- Remgro has a 44.6% stake in Mediclinic, which has operations in South Africa, Namibia, Switzerland and the UAE.
- Like its peers in the private healthcare industry, Mediclinic was hit hard by the impact of the Covid-19 pandemic, as fewer patients went to hospitals for elective procedures.
- As a result, Mediclinic’s earnings were down by 59.3%, impacting Remgro’s earnings by almost R1 billon.
Remgro CEO Jannie Durand says he is "cautiously optimistic" about private hospital group Mediclinic International’s turnaround after a performance marred by Covid-19.
The investment holding company has a 44.6% stake in Mediclinic, which has operations in South Africa, Namibia, Switzerland and the UAE. Like its peers in the private healthcare industry, Mediclinic was hit hard by the impact of the Covid-19 pandemic, as fewer patients went to hospitals for elective procedures.
"South Africa was hit a lot harder than the Swiss [Hirslanden Group] operations or the Middle East operations on elective surgeries," Durand said.
- READ | Remgro swings into recovery
Durand was presenting the group’s annual results for the year ended 30 June 2021, on Wednesday, which showed that Remgro’s headline earnings from continuing operations had increased by 66.1%, from R1.7 billion to R2.8 billion. Its headline earnings per share from continuing operations increased by 66%, to R510.6 cents, from 307.5 cents.
The improvement was due to the performance of its investee companies RCL Foods, Distell, TotalEnergies, and Rand Merchant Investment (RMI).
Durand said Mediclinic had been a drag on Remgro, with the worst period being 1 April 2020 to 31 March 2021.
However, he told shareholders that the company was seeing "encouraging signs of recovery" at the hospital group.
"Elective surgeries are starting to pick up and … we’ll still have the impact [of Covid-19], but hopefully from the 2023 financial year we should be fully back to normal, should everything go according to plan and everyone gets vaccinated," he said.
'We were looking very dark'
As for what the future holds for Remgro’s investment in Mediclinic, Durand said it was too soon to say, but the company was supporting the hospital group during its turnaround phase.
"We were worried ... during the pandemic. We looked at their capital structure … a lot of people think their debt in their Swiss operations is high, although it is ring-fenced.
"Things were looking very dark in the early days [of the pandemic]," he said, highlighting the hospital group’s capital structure as a concern.
But he added that he was now cautiously optimistic.
Going forward, Remgro is focusing on unlocking value at RCL Foods and RMI. RCL, whose products include Rainbow Chicken and Yum Yum peanut butter, is currently in a restructuring process. In July, the food manufacturer split off its chicken business into a standalone division.
Earlier this week, RMI said it would unbundle its Discovery and Momentum Metropolitan stakes to its shareholders. Remgro will continue to hold more than 25% of RMI stock and Durand said the group may only look at unbundling when the time is right in the future.
The group will still have more than a 25% stake in the remaining RMI, so it can unbundle that in the future.