By Jenny Ruth
Wednesday 24th November 2010
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Wakefield Health's profitability has been adversely affected in the last 18 months by the fall-off in revenue as surgical procedures declines, particularly from privately-funded and tightening criteria for ACC-funded service and lower contracting volume from district health boards, says McDouall Stuart.
"This trend will reverse but timing is difficult to determine," the broker says.
"The medium to long-term outlook remains favourable and sustained earnings growth should resume from demographics and capacity expansion (organic and acquisitions),"it says.
Rapid growth in the aging population, particularly those over 85, and weakening competition as public and not-for-profit hospitals face increasing funding pressure and are unable to service the growth in need, McDouall Stuart says.
Private health insurance cover is relatively high with 1.4 million people covered.
Wakefield has high operating leverage and a recovery in the current deferment of patient numbers should ensure further improvement in return on capital, the broker says. Its $30 million development of the Bowen hospital is almost half complete.
It is forecasting net profit for the year ending March 2011 will fall to $4.7 million from $6.2 million the previous year. From there, it will climb to $4.9 million in 2012, $5 million in 2013 and $6.7 million in 2014, its says.
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