Mediclinic International is one of those exotic companies that millions of us suddenly have no choice but to own. Anyone with a tracker-style investment product is probably exposed to this hotchpotch of hospitals and clinics in southern Africa, the Middle East and Switzerland.
The South African-based Mediclinic’s reverse takeover of Al Noor Hospitals in February last year gave it a primary listing in London and pushed it into the FTSE 100 with a market value of close to £5.5 billion.
To add to the confusion, and the territorial mix, the company also owns a 29 per cent stake in Spire Healthcare, the separately listed UK private healthcare business. with many speculating it may bid for the whole business.
The group insists that there are synergies from IT, purchasing and marketing in operating in these very different cultures and healthcare systems, but it’s hard to discern huge benefits.
A trading update yesterday gave new investors the chance to grapple again with this curious beast. The good news is that the largest territories, Switzerland and southern Africa, performed in line with expectations.
The worry is that the Middle East continues to be a headache, in particular the Abu Dhabi business acquired in the Al Noor deal. Scores of doctors quit when the deal was done. This desertion has been rectified, with 90 new ones installed since last April and 60 more on the way.
Now a new problem has hit, after the Abu Dhabi authorities ruled that Emiratis, who previously enjoyed free healthcare, would have to pay 20 per cent of the cost. Demand, as a result, is down by 40 per cent.
This week Mediclinic learnt that the canton of Zurich had dropped a proposed tax that could have cost it SwFr35 million (£27.8 million) a year. But a fresh tax threat is still pending.
Overall, however, the market was sanguine about the statement, with the shares marked 3 per cent higher to 759.5p yesterday, retracing some of the losses since last summer. They trade on 23 times estimated 2017 earnings and yield 1 per cent.
That still looks expensive given there is no certainty that the problems in Abu Dhabi are over. Debt, at £1.62 billion, is high, though the group is property-rich. Investors who can, may consider selling. The rest in passive investment vehicles will just have to lump it, of course.
My advice Sell
Why Very disparate markets; UAE problems have not yet bottomed out
Scapa Group
Wash your mouth out if you think Scapa is merely in the business of making sticky tape. This gem from Ashton-under-Lyne is “a global supplier of bonding solutions”, no less.
Shareholders don’t mind how it describes what it does. They’ve made as much as 20 times their money from the Aim-listed firm since 2009.
The bulk of its revenues do come from sticky tape — duct tape, tape to seal wounds, tape for ice hockey sticks or electricians’ insulating tape.
The medical division, which also makes dressings for wounds, is the exciting bit with the greatest growth prospects. The industrial division is a little more pedestrian.
But, under Heejae Chae, the chief executive, both sides keep widening margins and beating expectations, as they did again yesterday in a strong trading statement.
Increased outsourcing by Johnson & Johnson and Convatec have helped. Tight cost control has been crucial too, particularly the consolidating of its factories into fewer, more efficient plants. Berenberg, the house broker, reckons that three more could be closed.
And innovation is important. Medical wearables are the next big thing — sensors monitoring a patient’s heartbeat — and Scapa is working on how they get stuck to the body, while getting unstuck when required without too much agony.
The company is to report full-year pre-tax profits of £26 million next month. The shares, after being marked 5 per cent higher to 387p yesterday, trade on 28 times expected earnings and yield 0.75 per cent.
My advice Take profit
Why Great company, but the shares are very dear
Hays Group
Another day, another cheerful trading statement from a recruitment firm. This time it was Hays. It reported a 21 per cent increase in third-quarter fee income, or 10 per cent on an underlying basis.
While the UK and Ireland, which account for a quarter of revenues, posted a 4 per cent decline, the rest of the world did rather better. In particular, continental Europe is really beginning to motor.
The group said that it was on track for full-year profits at the top end of the £199 million to £209 million range. Net cash has reached £40 million and the company looks in line to generate £50 million by the year end — probably destined for a special dividend.
Recruitment is a volatile business. Hays shares crashed to less than £1 last July after the referendum as many predicted recession.
That fear has receded, though an ugly Brexit negotiation could bring it back to the fore. However, with much of the rest of the world hiring with gusto, Hays is partly protected.
Including the likely special dividend, Hays shares, up 2p yesterday to 170p, yield more than 4 per cent and trade on 18 times expected full-year profits.
My advice Hold
Why European promise tempered by UK uncertainty
And finally . . .
The cash shell Dorcaster has bought Escape Hunt, an “experience” leisure group where players pay about £25 each to find and solve clues to get out of a locked room within an hour. The Aim-listed Dorcaster, which is led by Richard Rose, the former Booker chairman, is financing the deal with a £14 million placing at 135p a share. Richard Harpham, the ex-head of the Tesco coffee shops chain Harris + Hoole, is to run the business. It has 38 branches globally but Dorcaster is aiming for 250, including in the UK.
