Netcare warns investors of steep drop in earnings

Image: GROUND UP/ JAMES STENT

Private hospital group Netcare on Thursday flagged a drop of as much as 20% in earnings per share in the half year, blaming in part new accounting rules on how its treats its leases.

Netcare, which competes with Life Healthcare and Mediclinic  International, said adjusted headline earnings per share (EPS) would likely be in the range of 67.4c and 75.9c, or 20% lower than the 84.3c it reported in the first half of 2019.

Headline earnings is the primary measure of profit that strip out certain one-off items, giving a fuller picture of a company’s underlying performance.

Netcare blamed part of the decrease in earnings on changes in accounting standards that affected lease and rental calculations, saying that the shift made the current period’s results “not directly comparable” to the previous period.

Excluding the impact of the new accounting standard IFRS 16 Leases, the company would have posted an adjusted headline EPS of 10% lower.  

Netcare’s adjusted headline EPS also exclude the impact of R348m from the implementation of a BEE transaction. With that charge added, headline EPS would by between 40% and 50% lower.

The group said earlier it had spent R150m in stepping up protective measures in its facilities and was readying itself for an anticipated surge in Covid-19 patients.

It had paused capital expenditure projects totalling R800m, put strategic projects on hold and was   suspending future share buybacks, it told investors in March.

Netcare shares ended trading 1.24% weaker on Thursday at R14.35, giving the group a R20.65bn market value.


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