Netcare explains why it’s given up on the UK market

Netcare Limited, South Africa’s largest private hospital and emergency medical services operator, has announced its decision to exit the UK market. The company acquired General Healthcare Group (GHG) in the UK back in 2006, which was later restructured into BMI Healthcare. Dr. Richard Friedland, the CEO of Netcare, joined CNBC Africa to explain the reasoning behind the decision. According to Dr. Friedland, the primary reason for the exit is the unsustainable rental costs that have plagued the UK business. He stated, 'It's the right commercial decision for all net gain. It's in the best interest of its shareholders. When we made this acquisition in 2006, there were urgent commercial reasons for doing it, but the global financial crisis changed the outlook in the UK.' The company has spent years trying to negotiate a rent reduction with BMI Healthcare's largest landlord, but after five years of unsuccessful attempts, they have decided to cut their losses and exit the market. Dr. Friedland also emphasized that Netcare has always kept their UK investments separate from their South African operations, with no financial recourse to South Africa for any UK obligations or debts. He mentioned that the company was not willing to fund the UK business from the South African balance sheet unless there were promising returns in the future. This commitment to financial prudence and risk mitigation has ultimately led to the decision to exit the UK market. Regarding the financial implications of the exit, Dr. Friedland clarified that there would be no significant costs associated with the decision. The company had already written down the value of the UK assets substantially in the previous year due to poor results. The upcoming financial results for the first half of the year will still include the UK operations, but thereafter, the exit will have no impact on Netcare's bottom line. When questioned about the timeline for the exit process, Dr. Friedland mentioned that Netcare had indicated its intention to exit and would soon begin a disposal process. However, there was no confirmed date for the conclusion of the exit, indicating that shareholders and stakeholders would need to wait for further updates. In summary, Netcare Limited's exit from the UK market is driven by the unsustainable rental costs that have hindered the business's profitability. The company's commitment to delivering solid returns to its shareholders and maintaining financial prudence has led to this strategic decision. While the exact timeline for the exit remains uncertain, Netcare is focused on completing the disposal process in a timely manner to ensure a smooth transition.