Mediclinic International plc (LON: MDC), the diversified private healthcare services group, has provided the following trading update ahead of the publication of the Group’s results for the half-year ended 30 September 2019 on 14th November 2019. The information on which this trading update is based, represents the Group’s latest financial estimates and has not been reviewed and reported on by Mediclinic’s external auditors. All financial figures, unless explicitly stated, are adjusted. The Group has adopted the new IFRS 16* accounting standard from 1 April 2019, applying the simplified transition approach on which basis comparatives will not be restated. Pre-IFRS 16 margins have been provided for comparative purposes only.
Commenting today, Dr Ronnie van der Merwe, Mediclinic International Group Chief Executive Officer, said:
“I am encouraged by the first-half performance of the Group with trading in line with expectations. At all three divisions, our core acute care business is being supplemented by our continued expansion across the continuum of care.
“In Switzerland, Hirslanden delivered good revenue growth and a broadly stable EBITDA margin. At Mediclinic Southern Africa, patient volumes were in line with expectations and we continue to invest in initiatives to further enhance our clinical standards. At Mediclinic Middle East, there was a continued focus on efficiencies in operational delivery. Contributing to the division’s growth was the strong performance at the new Mediclinic Parkview Hospital in Dubai and the continued gradual improvement in the Abu Dhabi business where Mediclinic Airport Road Hospital delivered good growth.”
Hirslanden has continued to make good progress in adapting the business to the regulatory changes affecting the Swiss healthcare system. Performance during the first six months of the financial year was in line with expectations and incorporates the impact of identified clinical treatments transferring from an inpatient to a lower outpatient tariff. This process has gradually occurred across Swiss cantons over the past two years, with official national implementation effective from 1 January 2019. In response, Hirslanden has initiated a new day case surgery strategy which focuses on a lower cost and more efficient service delivery model; continued to attract additional clinical professionals; delivered ongoing cost management and efficiency savings; and advanced the Hirslanden 2020 strategic project.
Hirslanden delivered 1H20 growth of around 5.0% in both revenue (1H19: CHF826m) and inpatient admissions, benefiting from the contribution of Clinique des Grangettes. Revenue per admission was down 2.2%, while the general insurance patient mix was 49.2% (1H19: 49.4%).
The revenue contribution in 1H20 from Clinique des Grangettes (consolidated from 1 October 2018) was around CHF55m (1H19: nil) and the hospital contributed 5.5% growth in Hirslanden inpatient admissions during the period.
On an IFRS16 accounting basis the EBITDA margin was around 16.0%. The pre-IFRS16 EBITDA margin for 1H20 was broadly stable at around 14.0% (1H19: 14.3%).
Mediclinic Southern Africa
At Mediclinic Southern Africa, 1H20 revenue was up around 7.0% (1H19***: ZAR8 013m) with an increase in inpatient bed days sold of 2.7%, in line with expectations.
The revenue contribution in 1H20 from the majority investment in the Intercare group (“Intercare”), consisting of four day case clinics, four sub-acute hospitals and one specialist hospital, effective since 1 December 2018, was around ZAR105m (1H19: nil). As expected, Intercare accounted for the majority of growth in the division’s inpatient bed days sold during the period at 2.4%.
On an IFRS16 accounting basis the EBITDA margin was around 21.0%. The pre-IFRS16 EBITDA margin for 1H20 was in line with expectations at around 20.0% (1H19***: 21.0%).
Mediclinic Middle East
At Mediclinic Middle East, revenue growth was driven by the continued ramp-up of Mediclinic Parkview Hospital in Dubai and a gradual improvement in the Abu Dhabi business with Mediclinic Airport Road Hospital delivering a strong performance. Mediclinic Parkview Hospital continues to outperform expectations since opening 12 months ago. The region continues to experience a weaker macroeconomic environment and a sustained competitive landscape.
Mediclinic Middle East 1H20 revenue growth was around 8.5% (1H19: AED1 495m). Inpatient and outpatient volumes in the division were up 9.0% and 5.5% respectively.
During the seasonally quieter first half of the year, on an IFRS16 accounting basis, the EBITDA margin was around 12.5%. The pre-IFRS16 EBITDA margin for 1H20 was in line with expectations at around 9.5% (1H19: 9.4%).
Spire Healthcare Group
Mediclinic holds a 29.9% investment in Spire Healthcare Group plc (“Spire”). Spire’s reported performance for its half-year financial period ended 30 June 2019 was in line with expectations and guidance for its financial year ending 31 December 2019 remained unchanged.
The investment in Spire is equity accounted, recognising the reported IFRS16 profit of £7.1m for Spire’s financial half-year ended 30 June 2019 (six months ended 30 June 2018 pre-IFRS16: £8.2m). Mediclinic’s 1H20 equity accounted share of profit from Spire amounted to £2.1m (1H19 on pre-IFRS16 basis: £1.8m).
At the Group level, in constant currency, a solid first half performance was delivered with revenue up around 6.5% (1H19***: GBP1 390m) and pre-IFRS16 EBITDA up around 3.5% (1H19 pre-IFRS16: GBP213m). On a reported basis, 1H20 revenue was up around 9.0% and pre-IFRS16 EBITDA was up around 5.0% (1H19 pre-IFRS16: GBP213m). The IFRS16 EBITDA margin was around 16.5%.
As guided in detail at the 2019 full-year results presentation, adjustments to depreciation and amortisation and finance costs are required for each division when adopting IFRS16. In addition, 1H20 earnings will also reflect the increased depreciation and amortisation and finance costs associated with the new Mediclinic Parkview Hospital in Dubai and the minority interest for the Hirslanden Clinique La Colline and Cliniques des Grangettes combination in Switzerland.
The average foreign exchange rates for 1H20 were GBP/CHF 1.25, GBP/ZAR 18.28 and GBP/AED 4.62 (1H19: 1.31, 17.71 and 4.89 respectively).The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and as a method to provide shareholders with clear and consistent reporting.
*The Group’s non-IFRS measures are intended to remove from reported earnings volatility associated with defined one-off incomes and charges which were previously referred to as underlying.
** IFRS 16 accounting standard: addressing the definition of a lease, recognising and measuring leases and establishing principles for reporting useful information to users of financial statements about the leasing activities of both lessees and lessors.
*** Income statement reclassification at Mediclinic Southern Africa increasing revenue and cost of sales by ZAR55m.