Netcare yesterday flagged that it expected its profits to take a huge hit for the first-half of its 2021 financial year as the private hospital group continued to be impacted by the Covid-19 pandemic. Picture: African News Agency(ANA)
Netcare yesterday flagged that it expected its profits to take a huge hit for the first-half of its 2021 financial year as the private hospital group continued to be impacted by the Covid-19 pandemic. Picture: African News Agency(ANA)

Netcare expects profits to decline for first-half of 2021 impacted by Covid-19

By Sandile Mchunu Time of article published Apr 23, 2021

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DURBAN - NETCARE yesterday flagged that it expected its profits to take a huge hit for the first-half of its 2021 financial year as the private hospital group continued to be impacted by the Covid-19 pandemic.

The group told its shareholders in a trading guidance that its earnings before interest, tax, depreciation and amortisation (Ebitda) were projected to tumble nearly 40 percent during the period as the Covid-19 continued to hit its operations.

Netcare said its Ebitda would fall between 35.5 percent and 38.5 percent for the six months to end March compared to the first half of 2020.

The group said the Ebitda, however, increased between 690 percent and 725 percent when compared to the low base of the second half of the 2020 financial year.

“Trading activity for the first half of 2021 was impacted by the emergence of an even more severe, nation-wide Covid-19 variant, which resulted in a second wave of infections,” Netcare said. “This was evidenced by the number of Covid-19 patient admissions in the first half of 2021, which exceeded that of the 2020 financial year.”

The group said that the period under review experienced the impacts of the tightening and subsequent easing of lockdown regulations, the sporadic commencement of elective surgeries and a marked reduction in non-Covid-19 medical admissions.

It said despite the improved performance in the first half compared to the second half of 2020, its activity levels and occupancies had not recovered to pre-pandemic levels.

Its total patient days for first half 2021 were still lower compared to the first half of 2020 by 13.6 percent, which consist of declines of 13.7 percent within acute hospitals and 12.6 percent in mental health facilities.

“The temporary suspension of elective surgery from mid-December 2020 coupled with higher Covid-19 admissions resulted in a 20.9 percent reduction in theatre minutes. As a result, for the six months end to March 2021, full week occupancy levels within acute hospitals decreased to 53.8 percent from 62.3 percent in the comparative period,” the group said.

Netcare said that its group revenue was expected to decline between 5.5 percent and 6.5 percent in the first half of 2021, but it would be up by between 24 percent and 25 percent compared to the second half of 2020.

Alec Abraham, a senior equity analyst at Sasfin Wealth, said Netcare’s 2021 trading update was reasonable when considering the sequential improvement on the second half of the financial year 2020.

“Key factors to bear in mind are that elective surgery and occupancy remain very much affected by the pandemic, providing a drag on profitability.

“Having said that, Netcare’s performance through the Covid-19 period does appear to have slightly lagged its peers, Life Healthcare and Mediclinic,” Abraham said.

The group said the tightening of lockdown measures over the Easter period successfully curbed the incidence of positive Covid-19 cases reported over the last two weeks.

“Despite several public holidays in April, activity levels within our hospitals continue to improve and are currently trending at 62 percent over the last five working days,” the group said.

Netcare rose 1.18 percent on the JSE yesterday to close at R14.61.

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