Netcare braces for coronavirus, spends R150m to prepare facilities

Private hospital group Netcare [JSE: NTC] says it has spent R150 million so far in efforts to enhance its readiness to treat Covid-19 patients.

Netcare on Monday issued an update to investors. It said it was "fully supportive" of the 21-day national lockdown, which kicked off on Thursday, to slow the spread of the novel Covid-19. Netcare said that ongoing evaluation is needed to determine if the 21 days will be sufficient to achieve the intended goals.

Netcare has implemented a number of measures to deal with the outbreak. This includes training its employees, screening and isolating patients to contain the spread of the virus and it has also spent R150 million to prepare its ICU or high care facilities by "purchasing additional ventilators, ultraviolet light disinfection robots and specialised air filters to ensure appropriate disinfection measures," it said.

Netcare has suspended all of its strategic projects, except for its "CareOn digital rollout" at Netcare Milpark Hospital.

"Given the lockdown, all routine activities other than essential activities relating to Covid-19, 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 of acquiring the virus," it said.

Furthermore R800 million worth of capital expenditure set aside for new and current projects has since been postponed in order to "preserve cash and ensure liquidity". "Management continues to actively monitor working capital and has prioritised additional inventory reserves, including adequate levels of personal protective equipment, drugs and consumables," it said.

Netcare said that its financial position and cash flows remained in a "healthy condition".

Netcare is also among the private hospitals which agreed to assist government by treating public Covid-19 patients, on a not-for profit basis and will only seek to recover costs. "Given our limited capacity, any referrals from the public sector will need to be assessed and pre-authorised by Netcare on a case-by-case basis," Netcare said.

Due to the uncertainty on the impact of the Covid-19, Netcare said it would be in a better position to provide guidance on its full-year performance, when it publishes its interim financial results in May 2020. This may also require that the group revise its dividend policy, it said. Last year the group's dividend increased 6.7% to 111c, Fin24 previously reported.

"The Covid-19 pandemic notwithstanding, the South African healthcare sector remains constrained, given the country's underlying macro-economic landscape," Netcare said. Prior to the Covid-19 pandemic reaching SA shores, Netcare had been experiencing "ongoing pressure" in respiratory admissions.

The group said its Ebitda (earnings before interest, taxation, depreciation and amortisation) margins had been in line with the guidance and the previous year's levels of 20.5% - mainly due to cost containment and efficiencies. "However, the impact on Ebitda margins in the month of March 2020 remains uncertain, following the extraordinarily significant focus on Covid-19 preparedness, and the commencement of a national lockdown from 27 March 2020," Netcare said. 

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