Mediclinic holds divi but shares fall as Abu Dhabi recovery only 'gradual'

MediClinic kept its dividend steady despite a poor performance from the Middle East arm, with the private hospital group seeing recent "gradual improvements" in the troubled Abu Dhabi business.

Thanks to good growth in Switzerland and South Africa, revenue in the year to 31 March rose 30% to £2.75bn, but only a 15% increase on a pro forma basis after last year's acquisition of Al Noor is taken into account.

The existing Dubai business increased revenue by 5% helped by a new City Hospital wing, but Abu Dhabi saw sales shrink 19% on a pro forma basis, as inpatient and outpatient volumes fell 12% and 14% respectively due to changes in the regulatory environment with the introduction of a co-payment on local "Thiqa" insurance card holders, increased competition, plus the changes made to align Al Noor with rest of the business.

Thiqa patient volume declines were greater than other insurance categories in Abu Dhabi with inpatients down 33% and outpatients down 31%, however after the year end, authorities eased back on the co-payment requirements of patients with Thiqa cards.

Chief executive Danie Meintjes said while the larger Switzerland and Southern Africa businesses, and the Dubai business, all grew patient volumes and revenues, a large focus has been on steering the business in Abu Dhabi towards a more sustainable long-term growth path.

"We expect a gradual improvement in the Middle East platform as we progress through the 2018 financial year and beyond," he said.

"This year, regulatory matters weighed on the Group more so than in the past and I'm pleased that in recent weeks we've made progress with some key issues in Switzerland and Abu Dhabi. We will continue to monitor the regulatory landscape and engage with authorities to offer quality and cost-efficient services towards the long-term sustainability of healthcare provision."

Underlying earnings before interest, tax, depreciation and amortisation increased 17% to £501m, though underlying operating profit margins decreased to 18.2% from 20.4%.

Underlying earnings per share down 19% to 29.8p due to the increase in the number of shares as a result of the Al Noor acquisition.

Longer-term he said growing demand for quality healthcare services, underpinned by an ageing population, growing disease burden and technological innovation, meant Mediclinic was well-positioned to deliver sustainable growth.

Analysts at Jefferies said they believe the "bulls anticipating a speedy recovery in the UAE are likely to be disappointed as the improvements are to take time" and maintained their 'underperform' rating due also to the "continued difficult macro environment persists in South Africa, and lower margins are anticipated in Switzerland".