Crunch for Mediclinic as hammered healthcare groups hold on for vaccine

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Mediclinic saw about 50% fewer patients during the in the six months ending in 30 September.

  • Mediclinic reported a revenue decline of 86% for the six months ended in 30 September 2020.
  • The hospital group has seen lower than usual patient numbers, who avoided going to healthcare facilities out of fear of catching Covid-19.
  • The group’s toughest month was April, when its Southern Africa revenue fell by 40% and the group had R157 million in Covid-19 related expenses.

Private hospital group Mediclinic has taken a hard revenue knock due to the Covid-19 pandemic, and CEO Ronnie van der Merwe says it will be a tough year ahead if there is no economic recovery or vaccine.

Van der Merwe’s concerns came as the group reported that its revenue for the six months ended in 30 September 2020 fell by 86% to £15 million (about R308 million at the current exchange rate) from £109 (about R2.2 billion at the current exchange rate), in 2019. 

Mediclinic, along with competitors, Life Healthcare and Netcare have seen lower than usual patient numbers, who avoided going to healthcare facilities for fear of catching Covid-19, especially earlier this year, when countries went into lockdown. This has had an impact on the healthcare industry that missed out on elective surgeries that were postponed and have been slow to pick up following the easing of lockdowns. For Mediclinic, fewer patients meant it had an occupancy rate of about 50% in the six months, compared to the same reporting period in 2019.

“The effect of this pandemic, especially the reaction and the actions of government and health authorities, has a very big impact on economies, and that is one of my biggest concerns,” said Van der Merwe during the group’s interim results call on Thursday. 

The group has operations in South Africa, Namibia, the UAE, Switzerland and a 29% shareholding in the UK’s private hospital group Spire Healthcare. He said Switzerland’s economy was the strongest of all four operations, but Southern Africa (Namibia and South Africa), the UAE and the UK were his main concerns. 

“The sooner we have an effective vaccine, the better, and that is also impossible to predict when that will happen but if the pandemic disappears within a few months then we are well on our way to recovery if it drags on, for another year, for 14 or 15 months, then it will be tough,” he said.

The group’s toughest month was April when most countries were in lockdown. Southern Africa’s revenue fell by 40% during the Level 5 lockdown and the group had R157 million in Covid-19 related expenses.

In its Hirslanden operations in Switzerland, revenue for April declined by 30% but began picking up in May as people took up more insurance policies and outpatients, as well as day surgeries resumed. The UAE also had a 30% decline revenue, but began recovering in June due to Covid-19 cases and counter seasonal trends, following the travel restrictions.

Economic recovery for some countries across the globe, particularly in Europe, has been hampered by a second wave of Covid-19 infections. And van der Merwe said while this is a another concern, a better understanding of Covid-19 will help government’s manage the second wave better than the first. 

Zaid Paruk, a portfolio manager and analyst at Aeon Investment Management, said although the profit decline was not great news, the market expected 2020 to be a writeoff across all business and for acute hospitals in particular, since elective surgeries are a big contributor to their revenues.

Mediclinic’s share price increased by almost 1% after the group reported its results on Thursday. 

Paruk said the main points the market was watching would be whether Mediclinic’s cashflow improved and when the company will issue its dividend, which it has suspended.