A sizeable investment in solar power over the past decade has enabled private hospital group Netcare to largely escape the impact of load shedding. It now has off-the-grid uninterrupted power supply systems and a fleet of 200 backup diesel generators bringing up the rear.

Chief executive officer Dr Richard Friedland says the sizeable solar power base across 72 sites is capable of generating 18-20 GWh of electricity per year. This is being used during daylight hours and outside load shedding to ensure that safe, sustainable care is delivered without disruption throughout hospitals.

For the six months to the end of March, Netcare incurred operational costs of R127-million related to strategic projects and expects to spend another R130-million on these projects in the second half of the year. 

Normalised Ebitda (earnings before interest, tax, depreciation and amortisation) margins strengthened from 16.9% in the first half of last year to 19.1% for the period under review – if strategic projects and generator diesel costs are excluded. 

Management attributes the improvement to well-managed costs and higher occupancy levels as many people are no longer reluctant to use healthcare facilities as Covid recedes.

“In March 2023, acute hospital occupancies in the core acute segment recorded the highest level since the onset of the pandemic. The sustained improvement in activity has resulted in group revenue for the first half of this year, exceeding pre-pandemic revenue in the first half of 2019 by 9.7%,” Friedland says.

The key strategic projects included:

• The CareOn digitisation project: Rolled out at 30 acute hospitals covering 6,722 beds (70% of registered beds) since the project kicked off three years ago. The digitisation of Netcare’s entire ecosystem is expected to provide a long-term sustainable competitive advantage. Although still in the implementation phase, the efficiencies and savings of R50-million realised in the first half of the year have already exceeded expectations. R43-million was spent on this project during the period under review.

One example of the digitisation project is the use of e-scripting. The Netcare e-scripting process was first verified by the South African Pharmacy Council in 2020 and, by May 2021, e-scripting was up and running in five Netcare hospitals. To date, more than a million e-scripts have been issued using the system, which has now been implemented at 26 hospitals across South Africa as part of Netcare’s adoption of an electronic medical records system.

Angeliki Messina, Netcare’s head of clinical pharmacy digitisation, explains that the move to electronic medical records has allowed for further integration with other digital systems. 

“E-scripting can eliminate errors of illegibility or misinterpretation. The Netcare e-scripting process complies with national regulations for e-scripting and includes an advanced electronic signature, which involves an accreditation process to ensure the validity of, and security for, prescribers. It is the first among private institutional pharmacies in this country,” she says. 

• Environmental sustainability strategy: An investment of R589-million since 2013 towards more than 204 environmental sustainability projects. These have played a pivotal role in reducing exposure to the impact of the instability of the national electricity grid. Energy intensity per bed has been reduced by 35% and Netcare has achieved cumulative operational savings and benefits of more than R1.2-billion to date.

Friedland adds that Netcare’s 2030 strategy aims to achieve 100% electrical energy utilisation from renewable sources, with zero waste to landfill and a 20% reduction of impact on water sources. 

Shareholders will receive an interim dividend of 30 cents per share, up 50% on the 2022 interim dividend and in line with the company’s dividend policy, which aims to provide shareholders with a sustainable dividend of 50% to 70% of earnings.

A R430-million capex spend during the period included R81-million towards expansionary projects such as the completion of the new 72-bed Netcare Akeso Gqeberha facility.

Cash generation remains strong, and group net debt declined to R5-billion from R5.4-billion as of 31 March 2022. 

The decrease in net debt is due to higher operating profit, partially offset by ongoing capital expenditure and dividend payments. As of the end of March 2023, Netcare had cash resources and undrawn committed facilities of R3.6-billion. DM