Netcare feels the strain of local healthcare sector


Netcare feels the strain of local healthcare sector

Published Date: 2019-05-14 | Source: Stephen Gunnion | Author: Stephen Gunnion

Netcare feels the strain of local healthcare sector

The private hospitals group increased earnings due to the inclusion of Akeso Clinics as demand for mental healthcare services grew.

Netcare says it faces an increasingly challenging economic and healthcare environment, with medical aid member numbers stagnating and growth in restricted hospital networks. This allows medical schemes to shift market share in return for price discounts.

Last year's acquisition of Akeso Clinics has helped boost full-year numbers though, with the integration of the mental healthcare network proceeding smoothly and strong growth in activity. Akeso's inclusion boosted patient days by 8.5%, compensating for a 1% decline in acute patient days at its other hospitals.

Its Primary Care division achieved good revenue growth as it expanded its occupational health offering and national day clinic network, including the new Richards Bay day clinic which opened last July.

Revenue from continuing operations rose 5.6% to R10.5 billion in the six months to end-March. Net financial expenses almost tripled to R246 million due to higher finance costs as it increased its debt to optimise its capital structure. Interest income declined following the disposal of its interest in the UK's BMI Healthcare. It grew normalised earnings before interest, tax, depreciation, and amortisation (EBITDA) by 1.3% to R2.11 billion. Adjusted headline earnings per share rose 2.4% and it raised its interim dividend by 6.8% to 47c per share.

It said the challenging healthcare landscape was expected to continue into the second half of the year, with patient days likely to grow by between 3% and 3.5% for the full year. Demand for mental health services was expected to remain strong, however. It said full-year growth would likely be weaker than the first half due to the inclusion of Akeso Clinics in the second half of last year as well as the expectation that acute patient day demand would be lower.

Its shares fell 3.3% to R22.48 yesterday.

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