Mediclinic expects revenue from Abu Dhabi to be lower than expected

Private healthcare company Mediclinic said “significant progress” was made integrating the Al Noor Hospital business, but revenues from its Abu Dhabi operations will be lower than anticipated.

The FTSE 100 company said progress was being made since the Mediclinic International and Al Noor Hospitals combination, in April, with a new management team and strategic operational review completed in June.

An estimate of cost synergies from the integration was revised to AE$75m per year, ahead of the AE$50m previously anticipated, which will be realised in the second half of the financial year and in the following years.

Nonetheless, those cost savings were expected to result in a one-off charge of AE$20m.

Mediclinic also announced it expected to receive AE$50m from the disposal of two units, with further small non-core disposals envisaged.

However, revenue growth in the Abu Dhabi operations was now expected to be lower than previously expected due to increasing competition for clinical personnel and a six month delay in the ramp-up of new units, including at the Al Jowhara hospital.

Those delays were seen subtracting AED75m from the group's 2016/17 revenues.

Mediclinic said it would also be affected by health insurer Daman’s 20% co-payment for Thiqa members using private healthcare facilities from 1 July which is likely to impact patient mix and volume.

Chief executive Danie Meintjes, said: "The combination of Mediclinic Middle East and Al Noor has created a leading private healthcare platform with exposure to a region with highly attractive long-term sustainable growth opportunities.

“Despite the short term challenges we are currently facing in Abu Dhabi, Mediclinic is well acquainted with the process of business integration along with operational and business alignment. We remain confident in the successful integration and growth of the business. Trading in Mediclinic Southern Africa and Hirslanden remains in line with management's expectations."

Trading in Dubai remains in line with expectations.

Management reiterated its expectations for the business in the medium-term but for the year ending 31 March 2017 Mediclinic Middle East was now expected to achieve only low to mid-single digit revenue growth and underlying EBITDA margins of mid to high teens, with performance being "materially" weighted towards the second-half of the year.