Acquisition of Al Noor hurts Medicare profits

SOUTH Africa’s largest hospital group Mediclinic International’s shares dropped almost 10 percent yesterday after the company results showed a 26 percent decline in underlying earnings per share (EPS) for the six months to end September.

Mediclinic’s share price slumped 9.74 percent to close at R137.20 as the company said its underlying EPS fell to 12.8 pence (R2.14), from 17.2p during the period.

The company said the group’s earnings were largely impacted by the shares issued to acquire Al Noor, a firm Mediclinic bought last year.

Al Noor helped Mediclinic double its exposure to the United Arab Emirates, but negatively affected its overall operating performance.

Chief executive Danie Meintjes said although the group did not perform by as much as they had expected, the company’s business in Switzerland showed growth during the period.

Progress

“We have seen good progress across the group. Switzerland had strong revenue and underlying earnings before interest, tax, depreciation and amortisation (Ebitda) growth driven by an increase in total patient activity,” Meintjes said.

The group’s underlying Ebitda rose 11 percent to £220 million, while group revenue increased by 27 percent to £1.28bn, up from £1.01bn reported in 2015.

Operating profit was slightly higher at £169m as compared to £154m compared with the previous period.

Revenue from Mediclinic’s Swiss Hirslanden unit rose 5 percent to £819m, up from £783m. In that country Mediclinic operates 16 hospitals and 4 clinics with a total of 1 677 inpatients beds.

Mediclinic operates in South Africa and Namibia in the region, and Switzerland and the United Arab Emirates internationally.

In South Africa there are 49 hospitals and two day clinics; in Namibia three hospitals; in Switzerland 16 private acute care facilities and three clinics; and five hospitals and 29 clinics in the United Arab Emirates.

The company said it expected modest growth and stable margins for the 2016/17 financial year.

Switzerland was the largest contributor to the group’s revenue in pound terms, and turnover was further boosted by sterling’s decline after Brexit, Meintjes said.

The board declared an interim dividend from retained earnings of 3.2p per ordinary share for the period.

The company said South African shareholders would be paid a cash equivalent of 53.31c per share. It said it expected revenue growth to be at the bottom end of expectations in the Middle East after new health insurance regulations took effect in July.

Meintjes said the region offered a long-term growth opportunity.