Netcare won't provide earnings guide for rest of year

By Sandile Mchunu Time of article published May 26, 2020

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DURBAN - Netcare saw its March revenue decline by R143million due to Covid-19 disruption and the JSE-listed healthcare provider yesterday, while releasing its interim results, warned that it could not provide an earnings guidance for the rest of the year as the period ahead was too uncertain.

Netcare’s St Augustine Hospital in Durban, which treated the first Covid-19 patient in the country, also reported its earnings before interest, tax, depreciation and amortisation (Ebitda) declined by R64m in March. The hospital had to be temporarily closed between April 2 and May 11, following an outbreak of Covid-19 infections at the facility.

By April, Netcare’s acute hospital patient days for the month declined by 49.5percent compared to April last year, with occupancy levels at 32.6percent compared to last year's 65percent. The group said mental health patient days in April also declined by 63.3percent against the comparative period.

“Netcare 911 experienced a slowdown in emergency cases during the lockdown while the impact on cancer care and renal care services was less severe. Within the Primary Care division, general practitioner patient visits declined approximately 50percent from pre-Covid-19 levels, while the South African Dental Association’s prohibition on non-emergency dental work saw a decline of approximately 67percent in dental visits,” the group said.

In the six months to end March, the group reported a 1.8percent increase in revenue to R10.71billion, with the first five months in line with expectations while Ebitda increased 1percent to R2.13bn at a margin of 19.9percent.

Operating profit slowed down by 0.6percent to R1.74bn and adjusted headline earnings per share declined by 6.3percent to 79cents a share.

The group said it had suspended the payment of the interim dividend given the performance of the business in April and the extraordinary levels of uncertainty.

Netcare chief executive Dr Richard Friedland said the group had adopted an “abundance of caution” approach in preparing for Covid-19 outbreak, which utilises a combination of the principles of Disaster Management and Occupational Health and Safety and is informed by the evolving policy guidelines of the National Department of Health, the National Institute of Communicable Disease and the World Health Organisation.

“We have committed approximately R150m to enhance the readiness of our intensive care unit and high care facilities in the form of additional ventilators, specialised air filters and ultraviolet light disinfection robots. Additional inventory reserves have also been procured, including adequate levels of personal protective equipment, drugs and consumables,” Friedland said.

In the hospital and emergency services segment, revenue grew by 2.5percent to R10.38bn, while patient days declined by 2.6percent.

Primary care segment revenue decreased by 12.5percent to R342m as a result of the integration of the 15 Medicross day clinics into the hospital division and the rationalisation of some previously loss-making Medicross clinics.

Netcare withdraw its guidance for the remainder of the year due to uncertainty of what lay ahead.

The group said given the evolving understanding of the pandemic, both locally and globally, it was evident that demand for, and the provision of, health care services for the next six months and beyond would change significantly.

“Netcare’s operational plans are informed by a Netcare-specific dynamic capacity demand forecasting model which assists in managing bed capacity on a risk-stratified basis. Margins will be impacted by changes in volume and case mix, which will be determined by the timing and peak of the pandemic, as well as the increased costs of risk mitigation measures that are essential in delivering health care in these circumstances,” it said.

Netcare also said that it had committed to the South African government to treat public Covid-19 patients in Netcare facilities on a not-for-profit, cost recovery basis and a process to establish pricing was under way.

Netcare shares closed 1.04percent higher at R13.60 on the JSE yesterday.

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