Mediclinic International’s biggest shareholder believes there’s still room for healing.
At its investor presentation last month, Remgro — which holds a commanding 44.6% stake in the private hospitals group — indicated Mediclinic is firmly in the group’s "turnaround bucket". And while it’s too early to say how long that turnaround will take, the group is cautiously optimistic, says CEO Jannie Durand.
Mediclinic, with a market value of R47bn, is a more imposing beast than Netcare (R24bn) and Life Healthcare (R33bn). But it’s structurally different, too — most notably its primary listing on the London Stock Exchange.
Mediclinic comprises a range of operations in three divisions. Its Hirslanden subsidiary operates 17 hospitals and four day clinics in Switzerland. Mediclinic Southern Africa has 50 hospitals, five subacute hospitals, two mental-health facilities and 12 day clinics. Mediclinic Middle East operates seven hospitals, two day clinics and 18 outpatient clinics, and is set to open a hospital in Saudi Arabia next year.
In addition, the group holds a 29.9% interest in UK-listed Spire Healthcare Group.
At Mediclinic’s recent AGM, directors reported strong underlying demand for the group’s services. As a result, it is expected to deliver growth in revenue and earnings before interest, tax, depreciation and amortisation (ebitda) across all three divisions in the year to end-March 2022. Its year-to-date operating performance has also been in line with expectations.
Directors expect a return to pre-Covid seasonal trends in the year ahead. More encouraging is the admission that the group "does not anticipate any long-term structural impediments in returning ebitda margins at Hirslanden and Mediclinic Southern Africa to pre-pandemic levels".
What’s more, Mediclinic Middle East expects margins to gradually increase as it grows its presence across the region.
With across-the-board improvements on the cards, what about a structural facelift? Remgro was specifically asked about splitting up Mediclinic into developed-and developing-market components at its investor presentation, but Durand intimated the question should be put to the company itself.
It’s debatable whether breaking it up would enhance shareholder value. Prospects for the Hirslanden operations are staid, due to stricter regulations on the Swiss hospitals sector. Hirslanden also carries a chunk of debt — though this needs to be contextualised by a low-interest-rate environment and steady cash-flow generation.
One can’t imagine Hirslanden and the Spire stake justifying a standalone London listing. And Hirslanden (and to a lesser extent Spire) could provide a base for cautious expansion into European private health markets.
As operating performance recovers, it is precisely the developed-developing-market mix that will make Mediclinic attractive to investors. And the enlarged entity would be able to raise funding in the market for further expansion.
The bottom line is that short-term challenges in Switzerland and the Middle East may detract from the prospects of the local operation. In the near term, the prospects for Life and Netcare look more rosy, but in the FM’s diagnosis, Mediclinic could be a better recovery prescription over the longer term.
Would you like to comment on this article?
Sign up (it's quick and free) or sign in now.
Please read our Comment Policy before commenting.