
€
FC
100.00
100.00
SCI CCN
€
FC
100.00
100.00
SCI CMA
€
FC
100.00
100.00
SARL GMR LA COTE PAVEE
€
FC
100.00
100.00
SAS CHATEAU de MORNAY
€
FC
100.00
100.00
AETAS S.P.A.
€
FC
100.00
100.00
II FAGGIO Srl
€
FC
100.00
100.00
RESIDENZA I PLATANI
€
FC
100.00
100.00
I ROVERI Srl
€
FC
100.00
100.00
CROCE DI MALTA Srl
€
FC
100.00
100.00
Il CASTAGNO Srl
€
FC
90.00
90.00
LE PALME Srl
€
FC
100.00
100.00
I GIRASOLI Srl
€
FC
95.00
95.00
VILLA ANTEA Srl
€
FC
95.00
95.00
GLI OLEANDRI Srl
€
FC
95.00
95.00
CARE SERVICE
€
FC
100.00
100.00
LE ROSE Srl
€
FC
90.00
90.00
259
Currency
2008
Method
% Control
% of
interest
I RODODENDRI Srl
€
FC
90.00
90.00
IL CILIEGIO Srl
€
FC
70.00
70.00
IPPOCRATE SPA
€
FC
95.75
95.75
SAS AUBERGERIE DE QUINCY
€
FC
91.78
91.78
SAS AUBERGERIE DU 3E AGE
€
FC
91.78
91.78
SARL BOURGOIN COUQUIAUD
€
FC
100.00
100.00
SARL MAISON BLANCHE
€
FC
100.00
100.00
SAS CENTRE MEDICAL MONTJOY
€
FC
100.00
100.00
SAS CLINIQUE DE PIETAT
€
FC
100.00
100.00
SARL LUBERON SANTE
€
FC
100.00
100.00
SA CRF LES GARRIGUES
€
FC
100.00
100.00
SAS MACO
€
FC
100.00
100.00
SCI DU BOIS HAUT
€
FC
100.00
100.00
SAS CHATEAU DE CAHUZAC
€
FC
100.00
100.00
SARL CRC GESTION
€
FC
100.00
100.00
SAS SAINTE COLOMBE
€
FC
100.00
100.00
SARL CHAPUIS FERNANDE
€
FC
100.00
100.00
SAS MONTROND LES BAINS
€
FC
100.00
100.00
SCI VALMAS
€
FC
100.00
100.00
SAS ALMA SANTE
€
FC
100.00
100.00
SCI ALMA SANTE
€
FC
100.00
100.00
SA CLINIQUE SAINT MAURICE
€
FC
100.00
100.00
SCI CLINIQUE SAINT MAURICE
€
FC
100.00
100.00
SARL CLINIQUE DE SAUSSENS
€
FC
99.96
89.96
SARL MT SANTE
€
FC
90.00
90.00
SARL CGCV
€
FC
100.00
100.00
SARL RESIDENCE LES PINS
€
FC
100.00
100.00
SAS LES QUATRE TREFLES
€
FC
99.93
99.93
SCI GASTON DE FOIX
€
FC
100.00
100.00
SAS GASTON DE FOIX
€
FC
100.00
100.00
SAS ARJEAN
€
FC
60.00
60.00
SAS LE VAL DES CYGNES
€
FC
99.90
59.94
SAS DLS GESTION
€
FC
77.33
77.33
SCI DLS IMMO
€
FC
100.00
77.36
Companies created in 2008
260
Currency
2008
Method
SARL MEDICA FRANCE LE VERDON
% Control
% of
interest
€
FC
100.00
100.00
€
FC
100.00
100.00
SAS MAISON DE REPOS ET DE
CONVALESCENCE LA PALOUMERE
€
FC
100.00
100.00
SCI LA PALOUMERE
€
FC
100.00
100.00
SAS FINANCIERE MEDICALE
€
FC
100.00
100.00
SAS LA VARENNE
€
FC
100.00
100.00
SCI LA VARENNE
€
FC
100.00
100.00
SAS LA ROSERAIE
€
FC
100.00
100.00
SCI LA ROSERAIE
€
FC
100.00
100.00
SAS CENTRE MEDICAL DE CONVALESCENCE
MONTVERT
€
FC
100.00
100.00
SOCIETE CIVILE IMMOBILIERE DE MONTVERT
€
FC
100.00
100.00
MS FRANCE
€
FC
60.00
60.00
HAD FRANCE
€
EM
40.32
40.32
SAS ST JEAN LEZ CEDRES
€
-
-
-
SARL RA DE LA FERME
€
-
-
-
SARL RA DE VILLARS LES DOMBES
€
-
-
-
SARL RA DE ST GEORGES DE DIDONNE
€
-
-
-
SARL GRAPA
€
-
-
-
SAS LES JARDINS DE SERMAIZE
€
-
-
-
SAS RA DE CHALONS
€
-
-
-
SARL SOGEMAPAD
€
-
-
-
SAS LE MOULIN DE L'ISLE
€
-
-
-
SARL SERPA
€
-
-
-
SA RA DE SARZEAU
€
-
-
-
SAS RA DE NOTRE DAME DE SANILHAC
€
-
-
-
Companies created in 2008
SARL MEDICA FRANCE LE VERDON
Companies merged in 2008
261
25.4
Auditors’ report on the corrected consolidated financial statements for the 12
months ended 31 December 2008
CONSTANTIN ASSOCIES
Patrick GRIMAUD
75012 – PARIS
____
AUDITOR’S REPORT ON THE CORRECTED CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2008
To the Chairman,
In our capacity as statutory auditors for MEDICA S.A. (formerly OBO1 S.A.S.) and in
response to your request, we have carried out an audit of the corrected consolidated
financial statements for the year closed on 31 December 2008, as attached to this report.
These corrected consolidated financial statements, finalised on 3 December 2009 by the
board of directors, reflect the correction of the calculation error concerning the
determination of the syndicated loan financial interests, described in Note 2-3 and
identified in November 2009. They were prepared under the responsibility of the board of
directors and it is our duty to express an opinion on these corrected consolidated financial
statements based on our audit. We stress that these corrected consolidated financial
statements do not correspond to the consolidated financial statements finalised by the
Chairman, which were presented in our legal report dated 30 April 2009, and were
approved by the general meeting on 29 June 2009.
We conducted our audit according to the professional standards applicable in France.
Those standards require that we perform the audit to obtain reasonable assurance that
the corrected consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis or using any other method of selection,
evidence supporting the amounts and disclosures in the corrected consolidated
statements. An audit also includes assessing the accounting principles used and
significant estimates retained, as well as evaluating the overall presentation of the
262
corrected consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the corrected consolidated accounts fairly and accurately reflect in all
material aspects and with respect to IFRS as adopted in the European Union, the net
worth, financial position and results of the group comprised by the people and the entities
included in the consolidation as at 31 December 2008, as well as the result of its
transactions.
Without contradicting the opinion expressed above, we would like to draw your attention
to Note 2-3 of the corrected consolidated financial statements relating to the impact of the
correction of the error in the calculation of the financial interests on the syndicated loan.
CONSTANTIN ASSOCIES
PATRICK GRIMAUD
Jean Paul SEGURET
263
25.5
Corrected consolidated financial statements for the 20 months ended 31 December
2007
Warning
During the preparation of their interim condensed consolidated accounts on 30
September 2009, the MEDICA Group (formerly OBO1) identified an error in the
calculation of the financial interests on the syndicated loan, arranged in August 2006. This
error affects the consolidated financial statements finalised for the financial year closed
on 31 December 2007, approved by the general meeting of 25 June 2008.
The consolidated financial statements presented in this document reflect the restatement
of the anomaly as if the error had been corrected at the beginning of the first period
presented.
The impacts of the corrections are presented in Note 3.3.
Notes
2007
Revenue
557,628
(26,047)
External expenses
23
(154,291)
(36,531)
Personnel expenses
22
(244,187)
24
490
97,062
EBITDA
Depreciation and amortizations
(21,828)
Allowance to provisions
(6,086)
69,149
25
(2,467)
66,681
407
26
(83,223)
(82,815)
Other financial revenues and interest expenses
27
Share in earnings of equity-method investees
6,953
(39)
(9,220)
Pre-tax income
Income tax expense
28
4,321
Net income
(4,899)
Dividends paid to the company’s shareholders
(5,248)
Minority interests
349
Average number of shares
7,286,040,
Group share of consolidated net income per share (in euros)
264
30
(0.72)
Notes
2007
ASSETS
Goodwill
5
332,765
Intangible assets
6
458,970
Tangible assets
8
260,684
11
14,532
9
1,952
Deferred taxes
19
872
10
1
1,069,776
1,373
Trade receivables
12
28,968
Tax assets
10,573
Other debtors
25,955
6,629
10
11,022
13
25,867
110,386
Total assets
1,180,162
Notes
2007
Notes
2007
LIABILITIES
Capital
14
116,577
0
(0)
Other reserves
(5,248)
49,757
161,085
349
Minority reserves
5,550
166,983
17
265
666,494
Notes
20
2007
3,441
0
Other provisions
21
7,611
Deferred taxes
19
208,366
10
0
16
34,728
920,640
17
14,180
20
684
Trade payables
15
33,947
Other creditors
41,280
Tax liabilities
2,447
10
0
0
92,538
Total liabilities
0
1,180,162
2007
(4,899)
39
25,527
(5,853)
1,280
16,094
(4,321)
82,815
94,588
1,048
4,458
(4,203)
(15,143)
Paid taxes
(17,368)
63,380
(442,191)
(31,559)
266
2007
(2,627)
(2,000)
(2,571)
11,704
510
Dividends received
(0)
(468,733)
Capital increase
116,593
Loan issues
711,579
Redemption of debts
(344,245)
(54,397)
0
(25)
429,505
0
24,152
0
24,152
24,152
267
Statement of changes in consolidated
Capital
Additional
paid-in
capital
Consolidated
reserves
Consolidated
income
(loss)
TOTAL
Group
share
Minority
shares
116,549
116,549
0
(5,248)
349
Equity at beginning of
year
Capital increase
Capital reduction
116,549
(17)
17
(4,899)
Changes in consolidation
scope (1)
45
Other changes (2)
0
116,577
0
(4,899)
(25)
(25)
5,525
5,569
39
5,531
49,734
49,734
49,734
0
55
55
11
44
166,983
161,085
5,899
TOTAL
Group
share
55,306
(4,899)
(25)
(1) Changes in the consolidation scope for the year are as follows:
Capital
Additional
paid-in
capital
Consolidated
reserves
The equity of the parent
company OBO1 on the
group’s creation date
45
0
(6)
Acquisition of the MEDICA
subgroup (consolidated for
the first time on 30 June
2006)
0
0
2,390
Acquisitions made by the
group prior to the group
creation date
0
0
Total impact of changes
in scope on the group’s
equity
45
0
Consolidated
income
(loss)
Minority
shares
39
39
0
0
2,390
0
2,390
3,141
0
3,141
0
3,141
5,525
0
5,569
39
5,531
(2) – the other changes correspond mostly to the impact of changes in method and the repayment by minority shareholders
of the losses incurred by an Italian subsidiary.
268
1.
General information
MEDICA “SFM”, (formerly MEDICA SA), parent company of the MEDICA group. MEDICA
(formerly OBO1) has a financial period beginning on 1 May 2006 and ending on
31 December 2007; therefore consolidated financial statements were established for the
first time on 31 December 2007.
The new group was consolidated using the balance sheets of the company MEDICA
(formerly-OBO1) and its subsidiaries closed on 31 December 2007. The sub-group SFM
(formerly-Medica) was consolidated as from 1 July 2006. Accordingly, the 2007 income
statement of the MEDICA Group (formerly-OBO1) showed 20 months of activity for the
parent company and 18 months of activity for the subsidiaries of the Medica sub group.
2008 will be the first year where the income statement will reflect the Group’s activity over
one year. For the information of the reader of these accounts, the Group’s income
statement for the period from 1 January 2007 to 31 December 2007 is presented in Note
33.
The goodwill generated at the acquisition of SFM (formerly Medica) by MEDICA (formerly
OBO1), was calculated on the basis of the equity of the subgroup SFM (formerly Medica)
on 30 June 2006, earnings included, after cancelling historic goodwill.
MEDICA (formerly OBO1) (“the Company”) and its subsidiaries (“the MEDICA Group”)
(formerly OBO1) are specialised in host structures and medicalised care for dependent
patients of all ages. The group operates in two business segments:

The Medico-social segment: homes for dependent senior citizens (EHPAD),
senior citizens’ home (EHPA) and Residential Services, handling the case

The Health-care segment: medicalised institution that manages temporary
post-op care and physiotherapy and rehabilitation (MPR), and institutions
specialized in the psychiatric care.
The MEDICA Group (formerly OBO1) is present in France and in Italy. It runs 88 medicosocial institutions (7,278 beds) and 32 health care institutions (2,019 beds) in France,
offering a reception capacity of 9,300 beds. It is also present on the Italian market, since
the acquisition in 2005 of the majority control of AETAS, with the operation of 16
institutions (1,358 beds) as at 31.12.07.
At 31.12.07 the total hosting capacity of the MEDICA Group (formerly OBO1) totalled
10,655 beds distributed in 136 institutions in France and in Italy.
MEDICA SA (formerly OBO1 SAS) is the holding of the MEDICA Group (formerly OBO1).
It is domiciled in France, its head office is located at “Le Diderot” at 39, rue du
These consolidated financial statements were finalised by the board of directors of 3
December 2009. They are expressed in thousands of euros, unless otherwise indicated.
269
2.
Accounting principles and policies
2.1
The consolidated accounts of the MEDICA Group (formerly OBO1) were prepared in
accordance with the International Financial Reporting Standards (IFRS) as adopted in the
European Union.
The standards and interpretations used to prepare the 2007 consolidated financial
statements are those reported in the European Union Official Journal (EUOJ),
summarised on the website of the European Commission at the address below:
http://ec.europa.eu/internal_market/accounting/ias_fr.htm#adopted-commission
and
whose application mandatory on that date.
MEDICA Group (formerly OBO1) has applied the new standard IFRS 7 “Financial
Instruments: Disclosures”. This standard, adopted in the EU on 11 January 2006 and
published in the EU official journal on 27 January 2006 is mandatory from 1 January 2007
onwards and its consequences have been explained in Notes 17 and 18.
*
IFRS 7 – “Financial instruments: Disclosures”. The disclosures on financial
instruments required by IFRS 7 have been detailed in the explanatory notes to the
financial statements.
*
Amendment to IAS 1, with respect to share capital disclosures. The disclosures on
share capital required by IAS 1 have been detailed in the explanatory notes to the
financial statements.
*
IFRIC 7, “Guidance on Applying the restatement approach under IAS29”.
*
IFRIC 8, “Scope of application of IFRS2”.
*
IFRIC 9 “Reassessment of Embedded Derivatives”
*
IFRIC 10 “Interim Financial Reporting and Impairment”
The application of these interpretations had no impact on the Group’s accounts at
31 December 2007.
Standards, amendments of standards or interpretations subject to early application
No standard and interpretation published in the EUOJ was applied ahead of schedule.
The Group expects no significant impact from the application of these texts.
Standards, interpretations and amendments to the already published standards but which
are not mandatory as at 31 December 2007.
The Group did not apply ahead of schedule any of the standards and interpretations
below already published by the IASB:
*
IFRS 8 “Operating segments” - applicable from 1 January 2009
*
IFRIC 11 “IFRS 2 – Group and treasury share transactions” – applicable from 1
January 2008
Furthermore, the texts published by the IASB on 31 December 2007 and not yet in force
in the European Union on that date are as follows:
270
*
IFRIC 12 “Service concessions” – applicable from 1 January 2008
*
IFRIC 13 – “Customer loyalty programmes” – applicable from 1 July 2008
*
IFRIC 14 “IAS 19 - The limit on a defined benefit asset minimum funding
requirements and their interact” applicable on 1 January 2008
*
Amendments IAS 23, “Borrowing costs” – applicable on 1 January 2009
2.2
The preparation of financial statements in accordance with IFRS implies that the
management of the group or subsidiaries carries out estimates and retains certain
commitments concerning accounting period.
As these assumptions are uncertain, the real results could be very different. These
2.3
-
impairment tests;
-
provisions for pensions;
-
the fair value of derivatives and other financial instruments.
Impacts of the correction of the error in the calculation of the syndicated loan’s
financial interests, set up in August 2006
Transitions from published accounts to corrected accounts:
Cost of net debt
2007 published
66,681
(86,269)
Pre-tax income
Correction of the
calculation of the
interests
2007
corrected
66,681
3,455
(82,815)
6,953
6,953
(39)
(39)
(12,674)
3,455
(9,220)
5,471
(1,151)
4,320
Net income (loss)
(7,203)
2,304
(4,899)
Group share
(7,552)
2,304
(5,248)
Income taxes
Minority share
349
349
(1.04)
(0.72)
271
Total assets
2007 published
Correction of the
calculation of the
interests
1,180,163
158,781
Minority reserves
2007
corrected
1,180,163
2,304
161,085
337
337
5,562
5,562
Total equity
164,680
2,304
166,984
669,948
(3,455)
666,493
Deferred taxes
207,216
1,151
208,367
Current liabilities
Total liabilities
45,780
922,944
45,780
(2,304)
92,539
1,180,163
920,640
92,539
0
1,180,163
2.4
Consolidation methods
a)
Subsidiaries
the assessment of the control exerted by the Group on another entity when they drive
Group. They are consolidated as from the date on which control is no longer exerted.
recognised in income.
between group companies are eliminated. The subsidiaries use the same accounting
272
b)
The Group has entered into buy-out agreements to acquire the minority interests of
consolidated subsidiaries. The Group grants to these shareholders put options which may
be exercised at certain dates in the future and at determined prices. IAS32 stipulates the
recognition of these commitments in financial liabilities for their strike value. The
difference between the share of net situation and the calculated debt is reported in
goodwill.
2.5
a)
The data included in the financial statements of each of the Group’s entities are
measured by using the currency of the principal economic environment in which the entity
carries out its activities (“the functional currency”). The consolidated financial statements
are reported in euros, which is the functional and reporting currency of the Group.
b)
The group has no transactions denominated in foreign currency.
c)
Group companies
(i)
date;
(ii)
exchange rate (except if that average is representative of the cumulative effect of
the rates in force on the transaction dates, in which case the income and expenses
are converted at the applicable rates on the transaction dates); and
(iii)
closing price.
2.6
a)
Income Statement
with the option offered by IAS 1, the MEDICA group (formerly OBO1) has chosen to
maintain the presentation of income statement by nature.
273
Revenue
Revenue mostly comprises services supplied in the context of the hosting and the care
given to the residents regardless of the origin of the payment.
amounts collected and likely to be paid back, on the grounds of a partial use of these
amounts with respect to the commitments taken by the Group under the Agreements, are
deducted from revenue and posted under “Other debts”.
Earnings Before Interest Taxes, Depreciation and Amortisation
EBITDA corresponds to Earnings before Interest Taxes, Depreciation and Amortisation.
Non current operations of a significant amount that may have an adverse effect on the
clarity of current operational performance is classified in “other operating income and
expenses” in accordance with the CNC recommendation adopted on 27 October 2004. It
includes in particular:

the capital gains or losses on sales or significant and unusual depreciation of
assets, tangible or intangible

the restructuring costs resulting from plans of an unusual nature and size disrupt
the clarity of current operating income

provisions of very high material significance.
Net cost of financial indebtedness

cash and cash equivalents (interest income generated by cash and cash
equivalents, income from the disposal of cash equivalents, income from interest
rate and currency hedges on cash and cash equivalents);

The gross cost of financial debt (interest charges on financing transactions, result
of interest rate and currency hedges on gross financial debt, gains and losses
linked to the extinguishment of debts).
“Other financial revenues and interest expenses” include ,where applicable:

financial income (dividends, profit on disposal of non consolidated securities,
cash and cash equivalent), profits on trading derivatives (foreign exchange, interest
rate), discounting financial income, positive change fair value of the financial
assets and liabilities measured at fair value, income from interest rate and currency
hedges on previous transactions, other financial income)

financial expenses (depreciation of non consolidated securities, loss on disposal of
non consolidated securities, depreciation and losses on disposal of other financial
274
assets (excluding cash and cash equivalent), loss on trading derivatives (foreign
exchange, interest rate), discounting financial expenses, negative change in fair
value of the financial assets and liabilities measured at fair value, losses from
interest rate and currency hedges on previous transactions, other financial
expenses).
b)
Balance sheet
Assets and liabilities are classified, according to their nature, into current or non current
period of twelve months as from the accounts finalisation date.
2.7
Intangible assets
a)
Goodwill
date. The goodwill linked to the acquisition of subsidiaries is included in “intangible
goodwill is irreversible. Income derived from the disposal of an entity takes account of the
carrying amount of the goodwill of the sold entity.
Goodwill is allocated to the cash generating units or to groups of cash generating units
likely to benefit from the business combination which led to the goodwill. MEDICA Group
(formerly OBO1) performs impairments tests on the goodwill of each business sector.
b)
Operating permits
extension of the institutions. The rules governing these permits are primarily set by the
law n° 2002-2 of 2 January 2002 renovating social and medico-social work and by decree
n°2003-1135 of 26 November 2003 concerning the terms of the permits to create,
granted for a period of 15 years in the medico-social sector and for 5 – 10 years for the
Operating permits are therefore not amortised and are tested annually for impairment.
combination are recognized in intangible assets. These authorisations are measured at
acquisition according to a method defined by the group based on the annual billing
formalities, they correspond to intangible fixed asset generated internally which do not
meet the criteria defined in paragraph 58 of lAS 38, Intangible assets, to be posted under
assets.
c)
Software
basis of costs incurred to acquire and set up the relevant software. These costs are
275
as expenses and when they are incurred.
2.8
Tangible assets
Property, plant and equipment mainly comprise:

land and constructions, mostly of the homes for dependent senior citizens,
institutions for post-op care and rehabilitation and offices

the machinery and equipment required for the proper operation of the institutions.
All property, plant and equipment are recorded at their historic cost. The historic cost
Subsequent costs are included in the carrying amount of the asset or where applicable,
Land is not amortised. The other assets are amortised according to the straight line
method. Except for special cases, the residual values are zero. Amortisation periods are
ones are:

Constructions: 50 years

Layout of constructions: 5 to 50 years (according to the components)

Technical installations: 5 - 10 years

Other (furniture…): 3 - 10 years
Assets acquired with finance leases that result in transferring to the group almost all the
Finance leases where the risks and rewards are not transferred to the group are
expenses using a straight line method.
Losses or profits on the sale of assets are determined by comparing the income from
disposal to the carrying amount of the sold asset. They are recognised in profit or loss.
2.9
a)
Amortised assets are tested for impairment where due to events or special
costs or its value in use, if greater. For the purposes of measuring impairment, the assets
276
are grouped into cash generating units which represent the least high level generating
separate cash flow. For non financial assets (other than goodwill) that are impaired, the
b)
The Group submits the goodwill and administrative permits to an annual impairment test.
The recoverable amounts of the cash generating units or groups of cash generating units
to which these intangible assets are attached are determined from the calculations of the
value in use or their fair value less the sale costs. The calculation of the value in use
retained by the group is based on the discounting of the future cash flows which will be
generated by the continuous use of the assets tested during 10 years and their possible
disposal after this period. Discounting is carried out at a rate corresponding to the
average weight cost of the group’s capital and debt.
care institutions.
Goodwill is tested at the level of each of the two business segments: medico-social or
healthcare.
2.10 Financial assets and liabilities
IAS 32/39 are applied by the Group as from 1 January 2005.
The financial assets defined by IAS 39, include loans and receivables, available-for-sale
They correspond to the balance sheet items below: available-for-sale assets, other non
current assets, trade accounts and other receivables, derivative financial instruments and
cash and cash equivalent. Management determines the classification of its financial
assets during the initial recognition and reconsiders it, in the conditions prescribed by IAS
39, on each annual or interim closing date.
The financial liabilities defined by IAS39 include loans recognised at amortised cost and
financial liabilities recognised according to the fair value option. They correspond to the
balance sheet items below: current and non current financial debts, other debts, trade
2.10.1. Measurement and recognition of financial assets
a)
Loans and receivables are non derivative financial assets with determined or
determinable payments which are not traded on an active market. They are included in
date. The latter are classified in non current assets. Loans and receivables are
recognised in the balance sheet under “trade receivables”, “other debtors” and “financial
b)
non current financial assets.
These are amounts paid to lessors as guarantee for rents. The value of these assets is
regularly readjusted when the rents are revised. The impact of the discounting is
277
considered as immaterial for the Group’s accounts. They are tested for impairment in
case of an indication of loss of value. A provision for impairment is recorded when the
carrying amount is greater than the estimated recoverable value.
c)
Available-for-sale financial assets include investment securities of non consolidated
companies. They are included in non current assets, unless the Group plans to sell them
their acquisition cost which the Group considers that it represents their fair value, in the
absence of an active market. Impairment is recognized in case of a long term drop in their
value in use. The value in use is determined according to financial criteria such as share
of equity and profitability outlook.
2.10.2. Measurement and recognition of financial liabilities
a)
Long-term loans
Bank loans
the effective interest rate method, which takes into account all issuance costs ; any
recognized in income over the term of the loan according to the effective interest rate.
Convertible bond loans
For convertible bond loans, the composite financial instrument is separated between a
debt component and an equity component right from their initial recognition. The fair
value of the debt component at issue is determined by discounting future contractual
cash flows, by using the applicable market rate for a bond issue that may have been
subscribed by the company at the same conditions but without a conversion option. The
debt component is then measured on the basis of the amortised cost. The value of the
equity component is determined at issue by the difference between the fair value of the
debt component and the fair value of the bond loan. The value of the conversion option is
not reviewed during subsequent years.
Issuance costs are broken down between the debt part and the equity part on the basis of
their respective carrying amounts at the time of the issue.
b)
With the exception of derivative instruments the other financial liabilities are measured at
amortised cost.
2.10.3. Measurement and recognition of derivative financial instruments and hedging
transactions
on the designation of the derivative as a hedging instrument and where applicable, the
nature of the item covered.
278
The derivative instruments held by the Group are therefore considered as derivative
income as other financial income and expenses.
2.11 Inventory
2.12 Trade receivables and other debtors
measured at their amortised cost using the actual interest rate method, after deducting
initial actual interest rate. The amount of the provision is booked in the income statement
as an estimated expense.
The heading “cash and cash equivalents” includes liquid assets, sight bank deposits,
highly liquid short term investments with initial maturities less than or equal to three
liabilities.
2.14 Share capital
the additional costs directly attributable to the transaction and the related tax impact, is
2.15 Deferred taxes
regulations) that were adopted or nearly adopted on the closing date and which is
The effect of any change of the tax rate is booked in the income statement with the
exception of changes concerning the items directly booked in equity.
279
compensation and are the responsibility of the same tax administration.
which will allow the deduction of timing differences, is probable. Their recoverable value
is reviewed at each closing and the booked value reduced in so far as it is no longer
probable that a sufficient taxable profit will be available to allow the use of all or part of
the advantage of this deferred tax asset.
2.16 Employee benefits and long service awards
known as a defined-benefits pension plan as defined by IAS 19 given that it defines the
amount of the pension benefit that will be collected by an employee who retires,
depending, generally on one or several factors, such as age, service record and salary.
The liability booked in the balance sheet under pension plans and other defined benefits
plans corresponds to the discounted value of the obligation linked to the defined benefits
plans at year end as well as the adjustments for actuarial gains and losses and the costs
of non recognised past services. The obligation under the defined benefits plans is
calculated each year by independent actuaries according to the projected credit units
method. The discounted value of the obligation under the defined benefits plan is
determined by discounting the estimated future cash outflows based on the obligation
interest rate of tier one companies and whose term is close to the estimate average term
of the concerned retirement obligation.
the obligation under the defined benefits plants (corridor), are booked in the income
statement over the term of the expected residual average active life of the concerned
employees.
Costs for past services are immediately recognised in the income statement, unless
changes to the pension plan are subordinated to maintaining the employees in activity
over a given period (the vesting period). In the last case, costs for past services are
amortised on a straight line basis for the vesting period.
on a mandatory basis. Once the contributions paid, the Group is not bound by any other
payment condition. The contributions are booked in expenses linked to employee benefits
when they are due. Contributions paid in advance are booked under assets in so far as
the payment of an advance results in reducing future payments or a cash refund.
Commitments concerning other long-term benefits:
Other employee and related commitments for which a provision is set aside are mostly
comprised of premium payments on the occasion of the distribution of long-service
awards.
280
2.17 Provisions
to fully extinguish the current obligation, discounted if necessary, on the closing date.
Dividend payouts to the Company’s shareholders are booked as a liability in the Group’s
financial statements during the period in which the dividends are approved by the
Company’s shareholders.
The Group presents basic earnings per share and diluted earnings per share.
The basic earnings per share is computed by dividing the Group’s net income for the year
The diluted earnings are calculated from the Group’s net income for the year, corrected
by the financial cost of debt dilutive instruments and their impact on the equity of
employees, net of the corresponding tax effect. Where the basic earning per share is
negative, the diluted earning per share is identical to the basic earnings.
In case of significant non current items likely to disrupt the clarity of earnings per share
and diluted earnings per share, net earnings exclusive of non current items per share is
calculated. The non current elements taken into account for this calculation then
corresponds to all the items included in the lines “other operational income and charges”.
3.
3.1
Financial risk
flow variations due to the change in interest rates. The Group’s risk management
Derivative financial instruments are used to hedge certain risk exposures.
a)
Market risks
The Group is exposed to the risk price which affects investment securities booked in
available-for-sale assets. However, given the nature of the investment securities, this risk
is considered low by the group.
281
Currency risks
Given that the Group’s businesses are based in France and in the Eurozone, its exposure
to currency risks is practically inexistent.
b)
Credit risk
instruments and the transactions settled in cash, the counterparties are restricted to top
quality financial institutions.
c)
Liquidity risk
appropriate credit facilities and being able to settle its positions on the market. The Group
maintains financial flexibility by managing credit lines opened but not used, via a cash
pooling system set up with its major banks.
d)
issued at floating rates expose the group to the risk of cash flow over interest rate.
The Group manages its cash flow over interest rate risk by contracting floating vs. fixed
rate swaps. On the economic level, these interest rate swaps result in converting these
floating rate loans into fixed rate loans. Under the interest rate swaps, the Group agrees
with third parties to swap, according to defined time intervals, the differential between the
fixed contractual rates and the variable rates calculated by reference to a certain notional
amount.
3.2
UCITS booked under cash equivalent) is based on the market prices at the closing date.
rates on the closing date. The valuations of the Group’s derivative instruments are
provided to the Group by its banks.
The nominal value, less the provisions for impairment, trade accounts and other
these items.
282
4.
The current financial year starts from 1 May 2006 and ends on 31 December 2007.
The Group acquired the assets below during the year:
-
Sub-Group Medica:
The company MEDICA SA (formerly OBO1 SAS) acquired the sub-group SFM (formerly
MEDICA) on 9 August 2006, which was consolidated for the first time in the financial
statements of the MEDICA Group (formerly OBO1) on 1 July 2006.
-
France :

the Montrond psychiatric institution (healthcare), September 2006;

the Montrond Alma institution (healthcare), January 2007;

the Jonchère St Maurice institution (healthcare), January 2007;

the Saussens institution (healthcare), March 2007;

the Narbonne Les Pins institution (EHPAD), March 2007;

the Marseille Les 4 Trèfles institution (EHPAD), April 2007;

the Mazères institution (EHPAD), April 2007;

the Labarthe sur Lèze institution (healthcare), July 2007
-
Italy:

the Monza, Baceno, Cilegio institutions, June 2006;

the Ippocrate institution, June 2007.
detailed below:
Italy
Amount paid in cash
France
7,984
Total
454,471
462,455
1,303
1,303
Call
7,984
455,774
463,758
Fair value of acquired net assets
7,984
126,231
134,215
0
329,543
329,543
Goodwill
The assets and liabilities linked to these acquisitions include:
Italy
France
Total
ASSETS
Intangible assets
13,267
445,045
458,313
Tangible assets
3,179
257,833
261,012
283
Italy
France
1
12,196
12,197
181
181
2,166
2,166
1
1
717,422
733,870
1,155
1,155
1,131
32,309
33,439
1
4,032
4,033
342
21,373
21,715
1,460
5,731
7,192
3,705
3,705
Deferred tax assets
Non current assets
16,448
Inventory
Customers
Current tax expense
Other debtors
Total
2,116
30,522
32,639
Current assets
5,051
98,827
103,878
Minority interests
(724)
(4,809)
(5,532)
(3,985)
(334,370)
(338,355)
(3,054)
(3,054)
Other provisions
(3,838)
(3,838)
LIABILITIES
(4,090)
(190,996)
(195,086)
(1,274)
(30,168)
(31,441)
(9,349)
(562,425)
(571,774)
(188)
(27,179)
(27,367)
(370)
(370)
Bank loans and advances (less than one year)
Provisions (less than one year)
Trade payables
(3,052)
(35,136)
(38,188)
Other creditors
(160)
(53,741)
(53,901)
(43)
(6,358)
(6,401)
(3,443)
(122,784)
(126,226)
7,984
126,231
134,215
2,116
19,452
21,568
Cash outflow
(7,984)
(455,774)
(463,758)
Impact of changes in the scope of consolidation on cash
flow
(5,868)
(436,323)
(442,190)
13,266
444,197
457,463
Tax liabilities
Current liabilities
NET ASSET
Impact of changes in the scope of consolidation on cash
flow
Intangible assets
284
Italy
Total
2
848
850
13,268
445,045
458,313
0
329,543
329,543
13,268
774,484
787,753
Goodwill
France
Acquisition of business assets:
Two business assets were acquired in the year:

the Nailloux institution (healthcare), November 2006;

the Cesson institution (EHPAD), November 2006;
In addition, the Group acquired the business assets and real estate of the Verdon
institution in Gréoux Les Bains (EHPAD), in October 2007 (not consolidated in the year).
The impacts of the consolidation of the Verdon institution would have been as
follows:
Balance sheet:
Assets
Capital Le Verdon
Le Verdon securities with Medica France
(10)
Elim, Le Verdon securities with
Medica Fracne
Liabilities
10
(10)
Goodwill (social business asset)
1 695
Income or Loss
Property
5,572
Prov for Risks
70
28
Other fixed assets
422
Residents’ deposits
Trade receivables
331
Trade payables
Other liabilities
322
C/C Medica France
Elim. C/C Le Verdon at Medica France
(8,191)
Intragroup elim
(355)
167
8,191
(8,191)
Cash
(33)
Taxes and social contributions
198
Total assets
108
Total liabilities
108
Income Statement (in thousands of euros)
Revenue Le Verdon
648
Intragroupe elim
(77)
285
Revenue Le Verdon
648
(41)
External expenses
(137)
Intragroup elim
77
(67)
Personnel expenses
(467)
Other expenses
(2)
EBITDA
(66)
Amortization expense and provisions
(177)
Operating income
(243)
Financial expenses
(112)
Net Income
(355)
Newly-created institutions in the year:
Six new institutions were created and consoldiated for the first time in 2007:
5.

the Sormiou institution (Ehpad), December 2006;

the Avignon institution (healthcare), January 2007;

the Vandoeuvre institution (Ehpad), October 2007;

the two institutions of Lyon Oullins: Ehpad, September 2007 and healthcare,
December 2007;

the Echirolles institution (healthcare), December 2007.
Goodwill
The main movements for the period can be analysed as follows:
Medico-Social
Healthcare
Total
Net carrying amount at beginning of the year
243,827
88,938
332,765
243,827
88,938
332,765
Earnout
6.
Intangible assets
Operating
permits
Software
Other
intangible
assets
Tangible
fixed assets
under
construction
Total
Net carrying amount at
beginning of the year
Entries into scope
457,463
621
Acquisitions
946
286
229
458,313
505
1 451
Operating
permits
Software
Disposals
(6)
Fixed assets transfers in
progress
Other
intangible
assets
(229)
428
Reclassification
457,463
1,384
Cost of acquisition
457,463
3,443
7.
(428)
0
46
46
(604)
0
123
458,970
123
461,029
(2,059)
457,463
1,384
Total
(235)
(604)
Net carrying amount at year
end
Net carrying amount at year
end
Tangible
fixed assets
under
construction
(2,059)
0
123
458,970
Periodic impairment tests
Pursuant to IAS 36 “Impairment of assets”, impairment tests were carried out at the end
of fiscal 2007 on the value of intangible assets with indeterminate useful life (cannot be
amortised) and goodwill. The tests revealed no impairment loss requiring recognition.
Operating permits are assigned to each concerned Cash Generating Unit (CGU).
Goodwill is assigned to the Groups of Cash Generating Units (GCGU) defined by the
In accordance with the principle stated in Note 2.9 the carrying amount of each asset
group is compared to its fair value less costs to sell or its value in use defined as equal to
the present cash flow expected to be derived from the asset over 10 years, stemming
from the latest forecasts for each of the groups of cash generating units.
The extrapolation of the 2008 budget on the following nine year is determined by applying
a 3% growth rate. These assumptions are based on past experience of Medium Term
Plans, and macro economic data on the health market. This growth rate does not exceed
the average to medium-term growth rate of the Group’s business segments. The Group
the market’s recent transactions. These flows are discounted at a rate of 7.5%, based on
the average weighted cost of the Group’s capital.
8.
Land and
buildings
Vehicles,
equipment
and tools
Other
Fixed
assets in
progress
Total
Net carrying amount at beginning
of the year
Entries into scope
227,941
5,695
Change in consolidation method
16,766
11,111
261,512
0
287
Land and
buildings
Vehicles,
equipment
and tools
Other
Fixed
assets in
progress
Total
Acquisitions
16,370
3,444
6,158
8,798
34,770
Disposals
(5,816)
(154)
(246)
(8,084)
(14,300)
8,364
260
713
(9,337)
0
Reclassification
(491)
(167)
157
(47)
(548)
(12,079)
(2,547)
(6,125)
0
(20,751)
234,288
6,532
17,423
2,440
260,684
Cost
305,396
20,503
46,891
2,440
375,230
(71,108)
(13,971)
(29,469)
234,288
6,532
17,422
(114,548)
2,440
260,684
Land and Buildings include the amounts below in the context of assets taken by the
Group in connection with lease agreements:
9.
2007
Cost
186,074
(40,413)
Net carrying amount
145,661
Available-for-sale financial assets primarily include acquisitions of minority investment
securities in non consolidated companies at year end 2006 (Les parentèles).
10.
The derivative financial instruments of MEDICA Group (formerly OBO1) primarily
comprise interest rate hedge contracts to the extent where a large portion of syndicated
loans are at variable rates.
At 31 December 2007, the notional of fixed rate swaps was €450 million with a maturity
date at 11 August 2011.
These instruments are initially recognised at their fair value; they are then reassessed at
their fair value. The fair value is calculated as the present value of estimated future cash
flows. The valuations of the MEDICA group’s (formerly OBO1) derivative instruments are
provided to the group by its banks.
Type of
agreem
ent
Notional
in EUR
millions
Maturity
date
Cap or
Swap rate
Reference rate
2007
Assets
SWAP
200
08.2011
3.82%
Euribor 3 months
3,741
SWAP
250
08.2011
3.53%
Euribor 3 months
7,281
288
Liabilities
Type of
agreem
ent
Notional
in EUR
millions
Maturity
date
Cap or
Swap rate
Reference rate
Assets
11.
2007
Liabilities
11,022
0
Rents paid in advance are discounted at the rate of 5.5% to their present value. The
short-term portion is classified in “Other liabilities”.
2007
Advance rents
260
Guarantee deposits
14,267
Miscellaneous
5
12.
14,532
Trade accounts, other debtors and other current assets
2007
Trade receivables
30,762
Impairment allowance
(1,795)
Trade accounts receivable – net
28,968
Accrued expenses
6,629
Tax and social receivables
4,969
Accrued income
2,975
Advances paid
6,576
Other receivables
11,434
Other debtors and non-current assets
32,584
During the year ended 31.12.07, the Group recognised a provision of €704,000 for its
impaired receivables and the Group used a provision for the impairment of receivables of
€565,000.
The use of reversals of provisions for impairment of receivables is recognised under
“Other operating income and expenses” in the income statement, and deducted from
losses on irrecoverable receivables. The reversals of unused provisions are booked in
diminution of the Depreciation and amortisation for the year.
Prepaid expenses mostly concern rents.
Receivable income mostly corresponds to accrued tripartite allowances as well as the
repayments expected from training expenses.
289
Paid advances mostly concern the acquisition of the Paloumère institution and the arrear
discounts granted by suppliers.
13.
2007
Cash UCITS
5,116
20,751
25,867
(1,653)
Net cash
24,214
sensitivity less than or equal to 0.25 and historical volatility at 12 months, close to zero.
14.
Equity
Share capital:
The capital stock comprises 7,286,040 shares with a nominal value of 16 euros per
share. All the issued shares are fully paid-up.
15.
2007
Trade payables
33,947
Tax and social liabilities
33,934
Down payments received
2,840
Debts- payables to fixed asset suppliers
50
Other debts
3,639
Deferred income
818
41,280
Accrued income in 2007 corresponds primarily to a grant received for the creation of the
Avignon institution.
16.
Other non current debts
2007
Deferred income
4,041
Residents deposits
11,892
40% repurchase option Italy (AETAS)
14,720
2,888
Miscellaneous
1,187
34,728
290
Other non current liabilities include deposits paid by the residents. Their amount has not
their payment.
The AETAS Italy debt corresponds to the outstanding 40% call option that could be
exercised between 1 May 2008 and 30 April 2010. This debt is determined from a
multiple of the restated pro forma current operating income (or loss). This debt was
discounted at the rate of 5.5%.
Debts concerning the “Saint-Simon” lease correspond to a lease for which the rents are
17.
The MEDICA group (formerly OBO 1) has two types of debt: a convertible bond loan
issued in 2006 and bank debt in the form of a syndicated loan and lease purchases.
The MEDICA Group (formerly OBO1) issued a convertible bond loan in equities of a
nominal amount of €174.8 million in August 2006. Interests due on the convertible bond
loan are recognised in equity.
On 9 August 2006, in order to refinance the existing bank debt, the MEDICA group
(formerly OBO1) signed with a bank syndicate led by The Royal Bank of Scotland, a
syndicated loan of €447.3 million together with an acquisition facility of €150 million and a
revolving credit facility of €25 million.
In July 2007, a portion of this debt was renegotiated: part of the syndicated loan was
redeemed early and refinanced by a new syndicated loan for an equivalent nominal
amount.
2007
92,547
539,243
2,201
32,503
666,494,
11,820
363
344
1,653
14,180
680,674
74,597
19,904
291
775,175
Analysis of loans:
The loans previously mentioned are analysed as follows:
Nominal interest rates
(%)
Maturity
date
31/12/2007
2019
199,869
10.00% capitalised
Redemption value of convertible bond loan
199,869
Syndicated loan
,
€92 million mezzanine loan (09/08/06)
Euribor 3 months + 3% and
5.625 capitalised interests
2016
99,435
€30 million loan - TA (09/08/06)
2013
27,750
€40 million loan - TB (09/08/06)
2014
40,000
€105.6 million loan - TB (09/08/06)
2014
105,600
€17 million loan - TB2 (06/07/07)
2014
17,000
€40 million loan - TC (09/08/06)
2015
40,000
€105.7 million loan - TC (09/08/06)
2015
105,700
€17 million loan - TC2 (06/07/07)
2015
17,000
ACF
2015
57,500
RCF
2013
12,000
344
,
Leases
40,202
Other bank loans
11,122
1,653
Redemption value of syndicated loans and
other debts
575,306
Redemption value of bank loans and financial
liabilities
775,175
(74,597)
(19,904)
680,674
Net financial debt:
Net financial debt as defined by the Group corresponds to the total of financial debts and
bank loans less cash and cash equivalents and marketable securities.
2007
680,674
-25,867
Net indebtedness
654,807
292
Interest rates:
The effective interest rates on the closing dates are detailed below:
2007
Convertible bond loan and syndicated loan
10.41%
Lease financing
6.84%
Banking ratios:
With respect to these loans, the Group is required to follow a number of usual obligations
in this type of contract. In the event of non compliance between them, the banks may
force the Group to totally or partly refund the loan or renegotiate the financing conditions.
The Group is thus required to comply with the financial covenants below for the period
from 1 January to 31 December 2007*:
Financial covenants
EBITDA/net interests
Net
indebtedness/EBITDA
Cash flow/Cost of debt
Objective
R1 > 1.50
R2 < 9.15
R3 > 1
Corrected
1.88
7.51
1.83
* These covenants are gradual over the entire duration of the agreement and are calculated at the level of MEDICA
(formerly OBO1) and its consolidated subsidiaries.
Less than
one year
Between one
More than
and five
five years
years
% of capital
199,869
199,869
Syndicated bank loans and other bank loans
5,554
23,876
504,020
533,451
Leases
6,973
23,303
9,926
40,202
1,653
Total gross values
14,180
1,653
47,179
713,815
775,175
Lease:
Future minimum payments under the lease agreements are indicated below:
2007
Less than a year
9,977
1 - 5 years
29,758
11,402
Future minimum payments under the lease agreements
51,137
Future financial expenses linked to finance lease agreements
10,935
Financial liabilities linked to finance lease agreements
40,202
293
2007
Short-term debts of lease agreements.
6,973
Non current financial liabilities of lease agreements
18.
33,229
Analysis of financial assets and liabilities.
Financial assets and liabilities included in the balance sheet headings are the following:
(In thousands of euros)
Fair Value
Held for
trading
(swap)
Repurchase
commitments for
AETAS minority
interests
Discounted
receivables
and
payables
Financial
debt at
amortised
cost
Other
financial
instruments
Total
Fair
Value
Other non current financial
assets
0
0
260
0
14,272
14,532
14,532
Available-for-sale assets (non
consolidated securities)
0
0
0
0
1,952
1,952
1,952
Trade receivable and related
accounts
0
0
0
0
28,968
28,968
28,968
Other debtors (excluding tax
receivables)
0
0
74
0
21,410
21,484
21,484
0
0
0
0
0
0
0
11,022
0
0
0
0
11,022
11,022
0
0
0
0
25,867
25,867
25,867
11,022
0
334
0
92,469
103,825
103,825
Non-current financial liabilities
0
0
0
554,494
112,000
666,494
666,494
0
14,720
2,888
0
13,079
30,686
30,686
Bank loans and advances (<
one year)
0
0
0
3,360
10,820
14,180
14,180
Trade payables
0
0
0
0
33,947
33,947
33,947
Trade receivables
0
0
0
0
40,463
40,463
40,463
Total financial liabilities
0
14,720
2,888
557,854
210,308
785,770
785,770
Derivative financial
instruments
Total financial assets
Financial debts at amortised cost are those subscribed by MEDICA (formerly OBO1) and
SFM (formerly-MEDICA), including the convertible bond loan.
19.
Deferred taxes
2007
14
858
294
2007
Deferred tax assets
872
208,824
(480)
22,
208,366
Liabilities net of deferred tax liabilities
(207,495)
The change in net deferred tax is presented below:
2007
As at 1 May 2006
0
Change in consolidation scope
(192,920)
Taxes charged to the income statement
10,224
Taxes directly charged to equity or goodwill
(24,798)
Au 31 décembre 2007
(207,495)
Deferred tax liabilities:
Time
Intangibles
differences
Revaluation
Financial
debts and
real estate
instruments
units
Lease
Total
As at 1 May 2006
Debited from / (credited to)
income statement
(522)
84
6,858
(673)
1,111
6,858
Charged to equity or goodwill
(14)
(76)
24,802
10
73
24,796
Acquisition of a subsidiary
929
148,525
1,352
37,001
7,306
195,113
14
(6)
(8)
0
407
148,526
8,481
226,766
Reclassifications
At 31 December 2007
33,013
36,338
Deferred tax assets:
Capitalisation of
tax deficits
Total
Retirement
allowances
As at 1 May 2006
Debited from / (credited to) the income statement
16,766
316
17,082
(3)
(3)
1,131
1,062
2,193
17,897
1,375
19,271
Reclassifications
At 31 December 2007
295
probable that the future taxable profits will be available.
20.
2007
4,060
Retirement benefits
Long-service awards
64
Total
4,124
684
Retirement benefits
663
Long-service awards
12
Total
675
2007
Updated value of non financed liabilities
4,334
(210)
4,124
2007
658
Financial cost
228
5
891
Paid benefits
(216)
675
Including personnel expenses
447
Including financial expenses
228
2007
Liabilities taken over during a business combination
3,449
891
Paid benefits
(216)
4,124
296
2007
684
3,440
including portion more than one year
Assumptions
2007
Discounting rate
5.25%
2.50%
Retirement age
Turnover rate
21.
Employees: 60 years
Executives: 62 years
0 to 8% according to the age of the employees
Provisions for non-current operations
Labour courts Closing of Miscellaneous
institutions
Total
As at 1 May 2006
Recognised in the consolidated income statement:
2,422
1,747
3,284
7,453
(878)
(277)
(548)
(1,703)
Used during the year:
(664)
(1,242)
(236)
(2,142)
Changes in scope
1,566
-
2,437
4,003
2,446
228
4,937
7,611
The provision for shutting down institutions covers the cost of business transfer from La
Sauvagère Institute in Marseille to Les Cyprès in Avignon.
The other provisions cover a dispute with the tax administration concerning a request for
VAT refund for a total of €2 million, a provision for risk on the wage tax of €1.5 million
and commercial litigations. After consulting external consultants, management
considered that the outcome of these lawsuits would not lead to any significant loss in
excess of the amounts set aside at 31 December 2007.
22.
2007
(178,191)
(65,549)
Retirement expenses – defined benefits schemes & Long service awards
(447)
(244,187)
France
5,785
297
2007
Outside France
84
Total
5,869
Allowances to provisions for social disputes posted under personnel expenses totalled
€2,422,000 in the year ended 31 December 2007.
The reversals used of provisions for social disputes posted under personnel expenses
totalled €664,000 in the year ended 31 December 2007.
23.
External expenses
2007
Temp staff
(3,774)
Professional Fees
(8,367)
Property leasing
(50,463)
Furniture rental
(7,248)
Maintenance
(6,842)
Subcontracting
(48,729)
Inventory purchases
(10,856)
Miscellaneous
(18,012)
External expenses
(154,291
The sub-contracting item includes €27,197,000 of expenses from Aetas, the Italian
subsidiary, given that almost the entire staff is subcontracted.
24.
2007
Operating subsidies
324
112
Reversal of provisions on trade receivables
565
Losses on bad debts
(664)
Miscellaneous
153
490
Reversals of provisions on trade receivables only apply to the reversals used. The
reversals of unused provisions are booked in diminution of the Depreciation and
amortisation for each year.
25.
2007
(349)
Costs for closing of institutions
(2,078)
298
2007
Reversal of goodwill in income
103
(69)
Miscellaneous
(74)
26.
(2,467)
2007
(80,287)
(5,108)
(85,395)
2,173
(83,223)
The effect of amortised cost represents the discrepancy between nominal interest rate
and effective interest rate.
27.
2007
(228)
2,572
(1,385)
125
(1,332)
Change in value of derivative instruments
7,317
117
(233)
6,953
299
28.
Income tax expense
2007
Current tax expense
(5,903)
Deferred tax income
10,224
Income tax expense
4,321
2007
Pre-tax earnings, share in equity-method companies and earnings on goodwill
(9,284)
Tax rate
33.33%,
Theoretical tax expense
-3,095
Non taxable income and expenses
460
Non capitalised prior deficits
66
Non capitalised prior deficits charged to the year
(441)
Capitalised or adjusted prior deficits in the year
25
3.3% social contribution
48
Impact of reduced rate taxations
29.
(673)
Earnings of companies with transparent tax policies in minority interests
(28)
Tax credits
(37)
Non allocated IFA
(39)
Tax rate difference on foreign companies
445
Tax savings on securities acquisition costs
(1,051)
Recognised tax expense
(4,321)
Net depreciation and provisions
In thousand of euros
2007
Depreciation and amortisation on property, plant and equipment
Depreciation and amortisation on intangible assets
20,751
604
Allowances to other provisions
7,453
(1,704)
Reversals on other provisions
(2,142)
Depreciation and provision for retirement commitments and similar benefits
Reversal of negative goodwill in profit or loss
675
(103)
Other reversals
(7)
Depreciation and provisions in the Statement of cash flow
Depreciation and amortisation in the income statement
300
25,527
In thousand of euros
2007
Depreciation and amortisation on property, plant and equipment
20,751
Depreciation and amortisation on intangible assets
604
Depreciation and amortisation in income statement including reversal of
provision
21,355
Including depreciation expense recognised in other operational income and expenses
500
Depreciation and amortisation excluding reversal of provisions
21,855
Including current
21,828
Including non current (shut down of institution)
Allowance to operational
provisions
income/
expenses
Non current provisions
27
operating
income/
expenses
Personnel
expenses
External
expenses
7 546
Trade provisions
income/
expenses
Miscellaneous
(93)
7,453
704
704
Retirement commitments
449
Reversal of unutilised non current
provisions
Reversals of non utilised Trade
provisions
675
(1,704)
(449)
(449)
(1 242)
Reversals of used Trade provisions
(664)
(117)
(119)
(565)
(12)
6 085
30.
226
(1 704)
Reversals of utilised non current
provisions
Allowances / reversals Other
Assets
Total
(565)
(8)
(1 242)
(2,142)
(573)
(215)
(117)
(23)
(21)
(65)
110
(140)
(3,909)
Earnings per share
Basic earnings
Basic earnings per share is computed by dividing the Company’s net income for the year
2007
Profit attributable to the Company’s shareholders (in thousands of euros)
(5,248)
Number of current common shares
1,823,301
Number of current preference shares
5,462,739
Basic earnings per share (€ per share)
(0,72)
301
31.
Dividend per share
The Group paid no dividend in 2005 and 2006.
32.
significant liabilities.
33.
Consolidated income statement for the 01/01/07 – 31/12/07 period (12 months)
(12 months) 2007
Revenue
384,700
(18,452)
External expenses
(105,990)
(25,504)
Personnel expenses
(168,084)
277
66,947
EBITDA
(15,072)
(4,595)
47,281
(1,828)
45,453
13
(59,510)
(59,497)
4,397
Pre-tax income
(9,647)
Income tax expense
4,077
Net income
(5,570)
(5,907)
Minority interests
34.
337
Commitments given:
2007
Guarantees given to Finance-lease agencies
4,581
Businesses pledged to Finance-lease agencies
Sureties given to Credit institutions
20,093
520,169
302
2007
Businesses pledged to Finance-lease agencies
3,597
UCITS pledged given to credit institutions
320
867
Purchase and investment promises
Project acquisition promises (subject to conditions precedent)
32,222
companies:
The table below details all the future minimum payments under non cancellable
operating lease agreements:
2007
Less than one year
37,563
124,258
69,083
Future minimum payments for operating leases
230,904
2007
Asset and Liability guarantees received linked to securities acquisitions
8,902
Asset and Liability guarantees given in connection with securities disposal
35.
-
There is no transaction between MEDICA Group (formerly OBO1) and the shareholders
with control over the Group, including TBU-3 International, except for the compensation
for the convertible bond loan representing €25.0 million of capitalised financial interests
for the year ended 31 December 2007 (20 months).
The company OBO1 has not paid out any dividend since the acquisition of the subgroup
SFM (formerly MEDICA) in August 2006.
Other information concerning affiliated parties:
No transaction between related parties had a material impact on the financial position
and performance of the Group.
Executives received the compensation below:(
2007
584
60
-
303
2007
-
-
(*)excluding employer charges and expenses for the 2007 calendar year
36.
Recent developments
Significant acquisitions that have occurred since the end of fiscal 2007:
On 01 January 2008, acquisition of the Sacré Coeur business, EHPAD with 30 beds
located at Grentheville (14),
On 08 January 2008, acquisition of SA La Paloumère, healthcare institution with 50 beds
located at Caubeyres (47),
On 28 February 2008, acquisition of SAS La Roseraie and SAS La Varenne, healthcare
institutions with 50 beds each located respectively in Hurigny (71) and La Varenne St
Sauveur (71),
On 1 April 2008, acquisition of SAS Montvert, healthcare institution with 62 beds located
at Castelmaurou (31)
37.
Currency
2007
Method
MEDICA (formerly OBO1)
% Control
% of interest
€
FC
parent
-
SFM (formerly MEDICA)
€
FC
100.00
100.00
SCI CHAMBERY JOURCIN
€
FC
100.00
100.00
€
FC
100.00
99.92
€
FC
100.00
100.00
SOCEFI
€
FC
100.00
100.00
SDSA
€
FC
100.00
99.99
SARL RA DE LA FERME
€
FC
100.00
99.99
€
FC
100.00
100.00
SARL INVAMURS
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
SCI LAXOU
€
FC
51.00
51.00
SCI LES SABLES
€
FC
100.00
100.00
SCI LYON GERLAND
€
FC
100.00
100.00
SCI ST MALO
€
FC
100.00
100.00
€
FC
100.00
100.00
SCI DU MANS
€
FC
100.00
100.00
SCI D'ARS EN RE
€
FC
100.00
100.00
304
Currency
2007
Method
% Control
% of interest
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
SARL RA DE LAXOU
€
FC
100.00
100.00
SARL GRAPA
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
SARL RA DU MANS
€
FC
100.00
100.00
SCI DE L'EUROPE
€
FC
100.00
100.00
€
FC
99.80
99.79
SNC DE DINARD
€
FC
100.00
99.99
€
FC
100.00
99.99
SAS RA DE CHALONS
€
FC
100.00
99.99
SARL SOGEMAPAD
€
FC
100.00
99.99
SNC DE L'EUROPE
€
FC
100.00
99.99
€
FC
100.00
99.99
SARL SERPA
€
FC
100.00
99.99
SARL SERAPA
€
FC
100.00
99.99
SA RA DE SARZEAU
€
FC
100.00
99.99
€
FC
100.00
99.99
€
FC
100.00
99.99
SAS RA DE DINARD
€
FC
100.00
99.99
€
FC
95.96
95.95
€
FC
100.00
100.00
€
FC
99.71
99.71
SARL CCN
€
FC
100.00
100.00
SARL LES ARBELLES
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
SCI LE SPLENDID
€
FC
100.00
100.00
LES LILAS
€
FC
100.00
100.00
COGOLIN
€
FC
100.00
100.00
SARL BEL AIR
€
FC
100.00
100.00
MEDICA France
€
FC
100.00
100.00
305
Currency
2007
Method
% Control
% of interest
€
FC
100.00
100.00
TOPAZE
€
FC
100.00
100.00
LES PINS
€
FC
100.00
100.00
SCI DE BICHAT
€
FC
100.00
99.99
SCI CCN
€
FC
100.00
100.00
SCI CMA
€
FC
100.00
100.00
€
FC
100.00
100.00
€
FC
100.00
100.00
AETAS S.P.A.
€
FC
100.00*
100.00*
II FAGGIO Srl
€
FC
100.00*
100.00*
RESIDENZA I PLATANI
€
FC
100.00*
100.00*
I ROVERI Srl
€
FC
100.00*
100.00*
CROCE DI MALTA Srl
€
FC
100.00*
100.00*
Il CASTAGNO Srl
€
FC
100.00*
100.00*
LE PALME Srl
€
FC
100.00*
100.00*
I GIRASOLI Srl
€
FC
100.00*
100.00*
VILLA ANTEA Srl
€
FC
100.00*
100.00*
GLI OLEANDRI Srl
€
FC
100.00*
100.00*
CARE SERVICE
€
FC
100.00*
100.00*
IPPOCRATE SPA
€
FC
100.00*
100.00*
€
FC
91.78
91.78
€
FC
91.78
91.78
€
FC
100.00
100.00
SARL MAISON BLANCHE
€
FC
100.00
100.00
€
FC
99.00
99.00
€
FC
100.00
100.00
SARL LUBERON SANTE
€
FC
100.00
100.00
€
FC
100.00
100.00
SAS MACO
€
FC
100.00
100.00
SCI DU BOIS HAUT
€
FC
100.00
100.00
€
FC
100.00
100.00
SARL CRC GESTION
€
FC
100.00
100.00
SAS SAINTE COLOMBE
€
FC
100.00
100.00
€
FC
100.00
100.00
306
Currency
2007
Method
% Control
% of interest
€
FC
100.00
100.00
SCI VALMAS
€
FC
100.00
100.00
SAS ALMA SANTE
€
FC
100.00
100.00
SCI ALMA SANTE
€
FC
100.00
100.00
SA CLINIQUE SAINT MAURICE
€
FC
100.00
100.00
SCI CLINIQUE SAINT MAURICE
€
FC
100.00
100.00
SARL CLINIQUE DE SAUSSENS
€
FC
99.96
89.96
SARL MT SANTE
€
FC
90.00
90.00
SARL CGCV
€
FC
100.00
100.00
SARL RESIDENCE LES PINS
€
FC
100.00
100.00
SAS LES QUATRE TREFLES
€
FC
99.93
99.93
SCI GASTON DE FOIX
€
FC
100.00
100.00
SAS GASTON DE FOIX
€
FC
100.00
100.00
SAS ARJEAN
€
FC
60.00
60.00
SAS LE VAL DES CYGNES
€
FC
99.00
59.94
SAS DLS GESTION
€
FC
77.33
77.33
SCI DLS IMMO
€
FC
100.00
77.36
SAS CLINIQUE MEDICALE DE LA SAUVAGERE
€
-
-
-
SAS LE SPLENDID
€
-
-
-
SAS HOLDING DE L'ABBAYE
€
-
-
-
SAS SOFITRE
€
-
-
-
SCI LYON OULLINS
€
-
-
-
SCI NANCY VANDOEUVRE
€
-
-
-
€
-
-
-
Companies merged in 2007
Companies sold in 2007
SCI SAINT MAURICE LECLERC
* The AETAS group, of which 60% of securities were acquired in 2005, is fully consolidated given the
repurchase commitment for the remaining 40%.
307
25.6
Auditors’ report on the corrected consolidated financial statements for the 20
CONSTANTIN ASSOCIES
Patrick GRIMAUD
75012 – PARIS
92130 – ISSY-LES-MOULINEAUX
____
AUDITOR’S REPORT ON THE CORRECTED CONSOLIDATED FINANCIAL
STATEMENTS (20 MONTHS) FOR THE YEAR ENDED 31 DECEMBER 2007
To the Chairman,
In our capacity as statutory auditors for MEDICA S.A. (formerly OBO1 S.A.S.) and in
response to your request, we have carried out an audit of the corrected (20 months)
consolidated financial statements for the year ended 31 December 2007, as attached to
this report.
These corrected consolidated financial statements, finalised by the board of directors on
3 December 2009, reflect the correction of the calculation error concerning the
determination of the syndicated loan financial interests, described in Note 2-3 and
identified in November 2009. They were prepared under the responsibility of the board of
directors. It is our duty to express an opinion on these corrected consolidated financial
statements based on our audit. We stress that these corrected consolidated financial
statements do not correspond to the consolidated financial statements finalised by the
Chairman, which were presented in our legal report dated 23 April 2008, and were
approved by the general meeting on 25 June 2008.
the corrected consolidated financial statements are free of material misstatement. An
audit includes examining, on a test basis or using any other method of selection,
evidence supporting the amounts and disclosures in the corrected consolidated
statements. An audit also includes assessing the accounting principles used and
significant estimates retained, as well as evaluating the overall presentation of the
corrected consolidated financial statements. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the corrected consolidated accounts fairly and accurately reflect in all
material aspects and with respect to IFRS as adopted in the European Union, the net
worth, financial position and results of the group comprised by the people and the entities
308
included in the consolidation as at 31 December 2007 (20 months), as well as the result
of its transactions.
to Note 2-3 of the corrected consolidated financial statements relating to the impact of the
correction of the error in the calculation of the syndicated loan financial interests.
CONSTANTIN ASSOCIES
PATRICK GRIMAUD
Jean Paul SEGURET
309
25.7
Restated consolidated financial information for the 12 months ended 31 December
2007 45
Asset (figures in €K)
31/12/2007
(1)
(20 months restated)
31/12/2007
(3)
2006 restatements
(2)
Intangible assets
458,970
458,970
Goodwill
332,765
332,765
Tangible assets
260,684
260,684
14,532
14,532
1,952
1,952
872
872
Deferred taxes
1
1,069,776
1
0
1,069,776
1,373
1,373
Trade receivables
28,968
28,968
Tax assets
10,573
10,573
Other liabilities
25,955
25,955
6,629
6,629
11,022
11,022
Investment securities, other investments and short-term cash
assets
25,867
25,867
110,386
0
110,386
1,180,162
0
1,180,162
Total assets
Capital
116,577
116,577
0
0
Other reserves
0
0
(5,248)
659
49,757
(659)
50,415
161,085
0
161,085
349
12
337
Minority reserves
5,550
(12)
5,562
Total Minority interests
5,899
0
5,899
Total equity
166,983
0
166,984
666,494
666,494
3,441
3,441
Other provisions
7,611
7,611
208,366
208,366
Deferred taxes
34,728
920,640
45
14,180
(5,907)
34,728
0
920,640
14,180
The financial statements restated over the 12 months closed on 31 December 2007 have been audited by the Statutory
Auditors.
310
684
684
Trade payables
33,947
33,947
Trade receivables
41,280
41,280
2,447
2,447
Tax liabilities
92,538
0
92,538
Total stockholders’ equity and liabilities
1,013,178
0
1,013,178
Total liabilities
1,180,162
0
1,180,162
(1) accounts 31 December 2007 (20 months) after correction of the calculation of the syndicated loan financial interests:
Period from 1May 2006 to 31 December 2007 for the parent company OBO1, and from 1July 2006 to 31 December 2007 for
Medica SA and its consolidated subsidiaries (Newly renamed SFM).
(2) 2006 restatements:
Period from 1 May 2006 to 31 December 2006 for the parent company OBO 1, and from 1 July 2006 to 31 December 2006
for Medica SA and its consolidated subsidiaries (Newly renamed SFM)
(3) Restated data 12 months 2007:
Period from 1 January 2007 to 31 December 2007 for all Group companies, after correction of the calculation of the
syndicated loan financial interests
31/12/2007
(1)
2006 restatements
(2)
31/12/2007
(3)
Income statement (figures in €K)
Revenue
-26,047
-7,595
-18,452
External expenses
-154,291
-48,301
-105,990
Personnel expenses
-244,187
-76,103
-168,084
-36,531
-11,027
-25,504
490
213
277
EBITDA
97,062
30,115
66,947
Depreciation expense
-21,828
-6,756
-15,072
-6,086
-1,491
-4,595
69,149
21,867
47,281
-2,467
-639
-1,828
66,681
21,228
45,453
557,628
172,928
384,700
407
394
13
-83,223
-23,713
-59,510
-82,815
-23,320
-59,497
6,953
2,556
4,397
-9,182
465
-9,647
Pre-tax income
311
Income taxes
4,321
244
4,077
-4,862
709
-5,570
-39
-39
-4,899
672
-5,570
-5,248
659
-5,907
Earnings after tax
Net income (loss)
Group share
Minority share
349
12
(1) : accounts 31 December 2007 (20 months) after correction of the calculation of the syndicated loan financial interests:
337
(2) : 2006 restatements:
(3) : Restated data 12 months 2007:
syndicated loan financial interests.
CASHFLOW STATEMENT (data in €K)
31/12/2007
(1)
31/12/2007
(3)
2006 restatements
(2)
(4,899)
671
25,527
8,518
17,009
(5,853)
(1,661)
(4,192)
1,280
(5)
1,285
39
39
0
16,094
7,562
8,532
(4,321)
(244)
(4,077)
82,815
23,318
59,497
94,588
30,635
63,951
(17,368)
(3,898)
(13,470)
1,048
1,074
(26)
3,870
Elim. of income on dividends from equity affiliates
Paid taxes
(5,570)
4,458
588
(4,203)
(8,053)
3,850
(15,143)
(3,907)
(11,236)
CASH FLOW LINKED TO OPERATING ACTIVITIES
63,380
16,439
46,939
(31,559)
(4,857)
(26,702)
(2,627)
(2,405)
(222)
11,704
991
10,713
(2,000)
(1,361)
(639)
510
508
2
(2,571)
(484)
(2,087)
(442,191)
(411,061)
(31,130)
0
0
Dividends received
312
CASH FLOW LINKED TO INVESTMENT ACTIVITIES
(468,733)
(418,669)
116,593
116,549
44
0
(0)
Capital increase
(50,065)
(25)
0
(25)
711,579
616,579
95,000
(344,245)
(296,438)
(47,807)
(54,397)
(17,145)
(37,252)
CASH FLOW LINKED TO FINANCING ACTIVITIES
429,505
419,545
9,960
Loan issues
Redemption of debts
CHANGE IN CASH AND NEAR CASH
24,152
(0)
0
17,314
6,836
17,316
24,152
24,152
(1) : accounts 31 December 2007 (20 months) after correction of the calculation of the syndicated loan financial interests:
Period from 1 May 2006 to 31 December 2006 for the parent company OBO 1, and from 1 July 2006 to 31 December
2006 for Medica SA and its consolidated subsidiaries (Newly renamed SFM)
(2) : 2006 restatements:
Period from 1 May 2006 to 31 December 2006 for the parent company OBO 1, and from 1 July 2006 to 31 December
2006 for Medica SA and its consolidated subsidiaries (Newly renamed SFM)
(3) : Restated data 12 months 2007:
syndicated loan financial interests.
313
EXPLANATORY NOTES
RESTATED CONSOLIDATED FINANCIAL INFORMATION
FOR THE PERIOD FROM 1 JANUARY 2007 TO 31 DECEMBER 2007
In August 2006, the holding company OBO1 (newly named MEDICA SA), became the
parent company of MEDICA SA (newly named SFM), parent company of the Medica
Group. OBO1 has a financial period beginning on 1 May 2006 and ended on 31
December 2007. The first statutory consolidated statements of OBO1 were prepared on
31 December 2007. They correspond to a corporate period of 20 months.
In order to provide additional information on fiscal 2007, 12-month restated consolidated
financial data were prepared by OBO1 in order to provide an image of what would have
been the Company’s income, expenses and cash flow, as well as the consolidated assets
and liabilities if the accounting year covered exclusively the 12 months from 1 January
2007 to 31 December 2007.
During the preparation of the interim condensed financial statements on 30 September
2009, the MEDICA Group identified an error in the calculation of the financial interests of
the syndicated loan arranged in August 2006. These restated consolidated financial data
reflect the correction of this error.
The restated consolidated financial data covering the period from 1 January 2007 to 31
December 2007 were extracted from the corrected consolidated statements of OBO1
according to the conventions below:

the scope is identical to the one retained in the consolidated accounts of OBO1
concerning the period from 1 May 2006 to 31 December 2007.

the selected accounting period corresponds to a period of 12 months beginning on
1 January 2007 and ending on 31 December 2007,

the restated financial data are prepared in a form compatible with the accounting
methods of the OBO1 group described in explanatory notes to the Group’s
corrected financial statements closed for the year ended 31 December 2007 in
in the European Union,

the restated income statement is derived from the 2007 (20 months) corrected
consolidated financial statements of OBO1, including the correction of the
calculation of the syndicate loan financial interests described in Note 2-3, which led
to the drafting of an audit report by the statutory auditors, from which were
deducted the expenses and income for the period going from 1 May 2006 to 31
December 2006 for OBO 1 and 1 July to 31 December 2006 for Medica SA and its
consolidated subsidiaries; the expenses and income from the period going from 1
May 2006 to 31 December 2006 for OBO 1 are included in the statutory financial
statements closed on 31 December 2007, covering a period of 20 months, certified
by the statutory auditors on 23 April 2008; the expenses and income for the period
going from 1 July 2006 to 31 December 2006 of Medica SA and its consolidated
subsidiaries are included in the statutory consolidated statements ended on 31
December 2006, covering a period of 12 months, established according to the
IFRS reference system, as adopted in the European Union, certified by the
statutory auditors on 30 April 2007;
314

the consolidated balance sheet remains unchanged with the exception of the
income and the reserves ; the net income for the period going from 1st May to 31
December 2006 for OBO 1 and from 1st July to 31 December 2006 for Medica SA
and its consolidated subsidiaries is restated in reserves;

the restated consolidated cash flows are derived from the corrected (20 months)
2007 consolidated accounts of OBO 1, including the correction of the calculation of
the syndicate loan financial interests described in note 2-5, which led to the drafting
of an audit report by the statutory auditors, from which are deducted the cash flow
for the period going from 1 May 2006 to 31 December 2006 for OBO 1 and 1 July
to 31 December 2006 for Medica SA and its consolidated subsidiaries.
315
25.8
Auditors’ report on the restated consolidated financial information for the 12
CONSTANTIN ASSOCIES
Patrick GRIMAUD
75012 – PARIS
____
AUDITORS’ REPORT ON THE RESTATED CONSOLIDATED FINANCIAL
INFORMATION
To the Chairman,
In our capacity as statutory auditors for MEDICA S.A. (formerly OBO 1 S.A.S.) and in
response to your request in the context of IPO plan, we have audited the restated
consolidated financial data of OBO 1, relating to the period going from 1 January 2007 to
31 December 2007 as attached to this report.
These restated financial statements, finalised by the board of directors on 3 December
2009 based on the corrected consolidated accounts for the 20-month financial period
closed on 31 December 2007, reflect the error in the calculation error of the syndicated
loan financial interests, described in the explanatory notes and identified in November
2009. It is our responsibility to express an opinion on these restated financial statements
based on our audit.
the restated consolidated financial statements are free of material misstatement.
An audit includes examining, on a test basis or using any other method of selection,
evidence supporting the amounts and disclosures in the restated statements. An audit
also includes assessing the accounting principles used and significant estimates retained,
as well as evaluating the overall presentation of the restated statements. We believe that
our audits provide a reasonable basis for our opinion.
316
We believe that the restated consolidated financial data was prepared, in all material
aspects, in accordance with the preparation principles described in the explanatory notes.
to the explanatory notes which specify that the restated consolidated data was prepared
in the context mentioned above and as such, does not represent full statements with
regard to the IFRS reference system as adopted by the European Union. With regard to
this reference system, only the full accounts comprising a balance sheet, an income
statement with comparative information, a statement of changes in equity, a statement of
cash lows and notes to the financial statements can fairly reflect, in all material aspects,
the net worth and financial position of the group comprised by the people and the entities
included in the consolidation as well as the result of its transactions.
CONSTANTIN ASSOCIES
PATRICK GRIMAUD
Jean Paul SEGURET
317
25.9
Pro forma consolidated financial information for the 12 months ended 31
December 2006 46
BALANCE SHEET
31-Dec-06
(MEDICA
CONSO)
Intangible assets
360,823
Goodwill
141,586
Restated Pro
forma
adjustments(1)
31-Dec-06
(OBO 1 Pro
forma)
Restated
(111,246)
249,577
502,764
502,764
4
141,590
1,314
Deferred taxes
634
12,421
516,778
1,314
14,254
12,421
405,776
1,192
Trade receivables
28,416
Tax assets
922,555
1,192
782
568
14,888
29,198
568
19,545
2,125
21,670
4,693
1,148
5,841
23,259
(5,881)
17,378
77,672
(1,826)
75,847
594,450
403,950
998,402
8,000
108,577
116,577
8,305
41,440
49,745
14,920
(19,432)
(4,512)
(8,558)
(8,558)
122,027
153,252
Total assets
Capital
Other reserves
31,225
Total Minority interests
1,401
Total equity
32,626
122,027
154,653
351,032
252,315
603,347
2,949
2,949
Other provisions
4,910
4,910
Deferred taxes
89,447
28,462
46
1,401
476,800
28,681
118,128
28,462
280,996
757,796
The pro forma accounts for the 12-month financial year closed on 31 December 2006 have been reveiwed by the
Statutory Auditors.
318
BALANCE SHEET
31-Dec-06
(MEDICA
CONSO)
17,600
Restated Pro
forma
adjustments(1)
3
459
31-Dec-06
(OBO 1 Pro
forma)
Restated
17,603
459
Trade payables
27,247
241
27,488
Other creditors
38,565
459
39,024
Tax liabilities
1,153
1,153
226
226
85,024
929
85,953
Total stockholders’ equity and liabilities
561,824
281,925
843,749
Total liabilities
594,450
403,952
998,402
(1)
Pro forma restatements including the correction of the error in the calculation of the syndicated loan
financial interests.
INCOME STATEMENT
31-Dec-06
(MEDICA
CONSO)
12 months
Restated Pro
forma
adjustments(1)
Revenue
324,919
-16,010
External expenses
-88,016
428
-87,588
-20,111
-3
-20,114
-143,619
-508
-144,127
Personnel expenses
-71
31-Dec-06
(OBO 1 Pro
forma)
Restated
324,848
-16,010
188
188
EBITDA
57,352
-155
57,197
-11,410
-16
-11,426
-1,639
5
-1,634
44,303
-166
44,137
137
-1,775
-1,638
44,439
-1,940
42,499
384
384
-16,943
-35,765
-52,708
-16,559
-35,765
-52,324
-4,025
8,003
3,978
Pre-tax income
23,855
-29,703
-5,848
Income taxes
-8,614
10,273
1,659
Earnings after tax
15,241
-19,430
-4,189
319
INCOME STATEMENT
31-Dec-06
(MEDICA
CONSO)
12 months
Restated Pro
forma
adjustments(1)
-231
31-Dec-06
(OBO 1 Pro
forma)
Restated
-231
Net income (loss)
15,012
-19,432
-4,420
Group share
14,920
-19,432
-4,512
Minority share
92
(1)
92
Pro forma restatements including the correction of the error in the calculation of the syndicated loan
financial interests.
320
EXPLANATORY NOTES
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION
In August 2006, the holding company OBO1 (newly named MEDICA SA), became the
parent company of MEDICA SA (newly named SFM), parent company of the MEDICA
Group. OBO1 has a financial period beginning on 1 May 2006 and ending on 31
December 2007. The first statutory consolidated statements of OBO1 were therefore
prepared for the period closed on 31 December 2007. They correspond to a corporate
period of 20 months.
These pro forma consolidated financial data have been prepared to reflect the financial
situation and consolidated income of OBO1, by considering a financial period of 12
months beginning on 1 January and ending on 31 December 2006 and assuming the
acquisition of MEDICA by OBO 1 on 1 January 2006.
During the preparation of the interim condensed financial statements on 30 September
2009, the MEDICA Group identified an error in the calculation of the financial interests on
the syndicated loan arranged in August 2006. These 12-month pro forma consolidated
financial data reflect the correction of this error.
Principles for preparing pro forma consolidated financial data
This consolidated pro forma data for the period from 1 January to 31 December 2006 was
prepared solely for the purpose of illustrating the effects which the integration of MEDICA
into the scope of OBO1 would have had on the income, expenses, assets and liabilities of
the OBO1 Group, if this deal had occurred on 1 January 2006 and if the financial period
of OBO1 had began on 1 January and ended on 31 December 2006.
The principles for preparing pro forma consolidated financial data are:


historic financial data used as a basis to prepare the pro forma consolidated
financial data of OBO1 from 1 January to 31 December 2006 include:

historic financial data (balance sheet and income statement) of Medica SA
extracted from the consolidated accounts of Medica SA for the financial
period began on 1 January and ended on 31 December 2006. These
consolidated accounts were certified by the statutory auditors on 30 April
2007;

historic financial data of OBO1 compiled from the interim parent company
accounts of OBO1 covering the period from 1 May 2006 to 31 December
2006, as included in the statutory parent company accounts, of 20 months,
for the financial period from 1 May 2006 to 31 December 2007. The statutory
parent company accounts of OBO1 were certified by the statutory auditors
on 23 April 2008;
the scope is identical to the one used in the consolidated accounts of MEDICA SA
for the financial period which began on 1 January and ended on 31 December
2006;
321

the accounting principles and methods applied to prepare the pro forma
consolidated income statement and the balance sheet were compliant with the
accounting methods of the OBO1 group, described in the group’s financial
statements for the year ended 31 December 2007 in accordance with the
International Financial Reporting Standards (IFRS) as adopted in the European
Union;

financial expenses were recognised, for a period of 12 months, related to the
acquisition debt contracted by OBO1 for the acquisition of MEDICA as well as the
new debt contracted by MEDICA, these two deals are considered as having been
completed on 1st January 2006. The capitalised portion of the additional interests
was added to debt, and the portion considered as a cash outflow deducted from
cash at hand;

the goodwill generated at the acquisition of MEDICA by OBO1, calculated on the
basis of the equity of the MEDICA group on 30 June 2006, was recognized in
Goodwill pending appropriation on 31 December 2006. The appropriation of this
goodwill, made in the accounts closed on 31 December 2007 has not been
retrospectively integrated into these 2006 pro forma consolidated financial data.
Furthermore, even if the pro forma consolidated data were prepared as if the
acquisition had taken place on 1 January 2006, the goodwill was calculated on the
basis of the MEDICA group’s consolidated equity on 30 June 2006 to ensure
consistency with the goodwill recognised in the consolidated accounts of OBO1. As
a result, the consolidated income of MEDICA at 30 June 2006 were recognised
contra to pro forma consolidated equity on 31 December 2006.
322
25.10
Auditors’ report on the pro forma consolidated financial information for the 12
CONSTANTIN ASSOCIES
Patrick GRIMAUD
75012 – PARIS
____
AUDITORS’ REPORT ON THE PRO FORMA CONSOLIDATED FINANCIAL
INFORMATION FOR THE PERIOD FROM 1 JANUARY 2006 TO 31 DECEMBER 2006
To the Chairman,
In our capacity as statutory auditors and pursuant to (EU) regulation No. 809/2004, we
have prepared this report on the consolidated pro forma data of MEDICA SA (formerly
OBO 1 S.A.S.) concerning fiscal 2006, intended to be included in its document de base
prepared in the context of the Initial Public Offering.
This consolidated pro forma data was finalised on 3 December 2009 by the board of
directors solely for the purpose of illustrating the impact of the acquisition by OBO 1 SAS
of the parent group company MEDICA (now SFM), in August 2006, on the accounts of
OBO1 SAS if the integration of MEDICA (now SFM) into the scope of OBO1 SAS, had
been carried out on 1 January 2006 and the financial period of OBO1 had ended on 31
December 2006. They reflect the correction of the calculation error concerning the
determination of the financial interests of the syndicated loan, described in the
explanatory notes identified in November 2009.
Due to their very nature, they describe a hypothetical situation and do not necessarily
represent the financial situation or performances that would have been observed if the
acquisition had occurred at a date prior to the date of its actual occurrence.
This consolidated pro forma information was prepared under your responsibility in
application of the provisions of regulation (EU) No. 809/2004 concerning pro forma
information.
It is our duty to express an opinion based on our review, pursuant to the terms required
by annex II point 7 of regulation (EU) No. 809/2004, on the appropriateness of the
preparation of the consolidated pro forma information.
We conducted our audit in compliance with what we considered as the appropriate
professional standards of the French national association of statutory auditors with regard
to this engagement. These audits which do not include a review of the financial data
323
underlying the preparation of the consolidated pro forma data, primarily entailed checking
that the bases from which this consolidated pro forma data had been prepared matched
the source documents as described in the explanatory notes to the consolidated pro
forma data, reviewing the evidence justifying the pro forma restatements and talking to
the Management of MEDICA SA (formerly OBO 1 S.A.S.) to collect the data and the
explanations that we considered necessary.
In our opinion:

this consolidated pro forma information was properly established on the basis
pointed out;

this basis is compliant with the issuer’s accounting principles.
This report is used for the sole purpose of filing the “document de base” with the AMF
and, where applicable, the public offering in France and in the other countries of the
European Union in which a prospectus, including the “document de base”, approved by
the AMF, would be notified. It can therefore not be used in another context.
Levallois-Perret and Paris, on 3 December 2009
CONSTANTIN ASSOCIES
PATRICK GRIMAUD
Jean Paul SEGURET
324
25.11
Consolidated financial statements of Médica SA for the year ended 31 December
2006
Notes
31/12/2006
31/12/2005
ASSETS
Intangible assets
7
360,823
298,513
Tangible assets
6
141,586
127,895
-
12
8
1,314
4,223
Total non-current financial assets
10
12,421
10,237
Deferred tax assets
17
634
2,171
516,778
443,051
1,192
773
28,416
24,223
568
1,083
11
19,545
12,264
9
4,693
1,712
12
23,259
17,245
77,672
57,300
594,450
500,351
8,000
8,000
Other reserves
8,305
14,129
Income or Loss
14,920
11,512
31,225
33,641
1,401
689
32,626
34,330
Investments in affiliated companies
Non-current assets
.......................................... (I)
Inventory
11
Trade receivables
Deferred tax assets
Other receivables
Current assets
...............................................(II)
Assets held for sale
........................................ (III)
GRAND TOTAL ASSETS
............................... (I to III)
EQUITY
13
Capital stock
Minority interests
................................ (IV)
LIABILITIES
Long-term financial debt
16
351,032
285,686
Other non-current debts
15
28,462
19,604
17
89,447
83,914
18
2,949
3,284
Other long-term provisions
19
4,910
1,354
476,800
393,842
...................................... (V)
Trade accounts payable
14
27,247
23,149
Other short-term provisions
19
459
679
325
Notes
31/12/2006
16
Short-term debts
17,600
16,233
1,153
114
-
309
38,565
31,695
85,024
72,179
594,450
500,351
Current tax expense
9
14
Trade payables
Current liabilities
........................................... (VI)
Liabilities linked to assets held for sale
31/12/2005
................. (VII)
TOTAL LIABILITIES AND SHAREHOLDERS’ EQUITY (IV to VII)
Notes
31/12/06
31/12/05
Revenue
324,919
272,711
(16,010)
(14,827)
(88,016)
(67,557)
(20,111)
(15,772)
External expenses
21
Personnel expenses
20
(143,619)
(126,891)
22
188
856
57,352
48,521
EBITDA
27
(11,410)
(10,352)
27
(1,639)
(1,074)
44,303
37,095
137
1,791
44,439
38,886
384
319
(16,943)
(21,242)
(16,559)
(20,923)
(4,025)
(1,002)
(231)
(24)
23,625
16,937
(8,614)
(5,090)
Net income
15,012
11,847
Including net income belonging to the company’s shareholders
14,920
11,512
92
335
14.92
11.51
Trading operating income
Other operational revenues and expenses
23
24
25
Other financial revenues and interest expenses
Share in earnings of equity-method companies
Pre-tax income
26
Income tax
Including net income belonging to minority interests
Net income per share (in euros)
28
Fully-diluted earnings per share (in euros)
28
1
cf. Note 2.5
326
-
9.19
Other
Capital Revaluation Translation
Consolidated TOTAL
stock of financial adjustment consolidate income (loss)
instruments
d reserves
Group
share
Minority
share
Equity on 1/1/2005
IAS 32 and IAS 39 restated
8,000
(314)
0
12,865
1,547
22,098
21,807
291
Dividends
-
(10)
-
(10)
-
(10)
Distribution of income
-
1,547
(1,547)
-
-
-
Profit for the year
-
-
11 847
11 847
11 512
335
Financial instruments: Fair
value changes
-
-
314
314
-
Translation adjustment
-
-
8
8
-
Change in consolidation
scope
-
73
-
73
-
73
314
8
8,000
0
8
14,475
11,847
34,330
33,641
689
8,000
0
8
14,475
11,847
34,330
33,641
689
Dividends
(10)
Distribution of income
11,847
Profit for the year
(10)
(11,847)
0
15,012
15,012
Financial instruments: Fair
value changes
(10)
14,920
0
Translation adjustment
(8)
Change in consolidation
scope
(8)
(8)
636
636
Correction of errors
(8)
(8)
0
Changes in AETAS principles
25
25
25
(early payment)
92
(17,353)
8,000
0
0
327
9,614
636
(8)
(17,353) (17,353)
15,012
32,626
31,224
1,401
Notes
Consolidated net profit (of which minority interests)
31/12/2006 31/12/2005
15,012
11,847
12,268
10,497
+/- Other calculated income and expenses
2,831
(55)
+/- Gain and losses on sales
(101)
(1,791)
4,223
3,993
231
24
Operating cash flow after cost of net financial debt and taxes
34,463
24,515
+ Cost of net debt
17,984
20,923
4,390
1,097
Operating cash flow before cost of net financial debt and taxes
56,837
46,535
+/- Refunded/(paid) tax
(3,531)
2,257
(293)
(127)
436
(1,114)
(3,607)
4,688
5,029
(525)
54,871
51,714
+/- Net depreciation and amortisation (excluding those linked to the current asset)
+/- Change in deferred tax
27
26
+/- Share of earnings in companies accounted for by the equity method
26
+ Tax expense
Inventory
+/- Trade receivables:
+/- Trade payables
+/- Other receivables and payables
= NET CASH PROVIDED BY OPERATING ACTIVITIES
- Cash outflows linked to acquisitions of tangible assets
6
(17,002)
(12,264)
- Cash outflows linked to acquisitions of intangible assets
7
(3,443)
(3,080)
6,534
5,312
470
(5,000)
(38,935)
(10,567)
(2,323)
423
(54,700)
(25,177)
(10)
(10)
338,693
267,101
+ Cash inflows linked to sales of tangible and intangible assets
- Cash outflows linked to acquisitions of financial assets (non-consolidated securities)
+/- Acquisitions of subsidiaries net of cash acquired
4
+/- Other flows linked to investing operations
= NET CASH FLOW LINKED TO INVESTING OPERATIONS
- Dividends paid to the minority interests of consolidated companies
+ Cash inflows from new loans
16
- Loan refunds (including lease financing agreements)
16
- Net financial interests paid (including lease financing agreements)
(316,979) (263,410)
(20,509)
(31,560)
= NET CASH FLOWS LINKED TO FINANCING OPERATIONS
1,195
(27,880)
+/- Impact of changes in accounting principles
(436)
= CHANGE IN NET CASH
CASH OR CASH EQUIVALENTS AT OPENING
CASH OR CASH EQUIVALENTS AT YEAR END
12
= CHANGE IN NET CASH
328
930
(1,343)
17,245
18,588
18,175
17,245
930
(1,343)
1.
General Information
Médica SA (“the Company”) and its subsidiaries (“the Médica Group”) are specialised in
host structures and medicalised care for dependent patients of all ages. The Group
operates in business segments:

the Medico-social segment: homes for dependent senior citizens (EHPAD),
senior citizens’ homes (EHPA) and assisted living facilities handling the case

the Healthcare segment: medicalised institutions that manage temporary
post-op care, physiotherapy and rehabilitation (MPR), and institutions specialized
in psychiatric care.
The Médica Group is present in France and in Italy. It runs 81 medico-social institutions
(6,827 beds) and 28 health care institutions (1,754 beds) in France, offering a reception
capacity of over 8,500 beds. It is also present on the Italian market, since the acquisition
in 2005 of the majority control of AETAS, with the operation of 15 institutions (1,062 beds)
as at 31 December 2006.
At 31 December 2006 the total hosting capacity of the Médica Group totalled 9,643 beds
distributed in 124 institutions in France and in Italy.
SDFM SAS (Société de Financement de Médica France) was converted on 28 April 2006
into a Société Anonyme (public limited company) with a Supervisory Board, and at the
same time changed the corporate name from SDFM SAS to Médica SA. Médica SA is
therefore the holding of the Médica Group. It is domiciled in France. Its head office is “Le
Diderot” located at 39, rue du Gouverneur Général Félix Eboué in Issy Les Moulineaux,
92130.
These consolidated financial statements were prepared on 30 March 2007 by the
Management Board. They are expressed in thousands of euros, unless otherwise
indicated.
2.
2.1
The consolidated accounts of the Médica Group were prepared in accordance with the
International Financial Reporting Standards (IFRS) reference system as adopted in the
European Union.
The standards and interpretations used to prepare the 2006 accounts are those reported
in the European Union Official Journal (EUOJ) on 31 December 2005 and whose
application was mandatory on that date.
The Group did not opt for the early application of any standard or interpretation published
in the EUOJ. The Group expects no significant impact from the application of these texts.
2.2
The preparation of the financial statements in accordance with IFRS implies that the
management of the Group or the subsidiaries carries out estimates and retains certain
329
commitments concerning the accounting period.
As these assumptions are uncertain, the real results could be different. These
2.3

the impairment tests (assumptions described in Note 7);

the provisions for retirement (assumptions described in Note 18); and

the fair value of derivatives and other financial instruments in Note 3.2.
Consolidation policy and principles
a)
Subsidiaries
the assessment of the control exerted by the Group on another entity when they derive
Group. They are deconsolidated as from the date on which control is no longer exerted.
recognised in income (see Note 2.6).
between Group companies are eliminated. The subsidiaries use the same accounting
b)
The Group has entered into buy-out agreements to acquire the minority interests of
consolidated subsidiaries. The Group grants to these shareholders put options that may
be exercised at certain dates in the future and at determined prices. IAS 32 stipulates the
recognition of these commitments in financial liabilities for their strike value. The
difference between the share of the net position and the calculated debt is reported in
goodwill.
330
2.4
a)
The data included in the financial statements of each of the Group’s entities is measured
by using the currency of the principal economic environment in which the entity carries
out its activities (“the functional currency”). The consolidated financial statements are
reported in euros, which is the functional and reporting currency of the Group.
b)
The Group has no transactions denominated in foreign currency.
c)
Group companies
(i)
date;
(ii)
exchange rate (except if that average is not representative of the cumulative effect
of the rates in force on the transaction dates, in which case the income and
expenses are converted at the applicable rates on the transaction dates); and
(iii)
closing price.
2.5
a)
Income Statement
with the option offered by IAS 1, the Médica Group has chosen to maintain the
presentation of income statement by nature.
Revenue
The revenue mostly comprises services supplied in the context of the hosting and the
care given to the residents regardless of the origin of the payment.
amounts collected that are likely to be paid back, on the grounds of a partial use of these
amounts with respect to the commitments taken by the Group in the context of the
Agreements, are deducted from the revenue and posted under “Other debts”.
EBITDA
EBITDA corresponds to Earnings Before Interest, Taxes, Depreciation and Amortisation.
331
Non-current operations of a significant amount that may have an adverse effect on the
clarity of current operational performance are classified in “Other operating income and
expenses” in accordance with the CNC recommendation adopted on 27 October 2004.
They include in particular:

capital gains or losses on sales or significant and unusual depreciation of tangible
or intangible assets;

restructuring costs resulting from plans of an unusual nature and size that disrupt
the clarity of current operating income; and

provisions of very high material significance.
Cost of net debt

income from cash and cash equivalents (interest income generated by cash and
cash equivalents, income from the disposal of cash equivalents, income from
interest rate and currency hedges on cash and cash equivalents); and

the cost of the gross financial debt (interest charges on financing transactions,
income from interest rate and currency hedges on gross financial debt, gains and
losses linked to the extinguishment of debts).
They include where applicable:

financial revenues (dividends, profit on disposal of non consolidated securities,
cash and cash equivalents), profits on trading derivatives (foreign exchange,
interest rate), discounting financial products, positive fair value change of the
financial assets and liabilities measured at fair value, income from interest rate and
currency hedges on previous transactions, other financial income); and

financial expenses (depreciation of non consolidated securities, loss on disposal of
non consolidated securities, depreciation and losses on disposal of other financial
assets (excluding cash and cash equivalents), loss on trading derivatives (foreign
exchange, interest rate).
b)
Balance sheet
Assets and liabilities are classified, according to their nature, into current or non-current
period of twelve months as from the accounts closing date.
2.6
Intangible assets
a)
Goodwill
date. The goodwill linked to the acquisition of subsidiaries is included in “Intangible
332
goodwill is irreversible. The income derived from the disposal of an entity takes account
of the carrying amount of the goodwill of the sold entity.
Goodwill is allocated to the cash-generating units or to the groups of cash-generating
units likely to benefit from the business combination which led to the goodwill. The
Médica Group tests the goodwill of each business sector for impairment (Note 2.8).
b)
Operating permits
extension of the institutions. The rules governing these permits are primarily set by Law
no. 2002-2 of 2 January 2002 concerning social and medico-social work and by Decree
no. 2003-1135 of 26 November 2003 concerning the terms of the permits to create,
granted for a period of 15 years in the medico-social sector and for 5 to 10 years for the
The operating permits are therefore not amortised and are tested annually for impairment
(Note 2.8).
combination, are recognized in intangible assets. These authorisations are measured at
acquisition according to a method defined by the Group based on the annual billing
formalities, they correspond to intangible assets generated internally which do not meet
the criteria defined in paragraph 58 of lAS 38 (Intangible assets), to be posted under
assets.
c)
Software
basis of the costs incurred to acquire and set up the relevant software. These costs are
as expenses when they are incurred.
2.7
Tangible assets
The tangible assets mainly comprise:

land and constructions, mostly of the homes for dependent senior citizens,
institutions for post-op care and rehabilitation and offices; and

machinery and equipment required for the proper operation of the institutions.
All tangible assets are recorded at their historic cost less depreciation. The historic cost
Subsequent costs are included in the carrying amount of the asset or, where applicable,
333
Land is not amortised. Other assets are amortised according to the straight-line method.
Except for special cases, the residual values are zero. The amortisation periods are
ones are:

constructions: 50 years;

fittings and fixtures of constructions: 5 to 50 years (according to the components);

technical installations: 5 to 10 years; and

other (furniture, etc.): 3 to 10 years.
Assets acquired with finance leases that result in transferring to the Group almost all the
Finance leases where the risks and rewards are not transferred to the Group are
expenses using a straight-line method.
The losses or profits on the sale of assets are determined by comparing the income from
disposal to the carrying amount of the sold asset. They are recognised in income.
2.8
a)
Amortised assets are tested for impairment where, due to events or special
costs or its value-in-use, if greater. For the purposes of measuring impairment, the assets
are grouped into cash-generating units, which represent the lowest level generating
separate cash flow. For non-financial assets (other than goodwill) that are impaired, the
b)
The Group submits the goodwill and the administrative permits to an annual impairment
test. The recoverable amounts of the cash-generating units or groups of cash-generating
units to which these intangible assets are attached are determined from the calculations
of value-in-use. The valuation method retained by the Group is based on the discounting
of the future cash flows that will be generated by the continuous use of the assets tested
during 10 years and their possible disposal after this period. Discounting is carried out at
a rate corresponding to the average weighted cost of the Group’s capital and debt.
care institutions.
Goodwill is tested at the level of each of the two business sectors: medico-social or
healthcare.
334
2.9
Financial assets and liabilities
IAS 32/39 are applied by the Group as from 1 January 2005.
The financial assets defined by IAS 39 include loans and receivables, available-for-sale
They correspond to the balance sheet items below: available-for-sale assets, other noncurrent assets, trade accounts and other receivables, derivative financial instruments and
cash and cash equivalents. Management determines the classification of its financial
assts during the initial recognition and reconsiders it, in the conditions prescribed by IAS
39, on each annual or interim closing date.
The financial liabilities defined by IAS 39 include the loans recognised at amortised cost
and the financial liabilities according to the fair value option. They correspond to the
balance sheet items below: current and non-current financial debts, other debts, trade
2.9.1
Measurement and recognition of financial assets
a)
Loans and receivables are non-derivative financial assets with determined or
determinable payments and are not traded on an active market. They are included in
date. The latter are classified in non-current assets. Loans and receivables are
recognised in the balance sheet under “Trade payables”, “Other liabilities” and “Financial
b)
non-current financial assets.
They are monies paid to lessors to secure rents. The value of these assets is regularly
readjusted when the rents are revised. The impact of the discounting is considered as
immaterial for the Group’s accounts. They are tested for impairment in case of an
indication of loss of value. A provision for impairment is recorded when the carrying
amount is greater than the estimated recoverable value.
c)
Available-for-sale financial assets include investment securities of non-consolidated
companies. They are included in non-current assets, unless the Group plans to sell them
their acquisition cost, which the Group considers to represent their fair value in the
absence of an active market. Impairment is recognized in case of a long-term drop in
their value-in-use. The value-in-use is determined according to financial criteria such as
share of equity and profitability outlook.
2.9.2. Measurement and recognition of financial liabilities
a)
Long-term financial debt
335
Bank loans
the effective interest rate method, which takes into account all issuance costs; any
recognized in income over the term of the loan according to the effective interest rate
method.
Bond loans with equity warrants
For bond loans with equity warrants, the composite financial instrument is separated
between a debt component and an equity component right from their initial recognition.
The fair value of the debt component at issue is determined by discounting future
contractual cash flows, by using the applicable market rate for a bond issue that may
have been subscribed by the company at the same conditions but without a conversion
option. The debt component is then measured on the basis of the amortised cost. The
value of the equity component is determined at issue by the difference between the fair
value of the debt component and the fair value of the bond loan component. The value of
the conversion option is not reviewed during subsequent years.
The issuance costs are broken down between the debt part and the equity part on the
basis of their respective carrying amounts at the time of the issue.
b)
With the exception of derivative instruments (cf. note 2.9.3) the other financial liabilities
are measured at amortised cost.
2.9.3
Measurement and recognition of derivative financial instruments and hedging
transactions
on the designation of the derivative as a hedging instrument and, where applicable, on
the nature of the item covered.
The derivative instruments held by the Group are therefore considered as derivative
income as cost of gross financial debt.
2.10 Inventory
2.11 Trade payables and liabilities
measured at their amortised cost using the effective interest rate method, after deducting
336
initial effective interest rate. The amount of the provision is booked in income as an
estimated expense.
The heading “Cash and cash equivalents” includes liquid assets, sight bank deposits,
highly liquid short-term investments with initial maturities less than or equal to three
liabilities.
2.13 Share capital
the additional costs directly attributable to the transaction and the related tax impact, are
2.14 Deferred taxes
regulations) that were adopted or nearly adopted on the closing date and which are
The effect of any change of the tax rate is booked in income with the exception of
changes concerning items directly booked in equity.
compensation and concern the same tax authority.
which will allow the deduction of temporary differences, is probable. Their recoverable
value is reviewed at each closing and the booked value reduced in so far as it is no
longer probable that a sufficient taxable profit will be available to allow the use of all or
part of the advantage of this deferred tax asset.
2.15 Employee benefits and long-service awards
known as a defined-benefits pension plan as defined by IAS 19, given that it defines the
amount of the pension benefit that will be collected by an employee who retires. In
general, this amount depends on one or several factors, such as age, seniority and wage.
The liability booked in the income statement under pension plans and other definedbenefits plans corresponds to the discounted value of the obligation linked to the defined-
337
benefits plans at year end as well as the adjustments for actuarial gains and losses and
the costs of non-recognised past services. The obligation under the defined-benefits
plans is calculated each year by independent actuaries according to the projected credit
units method. The discounted value of the obligation under the defined-benefits plan is
determined by discounting the estimated future cash outflows based on the interest rate
of tier-one corporate bonds and whose term is close to the estimated average term of the
concerned retirement obligation.
the obligation under the defined-benefits plans (corridor), are booked in income over the
term of the expected residual average active life of the concerned employees.
The costs for past services are immediately recognised in income, unless changes to the
pension plan are subordinated to maintaining the employees in activity over a given
period (the vesting period). In the last case, the costs for past services are amortised on a
straight-line basis for the vesting period.
on a mandatory basis. Once the contributions are paid, the Group is not bound by any
other payment requirements. The contributions are booked in expenses linked to
employee benefits when they are due. Contributions paid in advance are booked under
assets in so far as the payment of an advance results in reducing future payments or a
cash refund.
Commitments concerning other long-term benefits
The other employee and related commitments for which a provision is set aside are
mostly comprised of premium payments on the occasion of the distribution of long-service
awards.
2.16 Provisions
to fully extinguish the current obligation, discounted if necessary on the closing date.
The dividend payouts to the Company’s shareholders are booked as a liability in
the Group’s financial statements during the period in which the dividends are approved by
the Company’s shareholders.
The Group presents basic earnings per share and diluted earnings per share.
The basic earnings per share is computed by dividing the Group’s net income for the year
338
The diluted earnings are calculated from the Group’s net income for the year, corrected
by the financial cost of debt dilutive instruments and their impact on the equity of
employees, net of the corresponding tax effect. Where the basic earnings per share is
negative, the diluted earning per share is identical to the basic earnings.
In case of significant non-current items likely to disrupt the clarity of earnings per share
and diluted earnings per share, net earnings exclusive of non-current items per share is
calculated. The non-current elements taken into account for this calculation then
corresponds to all the items included in the lines “Other operational income and charges”.
3.
Managing financial risk
3.1
Financial risk
flow variations due to changes in interest rates. The Group’s risk management
Derivative financial instruments are used to hedge certain exposures to risk.
a)
Market risks
The Group is exposed to the price risk that affects investment securities booked in
available-for-sale assets. However, given the nature of the equity interests, the Group
considers this risk to be low.
Currency risks
Given that its activity is mostly based in France and in the Eurozone, the Group’s
exposure to currency risk is limited to the Valmont institution located in Switzerland. This
institution was sold in December 2005.
The Group managed this currency risk by contracting a cross-currency swap (see note on
derivative financial instruments).
b)
Credit risk
instruments and the transactions settled in cash, the counterparties are restricted to topquality financial institutions.
c)
Liquidity risk
appropriate credit facilities and being able to settle one's positions on the market. The
Group maintains financial flexibility by managing credit lines opened by not used, via a
cash pooling system set up with its major banks.
d)
339
issued at floating rates expose the Group to the risk of cash flow over interest rate.
The Group manages its cash flow over interest rate risk by contracting floating versus
fixed-rate swaps. On the economic level, these interest rate swaps result in converting
these floating-rate loans into fixed-rate loans. Under the interest rate swaps, the Group
agrees with third parties to swap, according to defined time intervals, the differential
between the fixed contractual rates and the variable rates calculated by reference to a
certain notional amount.
3.2
UCITS booked under cash equivalents) is based on the market prices at the closing date.
rates on the closing date. These valuations of the Group’s derivative instruments are
provided to the Group by its banks.
The nominal value, less the provisions for impairment, of trade accounts and other
these items.
4.
4.1
Significant changes to the scope
Acquisitions 2006 :
The group acquired the following assets during the financial year:

France :
Pontault facility (EHPAD), January 2006;
Quincy facility (EHPAD), January 2006;
two healthcare facilities in Jarnac, Maison Blanche and Villa Bleue, January 2006;
Briançon facility (healthcare), February 2006;
Pietat facility (healthcare), March 2006;
two facilities at Cahuzac, La Maison d’Emilienne (EHPAD) and Le Château
(healthcare), April 2006;
Ménerbes facility (healthcare), April 2006;
La Pinède facility (healthcare), May 2006;
Sens facility (healthcare), May 2006;
340
La Condamine facility (healthcare), June 2006;
Pons facility (EHPAD), June 2006;
Montrond facility (healthcare), September 2006;
Nailloux facility (healthcare), November 2006;
Cesson facility (EHPAD), November 2006.

Italy :
Rozzano, Monza, Baceno and Cilegio facilities, June 2006.
detailed below:
Italy
Amount paid in cash
France
3,314
Total
43,049
46,362
1,264
1,264
Call option
3,314
44,313
47,626
Fair value of the acquired net assets
3,099
24,874
27,973
215
19,439
19,653
Goodwill (Note 7)
341
Assets and liabilities (in aggregate) linked to these acquisitions are as follows:
Italy
France
Total
Intangible assets
4,831
29,076
33,907
Tangible assets
3,090
10,658
13,747
0
932
932
Investments in affiliated companies
Financial receivables
0
Inventory
0
126
126
522
3,901
4,423
1,103
4,174
5,277
1,721
9,426
11,147
1
1,241
1,242
(507)
(398)
(905)
(3,309)
(6,759)
(10,068)
Other non-current debt
(473)
(268)
(741)
Deferred tax (Note 17)
(1,594)
(10,001)
(11,595)
Provisions for employee benefits
(608)
(608)
(895)
(895)
(2,145)
(4,672)
(6,817)
(141)
(11,058)
(11,200)
Net assets
3,099
24,874
27,973
1,103
4,174
5,277
Cash outflows
(3,314)
(43,049)
(46,362)
Acquisitions net of cash assets acquired
(2,211)
(38,875)
(41,085)
4,830
29,042
33,872
1
34
35
4,831
29,076
33,907
215
19,439
19,653
5,046
48,515
53,561
Non-current assets
Minority interests
Borrowings
Acquisitions net of cash assets acquired
Intangible assets (breakdown)
Administrative permits
Software
Goodwill
Intangible assets including goodwill (note 7)
2006 Creations:
Three institution creations were included in the consolidation scope in fiscal 2006:

the Saint Avertin institution (EHPAD);

the Sormiou institution (EHPAD);

the Avignon institution (healthcare).
These institutions were opened to the public early January 2007.
342
4.2
Impact of changes in the scope of consolidation on the consolidated scope
Changes to the scope had no material impact on the Group’s consolidated data.
5.
Segment reporting
5.1
First level of segment reporting - business segments
At 31 December 2006, the Group is structured into two main business sectors: (1)
Retirement homes for dependent senior citizens (hereafter “Medico-Social”), (2)
Medicalised institutions that offer post-op care, physiotherapy and rehabilitation (hereafter
“Healthcare”).
Income items:
The earnings per business segment for the year ended 31 December 2006 are detailed
hereafter:
Medico-Social
Healthcare
Consolidated
Revenue
239,737
85,182
324,919
(13,139)
(2,871)
(16,010)
External expenses
(67,487)
(20,528)
(88,016)
(12,432)
(7,679)
(20,111)
(105,188)
(38,431)
(143,619)
(13)
200
188
EBITDA
41,478
15,874
57,352
(8,461)
(2,949)
(11,410)
(1,228)
(411)
(1,639)
31,789
12,514
44,303
1,133
(996)
137
32,922
11,517
44,439
Personnel expenses
Operating income
384
(16,943)
Cost of net financial debt
(16,559)
(4,025)
Share in earnings of equity-method companies
(231)
Pre-tax income
23,625
Income tax expense
(8,614)
Net Income
15,012
Balance sheet items:
Segment assets primarily include tangible assets, intangible assets and operating
receivables. They do not include deferred taxes, investments and the derivatives held for
trading or described as loan hedges. Cash items are not allocated by segment given that
they are managed centrally in a cash pool for the entire Group.
343
Segment liabilities include operational liabilities. They do not include taxes, the
Company’s borrowings and the related hedge derivatives.
Asset acquisitions include acquisitions of tangible assets (Note 6) and intangible assets
(Note 7), including acquisitions stemming from business combinations (Note 4).
The table below provides details on segment assets and liabilities as at 31 December
2006 as well as the asset acquisitions for the year ended on this date:
Medico-Social
Healthcare
Consolidated
Assets
Intangible assets
244,050
116,773
360,823
Tangible assets
104,108
37,478
141,586
1,314
Assets held for sale
Total non-current financial assets
44,592
(32,171)
Deferred tax assets
12,421
634
Non-current assets
516,778
729
462
1,192
Customers
13,453
14,963
28,416
Tax assets
568
0
568
Other receivables
9,655
2,221
11,876
6,146
1,524
7,669
Inventory
4,693
23,259
Current assets
77,672
TOTAL ASSETS
,
594,450
Total equity
32,626
351,032
Borrowings and other long-term debts
25,131
3,330
28,462
89,447
1,461
1,488
2,949
1,737
3,173
4,910
476,800
Trade accounts payable
Other short-term provisions
20,841
6,406
27,247
227
231
459
Borrowings and other short-term debts
17,600
Current tax liabilities
1,063
90
1,153
0
Other payables
18,210
Current liabilities
20,356
38,565
85,024
TOTAL LIABILITIES AND EQUITY
594,450
344
5.2
Second level of segment reporting - geographic segments
2006
6.
2005
Revenues
324,919
272,711
Revenues - France
297,350
261,969
Revenues - Abroad
27,569
10,742
Total assets
594,450
500,351
Total assets - France
561,558
490,030
Total assets - Abroad
32,892
10,321
Tangible assets
Land and
buildings
Vehicles, Other fixed assets Fixed assets in
equipment
progress
and tools
Total
For the year ended 31 December 2005
Newly-consolidated companies
4,300
763
1,768
Removals from scope
(175)
(345)
(704)
Acquisitions
3,351
1,355
2,514
5,044
12,264
(2,808)
-
(15)
-
(2,823)
3,354
134
10
(3,524)
(26)
-
-
-
-
0
(6,185)
(1,165)
(2,736)
-
(10,086)
108,006
4,587
11,621
3,681
127,895
Cost
118,534
6,926
18,037
3,681
147,178
Accumulated depreciation
(10,528)
(2,339)
(6,416)
-
(19,283)
Net carrying amount
108,006
4,587
11,621
3,681
127,895
10,544
512
2,689
2
13,748
-
-
813
-
813
5,302
1,964
3,802
5,934
17,002
(5,465)
(4)
(9)
(1,257)
(6,734)
5,690
101
492
(6,283)
0
Reclassification
(2,260)
8
292
1,547
(413)
Amortisation expense
(5,814)
(1,466)
(3,444)
-
(10,724)
116,004
5,703
16,256
3,624
141,586
Cost
134,537
9,812
25,907
3,624
173,880
(18,533)
(4,110)
(9,651)
-
(32,294)
Net carrying amount
116,004
5,702
16,256
3,624
141,586
Disposals
Transfers of fixed assets in progress
Impact of APC
-
6,831
(1,224)
At 31 December 2005
Newly-consolidated companies
Change of consolidation method
Acquisitions
Disposals
At 31 December 2006
345
The removals from the scope in 2005 correspond to the disposal of consolidated
companies (Qualité et Santé Suisse and SCI Tour Doyen).
Land and Buildings include the amounts below in the context of assets taken by the
Group in connection with lease-finance agreements:
Cost
Net carrying amount
7.
2006
2005
98,528
98,528
(35,273)
(32,340)
63255
66,188
Intangible assets (including goodwill)
Goodwill
Operating
permits
Software
programs
Total
Intangible assets in
progress
Acquisitions
1,550
1,403
127
3,080
Newly-consolidated companies (Note 4)
7,804
20,814
32
28,650
Removals from scope
-
-
(12)
(12)
-
-
18
18
(146)
-
(256)
(402)
87,114
210,749
650
298,513
87,260
210,749
906
298,915
(146)
-
(256)
(402)
87,114
210,749
650
298,513
-
3,411
-
-
3,411
24,434
33,873
504
352
59,163
Removals from scope
-
-
-
0
0
0
0
0
0
0
-
-
(264)
0
(264)
111,548
248,033
889
352 360,823
111,694
248,033
1,409
352 361,489
(520)
(666)
889
352 360,823
At 31 December 2005
Cost
Amortisation expenses
Net carrying amount
Acquisitions
Newly-consolidated companies (Note 4)
At 31 December 2006
Cost
(146)
Net carrying amount
111,548
248,033
Goodwill tested for impairment
Goodwill is assigned to the Groups of Cash-Generating Units (GCGU) defined by the
346
The table below summarises the assignment of goodwill by business segments:
2006
Medico-Social
2005
Healthcare
Total
Medico-Social
Healthcare
Total
Permits
182,022
66,011
248,033
60,768
26,346
87,114
Goodwill
64,576
46,972
111,548
168,445
42,304
210,749
246,598
112,983
359,582
229,213
68,650
297,863
In accordance with the principle stated in Note 2.8, the carrying amount of each asset
group is compared to its value-in-use defined as equal to the sum of cash flows
discounted over 10 years, stemming from the latest forecasts for each of the groups of
cash-generating units.
Extrapolation of the 2007 budget over the second and third year is determined by
applying a 4% growth rate, in the fourth year a growth rate of 3% and the following years
a growth rate of 2.5%. These assumptions are based on past experience of Medium Term
Plans, and macroeconomic data on the health market. This growth rate does not exceed
the medium- to long-term growth rate of the Group’s business segments. The Group
the market’s recent transactions.
These flows are discounted at a rate of 7.5%, based on the average weighted cost of the
Group’s capital.
8.
Available-for-sale financial assets include acquisitions of minority investment securities in
non-consolidated companies at year-end 2006 (Les Parentèles).
9.
2006
2005
Assets
Liabilities
Assets
Liabilities
Interest rate swaps
4,693
0
1,712
(309)
Total
4,693
0
1,712
(309)
Including short-term segment
4,693
0
1,712
(309)
As described in Note 2.9, the Group did not elect for hedge accounting, therefore
derivative instruments are assimilated into derivatives held for trading. They are classified
in current assets or liabilities.
The swaps held by the Group over the 2005 and 2006 period are presented below:
In September 2005, the Group contracted an interest rate swap with a nominal value of
€200 million in which it pays a 12-month Euribor floating rate with a tunnel (cap at 2.75%,
floor at 1.86%) and receives a 3-month Euribor floating rate. This swap matures in July
2008. The swap was unwound in August 2006 and generated income of €3.4 million.
347
In August 2006, the Group contracted an interest rate swap with a nominal value of €250
million in which it pays a fixed rate of 3.527% and receives a 3-month Euribor floating
rate. This swap matures in August 2011.
In September 1998, the Group contracted a cross-currency swap to protect itself against
interest rate risk and currency risk on the Swiss franc (CHF). The hedging of CHFdenominated debt and cash flows became unnecessary due to the disposal of the Swiss
subsidiary in 2005, therefore the cross-currency swap, set to mature in September 2013,
was unwound in January 2006 at a cost of €0.3 million.
10.
Other non-current financial assets
Rents paid in advance are discounted at the rate of 5.5%. The short-term portion is
classified in other liabilities (Note 11).
2006
2005
309
361
Security deposits
12,113
9,876
Total
12,421
10,237
Advance rents
11.
Trade receivables and other debtors
2006
2005
Trade receivables
29,855
25,908
(1,439)
(1,685)
Trade receivables - net
28,416
24,223
Prepaid expenses
7,669
4,628
Tax and social security receivables
4,402
3,053
Receivable income
1,621
1,955
Advances paid
4,731
356
Other receivables
1,121
2,272
19,545
12,264
Other debtors
During the year ended 31 December 2006, the Group recognised a provision of €505,000
(2005: 1,131,000) as impairment of its receivables (Note 27). The Group used a provision
for impairment of receivables (Note 22) of €565,000 during the financial year ended on 31
December 2005 (2005: €1,443,000). The use of reversals of provisions for impairment of
receivables is recognised under “Other operating income and expenses” in the income
statement, and deducted from losses on irrecoverable receivables. The reversals of
unused provisions are booked in diminution of the provisions for the year.
Prepaid expenses mostly concern rents. Receivable income mostly correspond to
tripartite allowances to be received as well as the repayments expected from training
348
expenses. Advances paid concern creations and acquisitions of future institutions
(Echirolles, Castera Verduzan, Jonchère St Maurice).
12.
2006
2005
8,751
16,013
-
(258)
Liquid assets and debit accounts merged into a cash pool
14,508
1,490
23,259
17,245
Bank overdrafts and credit accounts merged into a cash pool
(5,084)
(1,623)
Net cash
18,175
15,622
Cash UCITS
Currency swap
sensitivity less than or equal to 0.25 and historical volatility at 12 months close to zero.
Furthermore, the investment strategy in these UCITS excludes any equity risk and any
risk of capital loss.
13.
Equity
Share capital
The total number of authorised shares is 1,000,000 (2005: 1,000,000) of a nominal value
of 8 euros per share (2005: 8 euros per share). All the issued shares are fully paid-up
14.
Trade payables and other creditors
2006
2005
Trade payables
27,247
23,149
Social security and tax liabilities
32,145
25,605
Advances and deposits received
3,070
89
Liabilities to fixed-asset suppliers
145
119
2,534
2,591
Accrued income
671
3,291
Other creditors
38,565
31,695
Other debts
Accrued income in 2006 corresponds primarily to a grant received for the creation of the
Avignon institution.
15.
2006
2005
2,730
-
Deposits from residents
11,130
9,030
Call option 40% Italy (AETAS)
11,942
8,191
Accrued income
349
2006
2005
2,660
2,383
28,462
19,604
Total
The other non-current debts include deposits paid by the residents. Their amount has not
their payment.
The AETAS Italy debt corresponds to the outstanding 40% call option that can be
exercised between 1 May 2008 and 30 April 2010 (Note 4). This debt was determined
from a multiple of restated forecast current operating income. This debt was discounted at
the rate of 5.5%.
Debts concerning the ”Saint-Simon» lease correspond to a lease for which the rents are
16.
In December 2003, the Group set up financing of €264.8 million comprised of a
syndicated loan from a bank pool, of a bond issue in the form of bonds with equity
warrants placed with bankers and a bond issue placed with the Group’s shareholders.
This debt was rearranged in July 2005; the syndicated debt and the shareholder bond
issue were repaid ahead of schedule thanks to a new syndicated loan; the bond issue
placed with bankers resulted in a debt exchange without reimbursement.
On 9 August 2006, on the occasion of the takeover of Médica by OBO 1 and in order to
refinance the existing debt, the Royal Bank of Scotland (RBS) and the Intermediate
Capital Group (ICG) set up a new syndicated debt for a total amount of €241.3 million. At
the same time, OBO 1 set up a loan agreement worth €68.4 million.
Furthermore, the banking pool provided to the Médica Group an acquisition line of €150
million as well as a revolving credit line of €25 million.
2006
Long-term bank loans
2005
249,942
239,917
Long-term financial debts
36,470
45,769
Other long-term debts
64,620
Total bank borrowings and long-tem financial debts
351,032
285,686
Short-term bank loans
4,793
11,022
Short-term financial debts
7,618
5,211
Other short-term debts
106
Total bank borrowings and short-term financial debts
Bank loans and accrued interests not due
12,517
16,233
5,084
Total bank loans and financial debts
Of which fair value impact (equity)
Of which issuance costs
Total bank borrowings and financial debts excluding fair value impact
and issuance costs
350
368,633
301,919
0
24,863
7,114
3,323
375,747
330,105
Net financial debt
Net financial debt as defined by the Group corresponds to the total of financial debts and
bank loans less trading asset derivatives, cash and cash equivalents and marketable
securities.
2006
2005
368,633
301,919
(23,259)
(17,245)
Net debt
345,374
284,674
Analysis of the debt
The borrowings in place at year-end 2006 breaks down as follows:
1) Bank borrowing
The Company has contracted a syndicated credit facility, with RBS as the lead manager,
for €241.3 million, which is ultimately repayable no later than 31 March 2017. The interest
rate is contractually set at Euribor plus a fixed margin. This rate is swapped at a fixed rate
until 2014.
Under this borrowing, the Group is required to follow a number of usual obligations in this
type of contract. In the event of non compliance with one or more conditions, the banks
may force the Group to totally or partially repay the loan or renegotiate the financing
conditions.
The Group is thus required to comply with the financial covenants below for the next
maturity dates*:
EBITDA/
net interests
Net debt / EBITDA
Cashflow /
Cost of debt
31/12/2006
R1 > 1.35
R2 < 10.25
R3 > 1
31/12/2007
R1 > 1.50
R2 < 9.15
R3 > 1
Financial covenants
* These covenants are gradual over the entire duration of the agreement and are calculated at the OBO 1 level
and its consolidated subsidiaries.
2) Inter-company borrowings
OBO 1 has set up a €68.4 million loan to the benefit of Médica at the conditions below:

Interest rate: Euribor + 2.5%

Capitalised interests

Indefinite term
< 1 year
1-5 yrs
> 5 yrs
Nominal
Nominal
2006
2005
Finance leases
7,618
25,464
11,006
44,088
50,981
Bank loans
9,936
21,439
235,557
266,933
209,343
Bond issues / Banks
66,129
351
< 1 year
Other loans and liabilities
Total
106
1-5 yrs
> 5 yrs
64,620
17,660
46,903
Nominal
64,726
311,184
Nominal
3,652
375,747
330,105
All the loans are denominated in euros. The actual interest rates on the closing dates are
detailed below:
2006
2005
Bank loans
6.55%
7.00%
Finance leases
7.77%
7.62%
Lease financing
2006
2005
Liabilities linked to lease-financing contracts – minimum
payments for the lease
Less than 1 year
10,634
10,215
32,820
35,601
More than 5 years
12,169
16,041
55,624
61,857
Future financial costs linked to lease-financing contracts
11,650
16,289
Discounted value of liabilities linked to lease-financing contracts
45,927
50,256
The discounted value of liabilities linked to lease-financing contracts is indicated below:
2006
Less than 1 year
10,080
9,683
27,515
29,766
8,332
10,807
45,927
50,256
More than 5 years
Total
17.
2005
Deferred taxes
2006
2005
Deferred tax assets
- Deferred tax assets recoverable after 12 months
552
1,532
- Deferred tax assets recoverable within 12 months
82
639
634
2,171
352
2006
2005
- Deferred tax liabilities recoverable after 12 months
89,870
- Deferred tax liabilities recoverable within 12 months
83,089
(423)
- Deferred tax liabilities recoverable within 12 months
825
Net deferred tax liabilities
89,447
83,914
(88,814)
(81,743)
The change in net deferred taxes is presented below:
2006
2005
At 1 January
(81,743)
(61,702)
Change in scope (Note 4)
(12,271)
(7,526)
(4,223)
(3,993)
9,423
(8,522)
(88,814)
(81,743)
Taxes charged to income (Note 26)
Taxes charged directly to equity or goodwill
At 31 December
Temporary
differences
Intangible
Debts and
financial
instruments
Lease
financing
Deferred
expenses
Other
Total
At 31 December 2005 reported
1,153
67,656
8,670
8,280
816
553
87,128
Reclassification of the opening
presentation
(119)
29
0
(1,755)
(816)
(553)
(3,214)
283
187
1,443
1,235
(679)
(8,676)
Debited from the income statement
(49)
12,152
3,148
(9,356)
432
12,536
Reclassifications
At 31 December 2006
1,268
79,345
1,436
8,193
0
(75)
(75)
-75
90,167
The deferred tax liabilities concerning intangible assets, representing €79.3 million at 31
December 2006, concerned the goodwill assigned to operating permits. This tax would
only be due in the event the operating permits are sold separately.
Capitalisati
Time
differences on of tax
deficits
At 31 December 2005 reported
3,583
Retirement
allowances
1,296
353
Intangible
187
Deferred
expenses
Other
319
Total
5,385
Capitalisati
Time
differences on of tax
deficits
Reclassification of the opening
presentation
(3,583)
Credited to the income statement
Retirement
allowances
816
(661)
62
Intangible
Deferred
expenses
(187)
0
217
Total
(260)
(3,214)
(412)
(1,073)
38
38
215
277
Reclassifications
At 31 December 2006
Other
1,136
0
0
(59)
(59)
0
1,354
probable that future taxable profits will be available.
In 2005, the deferred taxes relating to the restatement of assets by components on
finance leases were assigned in temporary differences.
18.
2006
2005
3,349
3,828
59
65
3,408
3,893
459
609
Retirement benefits
551
474
Long-service awards
22
10
574
484
Retirement benefits
Long-service awards
Total
Including portion less than 1 year
Total
2006
2005
Updated value of non-financed liabilities
3,721
4,772
(313)
(879)
-
-,
3,408
3,893
Cost of non-recognised past services
354
2006
2005
449
314
Financial cost
121
168
4
2
(Gains) linked to the reduction of retirement benefits
0
-
575
484
(138)
(104)
437
380
of which payroll expenses (Note 20)
315
212
of which financial expenses (Note 25)
121
168
Paid benefits
2006
At beginning of year
Liabilities taken over during a business combination (Note 4)
Consideration of discounted assumptions about service record
2005
3,893
3,335
826
178
(1,747)
574
484
Paid benefits
(138)
(104)
3,408
3,893
459
609
2,949
3,284
of which portion less than 1 year
of which portion more than 1 year
2006
2005
Discounting rate
4.00%
4.00%
2.50%
2.50%
Employees: 60
years
Executives: 62
years
Employees: 60
years
Executives: 62
years
0 to 8%
according to the
age of the
employees
0 to 8%
according to the
age of the
employees
Retirement age
Turnover rate
355
19.
Other provisions
Other long-term provisions include:
Labour courts
As at 1 January 2005
Closing of
institutions
Other
Total
1,084
535
1,619
552
130
682
(135)
(135)
(493)
(257)
(750)
-
8
8
1,143
281
1,424
As at 1 January 2006
1,143
281
1,424
509
3,596
Recognised in the consolidated income
statement:
Used during the year
Changes in scope
Recognised in the consolidated income
statement:
1,568
(333)
(298)
(631)
Used during the year
(254)
(121)
(375)
707
189
896
560
4,910
Changes in scope
2,831
1,519
1,519
Total analysis of provisions:
2006
Non current
Current
2005
4,910
1,354
,
70
4,910
1,424
The provisions cover commercial and labour litigations.
After consulting external consultants, management considered that the outcome of these
law suits would not lead to any significant loss in excess of the amounts set aside at 31
December 2006.
The provision for closing institutions covers the cost of business transfer from the La
Sauvagère institution in Marseille to the Les Cyprès institution in Avignon.
The other short-term provisions correspond to the portion under one year of the
provisions above as well as the portion under one year of the pension and similar
commitments.
356
2006
2005
Other (current) provisions
Commitments for retirement and other benefits (Note 18)
20.
0
70
459
609
459
679
2006
Wages and end-of-employment benefits
2005
104,849
93,016
38,454
33,663
316
212
143,619
126,891
France
4,740
4,358
Abroad
69
64
4,809
4,422
Welfare expenses
Retirement expenses, defined-benefits plans and long-service awards (Note
18)
End-of-year workforce (full-time equivalents)
Total
The allowances to provisions for corporate disputes posted under payroll expenses
totalled €1,568,000 in 2006 and €552,000 in 2005 (Note 19).
The reversals of provisions for corporate disputes posted under payroll expenses totalled
€254,000 in 2006 and €493,000 in 2005 (Note 19).
21.
External expenses
2006
2005
Temp staff
2,583
2,259
Professional Fees
4,495
3,831
Property leasing
29,567
23,677
Furniture rental
4,181
3,276
Maintenance
4,396
2,863
25,562
13,765
Inventory purchases
8,451
7,315
Other
8,781
10,571
Total
88,016
67,557
Subcontracting
The change in the outsourcing item between 2006 and 2005 mainly stems from the Italian
subsidiary Aetas: in 2005 the Italian subsidiary was integrated over 6 months only, and
the entirety of external charges had been posted under “Other”.
357
22.
2006
2005
Operating subsidies
177
94
115
414
Profits on prescribed debts
428
Other revenues
842
Reversal of provisions on trade receivables (Note 11)
Losses on bad debts
565
1,443
(673)
(2,155)
Non-funded loan charge-off
(153)
Other expenses
Total
4
(57)
188
856
The reversals of provisions on trade receivables only apply to the reversals used. The
reversals of unused provisions are booked in diminution of the depreciation provisions for
each year.
23.
The other operating revenues and expenses correspond to income on disposals of noncurrent assets.
2006
2005
Earnings from sale of the Valmont institution (Switzerland)
1,406
Earnings from sale of SCI Tour Doyen
286
1,705
Costs for closing of institutions
(4,038)
Pons business acquired for no consideration
1,286
Consideration of discounted assumptions about service record
1,747
(569)
Miscellaneous
6
Total
24.
99
137
1,791
2006
2005
(16,923)
(17,923)
(3,692)
(3,894)
Amortisation of loan issue costs
(1,044)
(222)
Change in the fair value on mezzanine debt
1,167
(348)
Change in the fair value of swap on syndicated loan
3,549
1,145
(16,943)
(21,242)
Interest on borrowings
Total
358
25.
2006
2005
Other financial income
209
3
Interest expenses on retirements and long-service awards (Note 18)
26.
48
(120)
(168)
Bank charges on overdrafts
(712)
Exchange rate differences
(137)
Discounting effects
(1,042)
(33)
Amortisation of the balance of loan issue costs for old debt
(3,075)
,
Total
(4,025)
(1,002)
Income tax expense
2006
2005
Current tax
4,390
1,097,
Deferred taxes (Note 17)
4,223
3,993,
Total
8,614
5,090,
2006
Pre-tax earnings and share in companies accounted for by the equity method
Tax rate
Theoretical tax expense
Non-recognised tax losses
Non-recognised prior losses charged to the year
2005
23,856
16,961
33.33%
33.33%
7,951
5,653
18
348
(222)
Capital gains or losses of consolidated companies
0
(1,745)
Swiss tax on disposal of property assets
0
588
Change in tax rate
0
(357)
Tax on permanent time lags
631
340
Income tax divergence
255
257
Other
(19)
6
8,614
5,090
Recognised tax expense
359
27.
Net depreciation, amortisation and provisions
2006
Depreciation expense on tangible assets (Note 6)
2005
10,724
10,086
264
402
Allowances to other provisions (Note 19)
3,596
682
Non-utilised reversals on other provisions (Note 19)
(631)
(135)
Utilised reversals on other provisions (Note 19)
(375)
(750)
Allowances to provisions for retirement commitments and similar benefits (Note 18)
(1,311)
212
Amortisation expense in the statement of cash flows
12,267
10,497
2006
2005
Amortisation expense on intangible assets (Note 7)
Amortisation expense in the income statement
10,352
Depreciation expense on tangible assets (Note 6)*
11,224
10,086
264
402
11,488
10,488
(500)
(136)
10,988
10,352
Allowances to provisions in the income statement
2006
2005
Allowances to provisions on trade accounts (Note 11)
505
1,131
Reversal of provisions on non-utilised trade accounts (Note 11)
(218)
(53)
Allowances to other long-term provisions (Note 19)
3,596
130
Reversals on non-utilised provisions (Note 19)
(631)
(135)
3,252
1,073
Amortisation expense on intangible assets (Note 7)
Reversal of non-utilised provision charged to amortisation expense
* including €78,000 classified under non current
NB: The allowances to provisions for welfare-related benefits are posted under payroll costs.
The reversals used are posted against the expenses to which they are related.
28.
Earnings per share
Basic earnings
The basic earnings per share is computed by dividing the Company’s net income
attributable to the shareholders by the weighted average number of current shares in the
Profit attributable to the Company’s shareholders (in thousands of euros)
Weighted average number of current common shares
Basic earnings per share (euros per share)
360
2006
2005
14,920
11,512
1,000,000
1,000,000
14,92
11,51
29.
Dividends per share
No dividend was paid for 2005 and 2006.
30.
significant liabilities..
31.
Commitments given
2006
2005
Guarantees given to finance-lease agencies
14,150
14,150
Pledging of business assets to finance-lease agencies
8,444
8,444
Project acquisition promises (under conditions precedent)
13,215
3,044
Works completion commitment
2,000
2,000
companies
The table below details all the future minimum payments under non-cancellable operating
lease agreements:
2006
Less than 1 year
More than 5 years
Total
2005
33,394
21,515
113,835
72,834
78,334
39,093
225,460
133,442
2006
2005
Asset and liability guarantees
Asset and liability guarantees received linked to securities acquisitions
Asset and liability guarantees given in the context of securities disposals
(The sale of an SCI was also the subject of a liability guarantee without a cap.)
12,314
9,900
-
600
Other information
In 2004, a lawsuit was filed against Médica France by a company that considers that it
has been ill-treated following an alleged breach of a pre-contractual relationship
concerning the acquisition of a building.
The court rejected the entirety of the company’s claims on 12 May 2005. Following this
judgement, the company filed an appeal at the Versailles court of appeals.
361
The Versailles court of appeal also rejected the case after a hearing on 5 October 2006.
32.
The Group has no transactions with related parties.
33.
Recent developments
Significant acquisitions that have occurred since the end of fiscal 2006
On 1 January 2007, acquisition of Sarl CGCV, carrying an authorisation to run an EHPAD
with 84 beds to be located in Castéra-Verduzan (32).
On 4 January 2007, acquisition of Clinique Saint Maurice, a psychiatric institution with 30
beds located at La Jonchère (87).
On 15 January 2007, acquisition of Clinique Alma Santé, a healthcare institution with 48
beds located at Montrond (42).
On 22 February 2007, acquisition of Clinique de Saussens, a healthcare institution with
80 beds located at Verfeil (31).
On 19 March 2007, acquisition of Le Pins, an EPHAD with 80 beds located at Narbonne
(11).
On 4 April 2007, acquisition of Quatre Trèfles, an EPHAD with 90 beds located at
Marseille (13).
On 11 April 2007, acquisition of Gaston de Foix, an EPHAD with 80 beds located at
Mazères (13).
34.
Currency
2006
2005
Method
% control
% of interest
Method
% control
% of interest
MEDICA
€
FULL
Parent
-
FULL
Parent
-
SCI CHAMBERY JORCIN
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI NANCY VANDOEUVRE
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI SAINT MAURICE LECLERC
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
SOCEFI
€
FULL
100.00
100.00
FULL
100.00
100.00
SDSA
€
FULL
100.00
99.99
FULL
100.00
99.99
SARL RA DE LA FERME
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL INVAMURS
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI LAXOU
€
FULL
51.00
51.00
FULL
51.00
51.00
SCI LES SABLES
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI LYON GERLAND
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI ST MALO
€
FULL
100.00
100.00
FULL
100.00
100.00
362
Currency
2006
2005
Method
% control
% of interest
Method
% control
% of interest
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI DU MANS
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI D'ARS EN RE
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL RA DE LAXOU
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL GRAPA
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL RA DU MANS
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI DE L'EUROPE
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
99.80
99.79
FULL
99.80
99.79
SNC DE DINARD
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
100.00
99.99
FULL
100.00
99.99
SAS RA DE CHALONS
€
FULL
100.00
99.99
FULL
100.00
99.99
SARL SOGEMAPAD
€
FULL
100.00
99.99
FULL
100.00
99.99
SNC DE L'EUROPE
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
100.00
99.99
FULL
100.00
99.99
SARL SERPA
€
FULL
100.00
99.99
FULL
100.00
99.99
SARL SERAPA
€
FULL
100.00
99.99
FULL
100.00
99.99
SA RA DE SARZEAU
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
100.00
99.99
FULL
100.00
99.99
SAS RA DE DINARD
€
FULL
100.00
99.99
FULL
100.00
99.99
€
FULL
95.96
95.95
FULL
95.96
95.95
€
FULL
100.00
100.00
FULL
100.00
100.00
SAS CLINIQUE MEDICALE DE LA SAUVAGERE
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
99.71
99.71
FULL
99.71
99.71
SARL CCN
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL LES ARBELLES
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
SAS LE SPLENDID
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI LE SPLENDID
€
FULL
100.00
100.00
FULL
100.00
100.00
LES LILAS
€
FULL
100.00
100.00
FULL
100.00
100.00
COGOLIN
€
FULL
100.00
100.00
FULL
100.00
100.00
SARL BEL AIR
€
FULL
100.00
100.00
FULL
100.00
100.00
363
Currency
2006
2005
Method
% control
% of interest
Method
% control
% of interest
MEDICA France
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
TOPAZE
€
FULL
100.00
100.00
FULL
100.00
100.00
LES PINS
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI DE BICHAT
€
FULL
100.00
99.99
FULL
100.00
99.99
SCI LYON OULLINS
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI CCN
€
FULL
100.00
100.00
FULL
100.00
100.00
SCI CMA
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
€
FULL
100.00
100.00
FULL
100.00
100.00
AETAS S.P.A.
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
II FAGGIO Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
RESIDENZA I PLATANI
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
I ROVERI Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
CROCE DI MALTA Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
Il CASTAGNO Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
LE PALME Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
I GIRASOLI Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
VILLA ANTEA Srl
€
FULL
100.00*
100.00*
FULL
100.00*
100.00*
GLI OLEANDRI Srl
€
FULL
100.00*
100.00*
FULL
40.00
40.00
SAS GROUPE DOYENNES EUROPE (GDE)
€
-
-
-
FULL
99.17
99.17
SOCIETE D'EXPLOITATION DE LA RISLE
€
-
-
-
FULL
100.00
100.00
SAS LES MYRTILLES
€
-
-
-
FULL
100.00
99.17
SAS RESIDENCE DU LAC
€
-
-
-
FULL
100.00
99.17
EURL LE HOME
€
-
-
-
FULL
100.00
100.00
SDFI
€
-
-
-
FULL
100.00
100.00
SCI LA ROCHE SAMUEL MERYAT
€
-
-
-
FULL
100.00
100.00
SCI LA ROCHETTE
€
-
-
-
FULL
100.00
100.00
€
FULL
91.78
91.78
-
-
-
€
FULL
91.78
91.78
-
-
-
€
FULL
100.00
100.00
-
-
-
SARL MAISON BLANCHE
€
FULL
100.00
100.00
-
-
-
€
FULL
99.00
99.00
-
-
-
€
FULL
100.00
100.00
-
-
-
SARL LUBERON SANTE
€
FULL
100.00
100.00
-
-
-
€
FULL
100.00
100.00
-
-
-
SAS MACO
€
FULL
100.00
100.00
-
-
-
Sociétés fusionnées en 2006
Sociétés acquises en 2006
364
Currency
2006
2005
Method
% control
% of interest
Method
% control
% of interest
SCI DU BOIS HAUT
€
FULL
100.00
100.00
-
-
-
€
FULL
100.00
100.00
-
-
-
SARL CRC GESTION
€
FULL
100.00
100.00
-
-
-
SAS HOLDING DE L'ABBAYE
€
FULL
100.00
100.00
-
-
-
SAS SAINTE COLOMBE
€
FULL
100.00
100.00
-
-
-
€
FULL
100.00
100.00
-
-
-
€
FULL
100.00
100.00
-
-
-
SCI VALMAS
€
FULL
100.00
100.00
-
-
-
Care Service Spa
€
FULL
100.00
100.00
-
-
-
* The AETAS group, of which 60% of securities were acquired in 2005, is fully consolidated given the repurchase
commitment for the remaining 40% (see Note 15).
365
25.12
Statutory auditors’ report on the consolidated financial statements of Médica SA
for the year ended 31 December 2006
CONSTANTIN ASSOCIES
Jean Lebit
18, avenue du 8 mai 1945
95200 – SARCELLES
STATUTORY AUDITORS’ REPORT ON THE CONSOLIDATED FINANCIAL
STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2006
MEDICA S.A.
92130 - ISSY LES MOULINEAUX
Dear Sir,
Dear Shareholders,
In performing the duty entrusted to us by your General Meeting, we have audited the
consolidated financial statements of Médica SA for the year ended 31 December 2006, as
attached to this report.
The consolidated accounts were prepared under the authority of your Management
Board. It is our responsibility to express an opinion on these financial statements based
on our audit.
1. Opinion on the consolidated financial statements
We carried out our audit according to the professional standards applicable in France.
Those standards require that we plan and perform the audit to obtain a reasonable
assurance that the consolidated financial statements are free of material misstatements.
An audit consists of examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also consists in assessing the accounting
principles used and the significant estimates made by management in preparing the
accounts, as well as evaluating the overall presentation. We believe that our audit
provides a reasonable basis for the opinion expressed below.
We certify that the consolidated accounts for the year fairly and accurately reflect, in all
material respects and in accordance with the International Financial Reporting Standards
(IFRS) reference system as adopted by the European Union, the net worth, financial
position and results of the Group as comprised by the people and the entities included in
the consolidation.
2. Justification for assessments
In accordance with the requirements of article L.823-9 of the French Commercial Code
(Code de Commerce) relating to the justification of our assessments, we would like to
draw your attention to the following matters:
366
Your company has assessed the value of goodwill and operating permits, posted under
intangible assets, according to the methods described in part 2, “Accounting rules and
policies”, notes 2.6 a) and 2.6 b), of the notes to the financial statements. We have
carried out an assessment of the approach retained by your company and of the data and
assumptions on which these estimates are based. In the context of our assessments, we
are assured of the fairness of these different estimates.
Accordingly, the assessment we made is connected to the approach we use to audit
consolidated financial statements as a whole and therefore contributed to the formation of
our opinion, expressed in the first part of this report.
3. Specific reviews
We have also reviewed the information given in the Group’s management report. We
have no special comment to make as to its fair presentation and consistency with the
consolidated financial statements.
Paris and Sarcelles, 30 April 2007
CONSTANTIN ASSOCIES
JEAN LEBIT
Jean Paul SEGURET
367
26
DIVIDEND POLICY
Based on its strong ability to generate cash flow, the Medica group aims to pay a
dividend (while maintaining its capacity to finance its growth) of approximately 20% of net
profit attributable to equity holders of the Medica group from the shareholders’ general
meeting approving the accounts for the financial year ending 31 December 2010.
See Chapter 13 “Trend information” of this reference document.
368
27
LEGAL AND ARBITRATION PROCEEDINGS
In the normal course of its business, the Company and its subsidiaries may be involved in
legal, arbitration or administrative proceedings.
At the date of this reference document, to the best of the Company’s knowledge, there
were no exceptional events, claims or litigation likely to have or have had a material
adverse impact on the Company’s or the Medica group’s business activities, results of
operations or financial condition.
369
28
NO MATERIAL CHANGE IN THE ISSUER’S FINANCIAL OR TRADING
POSITION
To the best of the Company’s knowledge, there have been no material changes in the
financial or trading position of the Medica group since 30 September 2009.
370
29
ADDITIONAL INFORMATION
29.1
Information about the share capital
29.1.1
Amount of share capital (Article 6 of the Articles of Association)
At the registration date of the reference document, the Company’s share capital
amounted to €11,348,478.
It is divided into 1,823,301 ordinary shares and 5,462,739 preference shares
(“Preference Shares”).
The Company’s shares are all fully subscribed and paid up.
Holders of Preference Shares have the right to (i) a priority dividend calculated on the
basis of the subscription proceeds of such Preference Shares at an annual interest rate
of 13%, on which interest is capitalised, although no dividend has been distributed by the
Company since the issue of the Preference Shares in 2006 and their conversion ratio
(see below) takes into account the capitalised interest, (ii) a priority right to the
Company’s liquidation surplus and (iii) a priority right of repurchase in the event of a
capital reduction not occurring as a result of losses.
Nonetheless, holders of Preference Shares will convert the Preference Shares that they
hold into ordinary shares upon the flotation based on a ratio determined as follows:
P
R= T
Where:
29.1.2

P designates the subscription price per Preference Share (i) plus interest at an
annual rate of 13% calculated over the period from the date of issuance of the
relevant Preference Share to the date of conversion of said Preference Share, this
interest itself being capitalised on an annual basis at a rate of 13% calculated on
each anniversary date of the date of issuance of the relevant Preference Share
and (ii) less amounts paid in advance in respect of Preferential Dividends, it being
specified that the amount of interest referred to in (i) above will be restated so as
not to take into account the capitalisation of the sum(s) paid in respect of the
Preferential Dividends referred to in (ii) above between the date(s) of the payment
considered and the conversion date of the Preference Share; and

T designates the IPO price of the Company per ordinary share.
Pledges of the Company’s shares
None of the Company’s shares have been pledged.
29.1.3
Shares not representing capital
None.
29.1.4
Shares held by the Company or for its own account
At the registration date of the reference document, the Company did not hold any
treasury shares.
371
29.1.5
Breakdown of the share capital and voting rights
At the date of the reference document, the Company’s existing share capital is broken
down as follows:
Existing share capital
Shareholders
Ordinary shares
Preference shares
Number of
shares
% of share
capital and
voting rights
Number of
shares
% of share
capital and
voting rights
1,384,262
75.9%
4,990,426
91.4%
J. Bailet
223,111
12.2%
208,446
3.8%
C. Jeandel
137,550
7.5%
127,200
2.3%
40,625
2.2%
39,375
0.7%
6,750
0.4%
1,875
0.0%
Groupe
MEDICA
France
corporate mutual fund (FCPE)
6,001
0.3%
1,667
0.0%
ICG
25,000
1.4%
93,750
1.7%
Other
2
0.1%
0
0.0%
Total
1,823,301
100%
5,462,739
100%
TBU-3 International
1
Société Civile d’Investissement
du Groupe MEDICA
2
Société Civile d’Investissement
2
du Groupe MEDICA II
entities
(Intermediate
3
Capital Group)
1
TBU-3 International SA is owned by funds and vehicles advised by BC Partners, an
international private equity firm with a presence in London, Paris, Milan, Hamburg,
Geneva and New York.
2
The purpose of these investment partnerships is to acquire a stake in Medica; they
include certain senior executives.
3
The ICG units that hold the shares are three vehicles advised by ICG plc (a company
listed in London on the FTSE 250).
Holders of Preference shares and bonds convertible into ordinary shares will convert
these upon the IPO as stated in sections 29.1.1 “Amount of the share capital (Article 6 of
the Articles of Association)” and 29.1.6 “Other securities conferring rights to the share
capital” of this reference document.
29.1.6
Other securities conferring rights to the share capital 47
On 9 August 2006, the Medica group issued a convertible bond in a nominal amount of
€174,813,968 due to mature on 30 June 2019 (the “convertible bond”) represented by
10,925,873 convertible bonds, each with a par value of €16. The convertible bonds were
fully subscribed and paid up at their date of issuance and carry interest at an annual rate
of 10% until their redemption or conversion date.
47
At the date of registration of this reference document, there are no diluting instruments other than convertible bonds.
372
At the date of the reference document, ownership of the convertible bonds broke down as
follows:
Convertible bonds
Holders
Number
%
J. Bailet
228,506
2.1%
C. Jeandel
137,750
1.3%
45,000
0.4%
10,320,867
94.5%
193,750
1.8%
10,925,873
100%
Société Civile d’Investissement du Groupe Medica
Funds advised by BC Partners
ICG funds (Intermediate Capital Group)
TOTAL
Convertible bondholders will convert the convertible bonds that they hold into ordinary
shares upon the IPO based on the following ratio: each convertible bond will entitle the
holder (subject to the provisions of law and the regulations applicable to the protection of
holders’ rights) to a number of ordinary shares calculated as the nominal amount of the
convertible bonds plus the relevant capitalised and accrued interest at the date of the
admission, divided by the IPO price per ordinary share in the Company.
It is stated that:
29.1.7
(i)
a convertible may be converted into at most one ordinary share (it being specified
that should the value of a convertible bond exceed the value of the ordinary share
that the holder is entitled to receive, the excess amount will be transferred to an
“issue premium” account); and
(ii)
assuming the number of ordinary shares that a convertible bond holder is entitled
to receive is not a whole number, the number of shares resulting for each holder
from conversion of the convertible bonds will be rounded down to the nearest
whole number, with holders of convertible bonds handling themselves any sale
and/or consolidation transactions involving the convertible bonds.
Share capital authorised, but not issued
The delegations of powers and authorisations to issue shares and other negotiable
securities will be put in place during the combined general meeting to be held ahead of
the date of the approval (visa) of the prospectus. A proposal should be made at this
meeting to modify the terms and conditions of equity-linked securities with a view toward
their conversion ahead of the date of approval of the prospectus. This information will
thus appear in the subsequent note d’opération (securities note).
373
29.1.8
Changes in the Company’s ownership structure during the past three years
The following table shows changes in the Company’s ownership structure during the past
three years:
Definitive
completion
date
Type of
transaction
Shareholding as at 6/08/2006
Price
Identity of the
shareholder
At par
value of
€16
TBU-3
International
At par
value of
€16
Other
% of share
capital and
voting
rights held
Number of shares
acquired or
subscribed
% of the share
capital and voting
rights after the
transaction
Share
capital
after the
transaction
(in euros)
Ordinary
shares
Preference
shares
Ordinary
shares
Preference
shares
2,788
0
99.9%
0.0%
44,640
2
0
0.1%
0.0%
44,640
7/08/2006
Capital
increase
At par
value of
€16
TBU-3
International
99.9%
1,394,225
-
99.9%
0.0%
22,352,240
9/08/2006
Capital
increase
At par
value of
€16
TBU-3
International
99.9%
-
4,993,968
76.6% 48
91.4%
116,576,640
9/08/2006
Capital
increase
At par
value of
€16
Jacques Bailet
0.0%
223,111
208,446
12.2%
3.8%
116,576,640
9/08/2006
Capital
increase
At par
value of
€16
Christine
Jeandel
0.0%
137,550
127,200
7.5%
2.3%
116,576,640
9/08/2006
Capital
increase
At par
value of
€16
Société Civile
d'Investissement
du Groupe
Medica
0.0%
40,625
39,375
2.2%
0.7%
116,576,640
9/08/2006
Capital
increase
At par
value of
€16
ICG entities
(Intermediate
Capital Group)
0.0%
25,000
93,750
1.4%
1.7%
116,576,640
31/05/2007
Acquisition
from TBU-3
International
At par
value of
€16
Société Civile
d'Investissement
du Groupe
Medica II
0.0%
6,750
1,875
0.4%
0.0%
116,576,640
30/07/2008
Acquisition
from TBU-3
International
FCPE GROUPE
MEDICA France
0.0%
6,001
1,667
0.3%
0.0%
116,576,640
09/11/2009
Capital
reduction*
At par
value of
€16
11,348,478
* See section 15.6 “Company history and reorganisation”.
48
This percentage does not take into account the transfers that took place on 31 May 2007 and 30 July 2008 after which the
percentage of ordinary shares held by TBU-3 International decreased to 75.9%.
374
29.2
Memorandum and Articles of Association
29.2.1
Corporate purpose (Article 2 of the Articles of Association)
The Company’s corporate purpose is in France and abroad:
29.2.2

all management, consulting, ownership activities and/or operation of specialised
businesses in the healthcare and social sector, personal assistance and more
specifically long-term and short-term dependency care; and

more generally, the acquisition of shareholdings and interests or the acquisition by
any means of any business, company, operation or any asset and any commercial,
financial, equipment-related, real estate or other transaction, related directly or
indirectly to one of the purposes specified above, or likely to facilitate the
attainment or development thereof, or any similar or connected purpose likely to
foster development of the Company.
Provisions of the Articles of Association concerning the administration and
management bodies – Internal regulations of the board of directors
(a)
Board of directors (excerpts from Article 14 of the Articles of Association)
Composition of the board of directors
Subject to the legal provisions applicable in the event of the merger with another société
anonyme, the board of directors comprises at least three and no more than 18 members,
appointed by the ordinary general meeting of the shareholders.
Length of term of office — Age limit — Replacement
The term of office of the directors is three years, expiring at the end of the ordinary
general meeting convened to approve the financial statements for the financial year then
ended and held in the year in which the term of office expires. Every incumbent director is
eligible for re-appointment.
The number of individuals appointed as directors and permanent representatives of legal
entities aged over 70 may not exceed one-third of directors currently appointed.
The term of a director named to replace another director runs solely for the remaining
duration of his/her predecessor’s term of office.
Duties of directors
Each director, irrespective of whether he is an individual or permanent representative,
must hold a minimum of the Company’s shares which will be determined at a
shareholders’ annual general meeting held prior to the date of the approval of the
prospectus.
If on the day of appointment, a director does not own the requisite number of shares or if,
during the term of office, the director ceases to own this number, he is deemed to have
resigned as a matter of course, unless the situation is rectified within a period of three
months.
Chairman of the Board
The board of directors elects a Chairman, who must be an individual, from among its
members.
375
The Chairman of the board of directors organises and directs the work of the Board and
reports to the shareholders’ annual general meeting. He must ensure the proper
operation of the Company’s bodies and make sure that the directors are capable of
performing their duties.
The Chairman is a appointed for a period that may not exceed the length of his term of
office as a director. He is eligible for reelection. The board of directors may dismiss the
Chairman at any time. To exercise his duties, the Chairman must be less than 70 years
old. Should the Chairman reach this age limit during a term of office, he is deemed to
have resigned as a matter of course and a new Chairman is appointed. Should the
Chairman be prevented temporarily from exercising his duties or die, the board of
directors may appoint a director to perform the Chairman’s duties. Should the Chairman
be temporarily unable to perform his duties, this delegation of powers is granted for a
limited time and is renewable. In the event of the Chairman’s death, it is valid until a new
Chairman is elected.
The Chairman’s compensation and benefits are set by the board of directors upon the
advice of the Compensation and Appointments Committee.
When responsibility for the Company’s executive management is held by the Chairman of
the board of directors, the following provisions concerning the role of Chief Executive
Officer apply.
Exercise of executive management
Executive management
The executive management of the Company is the responsibility either of the Chairman
of the board of directors or of another individual appointed by the board of directors with
the title of Chief Executive Officer.
The Chief Executive Officer is appointed by the board of directors, which sets the length
of his term of office and sets his compensation and benefits, and, where appropriate, any
restrictions on his powers, within the internal regulations.
The Chief Executive Officer has the broadest powers to act in the name of the Company
under all circumstances. He exercises these powers within the limits of the Company’s
corporate purpose and subject to the powers that the law explicitly grants to general
meetings of the shareholders and the board of directors. He represents the Company in
its dealings with third parties. The Company is furthermore bound by acts of the Chief
Executive Officer that are not covered by the corporate purpose, unless it can prove that
the third party knew that the act fell outside the scope of the corporate purpose or that it
could not fail to know this in view of the circumstances, it being specified that mere
publication of the Articles of Association does not constitute such proof.
To exercise his duties, the Chief Executive Officer must be less than 70 years old. When
this age limit is reached during the Chief Executive Officer’s term of office, he remains in
office until the next meeting of the board of directors.
The Chief Executive Officer may be dismissed at any time by the board of directors. If the
dismissal is decided without just cause, it may give rise to the payment of compensation,
except where the Chief Executive Officer assumes the duties of Chairman of the board of
directors.
376
Deputy Chief Executive Officers
At the recommendation of the Chief Executive Officer, the board of directors may appoint
up to five Deputy Chief Executive Officers to assist him or her. A Deputy Chief Executive
Officer must always be an individual. He may or may not be chosen from among the
directors. In conjunction with the Chief Executive Officer, the board of directors
determines the scope and duration of the powers of the Deputy Chief Executive Officer,
which may not exceed those held by the Chief Executive Officer and the term of office of
the Chief Executive Officer. The board of directors determines the compensation and
benefits paid to the Deputy Chief Executive Officer.
Should the duties of the Chief Executive Officer cease, the Deputy Chief Executive
Officer may, unless the board of directors decides otherwise, stay in office until the new
Chief Executive Officer is appointed.
Board decisions
The board of directors meets as often as is required by the interests of the Company and
whenever it deems appropriate at the place indicated in the notice of the meeting.
The directors may be convened at any time to meetings of the board of directors by any
means and even orally by the Chairman or any other person acting on his behalf that he
designates. At least one-quarter of the members of the board of directors may ask the
Chairman to convene the Board with a given agenda within a period of three days.
Any director may ask another director to represent him at a meeting of the board of
directors. The board of directors is the sole arbiter of the validity of the mandate, which
may be given in any written form that unambiguously attests to the will of the person
giving the mandate. A director may represent only one other director.
In the event that the Chairman is unable to or fails to convene a meeting, the board of
directors may be convened by directors representing at least one-quarter of the members
of the board of directors.
The agenda may be set only during the meeting.
The meetings of the board of directors take place at the registered office or at any other
location in France or abroad stated in the notice of the meeting, including by means of a
conference call or videoconferencing (except for the verification of the audit of the annual
and consolidated financial statements, where appropriate) under the conditions provided
for in the internal regulations.
Decisions are approved pursuant to the majority and quorum requirements set by law. In
the event of a tie, the Chairman does not have a casting vote.
Powers of the board of directors
The board of directors determines the Company’s priorities and ensures that they are
implemented. Subject to the powers expressly attributed to shareholders’ annual general
meetings and within the scope of the corporate purpose, it considers all matters that
affect the Company’s operations and settles matters which concern it through its
decisions.
The board of directors decides whether the Chairman of the board of directors or whether
another person appointed as Chief Executive Officer is responsible for executive
management of the Company. Shareholders and third parties are informed of this choice
377
under the arrangements laid down by the provisions of law and regulations in force. The
board of directors decides between these options based on a simple majority of the
members present or represented. A change in the structure of executive management
may take place only after an annual general meeting.
The board of directors may form committees, of which it determines the members and
remit and which perform their activities under its authority. The role of these committees
is to assist the board of directors with its duties. To this end, the Company will set up an
Audit Committee and a Compensation and Appointments Committee (see section 19.3
“Committees of the board of directors”).
In addition, the board of directors may appoint based on a majority decision by its
members one or more non-voting advisors, who will also attend meetings of the board of
directors, without casting a vote, and receive the same information (in the same form and
at the same time) as that provided to the other members of the board of directors and
also be communicated the minutes of the meetings.
(b)
Internal regulations of the board of directors
It is stipulated that the Company’s board of directors will adopt internal regulations stating
the arrangements for its operation, in addition to the provisions of law, the regulations and
the Company’s Articles of Association.
These internal regulations will state, firstly, the structure of the organisation and
operations, the powers and duties of the board of directors and the committees it has
formed (see sections 19.3 “Committees of the board of directors” and 19.4 “Limitations on
management authority” for a description of the various committees formed and the
restrictions placed on the powers of executive management) and, secondly, on the
arrangements for assessing and evaluating its operation.
(c)
Assessment and evaluation of the operation of the board of directors
In accordance with the Articles of Association of the internal regulations of the board of
directors, the Board intends to make sure it has independent members, drawing
inspiration from the AFEP/MEDEF’s corporate governance code for listed companies.
Generally speaking, an independent director may not maintain any relationship of
whatever kind with the Company, Group or its management that may compromise the
exercise of his freedom of judgement.
The Company intends that its board of directors should have three directors satisfying the
independence criteria described above (see section 18.1 “Composition and operation of
management and control bodies”).
With effect from the 2010 financial year, provided that the Company’s shares have been
admitted to trading on the Euronext Paris market, the Chairman of the board of directors
will draft a report on the composition and on the preparation and organisation of the work
performed by the board of directors and its committees in accordance with the provisions
of Article L.225-37 of the French Commercial Code, as well as the internal control and
risk management procedures put in place by the Company.
378
29.2.3
Rights, privileges and restrictions placed on shares
Distribution of profits, payment of dividends and interim dividends (excerpts from
Article 16 of the Articles of Association)
Net profit - Statutory reserve
A sum is drawn first from the amount of net profit, less any prior losses, in an amount of:

at least five percent, which is allocated to the so-called “statutory reserve”. This
transfer ceases to be obligatory when this reserve reaches one-tenth of the share
capital, but resumes when, for whatever reason, this ratio is no longer met; and

all the amounts to be transferred to the reserves pursuant to the law or the Articles
of Association.
The profit available for distribution comprises the net profit recorded in the financial year
less any prior losses and the aforementioned levy, plus the amount of any retained
earnings.
Dividends
Where the financial statements for the financial year, as approved by shareholders, show
a profit available for distribution, the shareholders may decide to allocate it to one or more
reserve accounts the use or allocation of which they determine, carry it forward or
distribute it in the form of dividends.
After formally noting the existence of the reserves at their disposal, shareholders may
decide, in accordance with the arrangements stipulated in the Articles of Association, to
distribute amounts drawn from these reserves. In this case, their decision must explicitly
state the reserve accounts from which these amounts are to be drawn. However,
dividends are drawn in priority from the year’s profit available for distribution.
Interim dividend payments
When a balance sheet drawn up during or at the end of the financial year certified as
exact by the Statutory Auditor(s) shows that the Company has recorded a profit since the
end of the previous financial year, after setting aside the requisite depreciation,
amortisation and impairment charges and less any prior losses, where appropriate, as
well as the amounts to be transferred to reserves pursuant to law or the Company’s
Articles of Association, and taking into account retained earnings, the board of directors
may pay one or more interim dividends in accordance with the law prior to the approval of
the financial statements for the financial year. The amount of these interim dividends may
not exceed the amount of the profit defined above.
Payment of dividends and interim dividends
The payment in cash of the dividends is made on the date and at places set by the
shareholders’ annual general meeting or failing this by the board of directors within no
more than nine months of the end of the financial year, unless this deadline is extended
by an order of the President of the Commercial Court ruling at the request of the board of
directors.
Any dividends not received during the five years from the date of the shareholders annual
general meeting deciding on their payment are time-barred in accordance with the law.
379
The shareholders’ general meeting called to approve the financial statements for the
financial year has the option of granting each shareholder the choice between receiving
all or part of the dividend or interim dividend in cash or in shares. The request to pay the
dividend in shares must be made by a deadline set by the shareholders’ general meeting,
which must be no later than three months after the date of said general meeting.
29.2.4
Changes in the share capital and rights attached to shares (excerpt from Article 7
of the Articles of Association)
Capital increase
The share capital may be increased, either through the issuance of new shares, even
belonging to a category other than existing shares, or through an increase in the nominal
amount of existing shares or through the exercise of rights attached to securities
conferring rights to the capital. The new shares are paid-up either in cash, including by
the offset of due and liquid receivables of the Company or through the capitalisation of
reserves, earnings and issue premiums, or through contributions in kind, or as a result of
a merger or demerger.
The shareholders’ extraordinary general meeting is the sole body with the authority to
decide on or authorise an increase in the share capital immediately or in the future. It may
delegate this authority to the board of directors in accordance with the law or grant it the
requisite powers to carry out the increase in the capital by the statutory deadline on one
or more occasions, set the terms and conditions, formally record its completion and
amend the Articles of Association accordingly.
A decision may be made to restrict the size of the capital increase in cash to the amount
of subscriptions pursuant to the conditions provided for in law.
In the event of an increase through the issue of shares for cash, a preferential
subscription right exists pursuant to the provisions of law for holders of existing shares.
This said, shareholders may individually waive their preferential subscription right, and
the general meeting making the decision to increase the share capital may remove this
preferential subscription right pursuant to the arrangements provided for in law.
Those shareholders who do not possess a sufficient number of existing shares to obtain
a whole number of new shares must come to an agreement with others, if they want to
exercise their rights, without this agreement leading to the subscription of odd lots.
A capital increase may also be the result of the request made by any shareholder to
receive in shares the payment of all or part of the dividend or interim dividend paid when
this option has been granted to shareholders by the general meeting ruling on the
financial statements for the financial year.
The board of directors formally recorded the number of shares issued in accordance with
the previous paragraph and makes the relevant amendments to the Articles of
Association concerning the share capital and the number of shares that it comprises.
Reduction and amortisation of the share capital
The shareholders’ extraordinary general meeting may subject to the provisions laid down
in law decide to or authorise the board of directors to carry out a reduction in the share
capital, for whatever reason and in any manner whatsoever, notably through the
purchase and cancellation of a given number of shares or by means of an exchange of
existing shares for new shares, of an equivalent or smaller number, that may or may not
380
have the same nominal amount and, where appropriate, with the sale or purchase
existing shares to facilitate the exchange and with or without an equalising payment being
made or received.
29.2.5
Shareholders’ general meetings
Notice of meeting and powers of representation (excerpts from Article 15 of the
Articles of Association)
The shareholders’ general meeting is convened by the board of directors or, failing this,
by the Statutory Auditors or by an agent designated by the President of the Commercial
Court ruling in a summary injunction, at the request of one or more shareholders together
holding at least 5% of the share capital, or a shareholders’ association under the
conditions provided for in Article L.225-120 of the French Commercial Code.
Notice of the meeting is given at least two weeks in advance at the first time of calling
and at least six days in advance at the subsequent times of calling through a notice
placed in a journal authorised to make legal announcements in the same department as
the registered office and in the Bulletin des Annonces Légales Obligatoires (“BALO”,
Bulletin of Obligatory Announcements). Shareholders who have held registered shares
for at least one month at the date of these notices are convened either by ordinary letter
or by any means of electronic communication.
The notice of the meeting is preceded by a notice containing all the indications required
by law in the BALO at least 30 days ahead of the general meeting.
The agenda for each general meeting is prepared by the person who called the meeting.
Where appropriate, it contains the proposals made by one or more shareholders under
the terms and conditions provided for in law.
The general meeting comprises all the shareholders irrespective of the number of shares
they hold provided that they have been fully paid-up.
The right to attend general meetings in person or through a representative is subject to
the following conditions:

the registration of the shareholder in the registered share accounts kept by the
Company or by its designated agent at least five days ahead of the date of the
general meeting;

or the submission by the same deadline at the places stated for this purpose in the
notice of the meeting of a certificate issued by the authorised financial intermediary
that runs the shareholder’s account stating that the shares listed in the account
have been made unavailable until the date of the general meeting.
Even so, the board of directors has the option, by means of a general measure, of
shortening the deadline referred to above.
If a shareholder does not intend to attend the general meeting of the shareholders in
person, he may choose between the following three options:

giving a proxy to another shareholder or his/her spouse;

voting by correspondence; or

sending a proxy to the Company without any instructions;
381
in each case as permitted by applicable law or regulations.
Intermediaries that have satisfied the legal provisions in force may, pursuant to a general
securities management mandate, transmit for a general meeting the vote or proxy of the
holder of shares not domiciled in France.
The Company is entitled to ask the intermediary referred to in the previous paragraph to
provide the list of non-resident holders of the shares to which these voting rights are
attached, as well as the quantity of shares held by each one of them
General meetings (excerpts from Article 15 of the Articles of Association)
General meetings are held at the registered office or at any other location stated in the
notice of the meeting.
General meetings are chaired by the Chairman of the board of directors or, in his
absence, by the oldest director present at the general meeting. Otherwise, the general
meeting shall elect its own Chairman.
Voting rights (excerpts from Articles 11, 12 and 15 of the Articles of Association)
The voting right attached to the shares is proportional to the percentage of the total share
capital they represent. Each share carries one voting right. All shares have the same par
value.
Each share entitles the holder to representation at general meetings as permitted by law
and the Articles of Association.
Voting rights are exercised by the bare owner, except with regard to decisions concerning
the appropriation of earnings where they belong to the beneficial owner. Even so, the
bare owner has the right to participate in all the collective decisions of the shareholders.
Double voting rights
None.
Restrictions on voting rights
None.
Form of the shares and identification of the shareholders (excerpts from Articles 9
and 13 of the Articles of Association)
Shares are held in registered form until they are fully paid-up. When they are paid-up,
they may, subject to any provision of law stating the contrary, be in registered or bearer
form, at shareholders’ discretion. Ownership of the shares is the result of their registration
in an account as permitted by law and the regulations in force.
Unless stated otherwise in law, conversion of the shares from registered to bearer form,
and in the opposite direction, takes place at the signed request and expense of the
shareholder, in accordance with the regulations in force.
The Company is authorised to use the provisions of law provided for in terms of
identifying holders of shares granting voting rights at general meetings immediately or in
the future, in accordance with Articles L.228-1 to L.228-3-4 of the French Commercial
Code.
382
29.2.6
Shareholders’ agreement
No shareholders’ agreement existed at the registration date of this reference document.
29.2.7
Crossing of disclosure thresholds (excerpts from Article 13 of the Articles of
Association)
Aside from compliance with the legal obligation of informing the Company of the
ownership of certain interests in the share capital and attached voting rights, any person–
individual or legal entity–including any intermediary registered as being the holder of
shares for people not domiciled in France, who comes into the possession of, alone or by
acting in concert with other individuals or legal entities, a portion of 2% of the share
capital or voting rights or a multiple of this percentage, is obliged to inform the Company
by sending a registered letter with return receipt requested no later than by the close of
trading on the fourth business day following the crossing of one of these thresholds of the
number of shares or voting rights that it holds directly, as well as the number of shares or
voting rights attached to the shares or voting rights held by said person pursuant to
Article L.233-9 of the French Commercial Code.
Where they have not been declared in this manner, the shares exceeding the portion that
should have been declared are stripped of voting rights at general meetings if at a
general meeting the declaration failure was noted and if one or more shareholders
together holding at least 5% of the share capital or voting rights so request at said
general meeting. Likewise, voting rights that have not been duly declared cannot be
exercised. The loss of voting rights applies at any general meeting of the shareholders
held prior to expiry of a period of two years after the situation is rectified.
29.2.8
Changes in the share capital
The provisions of the Articles of Association governing changes in the share capital are
no more restrictive than those required by law. These arrangements are presented in
section 29.2.4 “Changes in the share capital and rights attached to shares (excerpt from
Article 7 of the Articles of Association)” above.
383
30
MATERIAL CONTRACTS
No contract (other than those entered into in the normal course of business) has been
signed by any member of the Medica group containing an obligation or a major
commitment for the Medica group as a whole.
384
31
THIRD PARTY INFORMATION AND STATEMENT BY EXPERTS AND
DECLARATIONS OF ANY INTEREST
To the best of the Company’s knowledge, this information has been reproduced faithfully
and there are no omissions making the information reproduced inaccurate or misleading
in any significant respect.
385
32
DOCUMENTS ON DISPLAY
The Articles of Association, minutes of the shareholders’ general meetings and the
Company’s other corporate documents, as well as the historical financial information and
any evaluation or declaration produced at the Company’s request that has to be made
available to shareholders, in accordance with the applicable legislation, are available for
inspection at the Company’s registered office.
386
33
INFORMATION ON HOLDINGS
The information on holdings is disclosed in section 25.5 “Corrected consolidated financial
statements for the 20 months ended 31 December 2007” (note 36) and 25.3 “Corrected
consolidated financial statements for the 12 months ended 31 December 2008” (note 36).
387
CROSS-REFERENCE TABLE
ANNEX 1 HEADINGS
OF EUROPEAN REGULATION NO. 809/2004
No.
Section(s)
1
Persons responsible
1.1
Persons responsible for the information given in the registration
document
1
1.2
Declaration by those responsible for the registration document
1
2
Statutory Auditors
2.1
Names and addresses of the issuer’s auditors for the period covered by
the historical financial information (together with their membership in a
professional body).
2
2.2
If auditors have resigned, been removed or not been re-appointed during
the period covered by the historical financial information, indicate details
if material
Not applicable
3
Selected financial information
3.1
Selected historical financial information regarding the issuer, presented
for each financial year for the period covered by the historical financial
information, and any subsequent interim financial period, in the same
currency as the financial information.
3.2
If selected financial information for interim periods is provided,
comparative data from the same period in the prior financial year must
also be provided, except that the requirement for comparative balance
sheet information is satisfied by presenting the year end balance sheet
information.
4
Risk factors
5
Information about the issuer
5.1
History and development of the Company
15.6
5.1.1
Legal and commercial name of the issuer
15.1
5.1.2
Place of registration of the issuer and its registration number
15.2
5.1.3
Date of incorporation and the length of life of the issuer, except where
indefinite
15.3
5.1.4
Domicile and legal form of the issuer, the legislation under which the
issuer operates, its country of incorporation, and the address and
telephone number of its registered office (or principal place of business if
different from its registered office)
15.4
5.1.5
Important events in the development of the issuer’s business
15.6
5.2
Investments
5.2.1
Description (including the amount) of the issuer’s principal investments
4
5 and 6
388
16.4
No.
ANNEX 1 HEADINGS
Section(s)
for each financial year for the period covered by the historical financial
information up to the date of the registration document
5.2.2
Description of the issuer’s principal investments that are in progress,
including the geographic distribution of these investments (home and
abroad) and the method of financing (internal or external)
13
5.2.3
Information concerning the issuer’s principal future investments on which
its management bodies have already made firm commitments.
13
6
Business overview
6.1
Principal activities
6.1.1
Description of, and key factors relating to, the nature of the issuer’s
operations and its principal activities
3 and 16
6.1.2
An indication of any significant new products and/or services that have
been introduced and, to the extent the development of new products or
services has been publicly disclosed, give the status of development
Not applicable
6.2
Principal markets
7 and 9
6.3
Where the information given pursuant to items 6.1. and 6.2. has been
influenced by exceptional factors, mention that fact
7 and 9
6.4
If material to the issuer’s business or profitability, provide summary
information regarding the extent to which the issuer is dependent, on
patents or licences, industrial, commercial or financial contracts or new
manufacturing processes
16.11
6.5
Basis for any statements made by the issuer regarding its competitive
position
7 and 9
7
Organisational structure
7.1
If the issuer is part of a group, a brief description of the group and the
issuer’s position within the group
7.2
List of the issuer’s significant subsidiaries, including name, country of
incorporation or residence, proportion of ownership interest and, if
different, proportion of voting power held
8
Property, plant and equipment
8.1
Information regarding any existing or planned material tangible fixed
assets, including leased properties, and any major encumbrances
thereon
16.4
8.2
Description of any environmental issues that may affect the issuer’s
utilisation of the tangible fixed assets
Not applicable
9
Operating and financial review
9.1
Financial condition
20
9.2
Operating results
20
389
15.5
No.
ANNEX 1 HEADINGS
Section(s)
9.2.1
Information regarding significant factors, including unusual or infrequent
events or new developments, materially affecting the issuer’s income
from operations, indicating the extent to which income was so affected
20.1
9.2.2
Where the financial statements disclose material changes in net sales or
revenue, provide a narrative discussion of the reasons for such changes
20.2, 20.3 and
20.4
9.2.3
Information regarding any governmental, economic, fiscal, monetary or
political policies or factors that have materially affected, or could
materially affect, directly or indirectly, the issuer’s operations
20.1
10
Capital resources
10.1
Information concerning the issuer’s capital resources (both short and
long term)
21
10.2
An explanation of the sources and amounts of and a narrative
description of the issuer’s cash flows
20.5
10.3
Information on the borrowing requirements and funding structure of the
issuer
20.5
10.4
Information regarding any restrictions on the use of capital resources
that have materially affected, or could materially affect, directly or
indirectly, the issuer’s operations
20.5
10.5
Information regarding the anticipated sources of funds needed to fulfil
commitments referred to in items 5.2.3. and 8.1.
20.5
11
Research and development, patents and licences
12
Trend information
12.1
The most significant recent trends in production, sales and inventory,
and costs and selling prices since the end of the last financial year to the
date of the registration document
12.2
Information on any known trends, uncertainties, demands, commitments
or events that are reasonably likely to have a material effect on the
issuer’s prospects for at least the current financial year
13
Profit forecasts and estimates
13.1
Statement setting out the principal assumptions upon which the issuer
has based its forecast, or estimate
13.2
Report prepared by independent accountants or auditors stating that in
the opinion of the independent accountants or auditors the forecast or
estimate has been properly compiled on the basis stated and that the
basis of accounting used for the profit forecast or estimate is consistent
with the accounting policies of the issuer
13.3
Profit forecast or estimates must be prepared on a basis comparable
with the historical financial information
13.4
If a profit forecast in a prospectus has been published which is still
390
16.11
13
14
Not applicable
No.
ANNEX 1 HEADINGS
Section(s)
outstanding, then provide a statement setting out whether or not that
forecast is still correct as at the time of the registration document, and an
explanation of why such forecast is no longer valid if that is the case
14
Administrative, management, and supervisory bodies and senior
management
14.1
Names, business addresses and functions in the issuer of the following
persons and nature of any family relationship between any of those
persons, details of that person’s relevant management expertise and
experience and the following information, an indication of the principal
activities performed by them outside that issuer where these are
significant with respect to that issuer: a) members of the administrative,
management or supervisory bodies; b) partners with unlimited liability, in
the case of a limited partnership with a share capital; c) founders, if the
issuer has been established for fewer than five years; and d) any senior
manager who is relevant to establishing that the issuer has the
appropriate expertise and experience for the management of the issuer’s
business.
18.1
If there is no such information to be disclosed, a statement to that effect
is to be made.
14.2
Administrative, Management, and Supervisory bodies and Senior
Management conflicts of interests
15
Remuneration and benefits
15.1
The amount of compensation paid (including any contingent or deferred
compensation), and benefits in kind granted to such persons by the
issuer and its subsidiaries for services in all capacities to the issuer and
its subsidiaries by any person referred to in 14.1
22.1
15.2
The total amounts set aside or accrued by the issuer or its subsidiaries
to provide pension, retirement or similar benefits
22.2
16
Board practices
16.1
Date of expiration of the current term of office, if applicable, and the
period during which the person has served in that office with respect to
those persons referred to in point 14.1
18.1
16.2
Information about members of the administrative, management or
supervisory bodies’ service contracts with the issuer or any of its
subsidiaries providing for benefits upon termination of employment, or
an appropriate negative statement.
19.2
16.3
Information about the issuer’s audit committee and remuneration
committee, including the names of committee members and a summary
of the terms of reference under which the committee operates
19.3
16.4
Statement as to whether or not the issuer complies with its country’s of
incorporation corporate governance regime(s). In the event that the
issuer does not comply with such a regime, a statement to that effect
19.6
391
18.2
ANNEX 1 HEADINGS
No.
Section(s)
must be included together with an explanation.
17
Employees
17.1
Number of employees at the end of the period or the average for each
financial year for the period covered by the historical financial
information up to the date of the registration document (and changes in
such numbers, if material) and, if possible and material, a breakdown of
persons employed by main category of activity and geographic location.
If the issuer employs a significant number of temporary employees,
include disclosure of the number of temporary employees on average
during the most recent financial year.
17.1
17.2
Profit-sharing and stock options
17.2
17.3
Description of any arrangements for involving the employees in the
capital of the issuer
17.2
18
Major shareholders
18.1
Insofar as is known to the issuer, the name of any person other than a
member of the administrative, management or supervisory bodies who,
directly or indirectly, has an interest in the issuer’s capital or voting rights
which is notifiable under the issuer’s national law, together with the
amount of each such person’s interest or, if there are no such persons,
an appropriate negative statement
23.1
18.2
State whether the issuer’s major shareholders have different voting
rights, or an appropriate negative statement
23.2
18.3
To the extent known to the issuer, state whether the issuer is directly or
indirectly owned or controlled and by whom and describe the nature of
such control and describe the measures in place to ensure that such
control is not abused
23.3
18.4
Description of any arrangements, known to the issuer, the operation of
which may at a subsequent date result in a change in control of the
issuer
23.4
19
24
20
Financial information concerning the issuer’s assets and liabilities,
financial condition and profits and losses
25
20.1
Historical financial information
25.3, 25.5 and
25.11
20.2
Pro forma financial information
25.9
20.3
Financial statements
25.3, 25.5, 25.7
25.9 and 25.11
20.4
Pro forma financial information
25.4, 25.6, 25.8
25.10 and 25.12
20.5
Age of latest financial information
30 September
392
No.
ANNEX 1 HEADINGS
Section(s)
2009
20.6
Interim and other financial information
25.1
20.7
Dividend policy
20.7.1
The amount of the dividend per share for each financial year for the
period covered by the historical financial information adjusted, where the
number of shares in the issuer has changed, to make it comparable
20.8
Legal and arbitration proceedings
27
20.9
Significant change in the issuer’s financial or trading position
28
21
Additional information
21.1
Share capital
21.1.1
The amount of issued capital, and for each class of share capital: a) the
number of shares authorised; b) the number of shares issued and fully
paid and issued but not fully paid; c) the par value per share, or that the
shares have no par value; and d) a reconciliation of the number of
shares outstanding at the beginning and end of the year. If more than
10% of capital has been paid for with assets other than cash within the
period covered by the historical financial information, state that fact
29.1.1
21.1.2
If there are shares not representing capital, state the number and main
characteristics of such shares
29.1.1
21.1.3
The number, book value and face value of shares in the issuer held by
or on behalf of the issuer itself or by subsidiaries of the issuer
Not applicable
21.1.4
The amount of any convertible securities, exchangeable securities or
securities with warrants, with an indication of the conditions governing
and the procedures for conversion, exchange or subscription
29.1.5
21.1.5
Information about and terms of any acquisition rights and/or obligations
over authorised but unissued capital or an undertaking to increase the
capital
29.1.6
21.1.6
Information about any capital of any member of the group which is under
option or agreed conditionally or unconditionally to be put under option
and details of such options including those persons to whom such
options relate
Not applicable
21.1.7
History of share capital, highlighting information about any changes, for
the period covered by the historical financial information
29.1.7
21.2
Memorandum and Articles of Association
21.2.1
Description of the issuer’s objects and purposes and where they can be
found in the memorandum and articles of association.
29.2.1
21.2.2
Summary of any provisions of the issuer’s articles of association,
statutes, charter or bylaws with respect to the members of the
administrative, management and supervisory bodies
29.2.2
26
Not applicable
29.1
29.2
393
No.
ANNEX 1 HEADINGS
Section(s)
21.2.3
Description of the rights, preferences and restrictions attaching to each
class of the existing shares
29.2.3
21.2.4
Description of what action is necessary to change the rights of holders of
the shares, indicating where the conditions are more significant than is
required by law
29.2.4 and 29.2.8
21.2.5
Description of the conditions governing the manner in which annual
general meetings and extraordinary general meetings of shareholders
are called including the conditions of admission
29.2.5
21.2.6
Brief description of any provision of the issuer’s articles of association,
statutes, charter or bylaws that would have an effect of delaying,
deferring or preventing a change in control of the issuer
29.2.6
21.2.7
Indication of the articles of association, statutes, charter or bylaw
provisions, if any, governing the ownership threshold above which
shareholder ownership must be disclosed
29.2.7
21.2.8
Description of the conditions imposed by the memorandum and articles
of association statutes, charter or bylaw governing changes in the
capital, where such conditions are more stringent than is required by law
29.2.8
22
Material contracts
30
23
Third party information and statement by experts and declarations
of any interest
31
24
Documents on display
32
25
Information on holdings
33
394
Printed by RR Donnelley
2OKN
9PPSMO
7/.3-+
#
\_O
N_
1Y_`O\XO_\
1ÊXÊ\KV
0ÊVSb
/LY_Ê
#
3]]c6O]7Y_VSXOK_b
0\KXMO
>OV$
#
#
0Kb$
#
#
!

france hotel laxou

Transcription

Similar documents

LabDAQ® Laboratory Information System

french medical companies

medical vision group

GROUP PROFILE 2014 M27135 rev 04

PDF-Download des MCHF-Programms

Business premises for sale in Javea 40,000 € Ref: L-1293

the future…

Group Profile 2016

Punch-a