Mediclinic doing well in the recovery room

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Mediclinic has provided a trading update for the year ended March 2022. With full results scheduled for release on 25 May, this gives the market a taste of what happened in that period.

As I’ve written many times before on this platform, the hospital groups were not beneficiaries of the pandemic. The cancellation of elective procedures caused havoc with operating margins. The latest results demonstrate that a recovery from that tough period is well underway.

Revenue grew by 8% and group EBITDA margin came in at around 16%, a 180bps improvement from the 14.2% result in the prior year. Revenue is now ahead of the FY20 period (GBP3.2 billion vs. GBP3 billion) but EBITDA margin hasn’t fully recovered yet, running 150bps below the FY20 margin of 17.5%.

Investors will appreciate the improvements in the balance sheet. After a tough period in FY21 with low cash conversion of profit into cash generated from operations (just 77%), a 125% conversion rate in FY22 reflects a period in which working capital swung positively.

Thanks to strong cash conversion, the group net debt / EBITDA ratio has improved from 5.1x to 4.0x. Importantly, this is better than the 4.3x reported in FY20.

Mediclinic’s share price is trading only slightly below pre-pandemic levels and is up around 7% this year.

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