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Durban - Private healthcare is traditionally a defensive business. When people need medical care it will be paid for. Private hospitals invest in expanding beds and specialised medical units, reasonably confident that capacity will be taken up.
Solid interim results from Medi-Clinic reflect these defensive qualities, particularly in the current tough economic climate, with earnings and earnings per share growing by 15% off revenue that increased 12% to R8.36bn. The interim dividend was increased by 12%.
But there are risks as well, key probably being regulatory issues.
"We look at regulatory issues on a day-to-day basis, in South Africa and overseas," says Gerhard Swiegers, Medi-Clinic's chief financial officer. "You must actively manage these as business risks and you can perform consistently despite them."
He seems more comfortable about regulatory risks in South Africa under the present health ministry.
"Under the previous ministry, there was a lot of uncertainty. The issues are more clarified now."
Chairperson Edwin Hertzog says what comes out clearly across the world (Medi-Clinic has three main geographic platforms in SA and Namibia, Switzerland and the United Arab Emirates) is that the private healthcare sector is playing an increasingly important role in helping authorities with guidelines.
Koert Pretorius, CEO of Medi-Clinic in SA, believes this will apply to the proposed National Health Insurance system and "the crucial role the private healthcare sector can play".
The group has invested significantly in expansion, with debt running at R21.76bn.
Swiegers says this has been spent across all platforms - for example beds in SA should increase to 7 028 from the current 6 859 in the next six months - but much of the capital has been invested abroad.
This was partly due to Medi-Clinic taking advantage of what was then cheap funding. "Our debt in Switzerland was for seven years (five years remaining) at an interest rate of 5.62%. Today that would cost you 8% to 9%."
He adds that while Medi-Clinic will still invest in SA, its hands are to an extent tied by the competition authorities. "If there is going to be another big leap, it will probably be outside South Africa."
- Fin24.com
