Mediclinic shares rise on trading update
SA’s biggest private hospital closes at R59.52, its best performance in almost a year, after it says annual results are in line with expectations
Shares in SA’s biggest private hospital Mediclinic International rose by as much as 9.87% on Wednesday, as the company reassured investors that its results for the year to March were in line with expectations despite tough trading conditions in Switzerland and the UK.
Mediclinic owns the Hirslanden hospital group in Switzerland, holds a 29.9% stake in the UK hospital group Spire, and owns hospitals in southern Africa and the Middle East.
Its shares reached an intra-day high of R61.93 before paring gains to close 5.53% higher at R59.52, its best performance in almost a year.
The surge in Mediclinic’s share price stands in sharp contrast to the market’s reaction last October, when the company’s shares nosedived after it issued a trading update for its half-year results warning of a poor performance in Switzerland and the UK.
Mediclinic said on Wednesday that it anticipated a 3.5% decline in earnings before interest, tax, depreciation and amortisation (ebitda), and a drop in adjusted earnings per share to 27p, compared with 30p the year before. Mediclinic moved its primary listing to London after it acquired Al Noor in the United Arab Emirates in February 2016. It has secondary listings on the JSE and the Namibian stock exchange.
“It looks like the declines of the past have stabilised and Mediclinic is close to a bottom. Hirslanden is still struggling to adapt to regulatory changes but at least ebitda is relatively stable, or at least not slipping at the rate we’ve seen in the past,” said Gryphon Asset Management portfolio manager Casparus Treurnicht.
“Having said this, Mediclinic is still in a very tight position with regards to financing their debt. Debt has been rising and they are just covering their interest payments. The audited results should give us better insights into whether this ship is going to turn around,” he said.
Hirslanden saw ebitda fall to about 16% compared with 18.3% the year before, as its cost containment measures could not fully compensate for the revenue decline triggered by regulatory changes and tariff reductions. The regulatory changes mean some treatments have been shifted from in-patient stays to less lucrative outpatient visits, ebitda for the year ahead was likely to be about 15%, said Mediclinic.
“There has been a lot of pessimism about the stock, so the fact that they confirmed expectations bolstered it on [Wednesday],” said Nitrogen Fund Managers CEO Rowan Williams. “The fact that they are able with a degree of confidence to give a sense of earnings for the next year has calmed the market down a bit,” he said.
In the UK, Spire reported a “challenging” performance for the year to December 2018, reflecting an “unprecedented decline” in revenue from state patients funded by the National Health Service. Mediclinic’s equity accounted share of profit from Spire was £2.7m, down from £2.8m the year before.
Mediclinic’s southern Africa business is expected to report a 5% increase in revenue and an ebitda margin of about 21%, a slight decline on last year’s 21.5% margin. Its Middle East division is expected to report a 7% increase in revenue and an ebitda margin of about 13%.