GCR has affirmed Netcare Limited’s National scale ZAR currency long and short term ratings at A (single A) and A1 (single A one) respectively. The rating specifically precludes an analysis of the debt incurred through GHG, as this is non-recourse to the South African operations.
The rating was supported by the consistent operational improvements since F08, which saw operating profit climb to R2.2bn in F11, a review period high (F09: R1.5bn). The group reported a 2.2% rise in patient days, while occupancy and revenue per patient day also improved. Combined with efficiency improvements across its facilities, this has resulted in a gradual increase in the operating margin.
Robust cash generation over the past 3 years had allowed the group to decrease net debt by almost R1.9bn. Accordingly, gross and net gearing receded to just 71% and 59% respectively at FYE11 (FYE10: 87%, 77%), a review period low, and more than half of the FYE08 level. Similarly, gross and net debt to EBITDA declined to 155% and 127% at FYE11 (FYE10: 190%, 167%), underpinned by the group’s strong earnings.
The successful settlement of outstanding convertible shares, as well as refinancing these shares with a new R1bn 5-year note was positively considered. Whilst Netcare SA expects to reduce its reliance on short term facilities going forward, as it generates sufficient cash to fund ongoing operations, sufficient unutilised facilities are available to cover unforeseen cash requirements. Looking ahead, the addition of new beds will support earnings growth over the medium term, while generating further cost savings remains a key focus.
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