Johannesburg - Private hospital operator Netcare is seeking international acquisitions as full-year earnings have risen on the addition of new beds in its South African operations.
“When the right opportunity presents itself we certainly have the resources to execute,” chief executive Richard Friedland said yesterday. “In this past year, we did look at three separate opportunities and walked away from them. In our numbers you can see there are due diligence costs included – these were expensive exercises but very important for us.”
Global expansion
Netcare is benefiting from increasing demand for private health care in South Africa and the UK as higher earners switch from state-owned providers.
The company added 584 new beds in its home market during the 12 months to September, bringing the total to 9 996. It plans to invest R2 billion in 2016, which will cover 44 more new beds this financial year, as well as the relocation of Netcare Christiaan Barnard Memorial Hospital, refurbishments and further brownfield expansion projects – including a substantial expansion of Netcare Milpark Hospital.
“We believe there’s good growth in South Africa because people continue, unfortunately, to get sick irrespective of the downturn in the economy.”
The company’s priority for international expansion was the UK, he said, its only other market. Adjusted headline earnings a share were 189 cents in the year to September, Netcare said. That was in line with the average estimate of 12 analysts polled by Bloomberg.
Revenue advanced 6.1 percent to R33.7bn. The final dividend was raised 12.5 percent to 54c a share.
“The demand for private health-care services in South Africa is expected to remain resilient despite weakness in the economy.
“We expect higher growth in demand across our network of services in 2016, driven in part by the new hospitals and capacity added in 2015.
“Pleasingly, in the period post year-end to date, patient-day growth is tracking in excess of 2 percent.”
Netcare shares fell by 3.81 percent to close trade at R37.61 on the JSE, valuing the company at R54.8bn.
The company’s share price is little changed this year, compared with a 22 percent gain at larger competitor Mediclinic International.
Netcare’s South African division increased revenue by 6.2 percent to R17.3bn from R16.3bn last year.
Earnings before interest, tax, depreciation and amortisation grew by 9.8 percent to R3.95bn from R3.59bn in the previous period.
Low growth
The local unit’s profit margin increased to 22.8 percent from 22.1 percent.
Operating profit increased 9.7 percent to R3.4bn from R3.1bn and adjusted headline earnings a share rose 13 percent to 182.9c from 161.8c in the previous period.
At the group’s hospital and emergency services division, demand for private health care remained resilient in the face of low economic growth and a decline in total medical scheme beneficiaries of 0.6 percent from 8.81 million at December 31, 2014 to 8.76 million at June 30, 2015, as reported by the Council for Medical Schemes.
“The impact of these factors together with intensified competition from six new competitor hospitals and a mild winter resulted in lower activity levels. This was particularly the case in the traditionally busy months of the last quarter of the year,” Netcare said of its hospital and emergency services unit.
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