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South Africa: Medi-Clinic Focuses On Lifting Foreign Revenue
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Business Day (Johannesburg)
15 May 2008
Posted to the web 15 May 2008
Nicola Mawson
Johannesburg
PRIVATE hospital group Medi-Clinic aims to derive more than half its revenue for the next financial year offshore as private healthcare regulations cast uncertainty over the sector.
The group, which reported revenue up 79% to R9,6bn in the year to March, said offshore operations contributed 37% of revenue. Operating profit rose 71% to R1,7bn , while headline earnings per share were 11% down to 144,5c .
Fully diluted headline earnings were 133,6c from 147,2c. Brokers expected fully diluted headline earnings per share of 120,6c due to the effect of last year's acquisition.
Medi-Clinic (MDC), however, has no intention of exiting SA and has committed R800m in capital for its domestic operations, R550m of which is already in the pipeline.
Edwin Hertzog, chairman of the Medi-Clinic Corporation, said the group had had its eye on the Hirslanden holding company for some time. Medi-Clinic bought the Swiss group last year for $2,36bn, but the transaction would have cost R2bn more if bought at year-end, because of a fluctuating rand.
Hertzog said the company had always wanted to purchase offshore subsidiaries, and this decision had nothing to do with the possibility of regulations in the private sector.
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Mark Ansley, a portfolio manager at Cadiz African Harvest, said with the regulatory risks facing hospital groups, they were being forced to move offshore and companies were overpaying for the benefit of having diversified.
However, the Hirslanden asset was a good asset, although the company had geared "to the hilt" to acquire it. He said there would be no short-term gains in the group's share, but the share was a long-term bet.
The group stayed upbeat on growth in SA's hospital sector , while Hirslanden and its investment in Emirates Healthcare also offered good growth prospects. Yet start-up costs of the City Hospital in Dubai would affect earnings, especially in the first six months.
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