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Netcare’s 10-year sustainability projects reduce energy use by 35%

Netcare’s 10-year sustainability projects reduce energy use by 35%
Neesa Moodley
By Neesa Moodley
21 Nov 2022
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Expenditure of R585-million on environmental sustainability projects over the past 10 years enabled Netcare to reduce its electricity or energy use by as much as 35%. Chief executive Richard Friedland says this saving provided a buffer from some of the “extraordinary increases from Eskom and municipalities”.

According to energy solution company PowerOptimal, electricity tariffs increased 653% between 2007 and 2022. Friedland says the hospital group’s energy bill this year would have been about R594-million, but is around R386-million instead.

For the year to end September, Netcare posted a 23.4% increase in adjusted headline earnings per share (HEPS) to 83.2 cents. Normalised operating profit grew 13.2% to R2.3-billion, helped by the relaxation of the national lockdown regulations in the second half of 2022, which led to a strong improvement in demand and activity in that period.

Dividend


Shareholders will receive a final dividend of 30 cents a share which, with the interim dividend of 20 cents declared in the first half of the year, represents a distribution of 60% of adjusted headline earnings per share.

 Total capital expenditure of R1.6-billion will be incurred in the year ahead, of which R111-million will be attributable to expansion in mental health, about R600-million for refurbishments that were delayed during the pandemic and R185-million to strategic projects.

“We will be spending R185-million on our digitisation,” Friedland says. “One of the efficiency gains around digital electronic records is that there are reduced medical malpractice claims, similar to experiences by other healthcare providers around the world.”

Netcare is working towards digitising its entire ecosystem across the African continent by the end of the year, with a small tail of about 900 beds or six hospitals that will be completed by April. Patients will have access to their entire electronic medical records and can also access electronic prescriptions.

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To date, 1.1-million electronic prescriptions have been issued and more than 5,800 iPads are in use. Friedland estimates that the group currently spends around R12-million a year on the storage of patient files and the digitisation programme will lift that by about 50% over 10 years, eventually eliminating the need for physical storage. The digitisation programme saw Netcare realise total savings of around R37-million in the 2022 financial year, which is expected to increase next year.

Normalised group revenue inched up 3% to R21.6-billion. Normalised group ebitda (earnings before interest, tax, depreciation and amortisation) including strategic operational costs, improved 9.5% to R3.5-billion. Excluding these costs, margins improved from 16.0% to 17.3%. Friedland attributed the margin improvement to higher activity levels in the second half of the year, coupled with lower Covid-19 costs and ongoing efficiencies.

Total patient days increased 5.4% during the year. Friedland says there has also been an increase in patients presenting with kidney problems and needing dialysis.

Mental health occupancies


“We are seeing what we are referring to as present traumatic stress disorder, where people were dealing with several traumas over two years. Now we’re seeing the consequences of that with a far higher utilisation of psychologists, social workers and increased admissions to mental health facilities,” he says. Netcare’s mental health occupancies showed strong improvement, increasing to 68% from 62% in the previous year.

Looking ahead, management is optimistic provided that Covid-19 continues to be managed as an endemic disease.

“Although the macro-environment continues to be impacted by national power grid load shedding, global supply chain constraints, higher inflationary pressures, and high levels of unemployment, the group has several measures in place to mitigate these challenges. As a precautionary measure, the procurement of IT equipment for CareOn was brought forward at favourable exchange rates to ensure the project is not impacted by any undue delays resulting from supply chain problems or elevated prices,” Friedland says.

Netcare’s share price moved up 7% intraday to close at R14.98 yesterday. BM/DM

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