Abu Dhabi challenges hit Mediclinic shares
SHARES in international multi-disciplinary private healthcare group Mediclinic traded 4.6 percent weaker on the JSE yesterday after the group released a trading update. The shares closed at R124.25. Trading conditions remained challenging in Abu Dhabi, where patient volumes and operating performance continued to be below expectations, particularly in January this year.
Chief executive Danie Meintjes said: “During the year, we have seen a good trading performance from our two largest platforms in Switzerland and Southern Africa, in line with full-year expectations for 2016/17.”
He said the challenging environment in Abu Dhabi continued into the second half of the year.
“We are taking many steps to build the foundations for a successful, sustainable, long-term business in the Middle East, leveraging our excellent reputation and operational performance in Dubai. One key step is the re-branding of our Abu Dhabi facilities to Mediclinic, and we expect this project to be implemented during 2017/18,” Meintjes said.
The group said because of a weaker secondhalf performance in Al Noor in Abu Dhabi it now expected a steeper decline in revenue and lower underlying earnings before interest, tax, depreciation and amortisation (Ebitda) margin for the Middle East for the full year 2016/17.
The group forecasts full-year 2016/17 Middle East revenue to be in the range of 3 000 billion dirham (R10.67bn) to 3 200bn dirham, with an underlying Ebitda margin of between 10 percent and 11 percent.
Doctors appointed
As previously announced, second-half performance in the Middle East was predicated on seasonality, realising integration synergies, stabilising Thiqa patient volumes, filling doctor vacancies and ramping up patient activity in new facilities.
The group said it is making good progress, leveraging off the experience of the Dubai recruitment team, with some 90 doctors appointed in the Middle East since April 2016 and 60 doctors in the process of being recruited.
“While building the foundations for a sustainable, long-term business in Abu Dhabi, the extended recruitment process, combined with the necessary re-alignment of certain business and operational practices, has resulted in a further short-term impact on patient and service volumes,” the group said.
Mediclinic will publish its full-year results on May 24.
Neil Brown, a fund manager at Electus Fund Managers, said the group’s operations in South Africa and Switzerland seemed to be performing in line with expectations.
“Dubai is performing in line with expectations, but the problem is Abu Dhabi. When Mediclinic bought Al Noor, which also gave them their listing in London, the key assets in Al Noor were based in Abu Dhabi,” he said.
He also pointed out that in July 2016 the Abu Dhabi government had ended its policy whereby local residents were treated free of charge in private hospitals. They now have to pay the first 20 percent of any treatment.
“The change led to a big decline in the number of local residents going to private hospitals.
“The expat community is also very important to Abu Dhabi’s private hospitals. The expats have been under pressure and faced with job cuts, often due to the lower oil price, while they also have a new rental tax and rising electricity costs.
“Mediclinic also lost many doctors in their Abu Dhabi hospitals. This takes time to replace and rebuild the revenue,” Brown said.