JOHANNESBURG - Private healthcare group, Netcare, on Thursday cited its exit from the UK and strong domestic demand as key drivers behind the 8.5 percent rise in half-year earnings.
The group reported profit after tax for six months ended March of R3.6bn from R1.9bn in the compartive preiod, while its adjusted headline earnings per share (HEPS) from continuing operations grew by 8.5 percent to 87.7 cents.
The group said it would spend R1.4 billion this year in the refurbishment of certain hospitals and cyclical replacement and technological upgrade of medical and theatre equipment.
Netcare chief executive Richard Friedland said the group was forecasting a return to growth for the South African market.
“We expect demand for private healthcare to remain resilient over the medium to longer term as a function of the ageing population, growing burden of disease and medical innovation,” Friedland said.
“Growth in patient days experienced to date is expected to continue for the remainder of the financial year and will include the trading results of Akeso in the second half.”
The competition authorities earlier this year approved Netcare’s R1.3bn acquisition of mental health care group Akeso.
The company has 811 beds in facilities located in Cape Town, George, Johannesburg, Pretoria, Nelspruit, Umhlanga and Pietermaritzburg.
Netcare last month said it would leave the UK after it could not secure lower rent for its hospitals.
Netcare first invested in General Healthcare Group (GHG), whose operating company BMI Healthcare runs 59 private hospitals in the UK, in 2006.
The group’s exit left rivals Mediclinic and Life Healthcare Group to slug it out in the UK.
Netcare reported an 8.2 percent R9.9bn hike in half-year group revenue, while normalised group earnings before interest, tax, depreciation and amortisation (Ebitda) increased 8.1 percent to R2bn. Netcare said its South African hospitals and emergency services grew revenue by 9.3 percent to R9.64bn.
The group declared an interim dividend of 44 cents per ordinary share, an increase of 15.8 percent over the previous interim period’s payment.
Aeon Investment Management chief investment officer Asief Mohamed said Netcare had invested in the UK on bad terms.
“One mistake they made was not to recognise that the national healthcare system in the in the UK is well run and patients don’t need to go to private hospitals to get the best care,” Mohamed said.
“The group will also face headwinds in South Africa because the private healthcare sector it not growing enough and discovery and GEMS have the bargaining power to determine the pricing that private healthcare can charge their members.”
Economic Development Minister Ebrahim Patel last week said, "I expect to receive and table in parliament this year, the outcome of three very significant Market Inquiries: into private healthcare, grocery retail (which includes shopping malls and spaza shops) and communication data costs."
The inquiry was established to investigate the dynamics in the private healthcare market and to determine whether there are barriers to competition and patient access.