MEDICLINIC INTERNATIONAL PLC 2022 FULL-YEAR RESULTS ANNOUNCEMENT

MEDICLINIC INTERNATIONAL PLC 2022 FULL-YEAR RESULTS ANNOUNCEMENT

 

Mediclinic announces its results for the year ended 31 March 2022 (the ‘period’ or ‘FY22’). For comparative purposes, the year ended 31 March 2021 (‘FY21’) is presented alongside the year ended 31 March 2020 (‘FY20’), the latter representing a pre-pandemic period.

 

	Strong financial performance with revenue exceeding pre-pandemic levels
●	Group revenue up 8%, driven by increase in client activity; revenue up 5% on pre-pandemic levels
●	Material improvement in Group adjusted EBITDA margin to 16.1% (FY21: 14.2%; FY20: 17.5%)
●	Group adjusted earnings per share (‘EPS’) increased 65% to 22.6p (FY21: 13.7p; FY20: 24.0p)
●	Reduced the leverage ratio to 3.9x (FY21: 5.1x), below pre-pandemic levels (FY20: 4.3x)
●	Proposed dividend re-instatement at 3.00 pence per share (FY21: nil)
	Continued delivery against key priorities
●	Dealing with the pandemic effectively, caring for around 85 000 COVID-19 inpatients since its onset
●	Progressing towards pre-pandemic profitability, with FY22 performance in line with improved outlook
●	Executing on Group strategy, positioning the Company as an integrated healthcare partner
●	Further improving value to all stakeholders
	Positive FY23 outlook
●	Expect increased client activity to drive further revenue growth, margin expansion and improved earnings
●	Improving profitability and strong operating cash flows expected to support continued deleveraging
●	Executing on opportunities to grow across the continuum of care
●	Enhancing digital healthcare solutions for clients and healthcare professionals
●	Investing in ESG initiatives to deliver on sustainable development strategy and achieve 2030 targets
	Statutory results
●	Operating profit up 34% to £280m (FY21: £209m)
●	Earnings and EPS both up 122% to £151m (FY21: £68m) and 20.5 pence (FY21: 9.2 pence), respectively

 

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

‘The Group delivered a strong operational and financial performance this year, driven by increased client activity across our care settings. As disruption from the pandemic receded, the fundamental demand for our broad range of healthcare services drove inpatient and day case revenue up 7%, and outpatient revenue up 10% compared with the prior year. Encouragingly, revenue and earnings exceeded pre-pandemic FY20 levels in all three divisions. Importantly, we have delivered these results while fulfilling our critical role in helping communities to navigate the pandemic, caring for around 43 000 COVID-19 inpatients this year, in addition to the 42 000 in the prior year. The profound impact of this work and supporting vaccination programmes is truly humbling and is a testament to the tireless efforts of our exceptional teams.

 

‘Mediclinic’s success this year is due to the dedication and commitment of our people and the trust our clients have in the Group to meet their healthcare needs. We are also benefitting from the ongoing delivery of our clear strategy to position the Company as an integrated healthcare partner, harnessing data, technology and innovation as we grow across the continuum of care.

 

‘In the year ahead, we expect to benefit from a continued increase in client activity which will drive further improvement in our profitability and earnings. Our sustainable development initiatives give me confidence in the Group’s ability to strengthen its leading market positions, delivering value and sustained success over the coming years.’

 

Group FINANCIAL SUMMARY

 

	FY22 £'m	FY21 £'m	Variance FY22 vs FY211	FY202 £'m	Variance FY22 vs FY201
Reported results
Revenue	3 233	2 995	8%	3 083	5%
Operating profit	280	209	34%	(184)	253%
Earnings3	151	68	122%	(320)	147%
EPS (pence)	20.5	9.2	122%	(43.4)	147%
Total dividend per share (pence)	3.00	‐	100%	3.20	(6)%
Adjusted results4
Adjusted EBITDA	522	426	22%	541	(3)%
Adjusted operating profit	311	221	41%	327	(5)%
Adjusted earnings	167	101	65%	177	(6)%
Adjusted EPS (pence)	22.6	13.7	65%	24.0	(6)%
Net incurred debt5	1 269	1 483	(14)%	1 622	(22)%
Cash conversion6	127%	77%		109%

 

1	The percentage variances are calculated in unrounded sterling values and not in millions.
2	2020 Full-year Results Announcement was published on 2 June 2020.
3	Reported earnings refers to profit for the year attributable to equity holders.
4	The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and to provide consistent and comparable reporting. See the policy and ‘Reconciliations’ section on pages 13–20 of this announcement.
5	Net incurred debt reflects bank borrowings and excludes IFRS 16 lease liabilities.
6	See calculation on page 19 of this announcement.

 

 

 

 

 

 

 

 

 

 

Details of the FY22 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

 

Delivering against our priorities

Amid the ongoing challenges posed by COVID-19, the Group made good progress in the achievement of our financial, operational and strategic goals during the year under review, further strengthening our foundation for future growth.

 

To guide our actions during FY22, I set out four key priorities at the start of the year:

 

1. Deal with the pandemic effectively;
2. Progress towards pre-pandemic profitability;
3. Execute on the Mediclinic Group Strategy; and
4. Further improve our Group value.

 

Dealing with the pandemic effectively

Our international perspective and centrally coordinated Clinical Services function proved instrumental in navigating the pandemic effectively, leveraging insight and best practice from across the Group to improve our response to each wave. Through multidisciplinary task forces at Group and divisional level, we continually evaluate our ongoing pandemic response, allowing for optimised treatment pathways. We also remain focused on the safety and wellbeing of every employee and partner doctor, adapting our support as the pandemic’s impact evolves.  

 

Since the onset of the pandemic, we have diligently cared for approximately 85 000 COVID-19 inpatients. Even though COVID-19 patient volumes were similar compared with the prior year, we experienced a significant increase in overall client activity, driven by demand for our broad range of healthcare services. In FY22, we treated around 750 000 inpatient and day case admissions, up 14% compared with FY21, with outpatient revenue increasing by 10%.

 

Collaborating with and supporting public and private stakeholders in all our geographies has proven vital in combatting the pandemic. In Switzerland, we administered over 1 million COVID-19 vaccine doses at our vaccination centres, and partnered with 12 cantons to manage repetitive polymerase chain reaction (‘PCR’) saliva testing on our digital platform, TOGETHER WE TEST. Our on-site vaccination centres in South Africa assisted with the delivery of a further 360 000 vaccines, while five of our facilities in the Middle East provide ongoing support to the world-class, government-led vaccination and testing programmes in the region.

 

Progressing towards pre-pandemic profitability

Our ability to provide our full breadth of services improved in FY22 compared with FY21. The Omicron variant proved less clinically severe than previous variants, resulting in fewer COVID-19 inpatient admissions compared with other waves; however, staffing and patient scheduling were severely disrupted at times by the variant’s higher transmissibility. Encouragingly, we were able to exit the fourth quarter strongly across all three divisions as the wave receded.

 

The Group delivered a strong operational and financial performance this year, in line with the improved outlook we indicated at the half-year results. Group revenue in FY22 was up 8% at £3 233m (FY21: £2 995m), adjusted EBITDA was up 22% at £522m (FY21: £426m) and the adjusted EBITDA margin significantly improved by nearly 200 basis points to 16.1% (FY21: 14.2%), signalling our progress towards pre-pandemic profitability (FY20: 17.5%). Reported operating profit was up 34% at £280m (FY21: £209m); adjusted operating profit was up 41% at £311m (FY21: £221m). Reported earnings were up 122% at £151m (FY21: £68m). Reported and adjusted EPS were up 122% at 20.5 pence (FY21: 9.2 pence) and 65% at 22.6 pence (FY21: 13.7 pence), respectively.

 

Cash and cash equivalents increased during the year to £534m (FY21: £294m), with cash conversion at 127% (FY21: 77%). The leverage ratio reduced to 3.9x at year end (FY21: 5.1x), and return on invested capital (‘ROIC’) increased to 4.0% (FY21: 3.0%). The Board has proposed that the dividend be reinstated with a final dividend of 3.00 pence per share (FY21: nil).

 

Executing on our Group strategy

The Group strategy aims to position Mediclinic as an integrated healthcare partner, harnessing data, technology and innovation to facilitate our growth across the continuum of care while offering sustainable value to our clients. To facilitate this, from 1 April 2022, we appointed Koert Pretorius, former CEO of our Southern Africa division, as Group Chief Operating Officer and refined Magnus Oetiker’s role to focus purely on strategy. I believe these changes will increase the speed of strategy execution while maintaining operational discipline in the business of today. It will also improve project alignment, resource allocation and operational excellence across the Group and divisions, and support our Group priority of returning to pre-COVID-19 levels of profitability.

 

Digital transformation

Traditionally, we have invested significantly in our global infrastructure, creating a valuable and market-leading portfolio of facilities. The pandemic, however, greatly increased the need for convenience and ease in accessing quality healthcare. We are growing our information and communications technology (‘ICT’), electronic health records (‘EHRs’) and digital initiatives accordingly to enable seamless and coordinated client journeys across physical and virtual care settings.

 

Through our collaboration with Mehiläinen, we are broadening our capacity to provide innovative digital healthcare solutions for clients and healthcare professionals on the BeeHealthy platform. We have launched client-facing applications in all three geographies, and are piloting various digital patient pathways. This will allow us to foster stronger direct relationships with our clients, enhancing clinical outcomes, client experience and stakeholder value.

 

Our virtual care initiative digitalises existing services to create a real-time healthcare system which comprises telehealth services, remote patient monitoring (‘RPM’) and virtual critical care unit solutions. We are also well advanced in robotic process automation (‘RPA’), which drives productivity and efficiency gains, and allows our people to prioritise valued-added activities.

 

Innovation

We established our healthcare technology and innovation hub in Switzerland during the year under review, and our precision medicine services have launched in the Middle East and Switzerland, with Southern Africa to follow shortly. These services, led by specialist geneticists, enable disease treatment and prevention tailored to individual clients’ genetic, environmental and lifestyle variables.

 

Growth and expansion across the continuum of care

In Switzerland, our numerous public-private partnerships (‘PPPs’) support cantonal hospitals to expand care delivery, while Hirslanden, along with Medbase and the insurance partners Groupe Mutuel, Helsana and SWICA, launched a joint digital ecosystem called Compassana, which will allow Swiss clients to coordinate their care. We also recently opened OPERA Bern day case clinic, our fifth in Switzerland, and are piloting an innovative insurance product in the same region, in collaboration with Medbase and Helsana Insurance, which offers supplementary insured clients access to high-quality, integrated care.

 

In Southern Africa, we opened two new day case clinics during the period, taking the division’s total to 14. Following the opening of our first renal facility in South Africa in partnership with BGM Renal Care in February 2021, three further facilities were opened during the period. Co-locating these services at existing facilities ensures a comprehensive, vertically integrated approach to renal care in the acute and chronic environment. In July 2021, we also partnered with Icon Oncology to open a new flagship oncology service.

 

We grew our services in the Middle East through the 100-bed expansion and the new integrated oncology unit at Airport Road Hospital in Abu Dhabi. In November 2021, we acquired the remaining 70% shares in the Bourn Hall Fertility Centre to further enhance our in vitro fertilisation (‘IVF’) offering. In Dubai, we successfully launched a new Mediclinic Perform sports medicine and rehabilitation centre, and a cosmetic facility, Enhance, is due to open by the end of May. We entered into the first-ever healthcare PPPs awarded by the Dubai Health Authority to operate two dialysis centres.

 

RPM and home care services present new growth opportunities. The Group invested in DomoSafety, a Swiss at-home health monitoring business; acquired Ayadi Home Healthcare in the Middle East; and commenced an RPM pilot with the Abu Dhabi Government. Furthermore, we converted 35 licensed beds in the Middle East to provide long-term patient care as we look to these and other specialties like mental health for further expansion.

 

The Group’s entry into the Kingdom of Saudi Arabia together with the Al Murjan Group is progressing well. We expect to open the 236-bed private hospital in 2023.

 

Sustainable development

Sustainable development is one of our core strategic focus areas and is ingrained in how we do business. Our people, clients and the planet are our priority as we seek to build healthier and happier societies for a better future, which drives value for all stakeholders.

 

We have allocated around £8m of capital investment per annum over the next three years towards projects that drive environmental improvements as we seek to achieve our 2030 targets, reducing costs and diversifying our energy reliance. Excellent, cost-effective initiatives are already underway, including water usage minimisation, alternatives to traditional energy sources and packaging reduction. During the period, we completed our first sustainability-linked syndicated loan in South Africa and signed agreements to procure renewable energy at lower rates than traditional energy tariffs while transitioning to 100% renewable electricity supply in Switzerland.

 

Further improving our Group value

Our purpose, to enhance the quality of life, drives everything we do as an organisation, galvanising our teams across geographies to deliver care for our clients. To enhance the Group’s position as a market leader, we are not restricted by geography or function, but instead harness the skills, knowledge, best practice and innovation from each of the three continents where we operate. We have seen clinical collaboration in areas such as virtual critical care units, COVID-19 treatment pathways and RPM. Our Digital Transformation and Innovation functions collaborate with partners from around the globe. Procurement initiatives ensure the consistency and security of supply, as well as competitive pricing which supports our profitability. ESG projects enhance our position as a trusted healthcare partner. All of these are being managed centrally to ensure we benefit from economies of scale, efficiencies and coordinated care, which will continue to set us apart from less diversified healthcare providers.

 

Spire Healthcare Group plc (‘Spire’) performance

Spire’s partnership with the National Health Service (‘NHS’) in the UK continued with a volume-based contract in the first quarter of 2021 – nine Spire hospitals became NHS cancer hubs. Similar agreements were established in the wake of the Omicron wave.

 

The group delivered a strong financial performance in the year ended 31 December 2021, with revenue growth of 20%. Spire also completed the sale and leaseback of its Cheshire hospital and refinancing of its borrowing facilities, paying down £100m of debt.

 

We continue to work with the company’s management and board to deliver on Spire’s strategy of being the first choice for private healthcare in the UK, and a key partner of the NHS, while progressing efficiency programmes and growth initiatives.

 

Positive Group outlook

It has been four years since my appointment as Group CEO, and three years since we introduced a comprehensive strategy for the entire organisation. During this time, there is no doubt we have matured in our approach to strategy execution and our ability to work cohesively towards enhancing our collective value. This gives me confidence in our future and the opportunities being created for the Group to deliver sustainable value.

 

In FY23, we expect a combination of volume growth and efficiency gains to continue to drive the Group towards pre-pandemic profitability, alongside a meaningful improvement in earnings.

 

We continually invest in our people, referral networks, innovative insurance products and digital initiatives as we expand across the continuum of care in an integrated and value-focused way. Our organisation’s resilience, the trust we have built with our clients and partners, and our ability to seize opportunities are only possible as a result of our people; it is impossible to feign the fortitude, positivity and commitment that our employees display every day, let alone the success that has resulted from their efforts. I wish to thank every employee and supporting doctor for their contribution in this.

 

Dr Ronnie van der Merwe

Group Chief Executive Officer

24 May 2022

 

 

 

 

GROUP CHIEF FINANCIAL OFFICER’S REPORT

Page 13 in the Financial review sets out the Group’s use of adjusted non-IFRS financial measures. Other non-IFRS measures, which include constant currency, cash conversion, ROIC, net incurred debt and leverage ratio, are further discussed, with reconciliations from the most comparable IFRS measure provided, on pages 14–24.

 

FINANCIAL SUMMARY

• Group revenue increased by 8% compared with FY21 (up 10% in constant currency), driven by growth in client activity; revenue up 5% on pre-pandemic levels (up 9% in constant currency)
• Group adjusted EBITDA increased by 22% compared with FY21 (up 24% in constant currency), driven by revenue growth, and adjusted EBITDA margin improved to 16.1% (FY21: 14.2%); adjusted EBITDA up 1% in constant currency compared with pre-pandemic FY20
• Adjusted operating profit of £311m; up 41% on FY21 and down 5% on pre-pandemic FY20; in constant currency terms up 41% and flat compared with FY21 and FY20, respectively
• Operating profit up 34% to £280m (FY21: £209m)
• Adjusted earnings and adjusted EPS increased by 65% compared with prior year; local currency adjusted earnings ahead of pre-pandemic levels in all three divisions
• Reported earnings up 122% to £151m (FY21: £68m) and reported EPS up 122% to 20.5 pence (FY21: 9.2 pence)
• Operating performance and cash conversion of 127% (FY21: 77%) delivered increase in cash and cash equivalents to £534m (FY21: £294m)
• Recovery in profitability and reduction in net incurred debt reduced leverage ratio (including lease liabilities) to 3.9x (FY21: 5.1x)
• Proposed final dividend of 3.00 pence per share in line with dividend policy payout ratio

 

GROUP RESULTS

The Group delivered a strong financial performance compared with FY21, driven by increased client activity. Compared with pre-pandemic levels, the volumes in Switzerland and the Middle East increased, while Southern Africa gradually recovered after a more severe impact from the pandemic. The improvement in FY22 was despite the disruption of further COVID-19 waves – with the Omicron wave proving particularly challenging from a staffing and patient scheduling perspective due to its high transmissibility and regulated self-isolation.

 

Group revenue was up 8% at £3 233m (FY21: £2 995m) and up 10% in constant currency terms. Compared with pre-pandemic FY20, Group revenue was up 5% (FY20: £3 083m) and up 9% in constant currency terms. Revenue increased in all three divisions compared with both the prior year and the pre-pandemic FY20 year.

 

Adjusted EBITDA was up 22% at £522m (FY21: £426m) and up 24% in constant currency terms. Across the Group, incremental COVID-19-related expenses totalled around £27m (FY21: £32m), reflecting the ongoing treatment of COVID-19 inpatients during various pandemic waves. The Group’s adjusted EBITDA margin increased materially to 16.1% (FY21: 14.2%), driven by the revenue performance.

 

Compared with the pre-pandemic FY20 period, adjusted EBITDA was down 3% (up 1% in constant currency terms). The adjusted EBITDA margin is approaching pre-pandemic levels (FY20: 17.5%) while still reflecting increases in employee costs and in consumable and supply costs driven by COVID-19-related expenses and input costs associated with higher acuity revenue, the impact of which is expected to reduce over time.

 

Adjusted depreciation and amortisation were up 1% to £209m (FY21: £207m) and down 3% compared with the pre-pandemic period (FY20: £217m), reflecting prudent delays in capital expenditure and translation differences more than offsetting the IFRS 16 impact of the commissioning of Airport Road Hospital in Abu Dhabi.

 

Adjusted operating profit was up 41% at £311m (FY21: £221m; FY20: £327m), resulting in an improved ROIC of 4.0% compared with 3.0% in FY21. In constant currency terms, adjusted operating profit was up 41% and flat compared with FY21 and FY20, respectively.

 

Adjusted net finance cost was down 8% at £67m (FY21: £72m; FY20: £78m), mainly due to the effect of lower net borrowings more than offsetting the IFRS 16 impact of the Airport Road Hospital commissioning.

 

The adjusted tax charge was £45m (FY21: £27m; FY20: £56m) and the adjusted effective tax rate for the period was 19.5% (FY21: 19.3%; FY20: 22.3%).

 

Adjusted non-controlling interests were up 72% to £19m (FY21: £11m; FY20: £18m), reflecting higher contributions from Southern Africa hospitals with outside shareholdings. Adjusted net loss from equity-accounted investments increased from £10m in FY21 to £13m in FY22, reflecting the net loss reported by Spire for the 12 months ended 31 December 2021.

 

Both adjusted earnings and adjusted EPS were up 65% at £167m (FY21: £101m), and 22.6 pence (FY21: 13.7 pence; FY20: 24.0 pence), respectively. All three divisions’ earnings in local currency were ahead of pre-pandemic levels with only translation differences resulting in Group adjusted earnings being down 6% compared with pre-pandemic levels (FY20: £177m).

 

The Group delivered cash conversion of 127% (FY21: 77%), with all three divisions above the Group target of 90–100%, through catch-up of the slower recovery in the prior year.

 

Ongoing investment across the Group to enhance the existing facilities and deliver future growth resulted in capital expenditure of £178m. As planned, this was up on the prior year (FY21: £126m), a period when capital expenditure was reduced in light of the initial uncertainty posed by the pandemic. FY22 spend was lower than planned due to the timing of projects with FY23 expected to reflect a catch-up, forecast to total around £251m in constant currency terms.

 

Given the recovery in profitability and cash conversion, the Group’s leverage ratio (including lease liabilities) significantly reduced during the year to 3.9x (FY21: 5.1x). While the Swiss and Middle East divisions continued to pay down debt by around £91m, translation differences at year end resulted in reported incurred bank debt remaining broadly flat at £1 803m (FY21: £1 777m). Strong cash generation supported a reduction in net incurred debt by £214m to £1 269m (FY21: £1 483m). 

 

At the end of FY20, the Board took the prudent and appropriate decision to suspend the dividend, as part of the Group’s response to maintaining its liquidity position through the pandemic and maximising its support in combatting COVID-19. The Board believes the Group is in a stronger financial position and the outlook, though subject to macroeconomic factors, is more certain than at any time in the past two years. Therefore, the Board is proposing to reinstate the dividend in line with the dividend policy targeting a payout ratio of 25–35% of adjusted earnings, and has proposed a final dividend per share of 3.00 pence (FY21: nil), representing 25% of 2H22 adjusted EPS.

 

Adjusted results

In arriving at FY22 adjusted operating profit, reported operating profit was adjusted for the following items:

·	past service cost of £9m relating to Swiss pension benefit plan changes and £2m relating to Middle East end-of-service benefit obligation;
·	insurance proceeds of £7m received for the damage of buildings and equipment at Klinik Hirslanden, Zurich;
·	accelerated depreciation of £19m relating to the dismantling of two hospital wings as part of an expansion project at Klinik St. Anna, Lucerne;
·	impairment charges of £7m relating to damaged buildings and equipment at Klinik Hirslanden; and
·	fair value adjustment of £1m on the deemed disposal of the equity-accounted investment, Bourn Hall.

 

Prior period FY21 operating profit was adjusted for the following items:

·	accelerated depreciation of £10m relating to the dismantling of two hospital wings as part of an expansion project at Klinik St. Anna;
·	impairment charges of £4m relating to Southern Africa; and
·	insurance proceeds of £2m received for the loss of equipment in Southern Africa.

 

Operating profit in FY20 was adjusted for the following items:

·	recognition of an impairment charge of £481m to Middle East goodwill;
·	recognition of an impairment charge of £33m to fixed assets in Switzerland;
·	impairment reversal of £4m relating to properties in Switzerland;
·	impairment charges of £2m relating to Southern Africa; and
·	fair value adjustments on derivative contracts of £1m.

 

FY22 reported earnings were further adjusted for the following items:

·	Mediclinic’s share of the equity-accounted gain on sale and leaseback from Spire of £7m;
·	Mediclinic’s share of the equity-accounted tax credit in respect of Spire’s sale and leaseback of £5m;
·	increase in the redemption liability related to Clinique des Grangettes, Geneva, due to remeasurement of £1m; and
·	related tax impact on adjusting items of £4m.

 

FY21 reported earnings were further adjusted for the following items:

·	Mediclinic’s share of the equity-accounted impairment loss from Spire of £60m;
·	reversal of previously recorded impairment losses against the carrying value of the equity investment in Spire of £60m;
·	increase in the redemption liability related to Clinique des Grangettes due to remeasurement of £23m; and
·	related tax impact on adjusting items of £2m.

 

FY20 reported earnings were further adjusted for the following items:

·	increase in the redemption liability related to Clinique des Grangettes due to remeasurement of £5m;
·	recognition of an impairment charge on the equity investment in Spire of £10m;
·	the reduction of Swiss property deferred tax liabilities of £29m resulting from corporate tax reforms in Switzerland; and
·	related tax impact on adjusting items of £3m.

 

 

Reported results

Reported revenue was up 8% to £3 233m (FY21: £2 995m), driven by the recovery in client activity and reduced restrictions on elective and non-urgent care.

 

Depreciation and amortisation increased by 5% to £228m (FY21: £217m) and includes accelerated depreciation of £19m (FY21: £10m) relating to the expansion project at Klinik St. Anna. Operating profit was up by 34% to £280m (FY21: £209m).

 

Net finance cost decreased by 29% to £68m (FY21: £95m) with the prior year reflecting the remeasurement of the redemption liability related to Clinique des Grangettes of £23m.

 

The Group’s effective tax rate for the period was 19.5% (FY21: 24.4%). The higher effective tax rate in the prior year was due to the remeasurement of the redemption liability, which is not deductible for tax purposes and had a tax effect of £4m.

 

Earnings and EPS were both up 122% at £151m (FY21: £68m) and at 20.5 pence (FY21: 9.2 pence), respectively.

 

 

 

 

 

DIVISIONAL RESULTS

 

	Group currency (millions)					Divisional currency (millions)1
	FY22	FY21	FY20	Variance FY22 vs FY21	Variance FY22 vs FY20	FY22	FY21	FY20	Variance FY22 vs FY21	Variance FY22 vs FY20
Revenue	£3 233	£2 995	£3 083	8%	5%
Switzerland	£1 503	£1 478	£1 438	2%	5%	1 885	1 784	1 804	6%	4%
Southern Africa	£909	£734	£907	24%	0%	18 416	15 573	17 031	18%	8%
Middle East	£820	£781	£737	5%	11%	4 111	3 760	3 445	9%	19%
Corporate	£1	£2	£1	(50)%	‐	n/a	n/a	n/a
Adjusted EBITDA	£522	£426	£541	22%	(3)%
Switzerland	£236	£225	£245	5%	(4)%	297	272	306	9%	(3)%
Southern Africa	£170	£106	£188	60%	(10)%	3 430	2 209	3 536	55%	(3)%
Middle East	£123	£102	£110	21%	12%	614	492	521	25%	18%
Corporate	£(7)	£(7)	£(2)	‐	250%	n/a	n/a	n/a
Adjusted EBITDA margin2
Group	16.1%	14.2%	17.5%
Switzerland3	15.6%	15.1%	17.0%
Southern Africa	18.6%	14.2%	20.8%
Middle East	14.9%	13.1%	15.1%
Adjusted operating profit	£311	£221	£327	41%	(5)%
Switzerland	£121	£107	£119	13%	2%	151	128	149	18%	1%
Southern Africa	£131	£71	£151	85%	(13)%	2 656	1 477	2 838	80%	(6)%
Middle East	£68	£51	£57	33%	19%	338	248	273	36%	24%
Corporate	£(9)	£(8)	‐	13%	100%	n/a	n/a	n/a
Adjusted operating profit margin2
Group	9.6%	7.4%	10.6%
Switzerland3	7.9%	7.1%	8.2%
Southern Africa	14.4%	9.5%	16.7%
Middle East	8.2%	6.6%	7.9%

 

Notes

1	Divisional currency for Switzerland is shown in Swiss franc (CHF), Southern Africa in South African rand (ZAR) and Middle East in UAE dirham (AED).
2	Adjusted EBITDA and adjusted operating profit as a percentage of revenue.
3	The numerator used for calculating the adjusted EBITDA and adjusted operating profit margins of Switzerland includes government grants of £16m (CHF19m) (FY21: £10m [CHF13m]) disclosed as ‘Other income’.

 

The Group uses adjusted income statement reporting as non-IFRS measures in evaluating performance and to provide consistent and comparable reporting. See the policy and ‘Reconciliations’ section on pages 13–20 of this announcement.

 

SWITZERLAND

A robust performance in Switzerland was underpinned by the recovery in client activity, exceeding pre-pandemic levels. As Switzerland adapted its response to the pandemic, it enabled greater operational flexibility to healthcare providers to deliver care for non-COVID-19 patients while continuing to provide significant support to health authorities and caring for COVID-19 patients.

 

Revenue for the period increased by 6% to CHF1 885m (FY21: CHF1 784m; FY20: CHF1 804m), exceeding pre-pandemic revenue by 4%. This was due to a good recovery in inpatient activity, up 2.1% compared with FY21, and 2.0% compared with the pre-pandemic period. The general insurance mix remained broadly flat at 51.3% (FY21: 51.0%), with supplementary insured volumes up 1.4% and general insured volumes up 2.7% as the division continued to support cantonal health authorities during the pandemic. Inpatient revenue per case increased by 1.1% due to higher acuity. As a result, inpatient revenue increased by 3%. Average length of stay increased by 0.4%, which in combination with the increase in inpatient activity delivered an occupancy rate of 62.6% (FY21: 61.1%).

 

Outpatient and day case revenue also recovered well during the period, up 6%, contributing some 20% (FY21: 20%) to total revenue in the period.

 

The division engaged extensively with Swiss cantonal authorities in planning for and navigating the pandemic, and, as part of this, provided hospital bed and staff capacity. In recognition and reimbursement of the support and capacity provided, several Swiss cantonal authorities introduced appropriate financial contributions for hospitals to offset certain costs and disruptions to operations. As a result, total government grants of CHF19m (FY21: CHF13m) were recognised as other income.

 

The increase in revenue supported a 9% increase in adjusted EBITDA to CHF297m (FY21: CHF272m), recovering towards pre-pandemic levels (FY20: CHF306m). The adjusted EBITDA margin increased to 15.6% (FY21: 15.1%; FY20: 17.0%) while the division continued to absorb COVID-19-related expenses of around CHF18m (FY21: CHF10m) and the direct and indirect impact on operational performance due to the pandemic.

 

Adjusted depreciation and amortisation increased by 2% to CHF146m (FY21: CHF143m; FY20: CHF157m). Adjusted operating profit increased by 18% to CHF151m (FY21: CHF128m; FY20: CHF149m). Adjusted net finance cost was flat at CHF58m (FY21: CHF58m; FY20: CHF58m).

 

Adjusted earnings increased by 44% to CHF67m (FY21: CHF47m), ahead of pre-pandemic levels (FY20: CHF57m).

 

Despite COVID-19, the division significantly improved its cash conversion to 126% (FY21: 66%) through improvement of its net working capital, enabling a CHF50m voluntary payment of senior debt.

 

Total capex spent during FY22 was broadly in line with expectations at CHF129m (FY21: CHF81m), comprising maintenance capex of CHF68m (FY21: CHF38m) and expansion capex of CHF61m (FY21: CHF43m).

 

The continued improvements in operating cash flow expected in Switzerland will enable the Group to proportionately increase the division’s annual capital investment while continuing to generate appropriate free cash flow to equity holders (including the annual CHF50m debt repayment). FY23 total capex is forecast at around CHF155m. Expansion capex of around CHF60m includes investment in the projects at Klinik St. Anna and Klinik Aarau to strengthen the competitive position and growth opportunities of these key hospitals. Maintenance capex is forecast at around CHF95m (including around CHF4m for ESG projects that will enhance our long-term sustainability), in line with the medium-term maintenance capex spend, which is expected to average around 4–5% of revenue.SOUTHERN AFRICA

 

Despite the significant demands and disruption caused by the pandemic, the division delivered an exceptional performance compared with the prior year. The Group has continued to treat the majority of its COVID-19 inpatients in its Southern Africa division, with over 40 000 cared for in FY22 (FY21: around 35 000). The division continued to adapt and effectively navigate multiple pandemic waves during the year, treating 18% more non-COVID-19 admissions compared with FY21.

 

The most severe and sustained wave to date impacted the division during 1H22, peaking in July 2021. In 2H22, the onset of the Omicron wave resulted in a rapid spike in COVID-19 admissions in December 2021. However, this remained below peak admissions compared with previous waves, before starting to recede quickly in January 2022. The greater challenge during the Omicron wave, as experienced in the other divisions, was the impact on staffing self-isolation and patient scheduling due to the variant’s increased transmissibility.

 

Revenue for the period increased by 18% to ZAR18 416m (FY21: ZAR15 573m; FY20: ZAR17 031m), reflecting the recovery in client activity. Revenue was ahead of pre-pandemic levels by 8%. Compared with FY21, paid patient days (‘PPDs’) increased by 14% and remained marginally below pre-pandemic levels, down 3%. COVID-19-related PPDs were around 17% of total PPDs during the period, compared with around 18% in FY21. The lowest six-month level of COVID-19-related PPDs since the pandemic began was experienced in 2H22 at 7% of total PPDs, as non-COVID-19 inpatient activity increased. 

 

Occupancy improved with the growth in PPDs to average 64.3% (FY21: 56.3%), approaching pre-pandemic levels (FY20: 67.9%). Encouragingly, February and March 2022 had the strongest occupancy levels experienced since the start of the pandemic at 69%. Average revenue per bed day was up 3.2% compared with FY21 and up 11.7% on pre-pandemic levels, continuing to reflect the elevated acuity of treatments. The average length of stay was down 2.5% compared with FY21, reflecting the increase in non-COVID-19 PPDs and their shorter average length of stay compared with COVID-19 inpatients.

 

Adjusted EBITDA increased by 55% to ZAR3 430m (FY21: ZAR2 209m), driven by the revenue performance, and recovering towards pre-pandemic levels (FY20: ZAR3 536m). The adjusted EBITDA margin materially increased in FY22 to 18.6% (FY21: 14.2%). The effects of COVID-19-related costs of around ZAR207m in FY22 (FY21: ZAR323m) and the change in case mix continued to impact the margin when compared with the pre-pandemic period (FY20: 20.8%).

 

Depreciation and amortisation were broadly flat at ZAR772m (FY21: ZAR763m; FY20: ZAR698m), mainly due to the prudent delay to investments in the prior period due to the pandemic. Adjusted operating profit increased by 80% to ZAR2 656m (FY21: ZAR1 477m; FY20: ZAR2 838m). Net finance cost decreased by 17% to ZAR465m (FY21: ZAR561m; FY20: ZAR554m) due to interest income on increased deposits and lower base interest rates.

 

Adjusted earnings increased to ZAR1 359m (FY21: ZAR519m), ahead of pre-pandemic levels (FY20: ZAR1 335m).

 

The division converted 108% (FY21: 111%) of adjusted EBITDA into cash generated from operations.

 

Total capex spent during the period increased to ZAR957m (FY21: ZAR702m), comprising maintenance capex of ZAR654m (FY21: ZAR302m) and expansion capex of ZAR303m (FY21: ZAR400m). Expansion projects during the year included Brits, Hoogland and Midstream hospitals, and Vergelegen and Winelands day case clinics.

 

FY23 total capex is forecast at around ZAR1 360m. Expansion capex is forecast at around ZAR635m, including projects at George, Legae, Vereeniging, Brits and Medforum hospitals and Pietermaritzburg day case clinic. In addition, further investment in ICT infrastructure projects will be made to support future growth initiatives including initial investment in an EHR. FY23 maintenance capex is forecast at around ZAR725m (including around ZAR60m for ESG projects that will enhance our long-term sustainability), broadly in line with the medium-term maintenance capex spend, which is expected to average around 3–4% of revenue.

 

THE MIDDLE EAST

 

In the Middle East, the Group delivered a strong performance driven by inpatient and outpatient volume growth. Volumes reached new highs exceeding the pre-pandemic period, underpinned by investment over recent years to expand and enhance facilities and services in the region. Similar to August 2020, counter-seasonal holiday trends due to global travel restrictions resulted in elevated client volumes compared with the pre-pandemic 1H20 period, a trend which is expected to normalise in FY23.

 

Revenue for the period increased by 9% to AED4 111m (FY21: AED3 760m; FY20: AED3 445m), which includes around AED315m (FY21: AED485m) in COVID-19-related and new revenue streams. Inpatient admissions and day cases were up 17% and outpatient cases up 16%. The volume increase was partly offset by a decrease in the average revenue per inpatient and day case admission, and in outpatient cases by 10% and 2%, respectively, reflecting a move towards pre-pandemic acuity levels and revenue mix.

 

Despite ongoing COVID-19-related costs of around AED10m (FY21: AED28m), adjusted EBITDA increased 25% to AED614m (FY21: AED492m; FY20: AED521m) due to the revenue performance. As a result, the adjusted EBITDA margin increased to around pre-pandemic levels at 14.9% (FY21: 13.1%; FY20: 15.1%).

 

Adjusted depreciation and amortisation increased by 10% to AED272m (FY21: AED248m; FY20: AED249m), largely reflecting the phased commissioning at Airport Road Hospital during the period, with an additional increase to be reflected in FY23. Adjusted operating profit increased by 36% to AED338m (FY21: AED248m; FY20: AED273m).

 

Net finance cost increased by 2% to AED79m (FY21: AED78m; FY20: AED91m), due to a reduction in gross debt and the base rate, and revised lease agreement rental savings, offset by the IFRS 16 interest associated with the Airport Road Hospital commissioning.

 

Adjusted earnings increased by 51% to AED257m (FY21: AED170m; FY20: AED181m).

 

The division significantly improved its cash conversion to 141% (FY21: 73%) through catch-up of under-recovery in the prior year.

 

Total capex spent during the period was lower than expected at AED141m (FY21: AED124m), mostly related to timing differences for expansion projects with the catch-up expected in FY23. FY22 investment comprised maintenance capex of AED41m (FY21: AED36m) and expansion capex of AED100m (FY21: AED88m), which mostly related to investment at Airport Road Hospital for the upgrade at the existing wing following the opening of the new facility and the EHR roll-out.

 

FY23 total capex is forecast at around AED275m. Expansion capex is forecast at AED190m, reflecting the catch-up from the lower than expected FY22 investment. Additional new projects are planned at Parkview and Al Jowhara hospitals, Me’aisem and Reem Mall clinics, and the opening of Mediclinic Enhance. Expansion capex is expected to materially reduce in FY24. FY23 maintenance capex is forecast at around AED85m (including around AED8m for ESG projects that will enhance our long-term sustainability), in line with the medium-term maintenance capex spend, which is expected to average around 2–3% of revenue.

 

OUTLOOK

 

Based on the most recent trends and expectations, COVID-19-related cases are expected to recede further, leading to an increase in more normalised client activity and fewer direct COVID-19-related costs. The underlying demand for Mediclinic’s broad range of services, its trusted and leading market positions, expansion across the continuum of care and new digital offerings are together expected to deliver sustained growth in revenue and profitability over the coming years. This – combined with targeted cash conversion, disciplined capital allocation, reduced leverage, improved returns and a clearly defined approach to sustainable development – is all expected to positively drive shareholder value. The Group is subject to macroeconomic factors, including inflationary and supply chain dynamics, and is proactively managing these through, among other levers, global procurement mobilisation, as well as productivity and efficiency gains.

 

FY23 guidance

The Group expects the positive momentum in revenue growth, margin improvement and earnings of FY22 to continue in FY23, driven by increased client activity supported by expected underlying economic growth in all three regions. Seasonal trends in patient activity levels, most notably in Switzerland and the Middle East, are expected to return, in the absence of any material new waves of COVID-19. Improving profitability and strong cash generation are expected to support continued deleveraging.

 

Switzerland expects to deliver modest FY23 revenue growth and EBITDA margin improvement to around 16%.

 

Southern Africa expects to deliver FY23 revenue growth in the mid-single digit percentage range and an EBITDA margin improvement, approaching 20%.

 

The Middle East expects to deliver FY23 revenue growth in the high-single digit percentage range and an EBITDA margin improvement approaching the mid-15% range.