Mediclinic's (MDC) reverse takeover of Al Noor in February 2016 may have boosted reported numbers, but on an underlying basis it has done more harm than good. The £648m revenue contribution from the Middle East division came in behind management's expectations as fewer patients opted to use Al Noor's services in Abu Dhabi. Poor margins here also dragged the group's cash profit margins down by more than 200 basis points to 18.2 per cent, and the increased number of shares in issue following the takeover contributed to a 19 per cent fall in underlying EPS.
Although this poor performance can be partly explained by regulatory changes, which have now been reversed, there are still challenges in the sector which have dampened both the outlook for the Middle East and investors' spirits. Rising competition means management thinks the division will only achieve "modest revenue growth" in the year to March 2018, while £92m of capital expenditure is likely to constrict profit growth.
But Mediclinic's remaining geographies are doing well. After stripping out favourable currency movements, the Swiss business - which contributes around half of the group's revenue - reported a 3 per cent top-line increase, and in South Africa - the group's domestic market - sales rose 7 per cent thanks to higher admissions and revenue per bed.
Analysts at UBS expect adjusted EPS of 40.7p in the year to March 2018, rising to 45.7p the following year.
MEDICLINIC (MDC) | ||||
|---|---|---|---|---|
| ORD PRICE: | 829p | MARKET VALUE: | £6.11bn | |
| TOUCH: | 828-829p | 12-MONTHHIGH: | 1,125p | LOW: 667p |
| DIVIDEND YIELD: | 1.0% | PE RATIO: | 27 | |
| NET ASSET VALUE: | 554p* | NET DEBT: | 40% | |
| Year to 31 Mar | Turnover (£bn) | Pre-tax profit (£m) | Earnings per share (p) | Dividend per share (p) |
|---|---|---|---|---|
| 2015 | 1.98 | 266 | 44.6 | 9.3 |
| 2016 | 2.11 | 245 | 29.6 | 7.9 |
| 2017 | 2.75 | 307 | 31.0 | 7.9 |
| % change | +30 | +25 | +5 | - |
Ex-div: 22 Jun Payment: 31 Jul *Includes intangible assets of £2.2bn, or 292p a share | ||||
