It was a year of pain and progress for Mediclinic International, the private healthcare services group founded in South Africa in 1983.
Total group revenue was up 2% for the year, moving from £2.87 billion to £2.93 billion, while adjusted headline earnings per share fell 10% to 26.9 pence in line with market expectations. Shareholders saw no change in the dividend declared per share, on par with last year’s dividend at 7.9 pence.
Equity analyst Roy Campbell of RMB Morgan Stanley says the only “new” news was the additional £143 million impairments in Swiss private hospital group Hirslanden. “While the quantum of the impairment is new, and the resulting unadjusted reported loss for the period is new, the market should be anticipating the result,” he said. Mediclinic’s results for the year to March 2019 were largely in line with a trading statement issued earlier this year, which the market responded favourably to at the time.
Swiss regulatory changes a bitter pill
Mediclinic’s adjusted earnings for the year to March 2019 fell 10% from £221 million the previous year to £198 million. CEO Ronnie van der Merwe noted that over the course of the last 18 months, all Swiss hospital operators had been affected by rapidly implemented regulatory changes related to outpatient tariff reductions and outmigration of care. He says action was taken to improve the performance of Hirslanden.
Steps included accelerated cost-saving initiatives and the introduction of new operational efficiencies. “As these plans started to take effect, they moderated the financial impact of the regulatory changes in the second half of the year, with Hirslanden delivering a 16% Ebitda [earnings before interest, taxes, depreciation, and amortisation] margin for the full year,” he said.
Day clinics paying off
Following on from Mediclinic’s 2017 purchase of Intercare, which manages 21 multidisciplinary outpatient clinics (including 15 dental centres), four day clinics, four sub-acute hospitals and a fertility hospital in Sandton, Van der Merwe identified this as a growth area for the South African operations.
“Our unique strategy of co-locating our day clinics next to our busiest hospitals has proved to be a success. It also allows us to free up much-needed bed space in the main hospital.
“We currently have fully functional co-located day clinics [in] Limpopo, Durbanville, Newcastle and Welkom. In addition, we are opening new facilities in Nelspruit and Stellenbosch this year, followed by four more in the 2021 financial year.
“Together, these facilities will add 13 hospitals and 109 beds to our portfolio,” he says, adding that day clinics aim to reduce the burden in acute hospitals by performing short-procedure or diagnostic treatments on a same-day basis.
Significant investment in the Middle East
Parkview Hospital in Dubai opened in September 2018, and despite being in the early ramp-up stage, contributed revenue of AED88 million for the period under review. Middle East revenue was up 7% to AED3.2 billion from AED3.05 billion the previous year.
The group has invested in several initiatives in this region, including:
- Opening of Parkview Hospital in Dubai in September 2018
- Renovation of Mediclinic Al Noor Hospital scheduled for completion in December 2019
- Mediclinic Airport Road Hospital 100-bed expansion and Comprehensive Cancer Centre – scheduled for completion during first half of 2020
- Acquisition of two Dubai-based clinics – Clinic Deira, an outpatient facility with two day-care surgery theatres and 18 medical disciplines, and Clinic Me’aisem, a smaller community clinic focusing on six core disciplines.
- 30% investment in Bourn Hall International, the holding company for the Bourn Hall Fertility Centre in the UAE.
Mediclinic closed 0.69% down on Thursday at R59.33.
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