Tough operating conditions in the UK had a negative influence on Netcare’s group operating profit, which fell 7.9 percent to R1.6 billion in the six months to March. The private hospital group warned that it expected the difficult trading environment to continue for the remainder of the year.
But a strong performance by the local operations mitigated this, resulting in a 15.7 percent rise in headline earnings a share to 48c.
Revenue increased marginally by 3.2 percent to R11.4bn.
The largest private hospital group in South Africa and the UK said currency conversion accounted for 3 percent of the operating profit reduction.
Recessionary pressures in the UK constrained privately funded caseloads in both the private medical insurance and self-pay markets.
Netcare owns General Healthcare Group (GHG) in the UK. The overall caseload of GHG grew by 19.4 percent driven by growth in the National Health Service (NHS) through the Choose and Book programme.
But this growth was tempered by NHS funding constraints and caution as the UK Department of Health sought to clarify issues related to implementing its white paper reforms.
Richard Friedland, the chief executive of Netcare, said the group believed the recessionary pressures were temporary. But in the meantime, to offset the impact of the reduced demand, Netcare had downsized its head office operations.
Restructuring and redundancy costs of £4.3 million (R49m) were incurred in the interim period.
The South African operations contributed 95.2 percent to basic headline earnings a share. Cash generated locally increased by 28.2 percent to R949m. In the hospitals and emergency services division, patient days grew 2.8 percent with a 6.7 percent increase in net revenue per patient day.
“We are pleased with our performance in South Africa. Working capital has improved, for the first time in five years, our debt levels are at their lowest in South Africa, so efficiencies are coming through,” Friedland said.
“In the primary care division, there was a R37m swing. The 2.8 percent increase in patient days is organic, there were no acquisitions.”
Nazeem Hendricks, a portfolio manager at Argon Asset Management, said the overall performance was solid and in line with expectations. He praised the company for the cash flow improvements.
Mark Ansley, a portfolio manager at Cadiz Asset Management, said although the local operations did well, the increase in patient days was much lower than competitor Life Healthcare, which last week reported a 6.4 percent increase in paid patient days.
The shares rose 0.93 percent to R14.15 yesterday. - Business Report