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NETCARE LIMITED - Update on FY 2019 trading

Release Date: 27/09/2019 15:00
Code(s): NTC NTCP     PDF:  
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Update on FY 2019 trading

NETCARE LIMITED
(Registration number 1996/008242/06)
JSE ordinary share code: NTC
ISIN: ZAE000011953
JSE preference share code: NTCP
ISIN: ZAE000081121
("Netcare")

UPDATE ON FY 2019 TRADING

The purpose of this announcement is to provide shareholders with an update on Netcare’s
trading for its financial year ending 30 September 2019 (“FY 2019”).

HOSPITALS AND EMERGENCY SERVICES

Total growth in patient days of approximately 3.7% is expected for FY 2019, exceeding the
full-year guidance of 3.0% to 3.5% provided at the time of Netcare’s interim results. This
includes the contribution from Akeso Clinics (acquired effective 27 March 2018) as well as a
decline of approximately 1.4% in acute hospital patient days (excluding the Netcare Rand and
Bell Street hospitals that are held-for-sale).

The decline in acute patient days in FY 2019 is primarily attributed to the creation of new
hospital networks by funders effective January 2019 and ongoing funder case management
activity that started in 2018, most notably in the medical respiratory disciplines.

Demand for mental health remains strong. Akeso experienced total patient day growth of
approximately 20.0% over the comparative base period (which was prior to the Netcare
acquisition). This has been boosted by the contributions from two new hospitals that were
opened in 2017 and 2018, respectively, and the expanded and refurbished Akeso George
Hospital, which re-opened in March 2019.

Up to August 2019, full week occupancy levels within acute hospitals (excluding Netcare Rand
and Bell Street hospitals) were at 66.0%, compared to 66.6% in the 2018 financial year (“FY
2018”). Acute hospital revenue per patient day increased by 4.3% to the end of August 2019.
Netcare continues to attract specialists and a net 100 doctors were granted admission rights
at acute and mental health facilities during the 11 months to August 2019.

Guidance provided at the time of Netcare’s interim results in respect of the EBITDA margin
for FY 2019 was a range of 20.0% to 20.3%. Full-year EBITDA margins are expected to be at
the higher end of this range, due to stronger traction on our cost efficiency initiatives.

A total of 57 mental health beds were added during the year under review, including the
expanded and refurbished Akeso George Hospital. There were no acute hospital beds added
during FY 2019. In line with Netcare’s focus on improving asset utilisation, ten under-utilised
acute hospital beds were converted to high demand haematology beds in January 2019 and
a further 19 beds were converted to higher demand disciplines in September 2019. Of the
100 beds transferred from Netcare Rand Hospital to Netcare Milpark Hospital, 48 beds were
opened in mid-September, a few weeks ahead of schedule.

PRIMARY CARE

The Primary Care division has delivered solid revenue growth for FY 2019 driven by the
expansion of its occupational health offering. EBITDA margins for the full year are expected
to increase from the 13.3% reported at the half-year.

DIGITISATION

Excellent progress has been made in achieving Netcare’s journey of implementing fully mobile
digitised patient and clinical records in terms of the strategy to deliver person-centred health
and care, which is digitally enabled and data driven. The blue-printing phase of the project
has been completed and the pilot programme at Netcare Milpark Hospital was successfully
launched in early September 2019. The pilot will be conducted in three wards before being
rolled out across the hospital in early 2020. The hospital is now the first in Africa to be able to
electronically prescribe medication with a fully integrated pharmacy dispensing system. The
system is also integrated with IBM Watson Micromedex, which allows automated drug safety
and interaction checks to improve medication safety during prescribing and administration.

SUSTAINABILITY

Netcare’s environmental sustainability initiatives continue to deliver value to the business
and have been recognised internationally through the prestigious 2019 Association of Energy
Engineers (AEE) Corporate Energy Management Award for the Sub-Saharan Africa region.
Netcare is the first healthcare company in Africa to receive this global award. This follows the
receipt of four Climate Champion Awards presented to Netcare in August 2019, including
three gold awards in the categories of Greenhouse Gas Emission Reduction, Climate
Resilience and Climate Leadership and a silver award for Renewable Energy. These awards
place Netcare second in the world among over 28 000 hospitals. Over the past six years
Netcare has reduced its energy intensity by 21% through these initiatives and is on track to
reduce its energy footprint by 30%.

REGULATORY UPDATE

National Health Insurance (“NHI”)

The amended draft NHI Bill published on 8 August 2019 paves the way for the establishment
of a NHI Fund, which will purchase services from accredited public and private healthcare
providers. Certain elements of the Bill remain unclear to the market and Netcare is actively
participating in engagements with policymakers on the detail of the Bill and will participate in
the parliamentary process. Given the inequality of access to quality healthcare and the
scarcity of resources, Netcare strongly supports an inclusive approach to improving
accessibility and quality of care. Netcare believes that the broader healthcare delivery system
can be constructively leveraged to create a healthier society.

The information provided in this update on FY 2019 trading has not been reviewed or
reported on by Netcare’s external auditors.

Netcare will be releasing its audited Group results for the year ended 30 September 2019 on
Monday, 18 November 2019.

27 September 2019

Sponsor
Nedbank Corporate and Investment Banking

Date: 27/09/2019 03:00:00
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