Home » News » FTSE 250 » Mediclinic International plc First half Group performance impacted by Hirslanden
Mediclinic International PLC

Mediclinic International plc First half Group performance impacted by Hirslanden

Mediclinic International plc (LON:MDC) announced its results for the six months ended 30 September 2018.

GROUP FINANCIAL RESULTS

·Revenue down 1% to GBP1 387m; up 2% in constant currency terms reflecting growth in Southern Africa and Middle East offset by weak performance in Switzerland

·Combined effect of the tariff reductions and less favourable insurance mix caused greater than expected impact on Hirslanden results

·Adjusted EBITDA down 8% to GBP213m; reflecting the lower contribution from Hirslanden

·Adjusted operating profit down 15% to GBP137m; reported operating profit down 71% to GBP39m, impacted by non-cash Hirslanden impairment charges of GBP98m

·Reported loss* of GBP168m (1H18: loss of GBP50m), reflecting a non-cash impairment charge on the equity investment in Spire of GBP164m (1H18: GBP109m) and Hirslanden impairment charges

·Adjusted earnings per share down 9% to 10.3 pence

·Cash conversion at 69% of adjusted EBITDA (1H18: 91%); impacted by timing differences in Southern Africa and the Middle East and HIT2020 implementation in Switzerland; expect full year cash conversion to be more in line with prior periods

·Interim dividend maintained at 3.20 pence per share

*Refers to loss attributable to equity holders.

Dr Ronnie van der Merwe, CEO of Mediclinic, today commented:

“The Group’s first half financial results were disappointing. The poor performance in Switzerland more than outweighed the revenue growth and margin expansion delivered by the Southern Africa and Middle East divisions.

“The rapidly implemented regulatory changes regarding outpatient tariff adjustments and outmigration of care in Switzerland are significantly impacting the healthcare market in that country. We are acutely focused on adapting Hirslanden to reflect the future healthcare environment in Switzerland. Steps have been taken to improve the current financial performance through securing revenue growth, reducing costs and driving efficiency savings in different areas of the business. These, together with customary seasonal benefits, are expected to support the delivery of improved performance in the second half.

“In the medium term, we will improve service differentiation across the insurance categories, address the cost base, drive operational efficiencies, focus on doctor recruitment initiatives and advance Hirslanden’s outpatient delivery model to capture the growing requirement for outpatient procedures in a cost-efficient manner. Here we will benefit from the Group’s experience of delivering such outpatient solutions successfully in Southern Africa and the Middle East. I am confident that Hirslanden is well positioned to deal with these challenges and remains profitable and cash generative.

“In the Middle East, we continue to gain momentum, supported by revenue growth, selective investment projects that both enhance our facilities and the clinical service offering and strategically expanding our capacity in the region. In September, a key milestone was achieved with the opening of the new 182-bed Mediclinic Parkview Hospital in Dubai, both on time and within budget. In Southern Africa, we continued to deliver excellent operational performance and made progress on our strategic priority to expand across the continuum of care, particularly in the primary care and day clinic settings.

“We are highly cognisant of our shareholders’ experience during this period of Swiss regulatory change. Underpinned by the continued global demand for healthcare services, I am determined to improve shareholder value and confidence in Mediclinic International through our focus on delivering growth and attractive returns over the medium term.”

GROUP STRATEGIC OVERVIEW

The Group’s strategic focus is to deliver cost-effective, high-quality healthcare services and provide an optimal patient experience across the operating divisions in Switzerland, Southern Africa and the Middle East. To this end, Mediclinic continued to invest in its people, clinical facilities and technology during the year. The Group’s growing international scale enables it to unlock further value through promoting collaboration and best practice between its operating divisions and to extract further synergies and cost-efficiencies across a complementary service set in the continuum of care.

There is a clear underlying long-term demand for Mediclinic’s services, across its operating divisions, which is expected to remain robust, underpinned by inter alia ageing population, growing disease burden and technological innovation. However, the expected increase in demand across the operating divisions is contrasted by lower economic growth in some regions and greater competition. In addition, there is an increased focus on the affordability of delivering healthcare which is resulting in changing care delivery models and greater regulatory intervention. This is in line with our philosophy of making long term decisions informed by our core business as well as the changing environment.

HIRSLANDEN

 

1H19

1H18

Variance

%

Inpatient admissions (000’s)

49.3

47.6

3.6%

Movement in inpatient revenue per admission

(2.8%)

(0.8%)

Revenue (CHFm)

 826

 820

1%

Adjusted EBITDA (CHFm)

 118

 143

(17%)

Adjusted EBITDA margin

14.3%

17.4%

Expansion capex (CHFm)

 14

 15

(7%)

Maintenance capex (CHFm)

 18

 26

(31%)

Adjusted EBITDA converted to cash

51%

91%

Average GBP/CHF exchange rate

1.31

1.26

4%

Revenue (GBPm)

 631

 651

(3%)

Adjusted EBITDA (GBPm)

 90

 113

(20%)