Mediclinic International said in a trading update a few weeks ago that shareholders could expect good results. Management mentioned a bunch of figures at the time, which saw the share price jump more than 10% on the day.
Yesterday, the half-year results themselves gave investors some more good news.
The figures show that Medicinic is nearly back at pre-Covid-19 levels and starting to enjoy the benefits of its expansion drive and a host of new projects that were completed recently.
After the presentation of the figures, group CEO Dr Ronnie van der Merwe outlined Mediclinic’s strategy going forward, saying that Mediclinic has continued to advance digital initiatives and is investing across the continuum of medical care to lay a solid foundation for future growth and innovation.
Van der Merwe pointed out that revenue at all three of the group’s divisions is higher than before the pandemic disrupted normal operations. Management expects that operating margins and earnings will recover to normal levels soon.
The income statement shows that margins have already improved – from 12% a year ago to nearly 16%, just short of the 16.6% before Covid-19 disrupted the world.
Revenue increased by 12% to £1.58 billion in the six months to September 2021 compared to £1.41 billion in the first half of the previous financial year. Revenue in the last six months was a few percent higher than in the six months to September 2019.
Operating in a more normal environment meant the small increase in revenue translated to a healthy 45% increase in Ebitda (earnings before interest, tax, depreciation and amortisation) – which increased to £247 million (from £171 million), while adjusted earnings increased by a massive 373%.
“Our recovery in the first-half is highly encouraging, but above all else, we are pleased with how we have continued to navigate the pandemic and safely treat patients through our diverse healthcare offering,” says Van der Merwe.
“Naturally, the pandemic impacted each region in which we operate differently and, accordingly, 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 SA was more severe than the previous two, and lasted longer.
“We treated a significant number of Covid-19 patients in SA, at times more than 20% of our patients,” he said, notably referring to an “ongoing” pandemic.
Costs associated with the pandemic remain high, with Myburgh saying that in the group’s local operations they amounted to R150 million.
Mediclinic’s other divisions are further along the road 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 was also notable for its continued margin improvement which resulted in the division’s Ebitda exceeding pre-pandemic levels,” says Van der Merwe.
Van der Merwe had some more good news for shareholders – the results for the full financial year are set to be better than previously anticipated.
“Given the encouraging revenue performance across all three divisions in the first half, the group expects to deliver revenue growth ahead of previous guidance at all three divisions in the full financial year, while maintaining margins,” he says.
“However, we remain alert to the ongoing pandemic and potential subsequent waves which provide an element of uncertainty as to near-term operating performance and the shape of the recovery.
“In Switzerland, Hirslanden expects to deliver 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 deliver revenue growth in the mid to high teen digit percentage range and a year-on-year improvement in Ebitda margin [approaching the 19% of previous periods],” says Van der Merwe.
“Mediclinic Middle East expects to deliver revenue growth in the high single digit percentage range and an Ebitda margin approaching 2020 financial year levels of 15%.”
Long term trends
Management is also optimistic about the longer term, with Van der Merwe saying the group is poised to take advantage of big long term trends, such as an ageing population and increasing lifestyle diseases such as obesity and diabetes.
The figures are staggering.
The number of people above 80 years old is expected to more than triple worldwide, from an estimated 137 million in 2017 to 425 million by 2050.
The number of people suffering from diabetes will increase to 642 million, while the prevalence of obesity has nearly tripled between 1975 and 2016 (based on figures from the World Health Organisation).
“By 2030, it is estimated that 56% of the global disease burden will be due to chronic diseases,” says Van der Merwe.
Mediclinic is also reacting to the trend of digitisation of just about everything in every business.
It recently launched a digital app, My Mediclinic 24×7, which gives people the ability to search for a doctor by location or speciality and make their own appointments.
Consultations can be either face-to-face in the doctor’s rooms or through a digital consultation – the modern version of the traditional ‘house call’.
Van der Merwe says the digital offering will be enhanced over time.
As mentioned, the share price got a boost from the figures in the trading update a few weeks ago, and the actual results saw the share unchanged just before the market close 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.