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Mediclinic takes Middle East writedown

May revenues have picked up after a slump in April
Mediclinic takes Middle East writedown

March is the final, and typically strongest, month of Mediclinic’s (MDC) financial year. But the transition into the first quarter of FY2021 has played out rather differently for the private hospital operator. Widespread lockdowns and the postponement of non-urgent procedures saw revenues for April drop by more than a third. A high fixed cost base meant that earnings were also badly hit – with a monthly cash loss of £20m, against a profit of £40m in April 2019.

IC TIP: Hold at 277p

That said, trends have since improved, with restrictions lifting and elective operations restarting. May revenues should come in about 30 per cent higher on a monthly basis. Still, as chief executive Dr Ronnie van der Merwe put it, “a high degree of uncertainty remains”.

Mediclinic was hit by a £481m goodwill impairment charge to its Middle East business, knocking the overall group into the red. This sizeable write-down came as the group highlighted “the current UAE macroeconomic and competitive landscape” – compounded by a lower oil price, the Covid-19 crisis, and below-inflation tariff-increases since 2018 which have affected “the pace of progression”. Analysts at Morgan Stanley believe the impairment is also indicative of medium-term expectations “being tempered somewhat”.

MEDICLINIC INTERNATIONAL (MDC)  
ORD PRICE:277pMARKET VALUE:£2.05bn
TOUCH:276.8-277.2p12-MONTH HIGH:419pLOW: 232p
DIVIDEND YIELD:nilPE RATIO:na
NET ASSET VALUE:392p*NET DEBT:77%**
Year to 31 MarTurnover (£bn)Pre-tax profit (£m)Earnings per share (p)Dividend per share (p)
20162.1124529.67.9
20172.7530731.07.9
20182.87-479-66.77.9
20192.93-137-20.57.9
20203.08-275-43.4nil
% change+5---
Ex-div:na   
Payment:na   

*Includes intangible assets of £1.2bn, or 159p a share

**Includes lease liabilities of £703m