MEDICLINIC INTERNATIONAL PLC 2021 FULL-YEAR RESULTS ANNOUNCEMENT

MEDICLINIC INTERNATIONAL PLC 2021 FULL-YEAR RESULTS ANNOUNCEMENT

 

Mediclinic announces its results for the year ended 31 March 2021 (the “period” or “FY21”); comparative figures are drawn from the Group’s results for the year ended 31 March 2020 (“FY20”).

 

Robust operating performance

• Fulfilled an essential role in combatting the pandemic in collaboration with health authorities
• Adapted swiftly to the pandemic with strong rebound in patient activity as COVID-19 restrictions eased delivering solid second-half financial performance
• Revenue down 3% to £2 995m; adjusted EBITDA down 21% to £426m
• Financial and liquidity position remains strong; net incurred debt down 9%; cash and available facilities increased to £679m (FY20: £518m)

 

Ongoing strategic execution

• Benefited from the Group’s scale, expertise and diverse service offering during the pandemic
• Continued to execute on Group strategy, accelerating innovation and digital transformation initiatives whilst launching a number of important partnerships and collaborations
• Accelerated development and deployment of virtual care initiatives to address changing client needs

 

Outlook

• Positioned for growth as restrictions ease and patient demand increases
• Remaining cautious given the ongoing pandemic, subsequent waves, varied pace of vaccine roll-outs and planning assumption of potential third waves causing continuing uncertainty on the recovery
• Expecting to deliver growth in revenue and EBITDA across all three divisions during FY22
• Continuing to pursue further opportunities to expand integrated services across the continuum of care supporting long-term sustainable growth across the Group

 

Dr Ronnie van der Merwe, Group Chief Executive Officer of Mediclinic, said:

 

“Mediclinic remains committed to supporting and collaborating with relevant health authorities in the response to the COVID-19 pandemic. We would like to reiterate our thanks to our medical professionals, nurses and employees whose tireless efforts helped us to effectively navigate the challenges and uncertainties of the pandemic. We strongly support the government-led vaccination programmes in all three divisions, and are pleased that priority is given to healthcare workers which helps to protect our front-line colleagues and the quality of care Mediclinic’s patients receive.

 

“The Group adapted well to the pandemic and demonstrated ongoing operational and financial resilience throughout the year. The first-half performance was significantly impacted, particularly in April 2020, by COVID-19-related lockdown measures and restrictions on non-urgent elective procedures. We were quick to adapt and, despite the more severe second wave of the pandemic placing even greater demand on our healthcare facilities and people, we delivered a solid second half performance with revenue growth of 1%, while full-year revenue was down 3%.

 

“Throughout the pandemic we continued to execute on our strategy, accelerated our innovation and digital transformation initiatives and launched a number of new and important partnerships and collaborations. These, alongside our focus on expanding Mediclinic’s integrated services across the continuum of care, support long-term sustainable growth across the Group.

 

“Looking ahead, we are confident in our ability to continue executing on our strategy and we are well positioned to deliver revenue and EBITDA growth across all three divisions in FY22, despite our expectations that there are likely to be further waves of the pandemic in the coming months.”

 

 

Group FINANCIAL SUMMARY

	2021 £'m	2020 £'m	% change1
Revenue	2 995	3 083	(3)%
EBITDA	428	541	(21)%
Adjusted EBITDA2	426	541	(21)%
Operating profit/(loss)	209	(184)	214%
Adjusted operating profit2	221	327	(32)%
Earnings/(loss)3	68	(320)	121%
Adjusted earnings2	101	177	(43)%
Earnings/(loss) per share (pence)	9.2	(43.4)	121%
Adjusted earnings per share (pence)2	13.7	24.0	(43)%
Total dividend per share (pence)	‐	3.20	‐
Net incurred debt4	1 483	1 622	(9)%
Cash conversion5	77%	109%

 

1	The percentage variances are calculated in unrounded sterling values and not in millions.
2	The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and to provide consistent and comparable reporting.  Refer to the policy and “Reconciliations” section on pages 20–23 of this announcement.
3	Reported earnings/(loss) refers to loss attributable to equity holders.
4	Net incurred debt reflects bank borrowings and excludes IFRS 16 lease liabilities.
5	Refer to calculation on page 25 of this announcement.

 

 

 

Details of the FY21 results webinar for investors and analysts are available at the end of this announcement and on the Group’s website at www.mediclinic.com.

 

Group CHIEF EXECUTIVE OFFICER’S REPORT

For many countries, businesses and people, the past year has undoubtedly been one of the most challenging in living memory. It has been no different for Mediclinic, but in facing the pandemic we have been able to do what we do exceptionally well – work together to provide care to clients who are at their most vulnerable and demonstrate our ability to identify and seize opportunities to adapt, improve and innovate.

 

Despite the past year demanding much of the healthcare industry, Mediclinic and our employees, we have remained resilient throughout. Since treating our first COVID-19 patient in January 2020, our incredible doctors and nurses have not faltered in caring for more than 40 000 affected inpatients. Our critical care and emergency services continued undisturbed. Throughout, the health and wellbeing of our employees and our clients remained our highest priority.

 

Despite the pandemic and the intermittent restrictions placed on elective procedures to prioritise healthcare resources during critical periods, I am proud of how quickly and proactively we established new services and supporting infrastructure, supplementing our existing business. While some of these are short-term initiatives that provide benefits in the near term only, others will form the foundation for future growth.

 

Effectively navigating the pandemic

 

The Group’s international perspective remains a key differentiating factor for Mediclinic. Led by the centrally coordinated Clinical Services function, the Group responded efficiently and effectively to the pandemic and expanded upon established infection prevention and control (“IPC”) programmes by leveraging Group insight and best practices.

 

Multidisciplinary taskforces at Group and divisional level enable Mediclinic to constantly re-evaluate its ongoing response to the pandemic, allowing it to optimise treatment pathways for patients in order that demand for critical and intensive care beds can be managed appropriately.

 

The Group invested in a number of initiatives to support employees, affiliated doctors and communities during this time, including establishing 24/7 client call centres and crisis control centres.

 

The Group’s centrally coordinated procurement teams with global sourcing capabilities have played a pivotal role in ensuring uninterrupted delivery of critical care during the pandemic. Across three continents, the teams’ proactive measures ensured the continued supply of critical personal protective equipment (“PPE”), medication, consumables and intensive care unit equipment.

 

The Group’s approach to providing elective procedures and outpatient treatments has remained fluid, while its delivery of critical and urgent care has not wavered. Hospitals have adapted their services to reflect any local restrictions, the changing demands on individual and regional facilities, and the availability of clinical personnel.

 

As the peaks of COVID-19 recede, more normal operating practices have resumed, demonstrating the strong underlying demand for Mediclinic’s specialist healthcare services. Patient activity is returning steadily, supported by the Group’s ability to implement and accommodate protocols to ensure services are offered safely and conveniently.

 

Collaborating with public and private stakeholders, including governments and authorities, has been vital in helping to address the effects of the pandemic. Across the world, major advances have been made in the development, manufacture and distribution of COVID-19 vaccines. Mediclinic is working with health authorities to support government-led vaccination roll-out plans and prioritisation schedules. It is encouraging to witness that across the world, governments are prioritising healthcare workers in the vaccination roll-outs. Mediclinic supports this approach and is facilitating the process, ensuring eligible colleagues receive a vaccine, thereby protecting their wellbeing and, as a result, the quality of care Mediclinic patients receive.

 

In Switzerland, Hirslanden has opened four vaccination centres and partnered with six cantons to manage repetitive testing on its digital platform, Together we test. Mediclinic Southern Africa is supporting the vaccine roll-out strategy of the National Department of Health and is part of the private sector initiative to assist the government where required, including the management of vaccine centres at its facilities. The government-led vaccination programme in the United Arab Emirates (“UAE”) is well underway and all Mediclinic Middle East facilities are supporting the roll-out.

Operating performance

 

The Group delivered a robust operating performance, despite revenue and profitability being significantly impacted in April 2020 by the implementation of COVID-19-related lockdown measures, the suspension of non-urgent elective surgical procedures and increased costs associated with managing the pandemic. From May 2020 onwards, government restrictions were moderated, enabling us to safely reintroduce our diverse service offering, while also caring for COVID-19 patients.

 

Performance in the second half of the year was impacted by the more severe second wave of the pandemic. However, due to the less restrictive measures introduced by governments and regulatory authorities, greater operational flexibility and the lessons learned during the first wave, the financial impact on the Group was less significant than during the first half, delivering a sequentially improved second half-performance. 

 

Group revenue in FY21 was down 3% at £2 995m (FY20: £3 083m), adjusted EBITDA was down 21% at £426m (FY20: £541m) and the adjusted EBITDA margin was 14.2% (FY20: 17.5%). Both adjusted earnings and adjusted earnings per share (“EPS”) were down 43% at £101m (FY20: £177m) and 13.7 pence (FY20: 24.0 pence), respectively.

 

Cash and available facilities increased during the year to £679m (FY20: £518m), net debt reduced to £2 159m at year-end (FY20: £2 325m) and FY21 cash conversion was 77% (FY20: 109%).

 

Strategy execution

 

Since my appointment as Group Chief Executive Officer three years ago, the Group has made significant strides in bolstering the value we offer collectively. Our international footprint, shared expertise and diversified service offering provide numerous opportunities to deliver value and growth as a Group.

 

We continue to see tangible benefits from this approach. Our Group bargaining power and coordination enable significant cost savings on a wide range of procured items – from low-cost high-volume consumables to low-volume cutting-edge capital equipment – and on contracting information communications technology (“ICT”) services and software. The latter being of growing importance to our digital transformation and innovation initiatives.

 

There are few international healthcare providers that offer services across the continuum of care in such diverse doctor models and insurance environments as Mediclinic. Through a shift towards centrally leading overlapping areas of expertise, we are collating the best practices from each of our divisions across the clinical, procurement, finance, ICT, data science, digital, and business development disciplines. Not only does this enable continuous improvement, but it also equips us with a world-class toolkit to successfully expand into new geographies and services across the continuum of care should opportunities arise.

 

This year, with such rapid developments in healthcare and client behaviour, we have further refined our Mediclinic Group Strategy to ensure that it continuously provides the best foundation from which to address the challenges of our industry and strengthen our competitive advantage. While disruptions due to the pandemic have complicated progress in some areas, they have simultaneously illuminated further opportunities in others. I am more confident than ever that our goals are aligned with future healthcare needs and long-term trends.

 

In summary, I would like to highlight three key areas on strategy delivery:

 

Transforming our services and client engagement through innovation and digitalisation

 

The pandemic has highlighted and accelerated the global demand for accessible, convenient, quality care. In response, we have prioritised the execution of our innovation and digital transformation initiatives. To help facilitate this, we welcomed Dr Tyson Welzel to the Group Executive Committee as Group Chief Innovation Officer in October 2020. Under his leadership, centrally led Innovation and Digital Transformation functions are being established to pursue more opportunities in this rapidly growing segment.

 

During the pandemic, lockdowns necessitated deploying certain virtual care initiatives quickly to provide remote access to the Group’s clinical experts and existing services. These overarching solutions will, in the longer term, form the foundation of a seamless service experience across both the virtual and physical care settings. Core to this is establishing a digital healthcare platform across the divisions. A client-facing application being piloted for a pregnancy and baby care pathway was launched at Hirslanden in April 2021. Mediclinic Southern Africa is due to launch its application in September 2021, piloting a new dialysis service, with Mediclinic Middle East set to implement remote patient monitoring in the same month.

 

We anticipate that our exciting precision medicine service at Hirslanden and Mediclinic Middle East, utilising established divisional laboratory facilities, will soon deliver new revenue streams. Led by specialist geneticists, the service will enable disease treatment and prevention tailored according to genetic, environmental and lifestyle variables of individual clients.

 

Recent robotic process automation projects focused on administrative processes have yielded significant improvements in speed and accuracy. Further trials and Group-wide roll-out are planned for the year ahead and a Group Hyper Automation Centre of Expertise is expected to be operational by June 2021. But our digital transformation focus extends beyond efficiencies to gaining competencies across the entire organisation to grow our client engagement and offer enhanced value in meeting their healthcare needs. 

 

Becoming an integrated healthcare provider across the continuum of care

 

In meeting the evolving and modern needs of our clients, we are positioned ideally to use our existing facilities and trusted clinical expertise as a foundation for expansion.

 

In support of regional care models, we continued to invest in our day case clinics, which now total 18. Here less complex cases can be treated more efficiently at high volume in a lower-cost setting without compromising on the quality of care our clients have come to expect at our existing acute care hospitals. These investments are generating good returns due to increased demand and volume growth. At the same time, we can increase our focus on delivering more complex and specialised medical and surgical care in the resulting capacity at acute care facilities.

 

Through its cooperation agreement with Medbase (the leading Swiss specialist in family healthcare and part of the Migros Group), Hirslanden has concluded the sale of its three outpatient clinics. The two partners have also established a radiology joint venture, which will be managed by Hirslanden. In addition, Helsana Insurance recently announced an innovative continuum of care insurance product, in collaboration with Hirslanden and Medbase, which offers supplementary insured clients access to high-quality, integrated care at Hirslanden and Medbase facilities. In South Africa, Mediclinic Southern Africa’s investment in the Intercare Group affords it a similar partnership, and in the UAE, Mediclinic Middle East owns an established network of 18 outpatient clinics.

 

Demand for care in specialised fields, such as mental health, rehabilitation, oncology and dialysis, remains high. In March 2021, Mediclinic Southern Africa announced a partnership with Icon Oncology to deliver seamless one-stop oncology services at a new flagship treatment facility based at Mediclinic Constantiaberg in Cape Town. In February 2021, the Southern Africa division opened its first renal facility at Mediclinic Bloemfontein in partnership with BGM Renal Care, with a further four centres planned for FY22. Co-locating these services at existing facilities will ensure a comprehensive vertically integrated approach to renal care in the acute and chronic environment. In April 2021, Mediclinic Middle East and the Dubai Health Authority entered into a public-private partnership (“PPP”) which will see Mediclinic operate the Dubai Health Authority’s Al Barsha Dialysis Centre from mid-May to provide patients with the highest quality specialised patient-centred care.

 

As our services expand, our extensive experience in these specialised fields can be replicated in existing and new markets. Soon, we will also be able to incorporate our virtual care offering to provide our clients with access to physical and virtual services focused on prevention, care, recovery and enhancement.

 

Improving our value proposition significantly

 

Our clinical processes are designed to protect the safety of our clients and our employees, and to improve the effectiveness of care. To further enhance these processes, we have started the implementation of a single electronic safety event reporting system in every facility across the Group.

 

Determining appropriate care plans for complex clinical cases directly impacts outcomes and affordability. At Mediclinic, these complex care decisions are made by panels of experts, i.e. indication boards. During the year, we added oncology, complex visceral and cardiac surgery, and bariatric surgery to the disciplines they cover.

 

We have also improved our feedback channels by expanding the Press Ganey® patient experience survey tool to cover all care settings, including virtual care. A classification system for underlying concerns in patient complaints was also implemented to identify further improvement areas.

 

By establishing Centres of Excellence (“CoEs”), PPPs, university affiliations and student medical training programmes, we are not only investing in our current knowledge base, but also in the future healthcare workforce. 

 

This year, Hirslanden added a further two PPPs to the two announced last year. In the UAE, the Surgical Review Corporation accredited the Metabolic and Bariatric Surgery CoE at Mediclinic Airport Road Hospital in Abu Dhabi. In May 2021, as part of a multi-year upgrade and expansion project, this same flagship tertiary care hospital commenced with the phased opening of a comprehensive cancer centre (“CCC”), the second to be established by the division in collaboration with Hirslanden oncology specialists. The newly built wing of the hospital also began delivering additional specialist inpatient and outpatient services in May 2021 and will be further complemented by the upgrade of the existing hospital by the end of FY22. The first CCC, situated at Mediclinic City Hospital (North Wing), was recently awarded the Dubai Healthcare City Excellence Innovation Award.

 

Spire Healthcare PLC

 

In the United Kingdom (“UK”), Spire partnered with the National Health Service (“NHS”) to play a considerable part in the broader national response to the pandemic. The group maintained solid levels of liquidity throughout the year by closely managing capital investment outflows and through its participation in the agreement with the NHS.

 

As a shareholder and fellow healthcare provider, Mediclinic supported the Board and senior management in their vital work. Initially on standby for overflow of patients, Spire rapidly shifted from a business offering elective care during regular working hours to a 24-hour operation. All the while, Spire simultaneously maintained a long-term view to enable a seamless transition to resuming private work when it was practical to do so.

 

Outlook

 

The Group is well positioned to deliver our services as restrictions ease and patient demand increases, benefiting from the postponement of non-urgent patient treatment. Encouraging momentum in non-COVID-19 patient activity was building towards the end of the period as we transitioned out of the second wave of the pandemic. This is expected to deliver revenue and EBITDA growth across all three divisions in FY22.

 

Given the Group’s focus on operational and cost efficiencies, we do not anticipate long-term structural impediments to returning EBITDA margins at Hirslanden and Mediclinic Southern Africa to pre-pandemic levels. At Mediclinic Middle East, we expect margins to continue gradually increasing as we grow our presence across the region, supported by recent expansion and upgrade projects in Dubai and Abu Dhabi.

 

A team-orientated approach

 

Our perseverance would not be possible without our employees, nurses, affiliated doctors and allied health professionals. Across our geographies and guided by our Company purpose, they have proven their strength, competence and compassion. They are Mediclinic and they are the reason we are able to provide excellent care, together.

 

An invaluable contributor to our accomplishments this year has been the steadfast support of the Board, especially our new Chair, Dame Inga Beale. I am also proud of the Group’s Executive Committee members, who have successfully balanced an increase in daily demands with a focus on our long-term goals and on motivating employees to remain positive and productive in extraordinary circumstances.

 

During this year, I’ve often reflected on my years working in theatre at night as a practising anaesthesiologist. It is inspiring how each healthcare worker, regardless of diverse background or experience, shares the same professional and personal concerns and desires, and an undeniable dedication to caring for clients, no matter how difficult the circumstances may be. I can vouch that these frontline employees, together with all the healthcare workers across the world, deserve our unqualified respect and gratitude for their conviction and resilience. We fully endorse the vaccination programmes which have commenced worldwide and are supporting the health authorities and communities we serve such that the vaccines can be delivered in haste.

 

We have learned many lessons in the past 12 months, through our unwavering commitment to patients during this trying time, and we have applied these as a collective to benefit the entire Group. I believe we will strengthen this foundation in the year to come and make good progress on the execution of our Mediclinic Group Strategy. We look to FY22 with hope and eagerness to pursue the opportunities it is sure to bring.

 

Dr Ronnie van der Merwe

Group Chief Executive Officer

25 May 2021