Netcare interims

Presenter: Jane van Renen

Guest(s): Richard Friedland

- Click here to listen to the interview

Summit TV speaks to Netcare chief executive officer Richard Friedland about results that include a 12% increase in revenue and 15% increase in operating profit and the outlook for their UK and South African operations

Jane van Renen: Richard, in terms of Netcare’s interim results you’ve got a 12% increase in revenue and a 15% increase in operating profit with businesses in the United Kingdom and South Africa – can you take us through the break down in terms of the results and how those two locations have impacted on the results?

Richard Friedland: As you’ve pointed out two very different geographies. Netcare is very much a tale of two countries – at a turnover or revenue level it’s about fifty-fifty, at an operating profit point of view the bulk of the operating profits is generated in the United Kingdom, but from an earnings point of view at the bottom line the majority of earnings comes from South Africa.

Jane van Renen: Can you explain how that works?

Richard Friedland: That’s because of the higher debt burden in the United Kingdom so 89% of our earnings is generated now in South Africa, and 11% is generated in the United Kingdom. As we de-gear the United Kingdom we will see those earnings increase. It’s important for viewers to understand that actually in terms of the size of the operations Netcare in South Africa is three times the size of our operations in the UK – it’s just the relative strength between the rand and the pound that gives you the split in turnover.

Jane van Renen: In terms of your acquisition strategy can you take us through that particular path in the UK specifically?

Richard Friedland: The UK is undergoing a lot of challenging economic pressures at the moment and there are opportunities that arise for us – in this past year we’ve been able to make four acquisitions, and we’ve done this at a very low capital cost because effectively we are taking over the operating companies and not the property companies where effectively we are taking over a lease. What that has done for us is to increase our presence in the centre of London – where we’ve been particularly weak -and generally across the United Kingdom – and that’s now allowed us to take a 36% share of the UK private healthcare market we are now the number one player. In South Africa growth has been purely organic.

Jane van Renen: How are you managing to get rid of your debt?

Richard Friedland: One of the most pleasing aspects of our results for this six months is that we’ve reduced our gearing on the South African balance sheet by R1.8billion and that’s about a 30% reduction in debt in six months.

Jane van Renen: Is part of that due to the sale of your stake in Ampath Laboratories?

Richard Friedland: Correct. Part of that is due to the sale of Ampath – those proceeds only came late in March so we will probably only see the interest reduction in the next six months. A lot is due to a focus on working capital management – we have very low debtors days, and we’ve been very focused on conversion of cash in the business. If you look at the UK that debt is fixed – it’s secured against the properties, it’s at 6.5% -and that will be de-geared over time as we increase our operating profits.

Jane van Renen: In terms of operating in the private segment obviously the recession is going to hit private healthcare even harder – the forecasts say that – how are you planning to buffer yourselves against that?

Richard Friedland: We’ve seen very strong demand for private Healthcare both here and in the United Kingdom despite the recessionary environment. Right across the board if you look at our hospitals, pharmacies, and emergency services or primary care we’ve seen 6.3% growth in our hospital patient days – and that’s despite what’s essentially a downturn in the SA economy. Like wise in the UK we’ve seen a lot of National Health System (NHS) patients coming into our hospitals choosing the private sector. Of course we are down in terms of cash patients out of pocket – they are preserving cash preferring to go the NHS. Where we have seen an impact is more at our primary care level where we are treating lower income patients – remember Primecure is a lower income market product where we are trying to bring on more lives within the medical aid environment, and there we have taken greater provisions for bad or doubtful debt and we are just being more prudent.

Jane van Renen: What’s your relationship like with the National Healthcare System there?

Richard Friedland: We have an excellent relationship with the NHS. That’s something we built up before we got involved with General Healthcare Group (GHG). One of our tenets in Netcare is to be a credible partner to government – because ultimately we believe we can help improve accessibility to Healthcare. We have a number of projects with the NHS in the UK and obviously we are looking to emulate those public private partnerships here in South Africa.

Jane van Renen: How much pressure will South African regulations in terms of tariff structures put on your operating margins?

Richard Friedland: We don’t believe that there are those kinds of pressures at the moment – but healthcare is always a regulated sector so we are not naive believing there will never be regulations. We are confident that we can justify the tariffs that are charged at the moment and we can justify the efficiencies that are brought to bear. I think many people forget the real asset of private healthcare in this country and the wonderful access – if you can afford it if you’re on a medical aid that you can get. I think our real challenge is to expand that to more.

Jane van Renen: Expansion very briefly – any acquisition targets for the rest of Africa?

Richard Friedland: I think where we are heading with Africa is through our public private partnerships. If you look at what we’ve done in Lesotho that’s the largest public private partnership in healthcare in Africa in partnership with that government – not only are we building a 420-bed facility, we are going to be running all the medical and nursing facilities and the primary care facilities. It’s underpinned by the World Bank and the International Finance Corporation (IFC). We think it’s a great project that has sustainability in Africa – if we can develop that I think there’s a lot of expansion there.

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Some options for medical care

Author: Code Name Insight

Having been a bit under the weather this week, I got to thinking about medical care. I have been extremely fortunate to have full coverage medical insurance practically since birth. Many people are not that fortunate and healthcare coverage is a major concern (it can also be a major cause of bankruptcy!). Here are some options for care when you get sick–both during “normal” times and during times of disaster:

• Obviously if you are in a life threatening situation (chest pain, shortness of breath, in active labor, a serious infection, been stabbed, been shot, etc), go to the nearest emergency room. The EMTALA Act says that emergency rooms MUST treat you whether you can afford to pay or not. Of course you will get an armload of bills after your treatment, but at least you will be alive to deal with them. Note that in some disasters or TEOTWAWKI scenarios, many hospitals may not be open/staffed.
• Your regular doctor. Hopefully you have a regular general practice doctor that can help you with general medical problems, chronic condition care, and preventative wellness checks. This is a less expensive option than an emergency room and hopefully, with preventative checks, your doctor will be able to find and treat problems while they are still minor. You may want to ask your doctor if he has a disaster plan, just to figure out if he would be available during a disaster situation.
• Community clinics. These range from “free clinics” to “sliding fee scale” clinics, to “you must pay a set fee” clinics. If you do not have insurance, these types of clinics may be the first place to look for affordable care. Less urgent and chronic condition care is very common at these types of clinics. Ditto on the note about disasters and TEOTWAWKI.
• “Urgent Care” clinics are springing up all over around our state. These are a less expensive option than an emergency room for urgent, but not life threatening, conditions. If you don’t have insurance you will need to pay at the time of service and there is no way to tell if these places would be open during a disaster (I’m guessing no).
• Lower level providers. In some cases, depending on your jurisdiction and what level of care lower level practitioners can provide, you may be able to get limited types of medical care from Physician’s Assistants (PA), Advanced Registered Nurse Practitioners (ARNP), and Registered Nurses (RN).
• Vets. For your everyday medical care/medical emergencies, vets will not treat you. There is a small problem with malpractice and providing care outside of their scope of practice that usually (as it should) stop them from treating human patients. This is not to say that veterinary care is not an option when TSHTF. Way back in the day in very rural areas, it was not uncommon for vets (and farmers who knew some vet skills) to provide antibiotics or sew up a gash on their (human) neighbors.
• Home remedies. I can count the number of times my grandparents went to a doctor on one hand. This was probably because of the cost but also because they pretty much didn’t trust doctors unless it was an emergency. What they did do, however, was tap into their huge knowledge of home remedies to treat just about any problem that came along. This is an excellent kind of knowledge to have at any time, but most especially during a disaster.
• Specialized types of medicine. Homeopathy, herbal medicine, and Chinese medicine are considered “alternative” types of medicine however a billion Chinese can’t be wrong. These types of medical practices are used to cure a wide range of ailments and most of the components of the medicines and treatments are available to anyone, not just licensed doctors. Note, however, that some of these treatments use plants and other natural items that can be toxic or fatal if used improperly so you really need to know what you are doing before you attempt to use these items.
• Other resources: For other medical care information consider nurse hotlines which can provide information over the phone that may save you a doctor’s visit. Also, Poison Control Centers can provide information on whether something that was ingested was poisonous and requires an ER visit or if the substance is actually non-toxic and not a problem.
• And some tips: The best solution to a medical problem is to not have the problem to begin with so preventative care is important. Take care of your health by eating right, exercising, wearing a helmet and seat belt when needed, and generally staying away from situations that can make you ill (stress), injured (skateboarding), or dead (smoking). Getting some medical training is a great idea, so consider signing up for a first aid or EMT class. Make friends in the medical field; during a disaster there will not be enough of these people to go around (look at the situation in Louisiana during Hurricane Katrina). Get some reference books. “When There is No Doctor” is a classic tome and you should also have a book (with lots of color pictures) about the types of plants that grow wild in your area that can be used for medicinal purposes. Also consider planting some medicinal herbs in your garden.