- Revenue: Increased by 4.3% to ZAR12 billion.
- EBITDA: Grew by 7.5% to ZAR2.1 billion.
- EBITDA Margin: Maintained at 19.1% excluding strategic and generator diesel costs.
- Adjusted Headline Earnings per Share (HEPS): Rose by 5.8% to ZAR0.49.
- Interim Dividend: Declared at ZAR0.30 per share, representing 61.2% of adjusted HEPS.
- Net Debt-to-EBITDA Ratio: Increased to 1.3 times from 1.2 times.
- Hospital and Emergency Services Revenue: Grew by 4.3% to ZAR11.7 billion.
- Hospital and Emergency Services EBITDA: Increased by 8.2% to ZAR2.1 billion.
- Hospital and Emergency Services Operating Profit: Rose by 9.3% to almost ZAR1.5 billion.
- Primary Care Revenue: Grew by 6.3% to ZAR337 million.
- Primary Care EBITDA: Declined by 9% to ZAR71 million.
- Return on Invested Capital (ROIC): Improved to 10.9%.
- Share Buyback Program: Invested ZAR684 million to repurchase 54.7 million shares.
- Profit Before Tax: Increased by 7.1% to ZAR1 billion.
- Profit After Tax: Amounted to ZAR716 million, a 7.5% improvement.
- CapEx Spend: ZAR510 million during the six months.
- Gross Debt: ZAR7.4 billion at March 31, 2024.
- Cash Balances: ZAR1.6 billion.
- Net Debt: ZAR5.8 billion at the half year-end.
- Cost of Debt: Increased to 9.4% from 8.9% at September 2023.
- Dividend and Share Buybacks: ZAR613 million returned to shareholders in the current reporting period.
Release Date: May 20, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Revenue rose by 4.3% to ZAR12 billion, indicating steady financial growth.
- EBITDA increased by 7.5% to ZAR2.1 billion, showcasing strong operational leverage.
- Adjusted headline earnings per share rose by 5.8% to ZAR0.49.
- Completion of the rollout of electronic medical records across the entire ecosystem, meeting financial expectations.
- Netcare's environmental strategy has led to significant cost savings and reduced reliance on the national grid.
Negative Points
- Total patient days for the first half of 2024 declined by 0.8%, with acute hospitals seeing a 1.7% decline.
- Average acute hospital occupancies slightly decreased to 62.1% from 62.6% in the comparative period.
- EBITDA margin for the primary care segment declined to 21.7%, impacted by lower activity and increased contribution from lower-margin occupational healthcare business.
- Net debt-to-EBITDA ratio rose to 1.3 times from 1.2 times in the comparative period.
- Higher interest rates and increased net debt balances led to a rise in financial expenses.
Q & A Highlights
Highlights of Netcare Ltd (JSE:NTC, Financial) Earnings Call Transcript
Q: Can you please further elaborate why patient admissions are well below the pre-pandemic levels? Can you quantify respiratory disease admissions and maternity case admissions relative to pre-COVID? And how confident are you that these will return back to normal?
A: (Erich Bock, Managing Director - Hospital Division) Our occupancies have recovered to 95% and above of our 2019 figures. The largest impact on our lower occupancy remains the out-migration of lower-margin day cases. Maternity cases are declining due to global trends and economic factors. Respiratory admissions have decreased since COVID, with more people self-medicating at home. However, ICU and high care occupancies have increased by more than 10% compared to pre-pandemic levels.
Q: The occupancy rate of 72.3% thus far in May is quite remarkable. Could you perhaps elaborate on some of the factors behind that performance?
A: (Erich Bock, Managing Director - Hospital Division) May is generally a strong month for us. We've seen a recovery in surgical cases and an increase in viral infections, which started at the end of April and continues.
Q: Congratulations on a strong occupancy in May. Could you comment on how this compares to pre-COVID occupancy for May in 2019? Could you also provide some color on trends in Netcare's hospital occupancies by province if the occupancies in some provinces are materially higher or lower than the group average occupancy?
A: (Erich Bock, Managing Director - Hospital Division) Occupancy levels are close to 99% of pre-pandemic levels in coastal regions and Gauteng. However, provinces with lower LSM groups have seen a negative impact due to migration to lower-cost networks.
Q: What is the benefit to Netcare in terms of having the EV charging point on their site?
A: (Richard Friedland, Group Chief Executive Officer) There is no direct financial benefit. However, it aligns with our commitment to environmental sustainability and encourages the use of electric vehicles.
Q: Could you provide more details on the financial performance and strategic initiatives?
A: (Keith Gibson, Group Chief Financial Officer) Revenue grew by 4.3% to ZAR12 billion, and EBITDA increased by 7.5% to ZAR2.1 billion. We have completed the rollout of electronic medical records and are focusing on digitization and data-driven strategies to improve patient outcomes and operational efficiencies.
Q: How is Netcare addressing the challenges posed by load shedding and water supply disruptions?
A: (Richard Friedland, Group Chief Executive Officer) We have measures in place, including full island capacity for hospitals, backup diesel generators, solar power installations, and water reservoirs. These ensure minimal impact on operations.
Q: What are the key strategic projects and their expected impact on Netcare's performance?
A: (Richard Friedland, Group Chief Executive Officer) Our strategy includes digitization, data-driven initiatives, and person-centered health and care. We have completed the first phase of electronic medical records implementation and are now focusing on clinical efficiency and patient engagement.
Q: Can you provide an update on Netcare's environmental sustainability initiatives?
A: (Richard Friedland, Group Chief Executive Officer) We have achieved significant savings and cost avoidance through our environmental sustainability strategy. Our targets include reducing Scope 2 emissions to zero and achieving 100% renewable energy utilization by 2030.
Q: What is Netcare's guidance for the remainder of the financial year?
A: (Richard Friedland, Group Chief Executive Officer) We expect total patient day growth between -0.5% to 0.5%, group revenue growth of 5% to 5.5%, and continued benefits from ongoing efficiencies. CapEx is expected to be ZAR1.4 billion.
Q: How does Netcare view the recent signing of the NHI Bill?
A: (Richard Friedland, Group Chief Executive Officer) We support universal healthcare but have concerns about the bill's flaws and the legislative process. We welcome the President's desire to work with all interested parties to improve the bill.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
