South African private healthcare provider Netcare, has reported an increase in profits for the 2024 financial year. Net profit grew by 15.8 per cent whilst the adjusted headline earnings per share increased by 7.6 per cent to 113.7 cents. The group said that these results were driven by resilient demand for private healthcare despite a challenging macroeconomy and competitive landscape. For more insights on these results, CNBC Africa is joined by Netcare CEO, Dr Richard Friedland.
South African private healthcare provider Netcare, has reported an increase in profits for the 2024 financial year. Net profit grew by 15.8 per cent whilst the adjusted headline earnings per share increased by 7.6 per cent to 113.7 cents. The group said that these results were driven by resilient demand for private healthcare despite a challenging macroeconomy and competitive landscape. For more insights on these results, I'm joined by Netcare CEO, Dr Richard Friedland. Dr Friedland, thank you for your time. Now you've noted that seasonal inconsistencies impacted the volumes in H1 of the financial year and you saw activity levels normalise in the second half of the year. Can you provide more details on the specific factors that caused these seasonal fluctuations and to what extent you would be able to manage them going forward if possible? Yeah, thank you very much, Namande. The seasonal factors we were talking about were really related to when Easter falls and school holidays and so all of that happened in the first half of the year. Our numbers were down 1.7 per cent in volumes. We recovered that by 2.2 per cent in the second half. So really, it's a seasonal impact that occurs every year and it just depends when Easter and school holidays fall each year, whether it happens before the 30th of March in the first six months of our year or after that in the second half of the year. Okay. The primary care division experienced a slight decline in gross profits in dental visits and that seems to be a changing dynamic in consumers with people doing more self-medication. How do you see this impacting your business going forward? Well, the primary care division, as you pointed out, did see a diminution in business. It's a much smaller contributor to the overall net care ecosystem but nonetheless, I think it is an indication that consumers are under pressure, there's less disposable income and we're looking at a number of things to ensure that we pivot, to ensure we can meet those demands of patients that are choosing rather to self-medicate first before coming to a general practitioner to seek help. If we look at the cost lines now, so we saw a significant reduction there in your cost lines and you've reduced strategic and operational costs. What specific cost initiatives did you put in place? What were most impactful and are there any additional areas of cost optimizations going into the next year? Well, Nomanda, you would have seen that we've completed phase one of our digital strategy and we have produced both cash and avoidable cost savings of R331 million since 2022. In fact, in this year, we managed to save R190 million, our budget was R120 million. So, the digital aspect of our strategy is critical. There were lots of other efficiencies that we brought to bear in what is a very tough market and we expect those digital efficiencies to continue into the future. And again, important to stress that some of that is in your cash saving and a large portion is cost avoidance going forward because the base has been structurally changed. Let's talk more on that digital strategy. So, you've completed the first phase of the electronic medical record system. What improvements are you seeing in patient care and clinical outcomes since its implementation? Well, I demonstrated this morning in one of our divisions, National Renal Care, the enormous impact that our digital records, use of the data and engaging with patients in what really matters to them as opposed to what's the matter with them. And we've seen engagement of patients and their conditions move from 1.5% to 94% of patients. We've seen people engaged on this app for up to 16 minutes looking at their results, looking at their session, looking at things that can make them healthy such as their diet and recipes. And we're now beginning to see that in clinical outcomes and we'll be publishing that in 2025. What we showed this morning was that even in their sense of physical well-being and mental well-being, there's a significant difference between patients who had no access to an app or a digital record and those that now have access to the app with this information and digital record. So, we're in the early phases. The first six years was roll out the tram lines, roll out digitization, make sure across our seven operating platforms, whether it's mental health, whether it's renal care, whether it's the hospitals, emergency services, etc. and primary care, we have digital records. The second phase, and that's about operational efficiency, the second phase is clinical efficiency. How do we improve outcomes? How do we make it safer for patients to come to our facilities? How do we improve patients' longevity? And how do we become clinically more efficient and reduce the overall cost of care? And that's about a two to three-year program. And then engaging with patients in their records is the third phase. You know, there's a lot of medical jargon out there. You can be given a diagnosis and you can be given your records, but frankly, it means nothing to us. So, we're using generative AI now to simply explain what's going on, what happened to you in hospital, what happened to you in our cancer ward, what happened to you in primary care. And that's a three to four-year journey that we're embarking on. You've noted a net increase of 113 doctors granted admission rights throughout your facilities in the past year. What is NETCARE doing or planning to do to continue attracting and retaining doctors? And to what extent does the digital initiatives that you're putting into place assist in retaining or attracting these specialist doctors? Well, it's absolutely critical. And it's critical even for our nursing, because I can tell you, the younger and newer generation want to be digitized. They don't want to be writing paper records. The days of having manual processes are over. And we provide very accurate records. The beauty of our system for a doctor is that you can access these records at home whilst you're having breakfast, or you're out for dinner somewhere, or you're traveling somewhere, you can see immediately the record and be notified and make a change to it. Take, for instance, an obstetrician. They could be phoned at night and, you know, you can see the records in front of you and be able to say to the nursing sister, please get the patient ready for theater. I'm going to have to do a cesarean. Or actually, this is just simple, normal contractions of pregnancy, Braxton Hicks, the patient can rest. And so it gives you an immediacy. You don't have to run to the bedside. You can be in theater and still see what's going on. It combines all the radiology, all the pathology, everything else everyone has said is available to you on the record. And the most important is we're putting in place a database that will allow our specialists to do exceptional research. Many of them don't have time. They're too busy seeing patients or operating. But we put a natural language processing and generative AI on top of it. And even if you're not a statistician, as a medical doctor, you will be able to look at your data anonymously. And of course, compliant and be able to make a real contribution to medicine and science in South Africa. I'd like to talk about this key issue, I suppose, of mental health. So you've noted that you've sort of seeing high demand in terms of mental health issues. And, you know, you've got upcoming expansions in your key facilities. So I've got two questions around that. Firstly, you know, what do you see in terms of mental health and the issues and the growth around that in South Africa? And really, what is the problem? And then secondly, how do you see sort of the growth and demand for mental health care affecting the group's performance going forward? Well, I think the mental health is a worldwide catastrophe at the moment. It's a pandemic. And I don't think that we're unique in South Africa or in Africa. I think the destigmatization of having a mental illness has helped bring us to the fore. But even having said that, we're seeing a very significant rise in the demand for care. And to be frank, I'm not sure that we have the solutions behind that. And the traditional way of approaching mental health works. Often, we're more concerned about, you know, what's the diagnosis? What's the matter with you? And so we write a script and we say to someone, come back and see us in in six weeks time. What we should really be asking a monitor of someone is what matters to you? Well, if I was a mental health patient suffering from acute depression and all sorts of other things, what matters to me would be able to say, I want to be able to maintain my job, be relevant in society, hold my family together, have a relationship with my children. And if that's the case, we've got to start measuring functionality and how we get people who are living with this chronic condition to become more and more functional. And that's the entire focus of our group as we move into this digital and data world. You asked about the contribution to net care. It's a very small division for us, but we are expanding our facilities. But again, I'm not sure it's about bricks and mortar. I think it's about a fundamental rethinking of the way we approach mental health. Right. Dr. Friedland, that's all we have time for. And definitely some really interesting insights coming out of that discussion. Thank you once again for your time. That was Dr. Richard Friedland, CEO of NetCare.
Theme: Financial Performance and Strategic Initiatives Drive Netcare's Growth
South African private healthcare provider Netcare has reported a significant increase in profits for the 2024 financial year, with net profit growing by 15.8 per cent and adjusted headline earnings per share rising by 7.6 per cent to 113.7 cents. Despite facing challenges in a competitive macroeconomic environment, the group credits the resilient demand for private healthcare as the key driver behind these positive results. In an exclusive interview with CNBC Africa, Netcare CEO, Dr. Richard Friedland, delved into the details behind the company's financial performance and the strategic initiatives that have contributed to its success. Dr. Friedland highlighted the seasonal fluctuations in healthcare volumes, the impact of shifting consumer dynamics on primary care, and the cost-saving initiatives that have bolstered the company's financial position. One of the key factors affecting Netcare's performance was the seasonal inconsistencies in healthcare volumes, particularly in the first half of the financial year. Dr. Friedland explained that these fluctuations were largely driven by the timing of holidays such as Easter and school breaks. While the first half saw a 1.7 per cent decline in volumes, the second half witnessed a 2.2 per cent recovery as activity levels normalized. Looking ahead, Dr. Friedland emphasized the importance of managing these seasonal fluctuations effectively to mitigate their impact on the company's performance. The changing dynamic in consumer behavior, particularly with a trend towards self-medication, has also had an impact on Netcare's primary care division. Despite experiencing a slight decline in gross profits from dental visits, Dr. Friedland acknowledged the need to pivot and adapt to meet the evolving demands of consumers. He highlighted the importance of implementing strategies to address the challenges posed by consumers opting for self-medication before seeking medical assistance. In terms of cost management, Netcare has implemented strategic initiatives to reduce operational costs and enhance efficiencies. Dr. Friedland cited the successful completion of phase one of the company's digital strategy, which resulted in substantial cost savings of R331 million since 2022. The digital transformation has played a pivotal role in driving operational efficiencies and positioning Netcare for future growth. Looking ahead, the company plans to continue leveraging digital technologies to optimize costs and enhance patient care. One of the key highlights of Netcare's strategic initiatives has been the implementation of the electronic medical record system, which has significantly improved patient care and clinical outcomes. Dr. Friedland discussed the positive impact of digital records on patient engagement and clinical efficiency, with plans to further enhance clinical outcomes and patient safety in the coming years. The utilization of generative AI and natural language processing is expected to streamline healthcare processes and drive innovation in patient care. Netcare's focus on attracting and retaining healthcare professionals, including doctors and nurses, has been a critical component of its growth strategy. Dr. Friedland emphasized the importance of digitization in appealing to a younger generation of healthcare professionals who prefer digital tools and streamlined processes. The company's digital initiatives have not only improved operational efficiencies but also facilitated research and innovation within the healthcare sector. In addressing the rising demand for mental health services, Dr. Friedland underscored the global challenge of mental health issues and the need for a transformative approach to mental healthcare. Netcare is expanding its facilities to meet the growing demand for mental health services, with a strong emphasis on measuring functionality and improving patient outcomes. Dr. Friedland emphasized the importance of shifting the focus from diagnosis to functionality, enabling patients to lead more fulfilling lives. In conclusion, Netcare's robust financial performance, driven by resilient demand for private healthcare and strategic cost-saving initiatives, underscores the company's position as a leading healthcare provider in South Africa. With a strong emphasis on digital transformation, patient care, and innovation, Netcare is poised to navigate the challenges of the evolving healthcare landscape and deliver high-quality healthcare services to its patients.
"The seasonal factors we were talking about were really related to when Easter falls and school holidays and so all of that happened in the first half of the year."
['Netcare', 'healthcare', 'profits', 'South Africa', 'financial year', 'private healthcare', 'resilient demand', 'cost-saving initiatives', 'digital transformation', 'patient care', 'clinical outcomes', 'mental health', 'innovation', 'doctors', 'nurses']