Shares of private hospital operator Mediclinic recorded their biggest gain since October 2021 after the company restored its dividend and reported that easing Covid-19 restrictions helped all three of its divisions beat pre-pandemic revenue in its 2022 year.
The CEO of SA’s biggest hospital group by market value, Ronnie van der Merwe, said on Wednesday the company was expecting further improvement in all key metrics in 2023, encouraged by a gradual normalisation in case mix, as well as long-term structural trends in the market.
Mediclinic, which operates in SA, the Middle East and Switzerland, said group revenue rose 8% in reported terms to £3.23bn (R63.4bn) for its year to end-March, up 5% from 2020.
Its shares leapt as much as 6.6% to R73.58 in response, eventually closing 4.61% higher at R72.21. Mediclinic, valued at R53.2bn on the JSE, is up about 6% so far in 2022, while peers Netcare and Life Healthcare have fallen 7.5% and 23%, respectively.
Sanlam Private Wealth investment analyst Christiaan Bothma said the group’s earnings were in line with what he expected, but slightly higher than the market expected. The share price reaction may also reflect the upbeat commentary and guidance, he said.
In 2022, the group treated about 750,000 inpatient and day case admissions, up 14% year on year, and while Covid-19 patient numbers were similar to the previous year, the group was able to restore its full-range of services.
As disruption from the pandemic receded, demand for a broad range of healthcare services drove inpatient and day case numbers up, with that trend expected to continue, Van Der Merwe said during a media call on Wednesday.
Covid-19 was still having effects in terms of staff availability and disruptions to patient scheduling, and while risks remained, each wave currently looked set to get less and less severe, he said.
“At the moment [there are] no real disruptions to note,” he said.
Profit recovery
Covid-19 hit hospital operators hard even as the pandemic threatened to overwhelm healthcare systems, resulting in a fall off in elective surgeries and increased equipment and staff costs.
Mediclinic’s reported operating profit rose by more than a third to £280m to end-March, with the group declaring a 3p per share dividend, a £22m payout, from none previously. In 2020, the group declared a total of 3.2p in dividends.
Covid-19 costs fell to £27m from £32m in the prior year, with the group’s core profit margin improving to 16.1% from 14.2%, though it is still below 2020’s 17.5%.
Mediclinic’s operations include 74 hospitals, five subacute hospitals, two mental health facilities, 20 day case clinics and 20 outpatient clinics. The Swiss operations, which account for almost half of group revenue, include 17 hospitals and four day case clinics, while its Southern Africa operations include 50 hospitals, three of which are in Namibia.
The group also has seven hospitals in the United Arab Emirates, two day case clinics and 20 outpatient clinics.
The group’s Southern Africa division showed the most recovery, growing revenue by almost a quarter to £909m year on year, and Mediclinic opened two new day case clinics during the period, taking the division’s total to 14. Compared with 2020, this division’s revenue is up only marginally, while Switzerland has grown 5% and the Middle East 11%.
Bothma said that from comments made by Netcare earlier in the week, it was quite likely that if there weren’t any mutations towards more serious strains, a recovery to pre-pandemic patient volumes in SA will happen over the next 6-18 months.
“We don’t think that the market factors in this recovery as of yet,” Bothma added.
Mediclinic said much of its focus was on becoming an integrated health provider rather than just a hospital group, and it had been investing in digitisation and telemedicine, for example investing in patient-facing apps for all its divisions and launching virtual clinics.
The group said its capital spend on that was relatively small, but should have enormous benefits in areas such as client engagement and remote monitoring, especially as populations aged.
The group said the global wellness and preventative care spend was expected to rise 40% to $7-trillion (R110-trillion) in 2025 from 2019, while telehealth use was expected to be 34 times what it was before the pandemic.
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