Stagnant medical aid schemes see Netcare normalized profits down 7.9%

JOHANNESBURG  – Private healthcare group Netcare on Monday reported a 7.9 percent decrease in normalized group profit after taxation to R1.115 billion for the six months ended 31 March 2019, down from R1,211 billion the previous year. 

But the group reported a 2.4 percent increase in headline earnings per share (HEPS) and delivered a resilient performance in a challenging economic and healthcare environment.

Netcare said the constrained environment has been exacerbated by the number of medical scheme members in South Africa remaining stagnant, while there has been an acceleration in the number of hospital networks introduced by medical schemes. 

Dr Richard Friedland, Netcare group chief executive, said these networks restrict member access to specified hospital facilities, thereby allowing medical schemes to shift market share in return for price discounts. Friedland remain firmly focused on executing their strategic objectives. 

"Pleasing progress has been made in this regard, and the integration of Akeso Clinics has proceeded smoothly, while this recently acquired Netcare business continues to experience strong activity growth, while also expanding its footprint," he said.

Group revenue from continuing operations grew by 5.6 percent to R10.5 billion, up from R9.9 billion the previous year, while normalized group earnings before interest, tax, depreciation and amortisation (EBITDA) increased 1.3 percent to R2.1 billion.

Netcare said the challenging healthcare landscape was expected to continue into the second half of the 2019 financial year. 

It said lower occupancies resulting from funder case management, the growing prevalence of restricted hospital networks and lower foreign caseload was likely to place EBITDA margins under pressure in the second half.

The group said it remained committed to its disciplined capital management guidelines and an interim dividend of 47.0 cents per share has been declared. 

"We remain focused on controlling costs and improving efficiencies, while continuing to drive strategic objectives and maintaining the consistently high levels of quality of care and clinical outcomes that patients and funders demand," Friedland said. 

– African News Agency (ANA) 

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