Netcare, South Africa’s largest private hospital group in terms of number of beds, will “only resume dividend payments once the operating environment stabilises” its CEO, Dr Richard Friedland, said in an interim results presentation on Monday.
Despite recovering to a profit position for its half-year to March 31, 2021 following the Covid-19 economic fallout in the second half of its 2020 financial year (August to September), Friedland and Netcare CFO Keith Gibson reiterated during the webcast that the group continues to be impacted by the pandemic.
Netcare did not declare an interim dividend. And, considering Friedland’s comments, a full-year dividend is also in doubt due to the ongoing impact of the pandemic this year.
Friedland said while the group is seeing hospital occupancies steadily increasing even into May (post half-year end), certain factors, such as the anticipated emergence of a third wave and any further waves of the pandemic, will have an impact the recovery.
Other factors he cited include the success of South Africa’s vaccination rollout efforts (including the efficacy of the vaccines on possible new Covid strains and variants) and the recovery of the economy broadly.
Friedland noted that Netcare is however better placed to deal with the pandemic, having “refined its approach to minimise disruptions” that may arise in the event of further waves.
Gibson said the group has not recovered to pre-pandemic levels.
He noted that the Covid-19 second wave in South Africa (over late December and early January) underlined the fact that the pandemic continued to have an impact, with Netcare having to temporarily suspend elective surgeries and seeing a considerable reduction in non-Covid-19 medical admissions during this period.
“While there has been a strong sequential improvement in the business in the first half of 2021, the performance still lags pre-pandemic levels,” remarked Gibson.
This saw the group highlighting its recovery in the first half of its 2021 financial year by comparing the performance to the second half of its 2020 financial year (to the end of September).
“Netcare continued to see a steady improvement in both patient days and occupancy levels in H1 2021, when compared to H2 2020,” it noted in its interim results media statement.
“Group revenue in H1 2021 rose by 24% to R10 081 million [H2 2020: R8 130 million],” it said.
“Profit before taxation for H1 2021 increased by 165.2% compared to H2 2020, although decreased by 60.9% against the prior period to R542 million [H1 2020: R1 387 million] … Adjusted headline earnings per share [Heps] declined 61.9% to 27.3 cents [H1 2020: 71.7c], although reflecting an improvement of 169.6% compared to H2 2020.”
Commenting on this Friedland said: “The comparative six-month period ended 31 March 2020 was largely free of the impact of Covid-19 other than for the last two weeks of March 2020, which makes comparable numbers unreliable indicators of performance.”
During the latest half-year Netcare also spent R316 million on Covid-19 costs, largely related to personal protective equipment for staff as well as additional sanitising measures for all people entering the group’s hospitals.
Friedland said Netcare currently has 530 Covid-19 patients admitted within its facilities.
Responding to a Moneyweb query on whether there is a third wave, Jacques du Plessis, managing director of Netcare’s hospital division said: “Right now Covid-19 patient volumes are relatively low and manageable in Netcare facilities.”
He reiterated that Netcare had “learnt a great” deal during the first and second waves, adding that the group is therefore prepared should a third wave occur.
Meanwhile, regarding the group’s investment plans Friedland said despite Netcare’s capex and other capital allocation being “tightly controlled” in the face of Covid-19, critical strategic projects are continuing.
“There was total capex of R473 million for H1 2021. Of this, R201 million related to expansionary projects, including the construction of the new Netcare Alberton Hospital.”
The total cost of the Netcare Alberton Hospital, which is located in the Newmarket development precinct in the Gauteng East Rand town, is around R400 million. It sees the consolidation of two Netcare facilities in Alberton into one new hospital that is set to open in April next year.
Listen to Nompu Siziba’s interview with Netcare’s CEO on the group’s interim results: