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Netcare seeks digital expansion as Covid-19 pressure eases

Group resumes paying annual dividend on the back of a recovery this year.
An artist's impression of the R400m Netcare Alberton Hospital, which is due to open in April next year. Image: Supplied

South Africa’s largest private hospital group Netcare plans to digitalise its entire ecosystem, with the rollout set to begin in 2022. The digitalisation means that Netcare patients can expect to – among other services – receive doctors’ prescriptions and view detailed patient records from the palm of their hands.

Reporting its full-year results for the period ending September 2021 on Monday, the healthcare provider noted that with the possibility of further Covid-19 waves of infections imminent, it is aiming to give its patients greater control of their health and deliver an interactive experience by the end of 2023.

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“In delivering a person-centred approach, which encourages patients to take ownership of, and to actively participate in, their health and care, the digitisation of our entire ecosystem across all our service offerings is critical,” Netcare said in a statement.

The group believes that digitalising its ecosystem will enhance patient safety and eliminate up to 60% of medication errors derived from misinterpreting doctors’ scripts.

“Netcare’s core purpose of providing the best and safest care has never been more relevant and we have been privileged to play a role on the frontline in supporting our country through the Covid-19 pandemic,” said group CEO Dr Richard Friedland.

Figures

The private hospital group delivered a strong performance that is indicative of a steady recovery towards pre-Covid-19 levels, albeit not quite surpassing them yet.

Netcare reported a 107.4% jump in adjusted headlines earnings per share (Heps) to 67.4 cents, from 32.5 cents in the previous comparable period.

Heps is the main profit measure in SA.

Group revenue increased 11.5% to just over R21 billion from R18.84 billion in 2020, improving group Ebitda (earnings before interest, taxes, depreciation and amortisation) to R3.19 billion, 24.8% up from the previous Covid-hit year.

Read: Strong performance by Life Healthcare, as non-Covid-19 patients return

The group’s Ebitda margin came in slightly better this period, at 15.2% compared to 13.6% in 2020. However, Netcare estimates that the 18 month-long pandemic may have cost it about R1.5 billion in group Ebitda.

Despite this, the group improved its bottom line, with profit after tax increasing by 188.8% on the last period to R904 million.

On the back of the better results, Netcare decided to resume its dividend, declaring a payment of 34 cents per share for its 2021 financial year.

In the wake of the Covid-19 pandemic and financial fallout last year, the group suspended its interim and final dividend payments for FY 2020 and its interim payment for the FY 2021.

Costs of the ‘worst health crisis’

According to Friedland, the Covid-19 crisis has been the worst health crisis in almost a century because of the scale of lives lost and its devastating impact on the economy.

Richard Friedland, Netcare, Covid-19

Dr Richard Friedland, CEO of Netcare. Image: Supplied

Netcare pointed out that it had to fork out an extra R521 million in FY 2021 for Covid-19 related costs, of which 80% was dedicated to the procurement of personal protective equipment (PPE) for staff, doctors and patients.

“Since our first Covid-19 case on 9 March 2020, we have treated over 125 000 Covid-19 patients, of which 43% were admitted to our hospitals,” Friedland said.

Although Netcare has treated more (54 772) patients in the second half of 2021 compared to the same period in 2020 (28 533), the group has over the duration of the pandemic, hospitalised a significantly less proportion of patients (52%) in the second half of 2021 than in the second half of 2020 (80%).

According to the group, this gives hope that the coming waves of infections may be less severe than before.

Read: SA virus cases begin to climb as fourth wave predicted

“This is due to increasing levels of immunity from natural infection and vaccination, which will continue to influence our ability to operate in an unrestrained environment,” it explained.

Netcare believes that a move away from a pandemic state to an endemic state – where outbreaks are not as disruptive – could create the conditions needed for the group to move back into pre-pandemic growth territory.

Outlook

As part of its expansion plans, Netcare is looking to build on its environmental sustainability strategy by reducing its scope 2 emissions to net zero by 2030 and adopt a total reliance on renewables in the next few years.

“We have set even bolder targets for 2030, with a primary target to reduce scope 2 emissions to zero by 2030 and reduce scope 1 and 2 emissions by a combined 84%,” Friedland said.

Read: Netcare and Standard Bank in R1bn ‘green bond’ deal

“As part of our strategy, by 2030 we aim to utilise 100% of our energy from renewable sources, achieve zero waste to landfill and reduce our impact on water sources by 20%,” he added.

Netcare said it plans to open its new 36-bed Akeso facility in Richards Bay in early 2022 and its 427-bed Alberton hospital facility by April 2022.

“We expect to spend R1.4 billion on capex including the investment of R227 million in strategic projects, R160 million on Netcare Alberton Hospital and R80 million in the new 72-bed Akeso facility in Gqeberha, which will be completed in FY 2023,” said Friedland.

Listen to Fifi Peters’s interview with Richard Friedland (or read the transcript here):

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