Sunday, May 28, 2023 | Netcare ups profits by almost half, but warns of worsening... | Netcare ups profits by almost half, but warns of worsening nurse shortage




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  • Netcare, which operates SA’s biggest network of private hospitals, reported profits jumped almost half in its six months to end-March.
  • The group continues to benefit from a post-Covid-19 recovery, and while its paid-patient days are yet to fully recover, they reached 98.5% of 2019 levels in March.
  • But the group warns SA is still facing a nursing crunch, and due to state constraints it is only training 360 a year, about 10% of its capacity.
  • For more financial news, go to the News24 Business front page.

Netcare, which operates the largest private hospital network in SA, said while a recovery from Covid-19 helped lift its interim profits by almost half, it’s still concerned about a worsening shortage of nurses in SA.

Net profit jumped almost 49% to R666 million in the half-year to end-March, it reported on Monday, with the company upping its dividend 50% to 30c per share.

Netcare, valued at about R22 billion on the JSE, operates more than 50 hospitals across SA, with the pandemic having pushed up costs while also forcing many to delay their non-urgent surgeries. The company said on Monday that acute hospital occupancies for March were at their highest level since the onset of the pandemic. For the six months, paid-patient days increased by just over 11%, and were at over 95% of pre-pandemic levels.

“This is the strongest set of results we have produced post the Covid period … and we intend to improve it even further,” CEO Richard Friedland said during an investor presentation on Monday.

While business was gradually returning to pre-Covid pandemic levels, Netcare warned of an impending structural constraint that will confront the whole healthcare sector in South Africa over the coming years.

Training gap

Netcare bemoaned the lack of nursing staff across South Africa, as the government has placed limitations on the training of new nurses. “The nursing issue probably represents the biggest single threat to the provision of healthcare in South Africa, both in terms of the public sector and private sector,” said Friedland. 

He added: 

We estimate, according to data that has been verified by the Health Department, that there is a shortage of between 26 000 and 62 000 nurses … in South Africa.

“If you think there are so many people desperate to acquire skills and unemployment is at an all-time high, one would think that government would be hard pressed to encourage the private sector to train as many as possible,” said Friedland.

“Unfortunately, that is not the case. And the South African Nursing Council has imposed a number of what we consider artificial and unnecessary restrictions on the training of nurses. We have an enormous opportunity as South Africans to increase the training of nurses. And in fact, the private sector has now been reduced to training 800 nurses a year.”

While Netcare has the capacity to train more than 3 500 nursing staff each year, it has now been restricted by the Nursing Council of South Africa to only training about 360 nursing students a year. Netcare said it received enquiries from more than 9 000 prospective students to be enrolled for training in 2023. Netcare said it had trained nearly 50 000 nurses over the past 24 years, an average of just under 2 100 nursing students a year. 

Friedland likened the artificial bottleneck to the load shedding crisis, which has resulted from inadequate electricity generation capacity as a result of ageing power stations.

Load shedding pressure

While Netcare has largely eliminated its reliance on Eskom for the provision of electricity to its hospitals and healthcare facilities, this has come at a high cost to the group, which is ultimately borne by the patients through a higher cost of services. The cost of using emergency generators is more than three times the cost of electricity, said Netcare. 

Electricity costs make up 5% of Netcare’s overhead costs, said Friedland. The group spent R67 million on diesel during the first half of the year, up from R9 million a year ago. For the full year in 2022 diesel cost Netcare R37 million to keep its hospitals powered.

Most of Netcare’s acute hospitals have full capacity to operate outside of the national electricity grid. “In addition, uninterrupted power supply systems and a fleet of 200 backup diesel generators support all facilities across the portfolio,” said Netcare. It said its solar panels installed at 72 facilities over the past decade is capable of generating up 20GW of electricity, which is used to ensure that safe care is sustainably delivered to its patients without disruption during load shedding.

Netcare has to date invested R589 million of capital on electricity generation, which has given it a sizeable solar panel capacity.

It said it expects its cost of keeping the lights on at its hospitals to increase substantially as load shedding intensifies over the coming years. 

During the period, it forked out R430 million in capital expenditure, R81 million of which was related to expansionary projects, including completion of the construction of the new 72-bed Netcare facility in Gqeberha in the Eastern Cape.

Shares in Netcare had fallen just over 1% in afternoon trade on Monday, but are up almost 2% on a one-year basis.

Click here for details of the company’s shares as well as other info.

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