The latest set of results from Mediclinic requires careful reading. The figures for the year to end-March 2022 as reported in accordance with International Financial Reporting Standards (IFRS) show strong growth compared to the previous financial year and recovery to above pre-pandemic levels.
However, adjusted non-IFRS figures – in good times touted by management as a better reflection of operational performance – show that Mediclinic is not quite there in terms of shaking off Covid-19.
The formal results show that revenue increased by 8% during the year, to £3.23 billion (close to R64 billion at the current exchange rate) compared to £2.99 billion in the previous year (R59 billion). This was some 5% ahead of the financial year to March 2020.
Operating profit increased by 34% and earnings and earnings per share by 122%. According to Mediclinic’s figures, earnings were 147% better than in the 2020 financial year.
The adjusted figures however paint a different picture. Adjusted earnings and adjusted earnings per share increased by 65% – but were apparently still 6% below the 2020 figures, which included the disruptions caused by Covid-19.
That a hospital group would perform worse during a health crisis is interesting as well. Mediclinic actually cut back on its activities (by performing only the most crucial medical treatments) during a period of transmittable disease.
“The group delivered a strong operational and financial performance this year, driven by increased client activity across our care settings,” says Mediclinic CEO Ronnie van der Merwe.
“As disruption from the pandemic receded, the fundamental demand for our broad range of healthcare services drove inpatient and day case revenue up 7%, and outpatient revenue up 10%,” he adds.
“Importantly, we have delivered these results while fulfilling our critical role in helping communities to navigate the pandemic, caring for around 43 000 Covid-19 inpatients this year, in addition to the 42 000 in the prior year.
“In the year ahead, we expect to benefit from a continued increase in client activity which will drive further improvement in our profitability and earnings. Our ability to provide our full breadth of services improved in financial 2022 compared with 2021.
“The Omicron variant proved less severe than previous variants, resulting in fewer Covid-19 admissions compared with other waves. However, staffing and patient scheduling were severely disrupted by the variant’s higher transmissibility,” he adds, while noting that things were nearly close to normal towards the end of the financial year as the last wave of infections receded.
It is likely that shareholders will be more interested in the group’s prospects than whether earnings were somewhat higher or lower than in ‘normal’ times.
Mediclinic’s share price closed a solid 4.61% up on Wednesday, at R72.21 a share. In comparison, the JSE ended the day marginally down -0.16%.
Christiaan Bothma, investment analyst at Sanlam Private Wealth, says earnings estimates were largely in line with expectations, maybe slighty ahead of what the market expected. “We think the market may like the upbeat commentary and revenue guidance.
“In particular, prospects for operations in the United Arab Emirates are promising – this is the growth engine for the group.
“The recovery trajectory to pre-pandemic patient volumes is different by region. Switzerland and the Middle East have recovered to above pre-Covid-19 patient activity levels, but the margin recovery is lagging as higher costs associated with supplies and treating Covid-19 patients need to fall out of the base.”
Bothma notes that the South African recovery has been the slowest, with activity still below pre-pandemic levels.
“From comments made by Netcare earlier the week, we think it quite likely that if we don’t see any mutations towards more serious strains of the virus, that a recovery to pre-pandemic patient volumes will happen over the next six to 18 months.”
Bothma doesn’t believe investors are factoring in this recovery yet.
Mediclinic management listed several opportunities for expansion and growth in their discussion of the past year. These included “numerous” public-private partnerships in Switzerland, while the group opened two new day care clinics in SA.
“Following the opening of our first renal facility in South Africa in partnership with BGM Renal Care in February 2021, three further facilities were opened during the period. Co-locating these services at existing facilities ensures a comprehensive, vertically integrated approach to renal care in the acute and chronic environment,” says Van der Merwe.
“In July 2021, we also partnered with Icon Oncology to open a new flagship oncology service.”
Mediclinic expanded its services in the Middle East by adding 100 beds and a new integrated oncology unit at one of its hospitals in Abu Dhabi.
It launched a new sports medicine and rehabilitation centre in Dubai, and a new cosmetic facility is due to open with days.
“We entered into the first-ever healthcare public-private partnership awarded by the Dubai Health Authority, to operate two dialysis centres,” says Van der Merwe.
Chief financial officer Jurgens Myburgh stated during a presentation of the results that the macro-economic outlook seems to favour Mediclinic. “I am not an economist, but recognise positive influences,” he says.
He notes that the boom in commodity prices will benefit SA, while higher oil prices are benefitting the Middle East.
“On an operating level, we are adapting our workforce as necessary and our procurement teams are working diligently to ensure security of supplies and pricing,” says Myburgh, adding that wages contribute 55% to the cost base and supplies 35%.
He says Mediclinic will start to increase capital expenditure again, after reducing expenditure on expansions and investments during the last two years when activity levels were lower than normal.
“We see opportunities to expand existing facilities and to invest in new ones,” says Myburgh.
Listen to Mediclinic’s CEO speaking about the group’s latest results: