Wrap Text
2018 Full Year Trading Update
Mediclinic International plc
(Incorporated in England and Wales)
Company Number: 08338604
LSE Share Code: MDC
JSE Share Code: MEI
NSX Share Code: MEP
ISIN: GB00B8HX8Z88
LEI: 2138002S5BSBIZTD5I60
("Mediclinic", the "Company" or the "Group")
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
18 April 2018
2018 Full Year Trading Update
Mediclinic International plc, the international private healthcare services group, provides the
following trading update ahead of the publication of the Group’s results for the year ended 31
March 2018 ("FY18") on 24 May 2018. The information on which this trading update is based
represents the Group’s latest financial estimates and has not been reviewed or reported on
by Mediclinic’s external auditors. All financial figures, unless explicitly stated, are presented
on an adjusted* basis.
Mediclinic management will host an analyst and investor call today at 08:30 BST. Further
details are provided at the end of this release.
Commenting today, Danie Meintjes, Mediclinic International CEO, said:
"The Group expects to deliver adjusted financial results for the year marginally ahead of
expectations, with a significant second half improvement from the Middle East division.
"We are succeeding with the turnaround of the Abu Dhabi business and laying the foundation
for long-term, sustainable performance. The Middle East division is now entering an
expansionary phase that we expect will drive a strong increase in revenue and improvement
in margins over time. In Abu Dhabi, the growth will be driven by an improved operating
performance in the existing business and strategic expansion projects at the Mediclinic Airport
Road, Mediclinic Al Noor and the new Mediclinic Western Region hospitals. In Dubai, we expect
that the ongoing performance of the existing business will be supported by significant growth
from the new 182-bed Mediclinic Parkview Hospital. This development project has progressed
ahead of schedule and we now expect the hospital to open in October 2018, some six months
earlier than previously communicated.
"The Southern Africa division delivered second half revenue growth ahead of expectations with
a stable EBITDA margin for the year. In Switzerland, the Hirslanden division performed in line
with expectations as it began to absorb the initial impact of regulatory changes. Both divisions
benefited from cost saving programmes and productivity initiatives implemented during the
year.
"The demand for the provision of quality healthcare services continues to increase driven by
factors including an ageing population, growing disease burden and new technologies.
Mediclinic, as the largest independent pan-EMEA private healthcare services group with
market leading positions across all our operating divisions, is well positioned to benefit from
these trends. Through our relentless focus on patient safety, excellent clinical performance,
and sustainable and efficient operating practices, Mediclinic expects to continue to create
long-term shareholder value."
Hirslanden - Switzerland
As previously indicated, Hirslanden’s FY18 performance was impacted by the timing of the
Easter period, a subdued summer market, the continued change in insurance mix and the
evolving changes in the regulatory environment. On 1 January 2018, the TARMED outpatient
tariff revisions became effective and four cantons, including Zurich, implemented a list of
procedures now reimbursed at outpatient tariffs. Although the Federal Government is
expected to implement a national framework from 1 January 2019, a number of insurance
companies in Switzerland are already applying certain elements of the framework in some
further cantons. As a result, Hirslanden expects to deliver FY18 revenue growth of around
1.8% to CHF1.7 billion (FY17: CHF1.7 billion). Inpatient revenue was broadly flat and
outpatient revenue, which contributed around 19% of the division’s total revenue, increased
by 8%. Bed days sold and inpatient admissions were up 2% and 3% respectively. Revenue per
bed day was down around 1.5%.
As anticipated, the EBITDA margin for FY18 is expected to be around 18.3% (FY17: 20.0%). This
reflects the impact on revenue of current trends in the market and regulatory environment as
well as the continued investment costs relating to the Hirslanden 2020 strategic programme
offset by the benefits from cost-management programmes and efficiency savings.
The acquisition of the Linde Private Hospital ("Linde") in Biel was completed at the end of June
2017 and is delivering a good operating performance following its successful integration.
Hirslanden continues to adapt its business model to address the trends in inpatient and
outpatient activity driven by the evolving regulatory environment in Switzerland and the
ongoing insurance mix change whilst maintaining excellent clinical performance. The
continued investment in the Hirslanden 2020 strategic programme is part of the long-term
strategy to adapt to this changing environment, whilst also delivering cost savings and
operational efficiencies for the division over time. The pace of regulatory change and its
impact on the business continues to evolve and we are monitoring it closely to adapt
accordingly.
In FY19, Hirslanden expects modest revenue growth supported by an increase in average bed
capacity for the year, largely related to Linde. As a result of the regulatory and market trends
more than offsetting the benefits of cost savings and efficiency initiatives, the FY19 EBITDA
margin is expected to contract by around 100 basis points ("bps") from the prior year.
However, the EBITDA margin is targeted to improve from FY20 onwards.
Mediclinic Southern Africa
In Southern Africa, FY18 performance was ahead of expectations, with revenue anticipated to
increase by around 5.0% to ZAR15.1 billion (FY17: ZAR14.4 billion), with inpatient bed days
decreasing by around 1.5% and revenue per bed day increasing by around 6.7%. In FY19, the
division expects there to be stable medical insurance membership and no forecast increase in
bed capacity. FY19 revenue growth will be driven by an expected increase in bed days sold of
1-2%, largely as a result of an increase in productive days compared to the prior year,
combined with tariff increases broadly in line with inflation.
EBITDA margin for FY18 is expected to be stable (FY17: 21.2%), resulting from the benefits of
cost-management and efficiencies initiatives. The EBITDA margin for Southern Africa is also
expected to remain broadly stable over the medium term.
Mediclinic Middle East
After reaching an inflection point, second half revenue in the Middle East is expected to grow
by around 6% comparatively and around 12% sequentially. FY18 revenue is expected to
increase by almost 1% to AED3.1 billion (FY17: AED3.1 billion). The division is expected to
deliver an improved FY18 EBITDA margin at around 12.5% (FY17: 11.7%) following the strong
second half operational performance.
The Middle East division is entering a growth phase underpinned by continued strong
performance in the established Dubai business, significant improvement in the Abu Dhabi
business and the opening of several new facilities over the coming years. In Dubai, the new
build 182-bed Mediclinic Parkview Hospital is progressing ahead of schedule and is now
expected to be commissioned in October 2018, some 6 months ahead of schedule, as part of
a multi-year ramp up programme. In Abu Dhabi, the extension of Mediclinic Airport Road
Hospital has been further re-configured to include a comprehensive cancer centre and is now
expected to open in FY20/21.
In FY19, the Middle East division is expected to deliver revenue growth in the low double-digit
percentage range reflecting the underlying operating performance of the business and
additional bed capacity coming online in the second half of the year. The EBITDA margin of
the existing operations is expected to increase by around 250bps and to continue improving
year-on-year to around 20% in FY22. As a result of the early opening of Mediclinic’s Parkview
Hospital and the updated schedule for the planned upgrade and expansion projects in Abu
Dhabi, the ramp up costs associated with these projects are expected to offset the margin of
the existing business by around 250bps per annum between FY19-FY21, reducing thereafter.
Spire Healthcare Group
Mediclinic has a 29.9% investment in Spire Healthcare Group plc ("Spire"). The investment in
Spire is accounted for on an equity basis recognising the reported profit after tax of £16.8m
for Spire’s financial year ended 31 December 2017 (31 December 2016: £53.6m). Spire’s
adjusted profit after tax for the year was £57.9m (31 December 2016: £76.6m). The principle
differences related to a £28.7m provision for the potential cost of a settlement relating to civil
litigation against a consultant who previously had practicing privileges at Spire and a charge
relating to a decision to cease the provision of radiotherapy services at the Spire Specialist
Cancer Care Centre in Baddow (Essex). The exceptional items materially impacted Mediclinic’s
FY18 equity accounted share of reported profit after tax from Spire. After adjusting for the
amortisation of intangible assets recognised in the notional purchase price allocation of the
equity investment, the FY18 income from associate was £2.6m (FY17: £12.4m).
Group
The Group expects to deliver adjusted financial results for the year marginally ahead of
expectations, with a significant second half improvement from the Middle East division. In
constant currency, FY18 revenue is expected to be up around 2% and adjusted EBITDA flat on
the prior year. However, after the translation effect of foreign currency movements, FY18
revenue is expected to be up around 4% at GBP2.9bn (1H17: GBP2.7bn) and adjusted EBITDA
up around 3% at GBP0.5bn (FY17: GBP0.5bn). Adjusted earnings per share, impacted by the
equity accounted share of reported profit after tax from Spire, is expected to be broadly flat
on the prior year (FY17: 29.8 pence). The average foreign exchange rates for FY18 were
GBP/CHF 1.29, GBP/ZAR 17.22 and GBP/AED 4.87 (FY17: 1.29, 18.41 and 4.80 respectively).
In line with the requirements of IFRS, the Group performs an annual review of the carrying
value for goodwill and other intangible assets. In Switzerland, the changes in the market and
regulatory environment have affected key inputs to the ongoing year-end review that could
potentially give rise to an impairment charge against intangible assets of GBP400m to
GBP600m. Hirslanden goodwill and indefinite life trade names were carried at £307m and
£341m, respectively, at the previous year end balance sheet date of 31 March 2017. Any
potential impairment charge will be non-cash and excluded from the adjusted earnings
metrics.
The Group will adopt the new IFRS 15 accounting standard (Revenue from Contracts with
Customers) from 1 April 2018. Under IFRS 15, revenue is recognised at an amount that reflects
the consideration to which an entity expects to be entitled in exchange for transferring goods
or services to a customer. The new accounting standard has implications for the Middle East
division where we expect certain operating expenses to be reclassified and set off against
revenue. This will not have an impact on EBITDA for the Middle East division and the Group
will provide further details at the FY18 results on 24 May 2018.
The Group will host a Capital Markets Day on 28 June 2018 in Zurich, Switzerland. Presenters
from the Mediclinic International Executive Committee will include Dr Ronnie van der Merwe
(appointed Group CEO from 1 June 2018), Jurgens Myburgh (Group CFO), Dr Ole Wiesinger
(Hirslanden CEO), Koert Pretorius (Mediclinic Southern Africa CEO) and David Hadley
(Mediclinic Middle East CEO). The event will be webcast live via the Mediclinic corporate
website where further details will be available ahead of the day. For those attending, site visits
will take place on 29 June 2018.
* 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.
Cautionary Statement
This announcement contains certain forward-looking statements relating to the business of
the Company and its subsidiaries (collectively, the "Group"), including with respect to the
progress, timing and completion of the Group’s development, the Group’s ability to treat,
attract, and retain patients and customers, its ability to engage consultants and general
practitioners and to operate its business and increase referrals, the integration of prior
acquisitions, the Group’s estimates for future performance and its estimates regarding
anticipated operating results, future revenue, capital requirements, shareholder structure and
financing. In addition, even if the Group’s actual results or development are consistent with
the forward-looking statements contained in this announcement, those results or
developments may not be indicative of the Group’s results or developments in the future. In
some cases, you can identify forward-looking statements by words such as "could," "should,"
"may," "expects," "aims," "targets," "anticipates," "believes," "intends," "estimates," or
similar words. These forward-looking statements are based largely on the Group’s current
expectations as of the date of this announcement and are subject to a number of known and
unknown risks and uncertainties and other factors that may cause actual results, performance
or achievements to be materially different from any future results, performance or
achievement expressed or implied by these forward-looking statements. In particular, the
Group’s expectations could be affected by, among other things, uncertainties involved in the
integration of acquisitions or new developments, changes in legislation or the regulatory
regime governing healthcare in Switzerland, South Africa, Namibia and the UAE and poor
performance by healthcare practitioners who practice at our facilities, unexpected regulatory
actions or suspensions, competition in general, the impact of global economic changes, and
the Group’s ability to obtain or maintain accreditation or approval for its facilities or service
lines. In light of these risks and uncertainties, there can be no assurance that the forward-
looking statements made in this announcement will in fact be realised and no representation
or warranty is given as to the completeness or accuracy of the forward-looking statements
contained in this announcement.
The Group is providing the information in this announcement as of this date, and we disclaim
any intention to, and make no undertaking to, publicly update or revise any forward-looking
statements, whether as a result of new information, future events or otherwise.
About Mediclinic International plc
Mediclinic is an international private healthcare services group, established in South Africa in
1983, with current operating divisions in Southern Africa (South Africa and Namibia),
Switzerland and the United Arab Emirates. Its core purpose is to enhance the quality of life of
patients by providing acute care, specialist-orientated, multi-disciplinary healthcare services.
Mediclinic also holds a 29.9% interest in Spire Healthcare Group plc, a LSE listed and UK-based
private healthcare group.
Mediclinic comprises 75 hospitals and 33 clinics. Mediclinic Southern Africa operates 49
hospitals and 2 day clinics throughout South Africa and 3 hospitals in Namibia with more than
8 000 inpatient beds in total; Hirslanden operates 17 hospitals and 4 clinics in Switzerland with
more than 1 700 inpatient beds; and Mediclinic Middle East operates 6 hospitals and 27 clinics
with more than 700 inpatient beds in the United Arab Emirates.
Mediclinic has a primary listing on the Main Market of the LSE in the United Kingdom, with
secondary listings on the JSE in South Africa and the NSX in Namibia.
Analyst and investor conference call details
A conference call will be held at 08:30 BST this morning hosted by Danie Meintjes, CEO, and
Jurgens Myburgh, CFO.
Participant dial in details:
Passcode: 8635027
United Kingdom +44 (0)330 336 9105
South Africa +27 11 844 6054
United Arab Emirates 8000 3570 2653
Switzerland +41 (0)22 567 5729
Replay facility (7 days) +44 (0) 207 660 0134 or +27 11 062 3065
Participants should state they wish to join the Mediclinic International conference call. Please
dial in 5-10 minutes prior to the call.
For further information, please contact:
Investor Relations, Mediclinic International plc
James Arnold, Head of Investor Relations
ir@mediclinic.com
+44 (0)20 3786 8181
Media queries
FTI Consulting
Brett Pollard/Debbie Scott – UK
+44 (0)20 3727 1000
Sherryn Schooling – South Africa
+27 (0)21 487 9000
Inside information
The information contained in this announcement is inside information. If you have any queries
on this, then please contact Victoria Dalby at Link Company Matters Ltd, the Company
Secretary for Mediclinic and the person responsible for arranging the release of this
announcement, at 6th Floor, 65 Gresham Street, London EC2V 7NQ or +44 (0)20 7954 9600.
Registered address: 6th Floor, 65 Gresham Street, London, EC2V 7NQ, United Kingdom
Website: www.mediclinic.com
Corporate broker: Morgan Stanley & Co International plc
JSE sponsor: RAND MERCHANT BANK (A division of FirstRand Bank Limited)
NSX sponsor: Simonis Storm Securities (Pty) Ltd
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