Netcare (NTC) – Patiently recovering bed days

NTC continues to generate healthy cash flow from its operations, but its revenue growth has been weighed down by the sluggish recovery at its Hospitals and pharmacy operations. However, the Primary Care division has broken its cycle of revenue declines since 1H20 and a robust improvement in Non-acute services’ patient days and occupancy boosted group revenue growth in 1H22. The Hospital and emergency services division which comprises c. 97% of group revenue, fell just shy of pre-Covid revenue.
Hospital and pharmacy operations’ patient days have been below 1m days in both 1H21 and 1H22. These lower bed days compared to pre-Covid, in combination with relatively low growth in revenue per paid patient days, resulted in the low levels of revenue growth that the group has recorded.
The evidence so far of a gradual recovery in revenue and incremental margin expansion across the group as a whole is encouraging, including the >60% occupancy experienced during February and March (also reported by competitors LHC and MEI). Management indicated that it has retained and increased the share of its hospitals in the funders’ preferred network providers, with some plans also awarding the hospitals anchor status. These initiatives will help increase hospital patient days