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Netcare a picture of health

May 04 2010 14:52
Andile Makholwa

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Last traded 40
Change 0
% Change 1
Cumulative volume 4396418
Market cap 0

Last Updated: 28-08-2015 at 05:05. Prices are delayed by 15 minutes. Source: McGregor BFA

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Netcare sees pick-up in earnings

Johannesburg – Hospital group Netcare [JSE:NTC] has signalled it’s in for a solid 2010 financial year – and analysts say organic growth and further expansion in the UK bode well for the company. 

In a trading update on Tuesday, Netcare said it expected headline earnings per share growth for the six months to end-March 2010 to come in by between 20% and 30%, compared with the same period last year.  

Through its subsidiaries, joint ventures and associates, Netcare operates a chain of private hospitals in South Africa and the UK. These provide a wide range of medical and health-related services, including specialised facilities.    

"This [the trading update] was in line with our expectations and if one assumes similar growth in the second half, the top end of this range is in line with consensus forecasts for the full year to September 2010," said Investec Asset Management’s Neil Stuart-Findlay.  

"Netcare has a defensive, cash-generative business model given its exposure to the South African and UK healthcare industries. Hence it is not a surprise that as the trading statement confirms, earnings have grown in both geographic areas."

Cadiz Asset Management’s Mark Ansley said price increases negotiated with the funders – the medical schemes – have been reasonable, and thus benefited the hospital group. 

Netcare's growth in earnings comes despite a continued loss of contracts with the UK's National Health Service (NHS). However, analysts said these were too small to have had any significant impact on Netcare, and that the loss of the contracts had been well communicated to investors.

"The UK remains a market for strong growth for Netcare going forward," said Stuart-Findlay.  

Said Ansley: “Good organic growth for Netcare is still available in South Africa, and the opportunity to increase bed utilisation is a key target for the General Health Group (GHG) in the UK.”

Last year, GHG shareholders in the UK indicated that a listing on the London Stock Exchange was planned - a development that may present Netcare with an opportunity to increase its stake in the firm.

Netcare’s results are expected to be released on May 17.




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