Netcare earnings slide 81% after Covid-19 offsets strong start to year

In what it described as a financial year of two halves, Netcare said it experienced strong trading during the first five months, but patient days were impacted later on by the suspension of non-urgent surgery during the start of a lockdown enforced nationwide to contain the pandemic.

JOHANNESBURG, November 23 (ANA) – South African private healthcare company Netcare said on Monday its adjusted headline earnings per share for the year ended September slid 81 percent as the Covid-19 pandemic offset an initially strong start.

In what it described as a financial year of two halves, Netcare said it experienced strong trading during the first five months, but patient days were impacted later on by the suspension of non-urgent surgery during the start of a lockdown enforced nationwide to try and contain the pandemic.

“As lockdown levels eased and Covid-19 admissions reduced, medically necessary and time-sensitive surgeries resumed, which led to a gradual and steady uplift in patient days,” it said.

“However, this was insufficient to counter the falloff in activity in the initial months of the lockdown.”

As a result of the lower patient days, group revenue declined by 12.7 percent to R18.8 billion, (US$1.2 billion) while normalised earnings before interest, taxes, depreciation and amortization (EBITDA) dropped 52.4 percent to R2.1 billion compared with the previous year.

Adjusted headline earnings per share, the key measure of a company’s profitability in South Africa, fell 81 percent to 32.5 cents.

“The lockdown measures have resulted in significant loss of employment across South Africa,” Netcare chief executive officer Dr Richard Friedland said.

He however said in recognition of Netcare workers’ extreme sacrifice on the frontline of healthcare for the past seven months, the company was adopting an intentional job preservation strategy.

“Given our intention, we will continue to manage our cost base extremely tightly and within clearly defined targeted efficiency initiatives,” said Friedland.

Netcare warned that in line with global trends, a relaxation of lockdown measures and Covid-19 fatigue may result in a second wave of infections, citing the sudden rise in cases in South Africa’s Eastern Cape province as a sober reminder of this.

“However, our experience of bed demand during the initial surge and reduced lengths of stay due to more effective treatment modalities, suggest that any potential second wave should not place hospital capacity under constraint,” the health group added.

While demand for, and provision of healthcare services would remain fluid over the next few months, the company did not foresee wide-scale suspension of elective surgery and activity over the short term.

“Nevertheless, over the next six months, hospital occupancy and margins may be impacted by changes in volume and case-mix,” Netcare added.

“This will be determined by the timing and pattern of the Covid-19 recovery, as well as increased costs of risk mitigation measures that are essential in delivering healthcare in these circumstances.”

– African News Agency (ANA), Editing by Stella Mapenzauswa