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Netcare removes its 2020 earnings guidance

By Sandile Mchunu Time of article published Mar 31, 2020

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DURBAN - Private hospital group Netcare has decided to remove its earnings guidance for the year to end September due to uncertainty around the impact of the Covid-19 outbreak.

The group released an investor update yesterday, and said the impact of Covid-19 introduced significant forecast risk for the business.

“Moreover, due to the increasing communal spread of the virus, Netcare has escalated its state of preparedness.

“Given the high level of uncertainty surrounding the impact and possible knock-on effects of Covid-19, coupled with the suspension of non- essential elective surgery as a result of the 21-day national lockdown, Netcare has decided to withdraw the financial year 2020 full-year guidance,” the group said.

It also said that it would be better positioned to provide an updated guidance at the time of publishing its interim results in May.

Netcare noted that the prevailing conditions might also necessitate a revision of Netcare’s dividend policy.

It has already spent R150million to enhance its Covid-19 preparedness, the group said.

However, Netcare said trading for the six months to end March was broadly in line with its previous guidance, excluding the impact of the Covid-19 outbreak.

Netcare said the South African health-care sector remained constrained, despite the Covid-19 pandemic, and given the country’s underlying macroeconomic landscape.

“Competition in the health-care market remains resilient and there is continued growth in the number of beneficiaries covered by low-cost restricted hospital network options,” the group said.

In November, Netcare said its first half financial year acute activity would be negatively impacted by 2019 hospital network arrangements, particularly in the last three months of the 2019 calendar year.

“While acute patient days to date are lower compared to the same time last year, we experienced some recovery in activity in the new calendar year,” the group said.

As a result Netcare expected the total patient days to decline by 2.7percent in the first half of the financial year, but forecast a 1.8percent increase in mental health care.

Acute hospital patient days were expected to decline by 3.1percent, excluding the Netcare Rand, Bell Street, Port Alfred and Settlers hospitals.

“The decline in acute patient days is primarily attributed to the competition created by new hospital networks And the impact of Covid-19 from mid-March,” the group said.

In the first five-months period to end February, full-week occupancy levels within acute hospitals were at 62.5percent compared to 64percent last year while acute hospital revenue per patient day increased by 5.1 percent during this period.

Netcare said it had committed to the government to treat public patients suffering from Covid-19 in its facilities on a not-for-profit, cost-recovery basis.

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