Release Date: November 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Netcare Ltd (NWKHY, Financial) reported a strong financial performance despite challenging macroeconomic conditions, with revenue increasing by 6.3% to ZAR25.2 billion.
- The company achieved a 10.1% increase in EBITDA to ZAR4.53 billion, with an EBITDA margin improvement of 60 basis points to 18%.
- Netcare Ltd (NWKHY) successfully completed the rollout of electronic medical records across its ecosystem, enhancing digital efficiencies and operational leverage.
- The company returned ZAR1.6 billion to shareholders through dividends and share buybacks, maintaining a strong balance sheet with a net debt to EBITDA ratio of 1.2 times.
- Netcare Ltd (NWKHY) won the Digital Innovation Award at the International Quality Awards, recognizing its efforts in using digital solutions to improve business processes and outcomes.
Negative Points
- Medical and dental patient visits in the primary care division declined by 3.1% year-on-year, attributed to financially constrained consumers opting to self-medicate.
- The EBITDA margin for the primary care division declined to 23% from 25% in the prior year, impacted by an increased contribution from lower-margin occupational health contracts.
- Netcare Ltd (NWKHY) faced increased electricity costs due to higher tariffs, which offset the benefits from reduced generator diesel costs.
- Interest expenses increased by 20.9% due to high prevailing interest rates and higher average net debt balances, impacting financial expenses.
- The company incurred strategic costs related to the rollout of its pathology network, which diluted the overall segment margin.
Q & A Highlights
Q: Could management elaborate on their thinking around doing share buybacks when the earnings yield is around 6% versus the cost of debt of around 9%?
A: Keith Gibson, CFO, explained that their policy prioritizes sustainable ordinary dividends, followed by capital application within the business. Surplus cash is returned to shareholders, with a preference for share buybacks, which have been accretive to earnings and are expected to be more so as interest rates decline.
Q: The interest cover covenant does not have much headroom. Are you going to do something about it or will you just let the current interest rate environment correct it?
A: Keith Gibson clarified that the premise of the question was incorrect. The banking covenants are reported on a pre-IFRS 16 basis, and there is ample headroom on the interest cover covenant when adjusted accordingly.
Q: Can we get an update on who the new CEO is and when they will start?
A: Richard Friedland, CEO, stated that the Board is not yet in a position to reveal the name of the new CEO. The candidate has been identified and secured, and the timeframe will be made public in due course.
Q: How will the strategic costs for the next data analytics phase compare to the rollout phase in Phase 1?
A: Keith Gibson noted that the strategic costs for the next phases will be absorbed into the operational base. The ongoing costs of running the digitized system will be outweighed by the benefits, as indicated in their presentation.
Q: What are the expectations for patient day growth and revenue growth for the new financial year?
A: Richard Friedland provided guidance for patient day growth between 0.8% to 1.3% and revenue growth between 5% to 6% for the upcoming financial year.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
