Mediclinic FY numbers - Regulation Changes Hurt

Mediclinic reported its full-year numbers yesterday where it said earnings per share fell 10%, in line with "market expectations". Thanks to a big change in regulation in Switzerland that affected the Hirslanden business which led to write-downs of GBP241 million. Total write-downs for the year were GBP405 million.

Part of the GBP241 write-down included a non-cash impairment charge on property, plant, equipment and vehicles of GBP168 million and intellectual property of GBP55 million. The other non-cash write-down of GBP164 million came from the Spire business in the UK.

The healthcare group reported revenues of GBP2.9 billion, an increase of 2% year-on-year. However, earnings before all the accounting non-cash items fell to GBP493 million from GBP 515 million year-on-year, in line with market expectations. The Swiss business still contributes 47% of group revenues.

The Swiss regulatory pains include what the company calls "tariff reductions on outpatients and a less favourable insurance mix". These regulations have compromised Mediclinic's margins, slipping from 18.3% to 16% in the current reporting period.

In the past two years, Mediclinic has written down a total of GBP1.2 billion due to a combination of badly timed acquisition in the UK and a shocking regulatory environment in Switzerland. Regulation is a two-edged sword that creates a barrier to entry but also punishes existing players in some cases as we've seen above.

Mediclinic is down 69.6% in three years but is showing signs of a recovery. A single trip to the doctor will not be enough to heal this company, so start booking some big operations at your nearest Mediclinic!