Private hospital operator Mediclinic (MDC) has revealed an in-line annual trading update with no nasty surprises and good visibility over earnings next year, helping the shares to rally 8.4% to 329p.

In the year to 31 March 2019, overall sales rose 3.5% and earnings before interest, tax, depreciation and amortisation (EBITDA) dipped 1.5% when currency changes have been stripped away.

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Mediclinic says sales in its embattled Swiss subsidiary Hirslanden rose approximately 2.5% thanks to a 3.8% jump in in-patient admissions, but revenue per admission declined 2.2%.

Looking ahead to March 2020, the firm expects modest revenue growth at Hirslanden, driven by more bed capacity.

The EBITDA margin in the same division is forecast to dip from 16% to around 15%, although this is in line with Morgan Stanley analyst Roy Campbell’s expectations.

‘Underlying macro conditions in all regions remain difficult, and Mediclinic continues to face serious headwinds, which we think they have handled admirably,’ comments Campbell.

WHAT WENT WRONG AT MEDICLINIC?

Trading at Mediclinic has come under pressure amid weaker than forecast in-patient admission growth at Hirslanden as more patients have insurance or have moved to different regions in the country.

Organic growth concerns in the United Arab Emirates (UAE) where Mediclinic and rival NMC Health (NMC) operates have not helped matters.

However, these concerns may be overblown as sales in Mediclinic’s Middle East business rose 7% over the same period amid an increase in in-patient and out-patient volumes.

Mediclinic forecasts sales growth in the Middle East of 10% in 2020 as its new hospital in Dubai ramps up, but this guidance is softer than investment bank UBS’s estimate of 11%.

Several headwinds have taken a toll on Mediclinic’s share price, which has plummeted by nearly 50% over the last year.

The private hospital operator is investing in its services across all regions and improving its clinical performance to boost trading in the future.


Issue Date: 17 Apr 2019