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Abu Dhabi continues to weigh on Mediclinic

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Johannesburg – Private healthcare group Mediclinic International says revenue for its South African unit will grow in the full year.

However, its challenging Middle Eastern unit continues to weigh on the company.

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Towards the end of 2015, Mediclinic agreed to combine with Al Noor to create the biggest private health-care provider in the United Arab Emirates.

However, this move has not been all plain sailing, as it has experienced challenges in Abu Dhabi, where patient volumes and operating performance have been below expectations, particularly in January this year.

In addition, in July 2016, the Abu Dhabi government ended its policy whereby local residents were treated free of charge in private hospitals. They now have to pay the first 20 percent of any treatment. This impacted on patient numbers.

Mediclinic is also seeking to actively recruit staff in the Middle Eastern country.

CEO Danie Meintjes notes its largest two platforms, Switzerland and Southern Africa, in addition to its Dubai business, all performed in line with expectations during the 2017 financial year.

“However, as previously announced, the Abu Dhabi business underperformed having been impacted by a major regulatory change in addition to certain business and operational challenges. We have been focused on resolving these issues and stabilising performance in the Middle East.

“Our confidence in the long-term growth opportunities of the region remains strong and we currently expect performance in the Middle East to improve as we progress through the 2018 financial year.”

In a statement issued on Thursday, the listed company, said for the year to March, its Southern African operations will show revenue up 6.8 percent to R14.4 billion.

Read also: Abu Dhabi challenges hit Mediclinic shares

This is despite inpatient bed days growing only 0.9 percent, and revenue per bed gaining 5.8 percent.

It adds the results were delivered against a continued weak macro-economic environment, stagnant medical scheme membership and increased competition in the private healthcare sector.

Mediclinic says the underlying earnings before interest, tax, depreciation and amortisation margin will be slightly lower than the previous year at 21 percent. The margin was impacted by the medical versus surgical mix, higher price increases on pharmaceuticals (sold at zero margin) and investment in additional clinical personnel.

Mediclinic owns 74 hospitals and 40 clinics. Mediclinic Southern Africa operates 49 hospitals and 2 day clinics throughout South Africa and 3 hospitals in Namibia with more than 8 000 inpatient beds in total; Hirslanden operates 16 private acute care facilities and 4 clinics in Switzerland with more than 1 600 inpatient beds; and Mediclinic Middle East operates 6 hospitals and 34 clinics with more than 700 inpatient beds in the United Arab Emirates.

Mediclinic Southern Africa expects full year depreciation and amortisation of around R460 million, net finance costs of around R495 million and income tax expense of around R625 million. Net finance costs increased compared to the prior year because of refinancing the corporate bridge loan in June 2016, it says.

International

In the Middle East, Mediclinic expects revenue to be down 8 percent to AED3.1 billion. It notes, while the Dubai business performed well, the Abu Dhabi business experienced challenging trading conditions impacting revenues.

It says the underlying earnings before interest, tax, depreciation and amortisation margin should, however, be slightly ahead of previous guidance at 10.5 percent to 11.5 percent.

Mediclinic Middle East expects full year depreciation and amortisation of around AED175 million and net finance costs of around AED30 million, similarly impacted by the refinancing of the corporate bridge loan.

In Switzerland, revenue was up 3.5 percent to some CHF1.7 billion.

BUSINESS REPORT ONLINE

 

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