Netcare shares buoyed by strong results

Netcare – the second largest JSE-listed private hospital group in terms of market cap – saw its share price firm over 4% on Monday, after it reported a robust set of annual results with headline earnings and dividends up by double-digits.

Group CEO Richard Friedland told Moneyweb the results represent Netcare’s best financial performance yet post-Covid and despite tough marco economic conditions.

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Netcare reported full year adjusted headline earnings per share (Heps) to the end of September 2023 had surged 27% (from 83.2c in FY2022 to 105.7c), on the back of revenue increasing 9.5% to R23.7 billion.

The group declared a gross final dividend of 35c per ordinary out of income reserves. This brought its total dividend per share for the year to 65c, 30% up on the prior financial year.

It also highlighted that group Ebitda (earnings before interest, taxes, depreciation, and amortisation) was up 14.5% for the year, to R4 billion.

Its share price hit a two-month high on Monday, trading 4.7% up and around the R13.60 mark just before 2pm.

Netcare’s share price

“Netcare is encouraged by the ongoing improvement in the group’s financial performance as demand continues to normalise from the impact of the Covid-19 pandemic,” the group noted in its results media statement.

“The higher activity levels, coupled with ongoing efficiencies, resulted in strong operating leverage and an improvement in group Ebitda margins of 120 basis points to 17.4%, from 16.2% in FY 2022,” it added.

Friedland told Moneyweb that while the group’s performance was strong, it could not be compared to the pre-Covid period due to “a totally different operating environment”.

“Notwithstanding the constrained macro environment, with SA’s low economic growth, Netcare Group has delivered a robust performance, delivering on all operational and strategic targets over the past financial year,” he reiterated.

Outlook

He said although the macro environment remains impacted by load shedding, global supply chain limitations, constrained consumers, high levels of unemployment as well as high inflation and interest rates, Netcare has several measures in place to mitigate these challenges and remains focused on optimising the progress made into its new financial year.

For FY2024, the group expects revenue growth of between 7.5% and 9.5%. Total patient days are expected to grow by between 2.5% and 3.5% off a largely normalised base.

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“The increased activity will drive further Ebitda margin expansion, improved earnings and a higher return on invested capital,” it said.

“We are confident that our strategy remains relevant, and we are firmly committed to realising growth opportunities, improving returns and the successful execution and completion of our key strategic projects. Notwithstanding the fluid economic environment, we expect ongoing improvements in the operational and financial performance of the business in FY 2024 and beyond,” added Friedland.

New CEO update

Meanwhile, Netcare announced that Friedland will be staying on longer as CEO, with the group only expected to have its new CEO coming on board in 2025.

“After an extensive search, Netcare has identified a preferred CEO candidate. Given that the candidate is unavailable for an extended period, details will remain confidential at this stage,” the group said in its results Sens announcement.

“At the board’s request, Dr Richard Friedland has agreed to continue as CEO beyond September 2024 for a further six months,” it added.

Friedland has been Netcare CEO since 2005, having been with the group for three decades.