Nompumelelo Magwaza
Hospital group Netcare remained confident that despite the slowing economy, the demand for private health-care services at primary and tertiary level in South Africa would be sustained over the medium and long term, it said yesterday.
However, Netcare chief executive Richard Friedland could not say the same about the company’s UK operations. “It is a tough market in the UK. The market is still in recession with the gross domestic product that has been down 6 percent since 2009,” he said.
The group increased its revenue by 11.5 percent to R25 billion in the year to September. However, it reported an 18 percent decline in diluted headline earnings a share to 93.6c from R1.142 a year ago.
Netcare said it had experienced a strong and improved contribution from South Africa, but the UK business had experienced weaker trading as a result of a challenging macroeconomic environment. Profit after tax had climbed 21.5 percent to R1.6bn with adjusted headline earnings a share up 8.7 percent to R1.132.
The group’s earnings before interest, tax, depreciation and amortisation (Ebitda) increased by 6.4 percent to R5.1bn due to strong operations.
South African operations increased their total revenue by 9.3 percent to R14bn, while operating profit rose 10.9 percent to R2.4bn. The group’s net revenue a patient increased by 5.7 percent and patient days increased by 2.8 percent.
Friedland said the volume growth showed that there was demand for health care that could be sustained. He said the volume growth was coming from employed South Africans.
In the UK, where revenue only grew by 0.4 percent to £834 million (R11.7bn), the group’s Ebitda declined 6.6 percent to £176.1m. This was affected by the drop in private medical insurance volumes.
Friedland said: “With global economic uncertainty persisting, budgetary and structural uncertainties in the National Health Services and the impact of austerity measures on the UK economy, we anticipate the next 12 months to remain challenging.”
The efficiency strategies and improvements implemented during the year position the business well for recovery in the market.
The UK results were also affected by certain material, non-cash adjustments relating to the General Healthcare Group (GHG) portfolio of 35 UK hospital properties acquired in 2006. Netcare said the refinancing of GHG’s property debt of about £1.5bn, which needs to be repaid by October 2013, remained a challenge.
Friedland said Netcare was not be able to share how this debt would be repaid.
Netcare added 190 beds during the financial year and plans to add between 60 to 100 beds in the next financial year. Health economist Alex van den Heever, a professor of social security systems administration at Wits University, said the health insurance market in the UK reacted pro-cyclically to economic downturns.
“This is because everyone has universal free access to the National Health Service and [they] drop private insurance when household budgets are squeezed.” In South Africa the public sector is not an option and a downturn has little effect on medical aid membership.
Netcare shares closed 1.5 percent lower at R17.98.