Shares in Mediclinic (MDC) have crashed 18.7% to 386p as earnings came under pressure after its Switzerland subsidiary Hirslanden struggled with weaker than expected inpatient admission growth.

The private hospital operator says sales in Hirslanden rose only 1% as revenue per bed days fell 2.8%, which it blamed on patients moving to different regions in the country and more generally insured patients.

Adjusted earnings before interest, tax, depreciation and amortisation (EBITDA) margins are also weaker, down from 17.4% to 14.3% in the six months to 30 September 2017.

TARMED regulations have hit margins by cutting Swiss outpatient reimbursement by an average of 10%, according to Credit Suisse.

Looking ahead, earnings margins are expected to hit 16% in the full year thanks to the ‘seasonal benefits’ of winter and cost cutting measures

As Hirslanden generated 47% of overall sales in the last financial year, investors are understandably concerned.

In Mediclinic’s second biggest division in Southern Africa, trading was more positive with sales rising approximately 5% to ZAR8bn thanks to a 4.5% increase in revenue per day.

Unfortunately, fewer pneumonia and bronchitis-related cases ‘largely offset’ strong bed day growth, while the EBITDA margin was broadly unmoved at 21.2%.

In the Middle East, first half sales grew 5% to AED1.5bn in a ‘characteristically quieter’ period.

Shares in Mediclinic have plummeted 40.5% over the last year following significant impairments in the Switzerland division and a disappointing performance in Spire Healthcare (SPI), in which it has a 29.9% stake.


Issue Date: 17 Oct 2018