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Trading update for the year ending 30 September 2018
Life Healthcare Group Holdings Limited
Incorporated in the Republic of South Africa
Registration number: 2003/002733/06
ISIN: ZAE000145892
Share Code: LHC
("Life Healthcare" or "the Company")
TRADING UPDATE FOR THE YEAR ENDING 30 SEPTEMBER 2018
The primary purpose of this announcement is to provide shareholders with an update on Life
Healthcare’s trading for the year ending 30 September 2018, further to the trading statement
released on SENS on 1 June 2018.
The Group has performed well overall with revenue expected to grow by between 10.0% and 14.0%
compared to the year ended 30 September 2017 (prior year) and normalised EBITDA growing between
8.0% and 10.0%. The southern African operations have recovered with positive volume growth against
the prior year. In the Group’s international operations, Scanmed S.A. (Scanmed) has continued to
perform in line with H1 2018. Alliance Medical Group Limited (Alliance Medical) delivered a solid
performance for the 2018 year in the Irish, Italian and northern Europe diagnostic businesses. In the
UK the molecular imaging business (PET-CT) continues to experience good scan volume growth with
2018 volumes increasing above 12% over the prior year. The diagnostic imaging business in the UK
was impacted by the mobile competition and the decrease in NHS prices. The strategic focus continues
to be long term partnership solutions with hospital trusts.
On 19 September 2018 Life Healthcare announced that it had accepted an offer from the global
investment firm Kohlberg Kravis Roberts & Co. LP. (KKR) to acquire Life Healthcare’s 49.7% stake in
Max Healthcare Institute Limited (Max Healthcare). Subject to the terms and conditions to be mutually
agreed in a share purchase agreement, KKR will acquire all equity shares held by Life Healthcare
International Proprietary Limited, which represents 49.7% of the share capital of Max Healthcare, for
approximately R4.3 billion before costs and taxes. The transaction has been hedged. The transaction
is currently expected to be finalised and become effective before the end of December 2018. The
Group will utilise the net proceeds after costs and taxes from the disposal to settle debt as well as to
invest in growth opportunities in the Company’s core markets.
The Max Healthcare investment’s book value as at 31 March 2018 amounted to R2.9 billion (30
September 2017: R3.0 billion). The Company’s share of net loss after tax for the year ended 30
September 2018 is expected to be between R115 million and R135 million (2017: R27 million).
The Group’s revenue and normalised EBITDA for the year ended 30 September 2018 are expected to
vary from those reported in the prior year within the following ranges:
Measure Estimated % range Estimated Reported Notes
for year ending 30 number range year
September 2018 for year ending ended 30
30 September September
2018 2017
Revenue +10.0% to +14.0% R22 877m to R20 797m
R23 709m
- Southern Africa +7.0% to +10.0% R17 002m to R15 890m 1
R17 479m
- Alliance Medical +23.0% to +27.0% R4 689m to R3 812m 2
R4 841m
- Poland +13.0% to +16.0% R1 237m to R1 095m 3
R1 270m
Normalised EBITDA* +8.0% to +10.0% R5 401m to R5 001m
R5 501m
- Southern Africa +5.0% to +8.0% R4 251m to R4 049m 1
R4 373m
- Alliance Medical +15.0% to +18.0% R1 044m to R908m 2
R1 071m
- Poland +90.0% to 95.0% R84m to R86m R44m 3
Average exchange rates
- Pound Sterling 17.45 to 17.65 16.93
- Polish Zloty 3.63 to 3.70 3.44
*Life Healthcare defines normalised EBITDA as operating profit before depreciation on property,
plant and equipment and amortisation of intangible assets and non-trading related costs and
income.
Notes:
1. Southern Africa review
Overall, revenue for southern Africa is expected to grow by between 7.0% and 10.0% with the
normalised EBITDA margin reducing slightly due to the drop in healthcare services margins and
higher Group head office costs due to an increased focus on business development, data analytics
and Group wide integration initiatives.
- Paid patient days (PPD) growth is expected to be between 0.9% and 1.3% higher than the
prior year, following the negative PPD growth experienced in the prior year. The annual
growth is lower than the 2.0% PPD growth reflected in H1. This is as a result of lower
admissions for pneumonia related conditions during the winter period, particularly July and
August compared to 2017. The managed care pressures on admissions by GEMS continued
from H1 into H2. Complementary services experienced good PPD growth.
- Occupancies for the year are expected to be circa 69.7% (2017: 70.0%).
- Revenue growth per PPD has come in at circa 6.2% (2017: 6.3%) reflecting a slight shift in the
case mix over the period.
- C. 100 beds were added during the year.
- The normalised EBITDA margin is expected to be between 24.5% and 26.0% (2017: 25.5%)
and in line with H1 2018 and H2 2017.
Healthcare services has shown strong revenue growth for the year with revenue growing between
28.0% and 30.0% on 2017. This growth however comes within the context of lower margins with
normalised EBITDA growing by between 4.5% and 6.0%.
2. Alliance Medical
Alliance Medical’s results as reflected in the table above are for a 12 month period in 2018 while
the 2017 comparative period is for 10.3 months.
Revenue, in Pound Sterling (GBP), on a like-for-like basis is expected to grow by between 3.0% and
6.0% against the full comparative 2017 year’s revenue and the normalised EBITDA margin for the
year is expected to be between 21.5% and 23.0%, consistent with H1 2018 (22.4%), but below
2017 (24.2%).
3. Poland
Revenue for H2 2018 was consistent with H1 and reflects strong year on year growth on the back
of the 4 year contracts signed with the NFZ.
- Revenue is expected to grow by between 7.0% and 10.0% on 2017 in Polish Zloty (PLN).
- The normalised EBITDA margin for the year is expected to be between 6.0% and 7.5% (2017:
4.0%).
Further trading statement
A further trading statement quantifying the expected earnings per share and headline earnings per
share within the ranges required by the JSE Listings Requirements will be released in early November
2018.
The financial information on which this trading update is based has not been reviewed and reported
on by the Company’s external auditors.
Illovo
28 September 2018
Sponsor
RAND MERCHANT BANK (a division of FirstRand Bank Limited)
Date: 28/09/2018 07:05:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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