November 20, 2017 / 12:19 PM / 2 years ago

South Africa's Netcare to restructure UK business as profit falls

JOHANNESBURG (Reuters) - South African private healthcare operator Netcare (NTCJ.J) will restructure its operations in Britain, its chief executive said, after the group reported a drop in annual profit due in part to belt-tightening by the UK’s National Health Service.

Netcare, South Africa’s second-largest private hospital firm, has been in the UK market for a decade through a controlling stake in BMI Healthcare and in September made an all-share offer to buy out minority shareholders.

“With unfettered management control we can drive the business in the same way as in South Africa, we can drive the same efficiencies,” Netcare Chief Executive Richard Friedland told Reuters in an interview on Monday.

Netcare plans to implement new information technology systems across BMI and aims to link it to Netcare’s other operations to share services and save on costs, he said, adding that back-office work could move from the UK to South Africa.

The South African group reported a 7 percent drop in profit for the financial year ended Sept. 30, flagging the effect of changes to non-urgent medical treatment by both the National Health Service, which outsources some services to private healthcare providers, and private medical insurers in the UK. The changes prompted the patient to shoulder more of the cost, reducing demand.

“We will cut our cloth accordingly,” Friedland said.

Netcare’s UK revenues fell 1 percent during the financial year to 887.1 million pounds as its more lucrative in-patient cases declined.

In South Africa, the length of patient stays declined year-on-year, weighing on revenue, but picked up in the last three months of the financial year and continued to do so in the first two months of the current year, the company said.

Diluted headline earnings per share (EPS) declined to 108.6 cents for the year to end-September, from 117.1 cents the previous year.

Headline EPS is the main profit measure in South Africa and strips out certain one-off items.

Netcare shares were down 2.5 percent at 22.43 rand by 1128 GMT, compared with a 0.7 percent rise in the JSE's benchmark Top-40 index .JTOPI.

Reporting by TJ Strydom; Editing by Vyas Mohan and Susan Fenton

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