Business

Netcare 'a formidable global company'

19 May 2009

South African private hospital group Netcare has turned itself into a formidable international company through its expansion in the UK and involvement in public-private partnerships in southern Africa, says consultancy Frost & Sullivan.

Netcare announced on Monday that its first half basic headline earnings per share were up 41% to 33.3 cents while revenue was up 12% to R11.619-billion,

"Netcare's acquisition strategy has led to strong revenue generation in the UK, even though this market's growth is not as high as that of its African operations," Frost & Sullivan healthcare analyst Lizelle Wentzel said on Monday.

Netcare's growth through its public-private partnership (PPP) strategy had also made the group a popular service provider in the South African and surrounding markets, Wentzel said.

The group, together with Nalithemba Hospitals, opened a 91-bed hospital in Port Alfred in the Eastern Cape in February 2009, and had also invested into a 390-bed PPP in Lesotho, in collaboration with the Southern African Development Bank.

In June this year, Netcare will open another hospital in Grahamstown, also in the Eastern Cape, Wentzel said.

"These initiatives have given Netcare a strong presence in the PPP area and have allowed it to continue expanding locally despite the restrictions on building new private hospitals."

Wentzel pointed out that Netcare did face regulatory constraints in South Africa. "The new tariff structure enforced on private healthcare providers sets limits on what patients can be charged for consumables and pharmaceuticals, which puts pressure on margins."

Wentzel said the company had also had to deal with the debt accumulated due to its investments, although this should prove to be manageable.

"The sale of its 50% shareholding in Ampath for R1-billion, although a small amount compared to its other transactions, alleviated some of this debt," she said.

Wentzel said Netcare's success in the UK had given it a platform from which to expand to other European countries, adding that the company could also look to take advantage of the growing opportunities in sub-Saharan Africa.

"Netcare should consider moving into countries that have well-established health care systems and growing demand for private care, such as Kenya and Tanzania."

Wentzel said the establishment of hospitals in southern African countries such as Angola, Mozambique and Mauritius was also taking off, posing opportunities for companies such as Netcare.

"These countries have significant need for improved healthcare services, and private companies could offer this either through PPPs or stand-alone investments."

Recent analysis from Frost & Sullivan suggested that revenues in the Kenyan and Tanzanian healthcare markets were set to nearly double over the next five years.

Sapa