Mediclinic full year numbers

Another one of our core holdings that had numbers this morning is Mediclinic, Summarised Audited Group Results For The Year Ended 31 March 2014. First things first, it is always necessary to interrogate why we would want to hold this business. In other words, what are the prospects for the business and by extension, you, the shareholder. Ultimately all we care about are the relative returns of the overall portfolio which is made up of different companies. What times frames do you give to a normal investment? I would think a minimum of five years. That is more than enough time for management to execute.

So what happened during the year for Mediclinic? The company managed a few things, they managed to raise 3.1 billion Rand, they bought 2 Swiss hospitals and one site in Dubai and one here in South Africa was commissioned, Mediclinic Midstream in Centurion. They managed to refinance their Swiss debt at more favourable terms. Total number of beds at the end of the current financial year will be 8 044, at the beginning of the prior year it was 7 614. Over 400 beds added during the course of 24 months, I guess that is pretty breakneck speed when talking about hospital beds. Revenues, up ten percent, were driven by an increase in bed days sold and the average income cost per bed. Patients admitted grew 2.3 percent whilst the average stay actually increased 2.1 percent.

This then translated through to basic normalised earnings per share of 408.2 cents, this is an increase of only 9 percent. I say only, the market is looking for more here, the stock is primed for higher earnings. The dividend increased 11 percent, 75.5 cents for the second half (31 in the first), not exactly a kings ransom, with a yield of less than one percent. Switzerland represents 53 percent of revenues, the Untied Arab Emirates 12, and the balance South Africa. From a profitability point of view, of group EBITDA, exactly half is Switzerland, 13 percent the UAE and the balance (37 percent) South Africa. You get a fair idea that this is pretty much a private hospitals group with roots here in South Africa, certainly the lions share comes from outside of South Africa.

The company is keeping pace with medical innovations, a da Vinci surgical robot. Huh? Check it out, absolutely fascinating and less invasive than before: Surgery Enabled by da Vinci. See how the robot can peel a grape. Any surgeons out there want to let me know how robotics improves your lives, please let us know. It is NOT cheap, costing around 2 million Dollars each. Any Cape Town folks visiting the Durbanville Mediclinic, let me know if you can ask to see it. For the time being, in terms of the reading that I am doing, the service cost each year is around 15 percent of the purchase price. Yowsers. And the average cost per procedure is more expensive, at least in the US. Of course if the industry does not start somewhere, we will never know whether or not this MUST be the direction that medical science moves.

Medical care is a very emotive issue, most particularly when it impacts on your life, or that of a relative close to you. I believe that capitalism can do a better job than governments any time, in any territory. I believe that many public health systems could be managed, even on a localised basis, by people with profit motives. At the end of the day the ship will be tighter. One thing that you do not skimp on is medical, your health. World class facilities operating in their respective environments backed by a strong shareholder (Remgro owns over 43 percent of the shares) will see the acquisitive nature remain at the forefront. The stock is certainly not cheap, the earnings are below what the market expected. Mediclinc's share price is down 5.5 percent, we view this as an opportunity to buy some more shares!