Mediclinic nursing Hirslanden back to health


Mediclinic nursing Hirslanden back to health

Published Date: 2019-05-24 | Source: Stephen Gunnion | Author: Stephen Gunnion

Mediclinic nursing Hirslanden back to health

The private hospitals group says tariff reductions due to regulatory changes will continue to impact its Swiss operation in the short term.

Mediclinic says steps taken to improve the performance of Hirslanden in Switzerland have helped moderate the financial impact of regulatory changes. Unfortunately, they haven't mitigated against a poor first-half performance, with the result that the private hospitals network has weighed on the group's full-year results - including a hefty impairment.

CEO Dr Ronnie van der Merwe says all Swiss hospital operators have been affected by rapidly implemented regulatory changes over the last 18 months. The changes relate to outpatient tariff reductions and outmigration of care. In the meantime, the group has continued to invest across all regions, opening several day case clinics in Switzerland and Mediclinic Southern Africa. It also opened the Mediclinic Parkview Hospital in Dubai and integrated new investments into the group.

For the year to end-March, the lower contribution from Hirslanden was offset by an improved second-half performance from its Southern Africa and Middle East operations. In the UK, Spire Healthcare reported a 53% decline in adjusted profit after tax to £27.5 million. The 29.9% stake in Spire is equity accounted. Mediclinic said full-year income from associates was slightly lower at £2.7 million.

Revenue rose 2% to £2.93 billion and was 4% higher in constant currency terms. Adjusted earnings before interest, tax, depreciation, and amortisation (EBITDA) fell 4% to £493 million and was down 2% in constant currency. The group said the decline reflected the impact of the regulatory changes on Hirslanden. Its reported loss of £151 million reflected a non-cash impairment charge on its investment in Spire in the UK as well as impairment charges of £241 million on Hirslanden. Adjusted earnings per share fell 10% to 26.9p and it's maintained its full-year dividend at 7.9p.

Although the group expects Hirslanden to report modest revenue growth in the year ahead, it said the anticipated cost management and efficiency savings it's aiming for are likely to be more than offset by reductions in tariffs and the operational effects of outmigration. Over the medium term, and assuming no further regulatory changes, its operating performance is expected to be supported by benefits from its 2020 strategic project. The project is aimed at accessing the most appropriate outpatient solution for each hospital in the network and increasing efficiencies by implementing standardised systems and processes.

Mediclinic's shares ended 0.4% down at R59.49 yesterday.

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