Netcare Gains Most in Six Months as U.K. Profit Margin Widens

Updated on

Netcare Ltd. shares rallied the most in six months as the South African owner of private hospitals improved U.K. profit margins and benefited from rising demand for private health care in its domestic market.

The stock climbed as much as 7.1 percent, the biggest gain since Nov. 24, and traded 6.2 percent higher at 41.56 rand as of 2:49 p.m. in Johannesburg. The U.K. unit’s margin on earnings before interest, taxes, rent and one-time items rose 0.7 percent to 22.9 percent in the six months through March, the Johannesburg-based company said in a statement on Monday.

“That Netcare has been able to increase its U.K. margin in the current climate is a good surprise,” Andre Bekker, an analyst at Avior Capital Markets in Johannesburg, said in an interview. “Jill Watts has only been heading the U.K. business for a few months, so the improvement is promising.”

Netcare is expanding in South Africa to meet increasing demand from the country’s mid-to-high income earners, while trying to attract U.K. customers keen to bypass the country’s state-run National Health Service as the British economy improves. First-half net income rose 18 percent to 1.14 billion rand ($96.5 million), while revenue increased 5.8 percent to 16.3 billion rand.

The hospital owner plans to take on more complex cases and improve ward scheduling and staffing in the U.K. to enhance profit margin further, Chief Executive Officer Richard Friedland said in an interview in Johannesburg. “We’ve made significant gains in ward scheduling in South Africa and have quite a long way to go on that in the U.K.,” he said.

Netcare’s on track to add about 362 beds in its home market in the second half, Friedland said. The margin in South Africa on earnings before interest, taxes, and one-time items rose to 22.8 percent from 21.4 percent a year earlier.

Netcare shares have climbed 9.3 percent this year, valuing the company at 61.3 billion rand. That compares with Mediclinic International Ltd., South Africa’s largest private-hospital owner, which has rallied 18 percent in 2015. Mediclinic is expected to report annual earnings on May 21.

Netcare raised the first-half dividend by 19 percent to 38 cents a share.

Before it's here, it's on the Bloomberg Terminal. LEARN MORE