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Mediclinic stung by impairment charges

The hospital operator has been forced to take impairment charges on its Swiss business and its equity stake in a UK operator
November 15, 2018

It’s been a pretty poor showing from Mediclinic (MDC) shares over the past six months. But any chance of a near-term share price recovery was promptly dashed by these half-year figures, which revealed a £164m impairment charge on the group’s 29.9 per cent equity stake in fellow hospital operator Spire (SPI) and a further £98m impairment charge on Swiss hospital business Hirslanden.

IC TIP: Hold at 345p

The company warned in late October that regulatory changes in Switzerland, which resulted in fewer inpatient admissions and falling revenue per bed, would prompt a fall in half-year adjusted cash profits. This was exacerbated by a disappointing first half from Spire, in which Mediclinic has a share of profit. True enough, interim adjusted cash profits fell 8 per cent to £213m, leaving adjusted earnings per share down 9 per cent at 10.3p.

Better performances were recorded in Mediclinic’s other two markets – South Africa and the Middle East – where revenues grew 5 per cent apiece in local currencies, leaving adjusted cash profits up 6 per cent at the former and 13 per cent at the latter.

Prior to these results, JPMorgan expected cash profits of £484m for the year to March 2019, giving EPS of 26.4p, compared with £515m and 30p in FY2018.

MEDICLINIC (MDC)   
ORD PRICE:345pMARKET VALUE:£ 2.54bn
TOUCH:344.9-345.4p12-MONTH HIGH:712pLOW: 336p
DIVIDEND YIELD:2.3%PE RATIO:NA
NET ASSET VALUE:445p*NET DEBT:53%
Half-year to 30 SepTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20171.41-10.0-6.83.2
20181.39-150-22.83.2
% change-1---
Ex-div:06 Dec   
Payment:18 Dec   
*Includes intangible assets of £1.46bn, or 198p a share