Netcare (NTC) Slower than expected recovery

Netcare’s FY21 results show a slower than expected recovery, in our view. We were bullish about the group’s recovery prospects in anticipation of relaxed Covid restrictions, but the pace of recovery is sluggish. Hospital and Emergency services division revenue, which comprise c. 96% of group revenue, has not recouped its FY20 losses.
Management cited the second and third Covid-19 waves’ impact on patient admissions. The low growth in revenue per patient days may have weighed on NTC’s revenue, in our view. NTC has lagged Life Healthcare in the extent of growth in revenue generated per acute hospital paid days, even as NTC’s length of acute hospital stay has been longer than that of LHC. In our opinion, NTC hospitals’ participation in restricted (low-cost) networks, which was later reduced through competitive pricing, might have impacted the growth in revenue per patient days.
NTC was not as defensive to Covid restrictions as its peers during FY20.