UPDATE 1-South Africa's Netcare scraps 2020 outlook due to coronavirus

  • Reuters
UPDATE 1-South Africa's Netcare scraps 2020 outlook due to coronavirus

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JOHANNESBURG, March 30 (Reuters) - South Africa's Netcare NTCJ.J has scrapped its 2020 outlook, suspended spending on projects and share buybacks, and may need to review its dividend policy due to the impact of coronavirus, the private hospital company said on Monday.

"The impact of COVID-19 introduces significant forecast risk. Netcare will be better positioned to provide updated guidance at the time of publishing its interim results in May 2020," it said in a statement. "This may also necessitate a revision of Netcare's dividend policy."

Non-essential elective surgery at Netcare's hospitals has also been suspended following a 21-day national lockdown to curb the spread of coronavirus that started last week, it said.

The company said its financial position and cash flow remained in a healthy condition and it had cash balances and committed banking facilities in excess of 3.5 billion rand from which to manage its future liquidity requirements.

In November, Netcare said it expected so-called patient day growth - which represents customer stays in its hospitals - of 0.8% to 1.2% for its fiscal year which ends on Sept. 30.

It also expected its margin on earnings before interest, taxes, depreciation and amortisation (EBITDA) within the core acute hospital business to hold steady at 20.5%, while capital expenditure was set to be 1.4 billion rand ($77.9 million).

However, Netcare said on Monday that 800 million rand of spending earmarked for new and current projects had been postponed, as had further share buybacks, to preserve cash and ensure liquidity.

Netcare, which competes with Life Healthcare LHCJ.J and Mediclinic MDCM.L , said it expected total patient days to fall by 2.7% in its hospital and emergency services division, the company's biggest, in the six months ending on March 31.

It said this was due to lower acute patient days as a result of competition from new hospital networks. The division also experienced ongoing pressure in respiratory admissions and slightly lower volumes in surgical procedures in March.

EBITDA margins in the division were broadly in line with the expected level of 20.5%, it said.

Total revenues at its Primary Care division were expected to fall after the healthcare provider integrated all 15 Medicross day theatres into the hospital division and rationalised some previously loss-making Medicross clinics.

Underlying revenue, which excludes day theatres and rationalised clinics, is expected to increase by about 7.5%, it said.

Netcare said it had spent 150 million rand to enhance its ICU and High Care facilities, including additional ventilators, ultraviolet light disinfection robots and specialised air filters to ensure appropriate disinfection measures.

Given the lockdown, all routine activities other than essential activities relating to coronavirus have been stopped.

"Netcare has also suspended non-essential elective surgery, to ensure that asymptomatic COVID-19 positive patients are not operated on, thereby potentially placing other patients, healthcare workers and doctors at risk," it said.

($1 = 17.9712 rand)

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