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Mediclinic earnings still laid low amid Abu Dhabi turnaround

By Oliver Haill

Date: Tuesday 17 Oct 2017

Mediclinic earnings still laid low amid Abu Dhabi turnaround

(ShareCast News) - First-half earnings from Mediclinic International will be down around 10% at the underlying level as the hospital operator turns around its Middle East business.
Inpatient and outpatient volumes in the Middle East were down 2% and 15% in the first half, leading sales to fall 4.7%, though if adjusting for the asset sales, revenue was down only 0.6%.

At the group level, this and lower patient volumes in Switzerland and Southern Africa due to the timing of Easter meant total group revenues were flat at constant currency rates and underlying earnings before interest, tax, depreciation and amortisation were down around 5.0% in the six months to 30 September.

However, at the reported level revenue was up 9.5% to £1.4bn and underlying EBITDA rose 5.0% to £231m, with underlying earnings per share expected to be around 11.5p versus 12.8p in the same period last year.

Patient volumes in the Middle East were hit by the turnaround measures put in place in Abu Dhabi at the end of last year with doctor vacancies having now "normalised", though the Dubai business continued to perform well.

Mediclinic's troubles in Abu Dhabi are abating, with the government's withdrawal of a part-payment system for holders of a 'Thiqa' insurance card seeing Thiqa inpatient and outpatient volumes increase 40% and 15% in the first half, with management now able to shift away from 'basic' patients towards 'enhanced' and Thiqa patients, which is bodes well for margins.

Chief executive Danie Meintjes, for whom a replacement is being sought after he announced his retirement in the summer, was pleased with the start for the Middle East business, citing investments in clinical services, personnel and facilities as 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," Meintjes said.

Further increased higher margin business is expected in the second half, supported by the seasonality benefit in the UAE following the end of the quieter summer period, leading Meintjes to expect "strong" sequential and comparative revenue growth and underlying EBITDA margin expansion.

Revenues in Switzerland rose 0.1% with bed days sold and inpatient admissions down 1.9% and 1.3% respectively due to the timing of the Easter period and a subdued market during the summer months.

Underlying Swiss EBITDA margins were roughly 17.4% versus 18.6% last time, reflecting lower volumes and an ongoing insurance mix change, partially offset by cost-management programmes and efficiency savings.

In Southern Africa, revenue was up 4.1% with inpatient bed days decreasing by 3.3% and revenue per bed day increasing by 7.7%.

Underlying EBITDA margin is expected to be around 21.0%, up from 20.7% thanks to a strong focus on cost-management and efficiencies, with full year margin expectations remain broadly stable.

In Switzerland and Southern Africa, Meintjes said management teams in both platforms had put in place cost savings programmes and productivity initiatives to help margins during the second half of the year.

"During the first half of the year we announced a number of selective acquisitions and investments as we look at further growth opportunities across the continuum of healthcare. In Switzerland, we acquired the 115-bed Linde Private Hospital in Biel; in Southern Africa, we have agreed to invest in the Intercare group which is focused on primary and sub-acute care."

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