Netcare weighed down by UK unit, but investors seem unconcerned
Earnings more than halved in the year to September largely due to Netcare's UK business, GHG
Investors in private hospital group Netcare shrugged off news on Monday that its earnings had more than halved for the year to September 30, largely due to issues with its UK business BMI Healthcare.
Headline earnings per share fell to 49.3c, compared with 109.9c the year before. The news was in line with investor expectations, as Netcare issued a trading statement last week saying it expected to report headline earnings per share would be between 44c and 55c.
Shares in Netcare rose as much as 5% to R26.
Headline earnings per share is the key profit measure used in SA financial reporting, as it strips out certain once-off items.
Netcare announced in March that it had decided to exit the UK and dispose of its controlling stake in the UK’s biggest private hospital group, GHG, due to tough trading conditions and its inability to negotiate lower rent after five years of talks. It has yet to find a buyer, it said on Monday.
Netcare said the UK operations had been deconsolidated and classified as a discontinued operation in order to allow comparison of the group’s underlying trading results. The continued operations of the group are now composed solely of Netcare’s South African operations.
Group revenue from continued operations grew 8.4% to R20.7bn, compared to R19.1bn in 2017. Normalised earnings before interest, tax, depreciation and amortisation increased 5.9% to R4.2bn, compared to R3.4bn the year before.
Adjusted headline earnings per share from continued operations remained virtually flat, rising a mere 0.6% to 171.6c, compared to 170.6c in 2017.
Netcare announced that it had received several offers for its planned sale of the Netcare Rand and Bell Street hospitals, which it was required to do by the Competition Tribunal following the approval of its acquisition of the Akeso mental healthcare group.
Netcare said it planned to spend R1.6bn on expanding its operations in SA, of which R600m would provide an extra 100 beds at Milpark Hospital, which would be commissioned in 2020.
Netcare said it would return excess capital to shareholders in the form of share buy backs or special dividends if there were no attractive investment opportunities for the group.
Netcare declared a final dividend of 60c, and a special dividend of 40c.