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Mediclinic benefits from patients’ return to hospital

The end of Covid restrictions means people are seeking elective and non-urgent treatments.
Mediclinic benefits from patients’ return to hospital
  • Revenue now exceeds pre-pandemic figure
  • Full recovery contingent on Covid infections receding 

People were, generally speaking, reluctant to seek healthcare during the pandemic. An apparent fear of contracting Covid-19 kept would-be patients away all over the world–from the major hospitals of London to rural treatment centres in South Africa.  Mediclinic (MDC), a private hospital group with operations in Switzerland, the UAE and Southern Africa, is now benefiting from a reversal in this trend.

In its full-year results, the company reported that group revenue had increased by 8 per cent compared to FY 2021, driven by growth in client activity. Patient volumes also increased, particularly in Switzerland and the Middle East, as restrictions on elective and non-urgent procedures were lifted. The situation in Southern Africa has been somewhat slower to stabilise. However, revenue growth here was still ahead of pre-pandemic levels.   

With its operating profit up 34 per cent and its cash conversion rate reaching 127 per cent (up from 77 per cent last year), Mediclinic’s finances appear to be recovering. But a bright outlook can only be sustained so long as there are no major new waves of Covid, and comparators will be much harder next year. The company will also be subject to macroeconomic factors, including supply chain snarl-ups and inflationary dynamics. 

Finally, Mediclinic will have to contend with a potential fall in demand for private healthcare services should a global recession materialise. The firm’s chief executive, Dr Ronnie van der Merwe, said he expects a “combination of volume growth and efficiency gains” in the coming financial year, as well as a meaningful improvement in earnings. Whether these can be realised in a market environment that is still unsteady after Covid remains to be seen. Hold.

Last IC view: Hold, 338p, 11 Nov 2021

MEDICLINIC (MDC)   
ORD PRICE:374pMARKET VALUE:£ 2.76bn
TOUCH:373.2-374p12-MONTH HIGH:395pLOW: 271p
DIVIDEND YIELD:0.8%PE RATIO:18
NET ASSET VALUE:421p*NET DEBT:63%
Year to 31 MarTurnover (£bn)Pre-tax profit (£mn)Earnings per share (p)Dividend per share (p)
20182.87-479-66.77.90
20192.93-137-20.57.90
20203.08-275-43.4nil
20212.961049.20nil
20223.2321120.53.00
% change+9+103+123-
Ex-div:04 Aug   
Payment:26 Aug   
*Includes intangible assets of £1.13bn, or 153p a share