JOHANNESBURG - Netcare has announced a strategic decision to exit the UK market and will dispose of its interests in General Healthcare Group (GHG).
Netcare acquired GHG in May 2006 as part of a consortium. Shortly after the acquisition, GHG was restructured into an operating company, BMI Healthcare, and a series of property companies that held the hospital properties and leased them to BMI Healthcare under long-term leases. Chief executive Dr Richard Friedland said that when these UK lease arrangements were concluded they were considered market related and provided for a fixed escalation in rent of 2.5percent a year.
“But following the global financial crisis of 2008 and the declining private medical insurance demand, and the sustained period of exceptionally low inflation in recent years, BMI Healthcare’s rent obligations have grown to be unaffordable.”
In 2017, rental costs represented 20percent of UK revenue, Friedland said. Netcare shares gained 7.21percent on the JSE yesterday to close at R26.92.
- BUSINESS REPORT