Mediclinic profits improve as Middle East back to health

Mediclinic International said it expects profits for the year to be marginally ahead of expectations, thanks to a "significant" second half improvement in its Middle East and Southern Africa hospitals.

The Middle East division had reached an "inflection point", management of the FTSE 100 company said, which has seen revenue in the second half grow by around 6% compared to last year and around 12% sequentially on the first half, with low double-digit percentage growth expected for the next financial year.

Helped by this turnaround, the group expects full year revenue is expected to be up around 4% to £2.9bn, or 2% if currency swings are excluded. Adjusted earnings before interest, tax, depreciation and amortisation up 3% to £0.5bn, or flat if excluding foreign currency movements.

Adjusted earnings per share, impacted by the equity accounted share of reported profit after tax from the 29% stake in FTSE 250 listed Spire Healthcare is expected to be broadly flat on the prior year's 29.8p.

"We are succeeding with the turnaround of the Abu Dhabi business and laying the foundation for long-term, sustainable performance," said chief executive Danie Meintjes, who is retiring later this year.

"The Middle East division is now entering an expansionary phase that we expect will drive a strong increase in revenue and improvement in margins over time."

Abu Dhabi's operating performance has been improved in the existing business, with growth to come from expansion of the Mediclinic Airport Road, Mediclinic Al Noor and the new Mediclinic Western Region hospitals. Dubai has seen a "strong performance" in established hospitals and new 182-bed Mediclinic Parkview Hospital is now expected to be commissioned in October 2018, some 6 months ahead of schedule.

The Swiss business is expected to see revenue growth of around 1.8% to 1.7bn Swiss francs as performance was impacted by the timing of the Easter period, a subdued summer market, the continued change in insurance mix and the evolving changes in the regulatory environment, but benefited from the acquisition of the Linde Private Hospital at the end of last June. EBITDA margin is expected to be around 18.3%, down from 20%.

In Southern Africa, performance was ahead of expectations, with revenue up by roughly 5% to 15.1bn rand as inpatient bed days dropped 1.5% and revenue per bed day climbed around 6.7%. EBITDA margin is expected to be stable at around 21.2%.

For 2019, the Middle East division is expected to deliver "low double-digit percentage" revenue growth in the with EBITDA margin of existing operations expected to increase by around 250 basis points and to continue improving year-on-year to around 20% in the 2022 financial year.

South Africa is expected to see stable medical insurance membership and no forecast increase in bed capacity, with revenue growth driven by an expected increase in bed days sold of 1-2%.

Switzerland expects modest revenue growth supported by an increase in average bed capacity for the year, largely related to the Linde acquisition. FY19 EBITDA margin is expected to shrink by around 100 basis points from the prior year but the targeted is to improve from FY20 onwards.