South Africa‘s Netcare warned that profitability at its biggest division, hospital and emergency services, will fall this year after it reported a 1.3% rise in half-year core profit.
The country’s third-largest private hospital chain by market value has seen falling occupancies as healthcare funders rein in costs, squeezing healthcare providers’ margins.
“The impact of the funder case management on our occupancy levels combined with the growing prevalence of restricted hospital networks and reduction in foreign case loads, will outweigh the benefits of our efficiency initiatives,” Chief Financial Officer Keith Gibson said at a results presentation.
“We do foresee a reduction in our hospital and emergency services full-year Ebitda margin of between 50 to 80 basis points.”
In the six-months to end March, Netcare’s hospital and emergency services division reported an earnings before interest, tax, depreciation and amortisation (Ebitda) margin of 20.8%, down from 21.5% a year earlier.
Netcare’s expectation for growth in patient days, which represent customer stays in its hospitals, in acute and mental health for the financial year 2019 is within a range of 3% to 3.5%.
At 0914 GMT, shares in Netcare fell 1.08% to R22.99.
Netcare, which competes with Life Healthcare and Mediclinic, reported a 1.3% rise in group normalised Ebitda to R2.12 billion ($148.53 million), boosted by rising day patient numbers at its hospital and emergency services division in the period.
While adjusted headline earnings per share rose by 2.4%, it said.
The healthcare provider increased its interim dividend by 6.8% to 47 cents a share.