Netcare nosedives after trading update
The private hospital group says it expects earnings per share for the year to end-September to fall as a result of weaker trading conditions in the UK
Netcare’s share price dropped as much as 10% on Wednesday after the company warned that the loss per share was expected to be at least 36.8c, representing a 130% decline in earnings per share from 2016’s 122.6c for the year to end-September, largely due to R5.56bn in impairments.
The hospital group, which expects to release its results on November 20, said in a statement on Tuesday that headline earnings per share (heps) were expected to fall between 5% and 10%, from the previous period’s 119c, citing tough trading conditions in SA and the UK.
The UK’s performance was affected by demand management initiatives implemented by the National Health Service and private medical insurers, which affected patient activity. Lower tariffs for National Health Service work took effect on April 1, the group said.
The impairments were softened by a large noncash accounting profit of R937m. This resulted from a mark-to-market valuation of UK-based BMI Healthcare’s long-term leases.
In a supplementary statement on Wednesday, the group said SA’s adjusted heps, excluding the discontinued Emergency Services business in Mozambique, represented a year-on-year decline of between 8% and 9%. The adjusted heps figure excluded impairments, which the company said it believed was a more appropriate indicator of financial performance. Under this measure, the group’s heps was expected to be between 22.5% and 27.5% lower at between 44.9c and 54.9c.
Electus fund manager Neil Brown said the decline in the local performance was to be expected due to the significant pressure placed on networks by medical aid schemes over the past 12 months.
The UK business remained a longer-term option for Netcare, but would require significant capital expenditure, said Brown.
Netcare closed 6.73% lower to R23.55 and is off 26.04% so far in 2017. The JSE’s healthcare index is off 8.08% in 2017.