Nicola Mawson
20 November 2007
Johannesburg — HOSPITAL group Network Healthcare Holdings (Netcare) expects a small profit from its UK operations next year as it starts reaping the benefits of its investment.
The company, which now earned 52% of its revenue from its UK operations, said it also expected capital expenditure of £50m-£60m.
Netcare said yesterday that revenue grew 66,8% to R18,6bn from R11,2bn in the year to September. Operating profit improved 89,5% to R2,9bn from R1,6bn while net profit, which benefited from the addition of reversed tax, grew 103,9% to R1,1bn from R537m.
Netcare bought a controlling stake in London-based General Healthcare, the UK's largest provider of acute private care, in a R23,7bn deal in May last year. The acquisition has been included for a full year for the first time.
In the next financial year, the company expected local operations to grow revenue 6%-8%, although margins were expected to be flat. The company said capital expenditure would take up R700m-R800m.
CEO Richard Friedland said the company, which has 26000 staff and serves 3,5-million to 4,5-million patients a year, spent R821m in capital in SA last year.
Netcare, which commissioned two new greenfields hospitals, acquired the remaining interest in Community Hospital Group. Its forecast capital expenditure for next year would include R100m on this addition.
Friedland said the company would continue to "invest heavily in SA to meet demand".
Demand was being driven by growth of medical aid membership, expansion of the self-pay market and increased use of the private hospital sector.
He said the company would seek to increase accessibility and affordability in SA, and aimed to forge partnerships with the government. Netcare's hospital price increases were on par with medical and general inflation last year at 5,7%.
Primary care, a lower-margin focus area, saw price rises of 2,6%. Growth of the primary care business resulted in flat margins, he said.
In the UK, Friedland expected consolidation and competition in the sector to place pressure on margins, but said the company had benefited from operational improvements and had a new management team in place.
Friedland said Netcare was on track with plans to grow revenue in the UK after a two-year restructuring .
The company had listed its Ampath stake as for sale, although it did not disclose a valuation.
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