Interim results for the six months ended 31 March 2022

Netcare delivers improved interim result

Monday, May 23 2022


“We wish to express our thanks and appreciation to our staff and doctors for their unwavering commitment and dedication in supporting our core purpose of delivering the best and safest care and enabling us to achieve our Group's strategic and operational goals,” Dr Richard Friedland, chief executive officer, Netcare Group.

• 2.3% increase in Group revenue to R10 311 million
• 8.8% growth in Group normalised EBITDA demonstrating strong operating leverage
• 100 basis point improvement in normalised EBITDA margin (excluding strategic costs) to 16.8%
• 28.9% increase in adjusted HEPS to 35.2 cents
• 1.7 times net debt to annualised EBITDA ratio, strengthening from 2.0 times in March 2021
• Dividend distribution continues with an interim dividend declared of 20.0 cents per share

South African private healthcare provider, Netcare, has delivered a steady improvement in financial performance over the six month period ended 31 March 2022 (H1 2022), when measured against the comparative interim period ended 31 March 2021 (H1 2021). This is notwithstanding the disruption to the operating environment caused by the fourth COVID-19 wave, driven by the Omicron variant.

Adjusted headline earnings per share (HEPS) rose 28.9% to 35.2 cents for H1 2022, which compares to 27.3 cents for H1 2021. Normalised operating profit grew by 14.0% to R1 043 million (H1 2021: R915 million) as improved activity levels and cost efficiencies translated into strong operating leverage. Profit after tax and exceptional items increased by 19.5% to R448 million (H1 2021: R375 million).

The Board has resolved to continue dividend distributions with an interim dividend declared of 20.0 cents per share.

Although more transmissible, the Omicron variant was characterised by a decoupling of the direct correlation between the rate of community transmission and rate of hospitalisation. Despite lower patient volumes experienced in December 2021 and January 2022, there has been high demand for private healthcare services since the fourth wave subsided.

Netcare chief executive officer, Dr Richard Friedland, commented, “The strong operating leverage achieved in H1 2022 is encouraging and it is equally pleasing that as the market transitions, our strategic projects remain on track. The rollout of the CareOn digitisation project in hospitals is progressing well, in line with budget and timelines, and is set to achieve expected efficiencies. Additionally, the new 427-bed Netcare Alberton Hospital opened in April 2022, where we are already seeing good occupancy levels, while the new 36-bed Netcare Akeso Richards Bay mental health facility opened in early May 2022.”

The Group’s environmental sustainability strategy is delivering tangible benefits and continues to achieve national and international recognition.

Group revenue increased by 2.3% to R10 311 million (H1 2021: R10 081 million).

Normalised EBITDA grew by 8.8% to R1 625 million (H1 2021: R1 493 million), and the normalised EBITDA margin, including strategic operational costs, improved to 15.8% (H1 2021: 14.8%).

Dr Friedland added, “The improvement in margin is largely as a result of higher occupancy levels since late January 2022, well managed costs and a reduction in COVID-19 personal protective equipment (PPE) expenditure. These factors have all contributed to absorbing the negative impact of lower occupancies in December 2021 and early January 2022 during the fourth wave.”

The Group incurred operational costs relating to strategic projects of R112 million (H1 2021: R96 million) during the period, with a further R161 million to be incurred in H2 2022.

Normalised EBITDA margins, excluding the strategic costs, strengthened from 15.8% in H1 2021 to 16.8% in H1 2022.

Strong cash generation during the period under review has resulted in net debt remaining at comfortable levels, with an annualised EBITDA ratio of 1.7 times (H1 2021: 2.0 times), which is well within banking covenants. Group net debt (exclusive of IFRS 16 lease liabilities) declined to R5.4 billion from R6.1 billion at 31 March 2021, which is due to the higher operating profit, partially offset by ongoing capital expenditure and the resumption of dividend payments.

The Group's healthy statement of financial position has facilitated continued investment in core projects, with R410 million invested in capital expenditure during the period. Of this, R145 million related to expansionary projects, including the completion of the construction of the Netcare Alberton Hospital. Capital expenditure of R24 million (H1 2021: R18 million) was invested in the CareOn project.

As at 31 March 2022, the Group had cash resources and available undrawn committed facilities of R3.4 billion.

Segmental performance - Hospital and emergency services

Hospital and emergency services comprise acute and mental hospitals, as well as emergency and ancillary services.

Hospital activity during December 2021 and the first three weeks of January 2022 was impacted by low COVID-19 admissions, together with reduced non-COVID-19 admissions due to sector seasonality and patient sentiment around hospitalisation, informed by the devastating effect of the previous Delta variant. However, after the fourth wave subsided and schools opened, the division experienced a steady increase in activity in both medical and surgical cases. February and March 2022 recorded the highest level of non-COVID-19 activity since the start of the pandemic.

Full week occupancy levels within acute hospitals increased to 55.5% in H1 2022 from 53.8% in the comparative period, with average occupancy across February and March 2022 of 62.4%. Occupancy levels have shown a strong recovery in the Group’s mental health facilities, increasing from 60.6% in H1 2021 to 64.2% for H1 2022, with an average occupancy across February and March 2022 of 78.8%.

Divisional revenue for H1 2022 increased by 2.2% compared to H1 2021, while normalised EBITDA grew by 8.0% to R1 554 million. Normalised EBITDA margins strengthened to 15.5% from 14.7% in H1 2021. The normalised EBITDA margin within the hospital and pharmacy operations sub-segment, excluding the impact of operational costs related to strategic projects, strengthened to 16.7% from 15.6%. The higher margin is attributable to improving occupancy levels, cost efficiencies and lower COVID-19 costs.

In line with the Group’s asset light strategy, no new acute beds were commissioned during H1 2022. The Group continually reviews the assets in its portfolio and elected to close the 28 bed Netcare Ceres Hospital in October 2021 and the 60 bed Netcare Bougainville Hospital in February 2022. Both facilities are in the process of being sold and a related property impairment of R11 million has been recognised in the reporting period.

Segmental performance - Primary Care

Revenue grew by 5.5% due to an increase of 3.1% in medical and dental consultations coupled with a 3.6% increase in occupational lives under management. This increase in activity, together with stringent cost management, resulted in EBITDA growth of 31.5% with EBITDA margins improving from 18.4% in H1 2021 to 23.0%.

Strategic projects

The digitisation of the Group’s entire ecosystem across all service offerings will provide Netcare’s long term sustainable competitive advantage in delivering person centred health and care that is digitally enabled and data driven. Netcare continues to differentiate itself through a number of key strategic projects underpinning this goal.

A major focus of these projects is to provide electronic medical records (EMR) across all divisions of Netcare. The CareOn hospital EMR has been successfully implemented at 14 hospitals to date (comprising approximately 2 500 beds) since the start of the project in 2020. In addition, over 8 000 healthcare professionals have been trained, comprising nurses, doctors, allied health professionals and pharmacists. The project remains on track for 20 hospitals to be completed by the end of 2022, with the full implementation across the entire hospital portfolio, scheduled for completion by the end of 2023.

Similarly, good progress has been made on the digitisation of Akeso, National Renal Care (NRC) and Medicross, which is expected to be fully implemented by the end of 2022. NRC has also launched a comprehensive renal care App, providing patients with electronic access to their records following each dialysis treatment.

In H1 2022, the Group invested capital expenditure of R71 million and incurred operational costs of R112 million on various strategic projects.

Promoting access to healthcare

NetcarePlus continues to gain momentum and launched dental vouchers, prepaid ear, nose and throat (ENT) procedures and GapCare cover – a range of three gap cover products underwritten by Hollard – during the period under review.

Empowering enterprise supplier development

Netcare has established an administration and logistics company, Netcare Diagnostics, which supports a new black female owned pathology service provider, through the provision of equipment and specialised infrastructure, logistics, administration, finance and operational support. The first stage rollout of blood gas analysers at Netcare’s intensive care and high care units has been completed, with 113 analysers in operation by the end of March 2022.

Netcare has also established a 51% black female owned dosimetry services business, which offers services to enhance the protection of healthcare professionals exposed to radiation. These services have been implemented across Netcare’s facilities as well as being offered to external clients.

Environmental sustainability

Since the implementation of Netcare’s environmental sustainability strategy in 2013, absolute Scope 1 and Scope 2 emissions have been reduced by 8%, with a 28% reduction in the intensity of Scope 2 emissions per bed. Energy intensity per bed has been reduced by 28% and is ahead of the initial 10 year target.

Bolder targets have been set for 2030, with a primary target to reduce Scope 2 emissions to zero by 2030 and to reduce Scope 1 and 2 emissions by a combined 84%. The Group’s 2030 strategy aims to achieve 100% utilisation requirements from renewable sources, with zero waste to landfill and a 20% reduction of impact on water sources.

Dr Friedland added, “It is very pleasing to report that for the second consecutive year, we have achieved the distinction of being the only healthcare institution in the world to win gold medals in all four categories of Greenhouse Gas Reduction (Energy), Renewable Energy, Climate Resilience and Climate Leadership, in the latest global Health Care Climate Challenge Awards.”

The awards are organised by Global Green and Healthy Hospitals (GGHH), an initiative of Health Care Without Harm (HCWH). The GGHH network comprises over 1 500 members in 75 countries representing the interests of over 60 000 hospitals and health centres.

In addition, Netcare was recently awarded the Commercial Corporate Company of the Year Award in South Africa by the Southern African Energy Efficiency Confederation (SAEEC) for outstanding accomplishments in developing, organising, managing and implementing its corporate energy management programme.

These awards solidify the Group’s standing in the global and local community of environmentally conscious healthcare institutions across all continents.

KwaZulu-Natal floods

Netcare 911 provided significant support, and participated collaboratively with multiple agencies in the search, rescue and retrieval operations during the devastating floods in KwaZulu-Natal. Disruptions to power, water and oxygen supply at Netcare’s various facilities were well managed.

“During this time,” said Dr Friedland, “our thoughts and prayers remain with the people of KwaZulu-Natal who have seen lives lost, people injured and extensive damage to property, leaving many without homes amidst catastrophic heavy rainfall and floods.”


While Netcare is encouraged by the continued improvement in performance, the outlook for the remainder of the 2022 financial year largely depends on the evolution of the COVID-19 pandemic and the various potential scenarios that may emerge. The new Omicron sub-variants (BA.4 and BA.5) that have recently emerged are currently driving an increase in COVID-19 positive cases in South Africa. While the impact of these subvariants appears to be mild thus far, reflected in relatively low hospitalisation and lower mortality, it may weigh on patient sentiment and could affect activity in the short term.

In addition, the possibility of further waves of COVID-19 does exist. However, in the absence of a new highly transmissible and virulent variant of the virus, and against the background of increasing levels of immunity from natural infection and vaccination, there may be a reduction in the severity of such potential waves if the serial mutation of the Omicron variant continues. Should this scenario eventuate, allowing South Africa to move from a pandemic to a more stable endemic state in which outbreaks are not overly disruptive and are largely controlled by significant and frequent vaccination, recovery in activity over time to pre COVID-19 levels can reasonably be foreseen.

A further factor that is beginning to emerge is the effect of Long COVID, which refers to a wide range of physical and mental health complications that subsequently present in patients who have previously contracted COVID-19. Medical experts have noted over 200 conditions and long term effects to date. This wide spectrum of clinical conditions may influence future demand for medical services, including primary care, dialysis, acute care and mental health.

The instability of the national electricity grid in South Africa remains a key risk, as frequent power outages necessitate an increasing reliance on diesel powered generators, where prices are escalating. The national shortage of nurses is a further risk and the attraction and retention of scarce skills remains a critical imperative for the business.

Dr Friedland concluded, “The macro environment continues to be impacted by global supply chain constraints, higher inflationary pressures and rising interest rates. These factors are likely to worsen, prolonging supply chain bottlenecks and placing increasing pressure on prices. As a precautionary measure, we have brought forward the procurement of IT equipment for CareOn, to ensure that the project is not impacted by any undue delays resulting from supply chain problems, or elevated prices.”



The Netcare Group (JSE: NTC) offers a unique, comprehensive range of medical services across the healthcare spectrum, enabling us to serve the health and care needs of each individual who entrusts their care to us. Our focus on implementing sophisticated digital systems will enable us to provide care that is fully integrated and an enhanced experience across our Group's operations. At Netcare, we are striving to change healthcare for the better. In addition to its world-class acute private hospital services, Netcare provides:
• radiosurgery, radiotherapy, chemotherapy, bone marrow transplant and robotic-assisted surgery through Netcare Cancer Care;
• primary healthcare services through Netcare Medicross;
• emergency medical services through Netcare 911;
• occupational health and employee wellness services through Netcare Occupational Health;
• mental health and psychiatric services through Netcare Akeso;
• innovative solutions to increase access to quality and affordable private healthcare through NetcarePlus; and
• renal dialysis services through National Renal Care (NRC).

Netcare is also a leading private trainer of emergency medical and nursing personnel in the country.

For more information visit

Issued by: MNA on behalf of Netcare
Contact: Martina Nicholson, Meggan Saville, Estene Lotriet-Vorster or Clementine Forsthofer
Telephone: (011) 469 3016
Email: [email protected],[email protected], [email protected], [email protected] or [email protected]