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Mediclinic trading statement - still struggling in UAE

Mediclinic had a trading update yesterday, their results are not until May, this was more of a look at their Middle East business. The first line is OK - "During the year we have seen a good trading performance from our two largest platforms in Switzerland and Southern Africa in line with full year expectations for the full year 2016/17."

And then the next seven paragraphs point out how "things" in the Middle East are sucking wind. A reminder, from the last set of numbers - Mediclinic half year numbers - not going so well in UAE: "Switzerland stands head and shoulders above them all, as you would imagine, being a 51.8 percent contributor and saw good growth (currency translations - yes) of 18 percent. The South African business contributed 34 percent to EBIDTA and the Middle East business was the balance, 15.45 percent."

A poor January in Abu Dhabi, those are the Al Noor assets, which are going to be rebranded in due course, they will take a 140 million AED, or 500 million Rand charge in the rebranding process, a non cash event. Expectations are for full year revenues from the middle east operations to be 3 to 3.2 billion AED or nearly 11.5 billion Rand at the top end of the range, EBITDA margins of 10 to 11 percent. Perhaps we should change those to Pound Sterling, of course that is the currency that they (Mediclinic) now report in. 650 to 700 million Pounds revenue. 65 to 77 million Pounds EBITDA, from their Middle East operations. Which is more than double at the half year stage (306 million revenues at H1, 34 million EBIDTA at H1).

I suspect that whilst integration is not going according to plan, government budgets under pressure (and the subsequent raising of the co-payments by the national health provider in the UAE) is not something Mediclinic can help in any way. The oil price has been rallying and I suspect that will definitely help matters. I think that the market possibly overreacted, sending the Mediclinic share price down nearly 6 percent in London and 4.6 percent here.

The market expects better, the stock trades at an elevated level for the stodgy numbers that they have delivered thus far, and it has been punished accordingly. It happens. The business is a really good one, with a great anchor shareholder that will definitely help if other opportunities come along for a deal. They need to "bed" (excuse the pun) down the Middle East, the reason for the London listing remember was access to cheaper capital, hence the acquiring of Al Noor for that purpose. We like the business, like the trends that will continue to appear for healthcare. Be patient, acquire on weakness will continue to be the message.


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