Mediclinic warns there will be a fall in revenue for Middle East business
Mediclinic’s Swiss and Southern Africa businesses have traded in-line with expectations for the 2016 financial year, however the Abu Dhabi business continued to be “challenging” and the private healthcare group warned that there would be “steeper revenue decline” and lower earnings for the Middle East business.
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In Abu Dhabi in the United Arab Emirates, trading conditions remained “challenging” as patient volumes and the operating performance of the business were below expectations and was particularly pronounced in January.
While the FTSE 100 company has been integrating the Al Noor and Mediclinic operations, the second half of the year was weaker in Abu Dhabi than it anticipated and so it now expects “a steeper revenue decline” and a lower underlying earnings before interest tax, depreciation and amortisation (EBITDA) margin for the Middle East for the year.
Full year 2016/17 Middle East revenue is now expected to between AED3bn to AED3.2bn with an underlying EBITDA margin of about 10% to 11%.
Chief executive Danie Meintjes said: "During the year we have seen a good trading performance from our two largest platforms in Switzerland and Southern Africa in line with full year expectations for the full year 2016/17.
“The challenging environment in Abu Dhabi has unfortunately continued into the second half of the year. We are taking many steps to build the foundations for a successful, sustainable, long term business in the Middle East, leveraging our excellent reputation and operational performance in Dubai."
Nonetheless, the situation in Dubai was more upbeat with a ramp-up in patient activity at the newly opened Mediclinic City Hospital North Wing.
The company was affected by low patient volumes from the introduction of a 20% co-payment for Thiqa members using private facilities for inpatient and outpatient services in Abu Dhabi and a the departure of a significant amount of doctors. The company has recruited 91 new doctors in the Middle East since April 2016 and a further 60 are currently being processed.
Mediclinic that although it has experienced problems in the Middle East business it has confidence in the long-term growth of the business in the region.
It also expects to make AED75m worth of cost synergies and will incur some costs due to the alignment of the Al Noor business with Mediclinic’s, along with costs worth AED140m rebranding Al Noor facilities with the Mediclinic brand.