JOHANNESBURG - Private healthcare group Mediclinic International’s share price shed 3.9percent and closed at R114.42 on the JSE after the group said yesterday that its operations in the Middle East continued to report weak earnings.
In the trading update, revenue in the Middle East was down 4.7percent to UAE dinar 1.5billion (R5.43bn) and after adjusting for the sale of non-core assets, revenue was down 0.6percent.
Inpatient and outpatient volumes were down 2percent and 15percent respectively in the first six months, impacted by the business and operational alignment initiatives that took place in Abu Dhabi during the prior year.
Chief executive Danie Meintjes said he was satisfied with the Middle East. “The Middle East business has started the financial year well, following the positive operational and regulatory changes in Abu Dhabi. I am pleased that the investments made in our clinical services, personnel and facilities are driving the turnaround in Abu Dhabi.
"The Dubai operations continue to perform strongly, benefiting from growing patient numbers at the Mediclinic City Hospital’s new north wing. We expect the Middle East business to generate strong sequential and comparative revenue growth and underlying earnings before interest, tax, depreciation and amortisation (Ebitda) margin expansion in the second half of the financial year,” Meintjes said.
Overall group revenue was flat with underlying Ebitda down by 5percent.
However, after the translation effect of foreign currency movements, revenue was up 9.5percent at £1.4bn (R24.73bn), up from £1.3bn and underlying Ebitda was up 5percent at £231m.
Underlying earnings per share was down to 11.5pence, from 12.8p reported a year ago.
The group showed encouraging signs in southern Africa, with revenue up 4.1percent to R7.6bn, up from R7.3bn, with inpatient bed days decreasing by 3.3percent and revenue per bed day increasing by 7.7percent. Revenue growth for the full year is now expected to be around 4percent.
Despite the pressure on volumes, the underlying Ebitda margin is expected to be around 21percent, resulting from a strong focus on cost-management and efficiencies. Full year margin expectations remain in line with previous guidance, broadly stable on the prior year, at around 21percent.
In Switzerland revenue is marginally up by 0.1percent to 0.8bn francs (R10.9bn), with bed days sold and inpatient admissions down 1.9percent and 1.3percent respectively. The group said Hirslanden’s outpatient revenues, which represent some 19percent of the overall platform revenues, continued to grow during the first half of the year, up 6percent.
The acquisition of the Linde Private Hospital in Biel was completed at the end of June 2017 and the hospital contributed francs 15m to Hirslanden’s revenues during the period. Hirslanden expects modest revenue growth for the full year.
Meintjes added that in Switzerland and southern Africa, patient volumes in the first half of the year were down on the prior year period, impacted by the timing of the Easter holiday period.
“The management teams in both platforms have implemented the appropriate cost savings programmes and productivity initiatives that will help margins during the second half of the year,” he said. Mediclinic has a 29.9percent investment in Spire Healthcare Group.
The investment in Spire was accounted for on an equity basis recognising the reported profit of £8.9m for Spire’s financial half year to end June Spire made a provision amounting to £27.6m for the potential cost of a civil litigation settlement.
- BUSINESS REPORT