Netcare says it has seen an emerging trend of new medical scheme members taking out cheaper plans as households continue to struggle financially in South Africa.
Netcare published its unaudited interim group results for the six months ended 31 March 2023, posting what it described as a “robust financial performance”, given the prevailing economy.
The group said that its finances for the period under review were strong compared to the six-month period ended 31 March 2022, even as the post-Covid-19 environment started to normalise.
It added that Covid-19 activity levels are at their lowest since the pandemic began in 2020 and have been absorbed into daily operations.
Moreover, it saw an improvement in the demand for private healthcare services, with an 11.5% increase in total paid patient days (PPD).
The group said that the improvement in activity has increased revenue for H1 2023 by 9.7% compared to H1 2019.
“Notwithstanding the fluid macroeconomic environment, we are encouraged by the ongoing improvement in our operational and financial performance,” the group said.
“We are confident that our strategy positions us to benefit from the positive long-term dynamics driving growth in healthcare and we remain committed to realising growth opportunities, improving returns and the successful completion and delivery of our key strategic projects.”
The group released the following key financials:
- 11.9% increase in Group revenue to R11,537 million
- 24.0% growth in Group normalised EBITDA
- 220 basis point improvement in Group normalised EBITDA margin (excluding strategic costs and generator diesel costs) to 19.1%
- 31.5% increase in adjusted headline earnings per share HEPS to 46.3 cents
- 50.0% increase in interim dividend to 30.0 cents per share (64.8% of adjusted HEPS)
New medical scheme trend
Despite the positive results, the group noted that economic headwinds are affecting customers, especially those entering the market.
The group said that existing medical scheme members have mostly retained their benefit plans. However, new medical scheme entrants are being priced out of more inclusive plans.
Increasing pressure on disposable income means that new medical scheme entrants are looking for cheaper, restricted plans.
Despite the limited growth in medical scheme membership, the group said it was encouraged by the existing pool of covered lives, demonstrating the sustainable demand for private healthcare.
Despite load shedding having a serious effect on other businesses, Netcare said that it was able to contain these costs.
It said that most of its acute hospitals have full island capacity, allowing them to work completely off the grid. 200 backup diesel generators are also able to support its system.
The group also invested in a major solar power base across 72 sites, which is used during daylight hours and load shedding to ensure that care is still possible.
Diesel costs are expected to reach R165 million for the full year, an increase from R37 million in FY 2022.
The group added that the national shortage of nurses is a significant constraint on the health sector.
It added that retaining the scarce skills of nurses is crucial for the business.
However, it said it is working with the government, regulatory bodies and other stakeholders to improve its under-utilised college capacity to improve the number of nurses in the country.
Although the group currently has the capacity to train 3,500 nurses, it is only accredited for 360 – despite the 9,000 prospective students for the 2023 year.