Mediclinic 6M trading update

Private hospital provider Mediclinic International released their interim trading and operational update yesterday. This is the first trading update after the Thiqa regulations in Abu Dhabi on co-payments by citizens had been repealed by the King.

The group now has 75 hospitals and 29 clinics across its operations in Mzansi through the Mediclinic brand, Abu Dhabi and Dubai in the United Arab Emirates through the Al Noor/Mediclinic Middle East brand, and Switzerland through the Hirslanden brand. Mediclinic also has a 29.9% stake in Spire Healthcare Group in the United Kingdom.

Mediclinic said that on the group level, revenues were flat in constant currencies but up 9.5% in pounds to GBP1.4billion compared to GBP1.3bn in the prior year. Earnings before accounting items were up 5% to GBP231million compared to GBP220million in the prior year. Earnings per share are expected to be 10% lower at around GBP0.115 compared to GBP0.128 in the prior year. As you can see, these aren't exactly blockbuster numbers. Shareholders pushed the share price down 3.2% yesterday extending the weekly losses to 7%.

Switzerland operations are still the powerhouse with 48% contribution to revenues with Mzansi operations coming second at 28% and Mediclinic Middle East contributing the remaining 24%.

The company reported that the Swiss operations were hit by the timing of the easter holidays and a subdued market during summer months. As a result revenues per bed day were flat. The Mzansi operations saw revenues increase by 4.1% to R7.6billion with a 7.7% increase in revenue per bed day in what management describes as a weak macro-economic environment that we are facing here at home.

The Middle East revenues were down by 4.7% and after once-off items they were pretty flat, but what caught my attention here was the huge improvement in Thiqa patient activity after the repeal of the co-payment requirement in Abu Dhabi. The quality of revenues should improve and the Dubai operations continue to do well.

Spire's earning were hit by Ian Peterson a surgeon nicknamed "the butcher" who apparently was jailed for performing unnecessary surgical procedures on patients. Spire made a provision of GBP27.6million before taking into account any potential recoveries from insurers, a potential cost of settlement relating to a civil litigation said the company.

It has been a very tough couple of years for Mediclinic and thats reflected on the share price which is down 27% over a one year period. We think the best times lie ahead for this business and long-term investors will be rewarded for their patience here, excuse the pun.