Wednesday, January 19

Mediclinic emerges stronger from the pandemic


Mediclinic International said in a trade update a few weeks ago that shareholders could expect good results. Management mentioned a bunch of figures at the time, in which the stock price was up more than 10% on the day.

Yesterday, the semi-annual results gave investors more good news.

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The figures show that Medicinic has almost returned to pre-Covid-19 levels and is beginning to enjoy the benefits of its expansion momentum and a number of new projects that were recently completed.

Read: Mediclinic’s first semester profit triples

Following the presentation of the figures, the group’s CEO, Dr. Ronnie van der Merwe, outlined Mediclinic’s strategy going forward, saying that Mediclinic has continued to advance digital initiatives and is investing in the continuum of care. to lay a solid foundation for future growth and innovation.

Van der Merwe noted that revenues in the group’s three divisions are higher than before the pandemic disrupted normal operations. Management expects operating margins and earnings to soon return to normal levels.

The income statement shows that margins have already improved, from 12% a year ago to almost 16%, just under 16.6% before Covid-19 disrupted the world.

Figures

Revenue increased 12% to £ 1.58bn in the six months to September 2021 compared to £ 1.41bn in the first half of the previous financial year. Revenues in the past six months were a small percentage higher than in the six months through September 2019.

Operating in a more normal environment meant a small increase in revenue which translated into a healthy 45% increase in Ebitda (earnings before interest, taxes, depreciation and amortization), which rose to £ 247 million (from £ 171 million ), while adjusted earnings increased. by a whopping 373%.

“Our recovery in the first half is very encouraging, but above all, we are pleased with the way we have continued to navigate the pandemic and treat patients safely through our diverse healthcare offering,” says Van der Merwe.

“Naturally, the pandemic affected each region in which we operate differently, and consequently the speed and nature of their recoveries have also varied.”

Mediclinic CFO Jurgens Myburgh noted during the discussion of the results that the third wave of Covid-19 infections in South Africa was more severe than the previous two and lasted longer.

Read: Mediclinic sees capacity tension with second wave

“We treat a significant number of Covid-19 patients in South Africa, sometimes more than 20% of our patients,” he said, notably referring to an “ongoing” pandemic.

The costs associated with the pandemic remain high, and Myburgh says the group’s local operations amounted to R 150 million.

The other Mediclinic divisions are further along the way to normal operations.

“With less severe waves impacting patient admissions, Hirslanden [in Switzerland] and Mediclinic Middle East [United Arab Emirates] increased patient volumes, exceeding pre-pandemic levels.

“Mediclinic Middle East also stood out for the continuous improvement of its margins, which resulted in the division’s Ebitda exceeding pre-pandemic levels,” says Van der Merwe.

Wait more

Van der Merwe had more good news for shareholders: results for the full financial year are expected to be better than previously anticipated.

“Given the encouraging revenue performance in all three divisions in the first half, the group expects to generate revenue growth ahead of previous guidance in all three divisions for the full financial year, while maintaining margins,” it says. .

“However, we remain alert to the ongoing pandemic and possible subsequent waves that provide an element of uncertainty regarding short-term operational performance and the manner of recovery.

“In Switzerland, Hirslanden expects to generate revenue growth approaching mid-single-digit percentages and a stable year-on-year Ebitda margin. [15.1% in the previous financial year]. Mediclinic Southern Africa expects to generate revenue growth in the mid-to-high percentage range of adolescent digits and a year-on-year improvement in the Ebitda margin. [approaching the 19% of previous periods]”Says Van der Merwe.

“Mediclinic Middle East expects to generate revenue growth in the high single digit percentage range and an Ebitda margin approaching the financial year 2020 levels of 15%.”

Long-term trends

Management is also optimistic about the long term, and Van der Merwe says the group is ready to take advantage of big long-term trends, such as an aging population and the rise in lifestyle diseases such as obesity and diabetes. .

The figures are staggering.

The number of people over the age of 80 is expected to triple worldwide, from an estimated 137 million in 2017 to 425 million in 2050.

The number of people with diabetes will increase to 642 million, while the prevalence of obesity has almost tripled between 1975 and 2016 (according to figures from the World Health Organization).

“By 2030, it is estimated that 56% of the global disease burden will be due to chronic diseases,” says Van der Merwe.

Technology

Mediclinic is also reacting to the trend of digitization of almost everything in all companies.

It recently launched a digital app, My Mediclinic 24 × 7, which gives people the ability to search for a doctor by location or specialty and schedule their own appointments.

Consultations can be face-to-face in the doctor’s rooms or through a digital consultation, the modern version of the traditional “home visit.”

Van der Merwe says that the digital offering will improve over time.

Read: Mediclinic also opts for his own power

As mentioned, the stock price got a boost from the figures in the trade update a few weeks ago, and actual results saw the stock unchanged just before the market closed on Thursday.

The current price of around R70 is only 10% lower than its recent high and represents a solid recovery from the March 2020 low of around R50.


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