Netcare financially weathers Covid-19 tumult – but remains concerned about a possible fourth wave

NETCARE has expressed concern about the possibility of the outbreak of a fourth wave of Covid-19 infections in South Africa after the private hospital group was battered by successive waves in the past year.

Netcare on Friday said the Covid-19-related costs had continued to weigh on its margins for the year ended September 30, 2021, given the higher prices paid for personal protective equipment (PPE) due to global supply shortages and uncertain lead times.

This was in addition to absorbing lower activity levels throughout the pandemic as Netcare had to temporarily suspend elective surgeries at the height of the second and third waves to deal with rising Covid-19 cases.

Since the onset of the pandemic in March 2020, Netcare has treated 126 130 Covid-19 patients and admitted 54 474, with 25.6 percent being treated in High Care or Intensive Care.

Netcare said, inventory levels continued to decline as the higher-priced PPE and drugs procured during the first Covid-19 wave were consumed, with an overall reduction of approximately R550 million in inventory balances since September 2020.

“The challenges of weathering significant rolling waves of Covid-19 and the short recovery periods between waves have impinged on our momentum towards a full recovery to pre-Covid-19 levels,” Netcare said in a trading update.

“However, average full week acute hospital occupancies continued to improve in the second half of 2021 to 58 percent compared to 53.8 percent in the first half, and 42.8 percent in the second half of 2020.”

Netcare said in the absence of a fourth wave, further stabilisation of hospital activity was anticipated due to enhanced patient sentiment and growth in elective procedures.

The group said the benefits of learnings and experience gained during the pandemic to date contributed to the continued sequential improvement in financial performance, in the second half of 2021, as well as a robust improvement in the group’s year-on-year financial results. It said its financial position remained strong, with net debt levels reduced by R1.1 billion during the past year and the business was compliant with its banking covenants.

Revenue for the 2021 financial year grew within a range of 11.3 percent to 12.4 percent when compared with the previous year. The group’s full-year earnings before interest, taxes, depreciation and amortisation also increased by between 21.6 and 26.5 percent against the low base in 2020.

Sasfin portfolio manager Nesan Nair said Netcare had seen a “massive increase” in the number of patients that checked in during this financial year.

“They are pointing towards a much more improved financial performance,” Nair said. “Of course they have been very busy, but just on the patients numbers mentioned they seem to be quite positive that they have managed to make several breakthroughs and looking to grow their business in the next few years, obviously based on the impact the Covid-19 pandemic has had in the past year and a half.”

Meanwhile, Netcare said it had adopted a conservative approach in electing to impair its Lesotho-related investments in the amount of R30m.

This was in light of the early termination of the Lesotho Public-Private Partnership agreement by the Government of Lesotho and ongoing uncertainty with regard to the resolution of matters under dispute.