TIDMMDC
RNS Number : 2412L
Mediclinic International plc
18 April 2018
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 GBP16.8m for
Spire's financial year ended 31 December 2017 (31 December 2016:
GBP53.6m). Spire's adjusted profit after tax for the year was
GBP57.9m (31 December 2016: GBP76.6m). The principle differences
related to a GBP28.7m 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 GBP2.6m (FY17: GBP12.4m).
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 GBP307m
and GBP341m, 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
This information is provided by RNS
The company news service from the London Stock Exchange
END
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