Durban – Shares in international multi-disciplinary
private healthcare group Mediclinic traded 4.6 percent weaker on the JSE on
Tuesday after the group released a trading update.
The shares closed at R124.25. Trading conditions remained
challenging in Abu Dhabi, where patient volumes and operating performance
continued to be below expectations, particularly in January this year.
Chief executive Danie Meintjes said: “During the year, we
have seen a good trading performance from our two largest platforms in
Switzerland and Southern Africa, in line with full-year expectations for
2016/17.”
He said the challenging environment in Abu Dhabi
continued into the second half of the year. “We are taking many steps to build
the foundations for a successful, sustainable, long-term business in the Middle
East, leveraging our excellent reputation and operational performance in Dubai.
One key step is the re-branding of our Abu Dhabi facilities to Mediclinic, and
we expect this project to be implemented during 2017/18,”Meintjes said.
The group said because of a weaker second-half
performance in Al Noor in Abu Dhabi it now expected a steeper decline in
revenue and lower underlying earnings before interest, tax, depreciation and
amortisation (Ebitda) margin for the Middle East for the full year 2016/17. The
group forecasts full-year 2016/17 Middle East revenue to be in the range of 3 000
billion dirham (R10.67 billion) to 3 200 billion dirham, with an
underlying Ebitda margin of between 10 percent and 11 percent.
Doctors appointed
As previously announced, second-half performance in the
Middle East was predicated on seasonality, realising integration synergies,
stabilising Thiqa patient volumes, filling doctor vacancies and ramping up
patient activity in new facilities.
The group said it is making good progress, leveraging off
the experience of the Dubai recruitment team, with some 90 doctors appointed in
the Middle East since April 2016 and 60 doctors in the process of being
recruited.
“While building the foundations for a sustainable,
long-term business in Abu Dhabi, the extended recruitment process, combined
with the necessary re-alignment of certain business and operational practices,
has resulted in a further short-term impact on patient and service volumes,”
the group said. Mediclinic will publish its full-year results on May 24.
Neil Brown, a fund manager at Electus Fund Managers, said
the group’s operations in South Africa and Switzerland seemed to be performing
in line with expectations. “Dubai is performing in line with expectations, but
the problem is Abu Dhabi. When Mediclinic bought Al Noor, which also gave them
their listing in London, the key assets in Al Noor were based in Abu Dhabi,” he
said.
He also pointed out that, in July 2016, the Abu Dhabi
government had 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. “The change led to a big decline in the number of local residents going
to private hospitals.
“The expat community is also very important to Abu Dhabi’s
private hospitals. The expats have been under pressure and faced with job cuts,
often due to the lower oil price, while they also have a new rental tax and
rising electricity costs.
“Mediclinic also lost many doctors in their Abu Dhabi
hospitals. This takes time to replace and re-build the revenue,” Brown said.