Netcare dips on earnings warning
Private hospital group Netcare shed R3.825bn of its value on Thursday after it said earnings for the year to September 30 would fall slightly compared with the year before, due to difficult trading conditions.
Private hospital group Netcare shed R3.825bn of its value on Thursday after it said earnings for the year to September 30 would fall slightly compared with the year before, due to difficult trading conditions.
Investors took a dim view of the news, and Netcare’s shares plunged by as much as 12.9% before recovering to close 9.42% lower at R25, leaving its market capitalisation at R36.775bn.
Netcare was SA’s secondbiggest private hospital group by value before the sell-off, and operates hospitals in Southern Africa and the UK.
It announced in March that it planned to exit the UK, but has yet to find a buyer for its controlling stake in the UK’s biggest private hospital group GHG.
Analysts attributed the drop in Netcare’s share price to its failure to announce a buyer for GHG and investor sensitivity to the slightest whiff of bad news.
“Post Steinhoff, markets are more skittish and react to anything vaguely negative in an extreme way,” said Sasfin securities analyst Alec Abraham, referring to the collapse in the value of the disgraced furniture retailer in December 2017.
He said Netcare’s trading statement, in which it said earnings before interest, tax, depreciation and amortisation (ebitda) would be down between 0.3 and 0.5 percentage points on the 2017 ebitda margin of 21.1%, was in line with his expectations.
“The fourth quarter was a bit soft and they have not found a buyer for their UK business, but I don’t think it was a 10%-down kind of performance. We are definitely in a more volatile market,” he said.
Nitrogen Fund Managers head Rowan Williams said there was general nervousness around health-care stocks, and investors were selling at the first sign of bad news.
The market had been expecting a stabilising or improvement in Netcare’s margins in the second half of the year, he said.
Rival hospital group Life Healthcare’s share price also declined, dropping 4.31% to close at R25.08.