Mediclinic reports falling margins and expects further declines

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Private clinic and hospital group Mediclinic International says margins in Southern Africa and Switzerland fell in the year to end-March and will probably decline again in the year ahead. Business Day reports that the group said in a trading update that group revenue rose by about 2% in the year to end-March, although earnings before interest, tax, depreciation and amortisation (ebitda) fell 3.5%. The group, which warned about possible non-cash impairments, said adjusted earnings per share fell by about 10% to 27 pence. In Southern Africa, revenue grew by about 5% although ebitda margins fell to about 21% from 21.5% on low volume growth.

In the 2020 financial year, the ebitda margin in the region would probably decline to about 20%, Mediclinic is quoted in the report as saying. Volumes in the region would grow by only about 1%, while the company would invest in staff and information and communications technology (ICT) during the year. Together with the expected lower margin contribution from Intercare, and the ramp-up of the new Mediclinic Stellenbosch facility, this would weigh on margins.

Mediclinic CEO Dr Ronnie van der Merwe said the group’s results for the 2019 financial year “were in line with market expectations in a challenging healthcare environment”.

“In Switzerland, Hirslanden’s performance in the second half of the year was as guided, resulting in a full-year margin of around 16%,” van der Merwe said.

The report says Hirslanden’s ebitda margin in 2018 was 18.3%. That unit’s margins were expected to fall to about 15% in the year ahead.

In the year to March, the Mediclinic Parkview Hospital in Dubai was opened, along with several day-case clinics in Switzerland and Southern Africa. The report said thanks in part to the Mediclinic Parkview Hospital, the Middle East division was expected to grow revenues by about 10% in the 2020 financial year.

“I am optimistic about our future and confident that we will make further progress against our strategic objectives in the next 12 months,” van der Merwe said. “Adapting our business to the changing global healthcare environment is a priority and to this end further selective expansion and upgrade investments will be made across the group.”

The company would appoint more clinical directors at hospitals in Southern Africa and would roll out an electronic health records system in the Middle East, he is quoted in the report as saying.

Business Day report

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