TIDMMDC
RNS Number : 2654E
Mediclinic International plc
17 October 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")
17 October 2018
THIS ANNOUNCEMENT CONTAINS INSIDE INFORMATION.
2018/19 Interim Trading Update
Mediclinic International plc, the international private
healthcare group, provides the following trading update ahead of
the publication of its results for the half year ended 30 September
2018 ("1H19") on 15 November 2018. The information on which this
trading update is based represents the Group's latest financial
estimates and has not been reviewed and reported on by Mediclinic's
external auditors. All financial figures, unless explicitly stated,
are adjusted*.
Mediclinic management will host an analyst and investor call
today at 08:00 BST. Further details are provided at the end of this
release.
Commenting today, Dr Ronnie van der Merwe, CEO, said:
"The Group has delivered on a number of key operational
initiatives during the first half of the financial year. In the
Middle East, the 182-bed Mediclinic Parkview Hospital in Dubai
opened in September on time and in budget. We look forward to the
hospital being a key contributor to the growth of this division as
it ramps up over the coming years. In Southern Africa, in-line with
our strategy to expand Mediclinic's primary care and day clinic
presence, we have completed the investment in the Intercare day
clinic business and Welkom Medical Centre. In addition, we recently
completed the build of our fourth day clinic at Mediclinic
Newcastle which is expected to open shortly. In Switzerland, we
announced the combination of Hirslanden Clinique La Colline and
Clinique des Grangettes, strengthening the leading market position
of Hirslanden in the attractive Geneva market. We continue to
progress with the Hirslanden 2020 strategic programme.
"Trading in the first half of the year experienced the customary
seasonality in Switzerland and the Middle East. In the Middle East,
we delivered a gradual improvement in revenue and margin expansion
ahead of the anticipated stronger growth in the second half of the
year. In Switzerland, the business continues to adapt to recent
regulatory changes in the outpatient environment, which in the
period had a greater than expected impact on admissions and the
insurance mix. In Southern Africa, margins were maintained on lower
volumes due to weakness in the second quarter from fewer pneumonia
and bronchitis related cases during the winter.
"For the full year, our performance in Southern Africa remains
in line with guidance. In the Middle East, full year EBITDA
delivery remains on track with revenue growth lower than previously
expected. In Switzerland, we now expect to deliver modest revenue
growth in the full year including contribution from Clinique des
Grangettes, with an adjusted EBITDA margin of around 16%.
"Since being appointed Chief Executive Officer, I've spent time
with all the Executive teams across the Group which has reinforced
my confidence in our focused approach to grow and improve our
business. As we highlighted at the Capital Markets Day in June, we
are adapting the business to the changing healthcare landscape.
Leveraging our core skills in efficiently operating world-class
acute care hospitals and providing quality clinical care, we are
expanding our presence across the continuum of care to increase the
value proposition to our patients and all stakeholders. I am very
positive about the opportunities ahead, successfully leveraging our
international reputation and brand."
Hirslanden - Switzerland
In Switzerland, 1H19 revenue was up around 1% (1H18: CHF0.82bn)
with weaker than expected growth in inpatient admissions of 3.6%
and revenue per bed day down 2.8%, reflecting the outmigration of
care and higher proportion of Generally insured inpatients (49.4%
compared to 46.9% in 1H18). Hirslanden's outpatient revenues, which
represent 19% of the overall division's revenue, continued to grow
during the first half of the year, up 1.7%. This growth in
outpatient revenue reflects the outmigration of identified clinical
treatments transferring from an inpatient to an outpatient tariff
across several cantons. This volume growth was offset by the
national outpatient tariff (TARMED) reductions effective from 1
January 2018.
Excluding the contribution from Linde which was acquired in July
2017, Hirslanden revenue was down around 1.5%, inpatient admissions
were up 0.3% and the percentage of Generally insured patients was
48.3% (1H18: 46.3%). The combination of the Hirslanden Clinique La
Colline and Clinique des Grangettes in Geneva was announced in
September 2018 and will be effective from 1 October 2018. The
combination strengthens Hirslanden's leading market position in
Geneva and will deliver enhanced services for patients in addition
to being earnings accretive.
The adjusted EBITDA margin for 1H19 is around 14.3% (1H18:
17.4%) impacted by recent outmigration and TARMED regulatory
changes, as referenced, partly offset by ongoing cost-management
programmes and efficiency savings.
During the period, Hirslanden announced several managerial
appointments including Dr Daniel Liedtke to become Chief Executive
Officer as of 1 January 2019 and Pierre-Antoine Binard becoming
Chief Financial Officer. The team are implementing a series of
plans to improve performance and enhance future returns. Leveraging
Hirslanden's leading market position, a key focus remains to
attract an increasing number of admitting doctors, supporting
long-term growth in patient volumes. The division is focused on
several cost and efficiency initiatives that are already realising
benefits and will look to deliver further savings in areas
including supply costs, staff utilisation and service
differentiation. Capital expenditure for the year is now expected
to be lower than originally budgeted, down around 15% on the prior
year. As part of the Hirslanden 2020 strategic programme, each
hospital will have a specific plan to appropriately adapt
infrastructure to sustainably provide outpatient and low acuity day
surgery procedures. The project has already been rolled out to the
two Zurich hospitals and will be delivered across Hirslanden,
driving expected long-term efficiency savings and improved
productivity.
Including the contribution from Clinique des Grangettes,
Hirslanden expects to deliver modest growth in revenue for the full
year. The adjusted EBITDA margin in the second half of the year is
expected to reflect the seasonal benefits of the winter period and
cost savings initiatives with a full year margin now expected of
around 16%.
Mediclinic Southern Africa
In Southern Africa, 1H19 revenue was up around 5% to ZAR8.0bn
(1H18: ZAR7.6bn) with inpatient bed days increasing by 0.5% and
revenue per bed day increasing by 4.5%. The division saw fewer
pneumonia and bronchitis related cases during the winter, largely
offsetting the strong bed day growth in the first half of the
period.
The adjusted EBITDA margin for 1H19 was around 21.2% (1H18:
21.0%), as a result of a continued focus on cost-management and
efficiencies. Overall performance for the full year remains on
track.
During the first half of the year, Mediclinic Southern Africa
received Competition Commission approvals for the proposed majority
investment in Intercare's four day clinics and three rehabilitation
and sub-acute facilities, as the group continues to look for
opportunities to expand across the continuum of care. Intercare is
expected to be integrated from November 2018 and follows the
successful minority investment Mediclinic made in Intercare's
primary care business during the prior year. In September 2018,
Mediclinic acquired a majority stake in the Welkom Medical Centre,
the division's third day clinic. The centre consists of a day
clinic with 20 beds, a sub-acute unit of 20 beds and a mental
health unit with a further 20 beds. The division has successfully
completed the building of its fourth day clinic in South Africa at
Mediclinic Newcastle which is expected to open shortly. Five
further day clinics are expected to open in the following financial
year with Mediclinic Southern Africa committed to investing in day
clinics and the provision of sub-acute care which forms an
important role in broadening access to healthcare and maximising
value for patients.
Mediclinic Middle East
In Mediclinic Middle East, the characteristically quieter first
half saw revenue growth of around 5% to AED1.5bn (1H18:
AED1.4bn**). Inpatient admissions were up 3.1% whilst outpatient
volumes were down 0.8%, reflecting the divestment of non-core
facilities and the successful insurance mix strategy in Abu Dhabi.
This strategy resulted in Thiqa and Enhanced volumes increasing by
20% and 11% for inpatients and outpatients respectively whilst
lower tariff Basic insurance volumes for inpatients and outpatients
declined by 35% and 32% respectively.
The adjusted EBITDA margin for 1H19 is in line with expectations
at around 9.4% (1H18: 8.5%), including the start-up costs
associated with the new Mediclinic Parkview Hospital that opened in
September 2018. Seasonal benefits of the second half of the year in
the Middle East, combined with the continued gradual improvement in
the Abu Dhabi patient mix are expected to deliver a strong second
half performance. For the full year, overall EBITDA performance
remains on track with revenue growth now expected to be in the high
single-digits with a resulting improvement in the expected EBITDA
margin.
Ongoing investment across existing and new facilities is
supporting the long-term growth of the Middle East division and
enhancing Mediclinic's leading market position in the region. The
new build 182-bed Mediclinic Parkview Hospital in Dubai opened at
the end of September and is expected to gradually ramp up over the
coming years. In Dubai, the Group completed the acquisition of two
Majid Al Futtaim clinics in May 2018. The clinics serve strategic
locations, referring higher acuity inpatient cases to existing
Mediclinic Middle East hospitals including Mediclinic Parkview
Hospital. The investment projects at the two main Abu Dhabi
hospitals, Mediclinic Airport Road Hospital and Mediclinic Al Noor
Hospital (previously Khalifa Street Hospital), are underway and
will enhance the clinical service offering and patient experience
at both facilities. They also support the investment in previously
announced business and operational alignment initiatives. The
Western Region Hospital project has also been initiated and the
project planning is currently underway for the 40-bed facility.
Spire Healthcare Group
Mediclinic has a 29.9% investment in Spire Healthcare Group plc
("Spire"). Spire reported a disappointing first half performance to
30 June 2018 reflecting significantly declining NHS admissions,
lower than anticipated growth in Private admissions and planned
investment in Clinical quality and Consumer engagement.
The investment in Spire is accounted for on an equity basis
recognising the reported profit of GBP8.2m for Spire's financial
half year ended 30 June 2018 (6 months ended 30 June 2017:
GBP8.9m). Mediclinic's 1H19 equity accounted share of profit from
Spire was GBP1.8m (1H18: GBP1.1m) after adjusting for the
amortisation of intangible assets recognised in the notional
purchase price allocation of the equity investment.
The carrying value of the Group's investment in Spire will be
considered as part of the interim review process and reported with
the results for 1H19 on 15 November 2018.
Group
At the Group level, in constant currency, 1H19 revenue was up 2%
and adjusted EBITDA was down around 4%. On a reported basis, 1H19
revenue was down around 1% at GBP1.4bn (1H18: GBP1.4bn) and
adjusted EBITDA was down around 8% at GBP0.21bn (1H18: GBP0.23bn).
Adjusted earnings per share is expected to be around 10p pence
(1H18: 11.3 pence). The average foreign exchange rates for 1H19
were GBP/CHF 1.31, GBP/ZAR 17.71 and GBP/AED 4.89 (1H18: 1.26,
17.08 and 4.75 respectively).
During the first six months of the year, Mediclinic completed
the refinance of its Southern African and Middle East borrowing
facilities, initially extending both terms by up to 5 years.
* 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.
** AED1.4bn reflects adjusted 1H18 reported revenue following
the adopting of IFRS 15. As previously reported, the Group adopted
IFRS 15 Revenue from Contracts with Customers from 1 April 2018.
IFRS 15 has implications for the Middle East division where certain
operating expenses will be reclassified to revenue. Based on
current estimates, the Group expects a reclassification from
operating expenses (bad debts) to revenue of approximately GBP17m
to account for the difference in treatment between the existing
standard (IAS 18) and IFRS 15 in FY18. Whilst reported revenue in
FY18 will not be re-stated, revenue growth guidance does reflect
net revenue in FY18.
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 group with
operating platforms 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.
As at 30 September 2018, Mediclinic comprises 75 hospitals and
29 clinics. Hirslanden operates 17 private hospitals and 4 clinics
in Switzerland with more than 1 800 inpatient beds; Mediclinic
Southern Africa operates 48 hospitals and 3 day clinics throughout
South Africa and 3 hospitals in Namibia with more than 8 100
inpatient beds in total; and Mediclinic Middle East operates 7
hospitals and 22 clinics with more than 900 inpatient beds in the
United Arab Emirates.
The divisions' contributions to Group revenue for the financial
year ended 31 March 2018 were 47% by Hirslanden, 31% by Mediclinic
Southern Africa and 22% by Mediclinic Middle East.
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 08:00 BST this morning hosted
by Dr Ronnie van der Merwe, CEO, and Jurgens Myburgh, CFO.
Participant dial in details:
Passcode: 2714622
United Kingdom +44 (0)330 336 9127
South Africa +27 11 844 6054
Switzerland +41 (0)44 580 7206
United Arab Emirates 8000 3570 2653
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
Jayne Meacham 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 9569.
Registered address: 6th Floor, 65 Gresham Street, London, EC2V
7NQ, United Kingdom
Website: www.mediclinic.com
Corporate broker: Morgan Stanley & Co International plc and
UBS Investment Bank
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 news service of the
London Stock Exchange. RNS is approved by the Financial Conduct
Authority to act as a Primary Information Provider in the United
Kingdom. Terms and conditions relating to the use and distribution
of this information may apply. For further information, please
contact rns@lseg.com or visit www.rns.com.
END
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