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Private Hospital Admissions Weigh On Wakefield Profit

Fuseworks Media
Fuseworks Media

Wellington, Nov 6 NZPA - Declining private hospital admissions contributed to Wakefield Health's after-tax earnings dropping 41.2 percent to $3.6 million for the six months to September 30.

Chairman John Calder said trading conditions this financial year had become very challenging.

The company had highlighted in its guidance in August that first quarter earnings had been adversely impacted by negative trends in district health boards (DHB), ACC and self-funded patient revenues and that a continued slowdown could result in net earnings for the half year being considerably lower than the record profit for the equivalent period last year.

"This slowdown did indeed continue. A decline in admission numbers, most notably those for major surgery, resulted in a 10.1 percent decline in revenue (to $40.09m)," Mr Calder said.

"Operating costs were down 2.9 percent. Medical supplies costs declined in line with revenue, but payroll costs reflected an overall increase.

"While savings were effected by reducing agency staff and overtime to align with the reduced workloads, this was more than offset by the impact of wage settlements in the prior year to attract and retain key staff in a competitive market."

With costs not decreasing to the same extent as revenues, margins declined significantly, with earnings before interest, tax, depreciation and amortisation (ebitda) down 28.6 percent to $8.93m.

Depreciation and amortisation expense increased as a result of investment in facility and technology upgrades the previous year.

While the company benefited from lower interest rates and debt levels, the impact of lower operating earnings flowed through to the bottom line.

Mr Calder said there was little to indicate that DHB contract work would increase this financial year, while ACC's challenges would not dissipate in the near future.

"It is positive to note that despite the impact of the recession, the number of New Zealanders with private health insurance has remained steady," he added.

Wakefield operates two hospitals in Wellington and one in Hastings.

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