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Netcare Says U.K. Improvement to Continue in Second Half

Netcare Ltd. predicted continued improvement from its U.K. business in the fiscal second half and said its hospitals will also benefit from rising South African demand for private health care.

Netcare posted a 26 percent increase in six-month profit from continuing operations, excluding one-time items, to 868 million rand ($92 million), the Johannesburg-based owner of hospitals in South Africa and Britain said today in a statement. Revenue rose 8.5 percent to 13.3 billion rand in the six months through March, with a weaker rand contributing to the gain.

“Our aim was to get the U.K. operations to break even,” Chief Executive Officer Richard Friedland said in Johannesburg today. “We exceeded that and the positive earnings contribution made is continuing in the second half.”

The U.K. still has “a very tough macro environment and operations there will be challenging for at least six months,” he said. As Britain’s economic environment has weakened, the number of patients coming from the national health system has grown to 32 percent, from 3 percent in 2006, Friedland said. Netcare has still been able to profit from this lower-margin work, he said.

Primary Care

In South Africa, revenue growth in hospital and emergency services was offset by a drop in primary care. Netcare plans to add 89 beds in the second half. These will range from intensive care to pediatric, said Jacques du Plessis, managing director of the hospital division.

Netcare is also looking to expand its mental-health offering. The group has 150 beds dedicated to mental health, with approval for a further 119 beds in progress, he said.

The company plans to spend about 800 million rand in South Africa and 40 million pounds in the U.K. on capital improvements in the fiscal year. Total capital spending amounted to 455 million rand in the first half.

The shares fell 2.9 percent to 22.13 rand by the close in Johannesburg, valuing the company at 32.5 billion rand. The stock has gained 48 percent in the past 12 months.

Finance expenses dropped to 389 million rand, from 962 million rand, on lower interest charges after Netcare reduced its interest in the property business of its General Healthcare unit to less than 50 percent. The interim dividend was raised 23 percent to 27 cents.

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