Healthcare operator flags Abu Dhabi revenue challenges

Mediclinic says patient volumes and operating performance continue to be below expectations in UAE capital

Private hospital group Mediclinic International has warned it may deliver lower earnings for its Middle East business amid a "challenging" market in Abu Dhabi.

The company said in a statement that patient volumes and operating performance continue to be below expectations in Abu Dhabi and was particularly pronounced in January.

The group said it now expects full year 2016/17 Middle East revenue to be down to AED3 billion ($820 million) with an underlying EBITDA margin of approximately 10-11 percent.

Mediclinic took over Abu Dhabi's Al-Noor last year and started consolidating the group's hospitals with its own Dubai operations.

Danie Meintjes, CEO, said: "The challenging environment in Abu Dhabi has unfortunately continued into the second half of the year. We are taking many steps to build the foundations for a successful, sustainable, long term business in the Middle East, leveraging our excellent reputation and operational performance in Dubai.

"One key step is the re-branding of our Abu Dhabi facilities to Mediclinic and we expect this project to be implemented during 2017/18."

In the Middle East, Mediclinic said its established Dubai business continues to perform well, including a strong ramp up in patient activity at the newly opened Mediclinic City Hospital North Wing.

As previously announced, the company said the second half performance of the Middle East was predicated on "seasonality, realising integration synergies, stabilising Thiqa patient volumes, filling doctor vacancies and ramping up patient activity in new facilities".

Meintjes added: "While we continue to make good progress in integrating the Al Noor and Mediclinic operations and realising synergies, the second half has been weaker in Abu Dhabi than anticipated and we now expect a steeper revenue decline and a lower underlying EBITDA margin for the Middle East for the full year 2016/17."

In July 2016, a 20 percent co-payment was introduced for all Thiqa health insurance members using private facilities for inpatient and outpatient services in Abu Dhabi, which Meintjes said had an "immediate and significant impact" on Thiqa patient volumes.

He added: "While building the foundations for a sustainable, long term business in Abu Dhabi, the extended recruitment process, combined with the necessary re-alignment of certain business and operational practices, has resulted in a further short term impact on patient and service volumes."

Despite the current economic and trading environment, Mediclinic said it has confidence in its long term Middle East growth strategy.

It said significant progress has been made integrating the Al Noor and Mediclinic operations into a single business unit and AED75 million of annualised cost synergies are expected to be realised during the current financial year.

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