Healthcare company revenues decrease by 9.6%

NETCARE, the health care company, yesterday reported results for the year to end September that showed a business under pressure.

However, the group said: “The SA growth experienced in patient days in the fourth quarter of 2017 has continued into the first two months of the current year. This trend is expected to continue through the financial year 2018. The business expects to benefit from the restructuring of the Emergency Services business and improved performance from the new Primary Care day theatre and sub-acute facilities.”

The group’s revenue decreased 9.6 percent to R34.13 billion, down from R37.73bn, with the decline being attributable to currency conversion.

The group said that, in constant currency terms, revenue was broadly flat year-on-year, with a 1.2 percent increase in SA revenue being offset by a similar decrease in UK revenue.

Normalised earnings before interest, tax, depreciation and amortisation (Ebitda) declined 22.7 percent to R4.27bn, excluding exceptional items, while normalised operating profit fell 28.1 percent to R2.97bn from R4.13bn reported last year.

Normalised operating profit fell 28.1 percent to R2.97bn, while normalised profit after taxation fell 38.7 percent to R1.78bn, down from R2.89bn reported last year.

Chief executive Richard Friedland said the 2017 financial year was an unusually difficult period for Netcare.

“Market conditions in both South Africa and the UK placed pressure on our ability to grow, while funder-led demand management initiatives in both geographies impacted our results,” he said.

He added that South Africa experienced negative patient day growth for much of the year, and despite overall UK case load volumes growing marginally; there was a fall in our higher revenue in-patient cases not fully offset by the increase in day cases.

In South Africa, revenue from continuing operations increased 1.2 percent to R19.11bn, while normalised Ebitda from continuing operations was lower by 3.7 percent at R3.98bn, with margins of 20.8 percent.

UK revenue decreased 0.9 percent to £887.1 million (R16.36bn), driven by the shift in case mix towards lower revenue cases.

Ebitda fell 60.7 percent, before one-off costs, to £25.1m from £63.8m; with this margin deteriorating from 7.1 percent last year to 2.8 percent in the current year. An operating loss of £20.6m was reported for the period.

Ron Klipin, a senior analyst at Cratos Capital, said hospitals in South Africa were under margin pressure, due to medical schemes cutting costs, resulting in lower income per patient.

“In addition, patient stays have been curtailed, which has also impacted on hospital profits,” Klipin said.

Netcare shares fell 2.78 percent to close at R22.36 on the JSE yesterday.