Netcare share price tests resistance after results release

Key takeaways

• Financial Performance: For the six months ended 31 March 2024, the company reported a 7.0% increase in Group EBITDA to R2.2 billion, a 5.8% rise in adjusted headline earnings per share (HEPS) to 49.0 cents, and a 4.3% growth in revenue to R12.034 billion.

• Profitability and Dividends: Operating profit increased by 7.9% to R1.491 billion, while profit for the period grew by 6.3% to R708 million. The interim dividend remains unchanged at 30.0 cents per share.

• Balance Sheet Overview: Total assets rose by 4.3% to R27.972 billion, and total liabilities increased by 7.2% to R16.837 billion. Net debt, excluding lease liabilities, increased by 16.4% to R5.841 billion, while total shareholders' equity showed a slight increase of 0.4% to R11.135 billion.

• Dividend Declaration: A gross interim dividend of 30.0 cents per ordinary share has been declared, with important dates including the last day to trade cum dividend on 9 July 2024, the ex-dividend date on 10 July 2024, the record date on 12 July 2024, and the payment date on 15 July 2024.

Financial Results Overview

The unaudited interim group results for the six months ending 31 March 2024, show robust growth across various financial metrics for the company. Group EBITDA surged by 7.0% to R2.2 billion. This increase highlights the company's profitability from its core operations. The adjusted headline earnings per share (HEPS) also saw a rise of 5.8% to 49.0 cents, demonstrating an efficient management of resources and a solid financial performance.

Revenue for the six months grew by 4.3% to R12.034 billion from R11.537 billion in 2023, showcasing steady top-line growth. Operating profit, the profit earned from regular business operations, increased by 7.9% to R1.491 billion, while profit for the period stood at R708 million, a 6.3% rise from the previous year.

Balance Sheet Highlights

Looking at the company’s financial position, total assets rose by 4.3% to R27.972 billion, while total liabilities increased by 7.2% to R16.837 billion. Total shareholders' equity saw a marginal increase of 0.4% to R11.135 billion. Net debt, which excludes lease liabilities, rose significantly by 16.4% to R5.841 billion. This could indicate increased borrowing, possibly for expansion efforts, and traders should keep an eye on how this debt is managed moving forward.

Moreover, basic earnings per share improved by 6.3% to 48.7 cents, and headline earnings per share climbed by 9.2% to 48.9 cents. These metrics highlight the company’s ability to generate value for its shareholders.

Dividend Declaration

The company has declared a gross interim dividend of 30.0 cents per ordinary share for the six months ended 31 March 2024. This dividend will be paid to shareholders listed in the company register by 12 July 2024, with the ex-dividend date commencing on 10 July 2024. For shareholders not exempt from dividend withholding tax, the net final dividend will be 24.0 cents per share, while those exempt will receive the full 30.0 cents.

Netcare – technical view

The share price of Netcare trades in a short-term consolidation between levels 100 (support) and 1180 (resistance).

Traders bullish on the stock might hope to see a break of resistance (confirmed with a close above) at 1180, before targeting a move towards the 1240 level. In this scenario, a close below 1150 might be used as a stop loss consideration.

Range traders might instead hope to see a bearish reversal off the 1180 resistance level, confirmed with a close below 1150, before targeting a move to support at 1100. In this scenario, a close above the 1180 level might be used as a stop loss consideration.