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LIFE HEALTHCARE GROUP HOLDINGS LIMITED - Unaudited group results for the period ended 31 March 2019, cash dividend declaration and trading statement

Release Date: 30/05/2019 07:05
Code(s): LHC     PDF:  
 
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Unaudited group results for the period ended 31 March 2019, cash dividend declaration and trading statement

LIFE HEALTHCARE GROUP HOLDINGS LIMITED
Registration number: 2003/002733/06
Income tax number: 9387/307/15/1
ISIN: ZAE000145892
Share code: LHC 

UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2019, 
CASH DIVIDEND DECLARATION AND TRADING STATEMENT

HIGHLIGHTS

- Revenue                                   
  +9.5%                                     
  to R12.4 billion                          
                                            
- Normalised EBITDA                         
  +2.2%                                     
  to R2.7 billion                           
                                            
- Interim dividend of 40 cents per share    
  +5.3%                                     
                                            
- Investments for future growth             
  R74 million                               
  (including opex and capex)                
                                            
- Normalised earnings per share             
  -9.4%                                     
  to 49.1 cents                             

CONDENSED CONSOLIDATED STATEMENT OF PROFIT OR LOSS AND OTHER COMPREHENSIVE INCOME
for the period ended 31 March 2019
                                                                        2019            %            2018    
                                                                         R'm       change             R'm    
Revenue                                                               12 399          9.5          11 323    
Operating expenses                                                   (10 596)                      (9 453)   
Operating profit                                                       1 803         (3.6)          1 870    
Fair value adjustments to contingent consideration                       (38)                           -    
Fair value loss on derivative financial instruments                     (370)                          (2)   
Impairment of assets and investments                                     (37)                         (17)   
Profit on disposal of property, plant and equipment                        4                           39    
Transaction costs                                                        (30)                          (8)    
Other                                                                     (2)                           -    
Finance income                                                            13                           26    
Finance cost                                                            (525)                        (488)   
Share of associates' and joint ventures' net                               4                          (64)   
profit/(loss) after tax                                                                                      
Profit before tax                                                        822                        1 356    
Tax expense                                                             (324)                        (419)   
Profit after tax                                                         498        (46.9)            937    
Other comprehensive income/(loss), net of tax                                                                
  Items that may be reclassified to profit or loss                                                           
  Movement in foreign currency translation reserve                       466                         (911)   
  Items that will not be reclassified to profit or loss                                                      
  Retirement benefit asset and post-employment medical aid                (4)                          (4)   
Total comprehensive income for the period                                960         >100              22    
Profit after tax attributable to:                                                                            
  Ordinary equity holders of the parent                                  357        (54.1)            777    
  Non-controlling interest                                               141                          160    
                                                                         498        (46.9)            937    
Total comprehensive income/(loss) attributable to:                                                           
  Ordinary equity holders of the parent                                  812         >100            (126)   
  Non-controlling interest                                               148                          148    
                                                                         960         >100              22    
Weighted average number of shares in issue (million)                   1 456          2.3           1 423    
Earnings per share (cents)                                              24.5        (55.1)           54.6    
Headline earnings per share (cents)                                     26.9        (49.9)           53.7    
Diluted earnings per share (cents)                                      24.4        (55.1)           54.4    
Diluted headline earnings per share (cents)                             26.8        (49.9)           53.5    
Headline earnings (R'm)                                                                                      
Profit attributable to ordinary equity holders                           357                          777    
Adjustments (net of tax)                                                                                     
  Impairment of assets and investments                                    37                           17    
  Profit on disposal of property, plant and equipment                     (3)                         (30)   
Headline earnings                                                        391        (48.8)            764    


CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
as at 31 March 2019
                                                                                 31 March    30 September    
                                                                                     2019            2018    
                                                                        Note          R'm             R'm    
ASSETS                                                                                                       
Non-current assets                                                                 31 229          30 558    
Property, plant and equipment                                                      12 338          12 243    
Intangible assets                                                                  17 504          17 084    
Other non-current assets                                                            1 387           1 231    
Current assets                                                                      9 047           8 584    
Cash and cash equivalents                                                           1 691           1 494    
Other current assets                                                       2        4 515           4 249    
Asset classified as held for sale                                                   2 841           2 841    
Total assets                                                                       40 276          39 142    
EQUITY AND LIABILITIES                                                                                       
Capital and reserves                                                                                         
Stated capital                                                                     13 523          13 510    
Reserves                                                                            1 499           1 406    
Non-controlling interest                                                            1 277           1 286    
Total equity                                                                       16 299          16 202    
LIABILITIES                                                                                                  
Non-current liabilities                                                            14 496          14 764    
Interest-bearing borrowings                                                1       12 650          12 870    
Other non-current liabilities                                              2        1 846           1 894    
Current liabilities                                                                 9 481           8 176    
Bank overdraft                                                                      1 710             488    
Interest-bearing borrowings                                                1        3 017           3 086    
Other current liabilities                                                  2        4 754           4 602    
Total liabilities                                                                  23 977          22 940    
Total equity and liabilities                                                       40 276          39 142    


CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the period ended 31 March 2019                              
                                                                       Total                                 
                                                                     capital             Non-                
                                                                         and      controlling       Total    
                                                                    reserves         interest      equity    
                                                                         R'm              R'm         R'm    
Balance at 1 October 2018 (as previously reported)                    14 916            1 286      16 202    
Transition adjustment relating to IFRS 9                                  20                -          20    
Balance at 1 October 2018 (restated)                                  14 936            1 286      16 222    
Total comprehensive income for the period                                812              148         960    
Profit for the period                                                    357              141         498    
Other comprehensive income                                               455                7         462    
Transactions with non-controlling interests                              (35)              (7)        (42)   
Distributions to shareholders                                           (734)            (150)       (884)   
Share-based payment charge for staff benefit schemes                      43                -          43    
Balance at 31 March 2019                                              15 022            1 277      16 299    
Balance at 1 October 2017                                             14 380            1 171      15 551    
Total comprehensive (loss)/income for the period                        (126)             148          22    
Profit for the period                                                    777              160         937    
Other comprehensive loss                                                (903)             (12)       (915)   
Issue of new shares as a result of scrip distribution                    360                -         360    
Transactions with non-controlling interests                             (107)              21         (86)   
Distributions to shareholders                                           (652)            (150)       (802)   
Share-based payment charge for staff benefit schemes                      46                -          46    
Balance at 31 March 2018                                              13 901            1 190      15 091    


CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                      
for the period ended 31 March 2019                                                  
                                                                        2019                %        2018    
                                                                         R'm           change         R'm    
Cash generated from operations                                         2 591             (3.3)      2 679    
Transaction costs paid                                                   (30)                           -    
Interest received                                                         13                           26    
Tax paid                                                                (477)                        (548)   
Net cash from operating activities                                     2 097             (2.8)      2 157    
Capital expenditure                                                     (925)                        (882)   
Investments (net of cash acquired) and contingent                                   
considerations paid                                                     (236)                         (24)   
Other                                                                    (97)                         (72)   
Net cash utilised in investing activities                             (1 258)                        (978)   
Proceeds from interest-bearing borrowings                              2 076                        5 102    
Repayment of interest-bearing borrowings                              (2 610)                      (5 386)   
Dividends paid                                                          (734)                        (292)   
Finance costs paid                                                      (467)                        (519)   
Other                                                                   (153)                        (161)   
Net cash utilised in financing activities                             (1 888)                      (1 256)   
Net decrease in cash and cash equivalents                             (1 049)                         (77)   
Cash and cash equivalents - beginning of the period                    1 006                          726    
Effect of foreign currency rate movements                                 24                         (141)   
Cash and cash equivalents at end of the period 1                         (19)                         508    
1 Cash and cash equivalents at end of the period are net of bank overdrafts.


SEGMENTAL INFORMATION
for the period ended 31 March 2019

The Group's segments are aligned to those business units that are evaluated regularly by the chief operating 
decision maker (CODM) in deciding how to allocate resources and in assessing performance.

In southern Africa, the hospitals and complementary services segment comprises all the acute hospitals and 
complementary services which include mental health, acute rehabilitation, renal dialysis and oncology. 
The healthcare services segment comprises Life Esidimeni and Life Employee Health Solutions while growth 
initiatives comprise new outpatient models and radiology.                              

International comprises diagnostic services, healthcare services (Scanmed) as well as growth initiatives, 
which comprise product development, across Europe and United Kingdom.                              

Corporate is an additional non-operating segment.

The comparative information has been restated to adjust for the current change in the composition of the 
reportable segments.                              

The operating businesses have been aggregated into different segments based on the similar nature of 
products and services, similar economic characteristics, similar type of customers and operating in a 
similar regulatory environment.                              

Inter-segment revenue of R2 million (2018: R2 million) is eliminated and relates to revenue between 
Life Employee Health Solutions and the southern Africa business.                              

                                                                            2019            2018    
                                                                             R'm             R'm    
Operating segments                                                                                  
Revenue 1                                                                                             
Southern Africa                                                                                     
  Hospitals and complementary services                                     8 238           7 796    
  Healthcare services                                                        609             568    
International                                                                                       
  Diagnostic services                                                      2 742           2 315    
  Healthcare services                                                        664             644    
  Growth initiatives                                                         146               -    
                                                                          12 399          11 323    
Normalised EBITDA 2                                                                                 
Southern Africa                                                                                     
  Hospitals and complementary services                                     1 830           1 774    
  Healthcare services                                                         70              71    
  Growth initiatives                                                         (10)              -    
International                                                                                       
  Diagnostic services                                                        628             518    
  Healthcare services                                                         42              60    
  Growth initiatives                                                         (13)              -    
Corporate                                                                                       
  Recoveries                                                                 625             602   
  Corporate before growth initiatives                                       (421)           (352)    
  Corporate growth initiatives                                               (18)              -    
                                                                           2 733           2 673    
1 Revenue of approximately 23% (2018: 23%) is derived from one external customer. The revenue 
  is attributable to the southern Africa segment.
2 Life Healthcare defines normalised EBITDA as operating profit before depreciation on property, 
  plant and equipment, amortisation of intangible assets and non-trading-related costs or income.

                                                                            2019            2018    
                                                                             R'm             R'm    
Depreciation                                                                                        
Southern Africa                                                                                     
  Hospitals and complementary services                                      (284)           (261)   
  Healthcare services                                                         (8)            (10)   
International                                                                                       
  Diagnostic services                                                       (266)           (226)   
  Healthcare services                                                        (32)            (29)   
  Growth initiatives                                                          (4)              -    
Corporate                                                                                           
  Corporate before growth initiatives                                        (24)            (22)   
  Corporate growth initiatives                                                (1)              -    
                                                                            (619)           (548)   
EBITA 3                                                                                              
Southern Africa                                                                                     
  Hospitals and complementary services                                     1 546           1 513    
  Healthcare services                                                         62              61    
  Growth initiatives                                                         (10)              -    
International                                                                                       
  Diagnostic services                                                        362             292    
  Healthcare services                                                         10              31    
  Growth initiatives                                                         (17)              -    
Corporate                                                                                           
  Corporate before growth initiatives                                        180             228    
  Corporate growth initiatives                                               (19)              -    
                                                                           2 114           2 125    
3 EBITA is defined as normalised EBITDA less depreciation.                                          

Amortisation                                                                                        
Southern Africa                                                                                     
  Hospitals and complementary services                                       (55)            (55)   
International                                                                                       
  Diagnostic services                                                       (203)           (180)   
  Healthcare services                                                         (9)            (10)   
  Growth initiatives                                                         (32)              -    
Corporate before growth initiatives                                          (12)            (10)   
                                                                            (311)           (255)   
Operating profit before items detailed below                                                        
Southern Africa                                                                                     
  Hospitals and complementary services                                     1 491           1 458    
  Healthcare services                                                         62              61    
  Growth initiatives                                                         (10)              -    
International                                                                                       
  Diagnostic services                                                        159             112    
  Healthcare services                                                          1              21    
  Growth initiatives                                                         (49)              -    
Corporate                                                                                           
  Corporate before growth initiatives                                        168             218    
  Corporate growth initiatives                                               (19)              -    
                                                                           1 803           1 870    
Fair value adjustments to contingent consideration                           (38)              -    
Fair value loss on derivative financial instruments                         (370)             (2)   
Impairment of assets and investments                                         (37)            (17)   
Profit on disposal of property, plant and equipment                            4              39    
Transaction costs                                                            (30)             (8)   
Other                                                                         (2)              -    
Finance income                                                                13              26    
Finance costs                                                               (525)           (488)   
Share of associates' and joint ventures' net profit/(loss) after tax           4             (64)   
Profit before tax                                                            822           1 356    
Operating profit before items detailed includes the segment's share of shared services and rental 
costs. These costs are all at market-related rates.                              

                                                                        31 March    30 September    
                                                                            2019            2018    
                                                                             R'm             R'm    
Total assets before items below                                                                     
Southern Africa                                                           13 256          12 998    
International                                                             22 877          22 078    
                                                                          36 133          35 076    
Asset classified as held for sale                                          2 841           2 841    
Employee benefit assets                                                      390             401    
Deferred tax assets                                                          851             700    
Derivative financial assets                                                    6             100    
Income tax receivable                                                         55              24    
Total assets per the balance sheet                                        40 276          39 142    
Net debt                                                                                            
Southern Africa                                                            8 445           8 018    
International                                                              7 241           6 932    
                                                                          15 686          14 950    
Cash and cash equivalents (net of bank overdraft)                                                   
Southern Africa                                                           (1 089)            (82)   
International                                                              1 070           1 088    
                                                                             (19)          1 006    
Net debt is a key measure for the Group, which comprises all interest-bearing borrowings, overdraft 
balances and cash on hand.

ACQUISITIONS AND DISPOSALS OF INVESTMENTS

Transactions with non-controlling interests
Increases and decreases in ownership interest in subsidiaries
The Group had marginal increases and decreases in its percentage shareholdings in some of its 
southern Africa and Polish subsidiary companies due to transactions with minority shareholders. 
The individual transactions are immaterial.
Business combinations
The following material acquisition took place during the current financial period.
                                                                        European Scanning Centre     
                                                                                   Limited (ESC)    
Acquirer                                                                        Alliance Medical    
Country of incorporation                                                          United Kingdom    
Acquisition date                                                                21 December 2018    
Percentage voting equity interest acquired                                                  100%    
Primary reasons for business combination                                    This is in line with     
                                                                               Life Healthcare's     
                                                                         strategy to establish a     
                                                                          sizeable international    
                                                                       business, and complements     
                                                                            the Group's existing    
                                                                     diagnostic services segment    
Qualitative factors that make up goodwill recognised             Attributable to future earnings     
                                                                         potential and synergies    
Contingent liabilities at acquisition                                                       None    

Details of the fair values of net assets acquired and goodwill are as follows:
R'm                                                                                          ESC    
Total purchase consideration                                                                (213)   
Cash portion                                                                                (195)   
Contingent consideration 1                                                                   (18)   
Fair value of net assets acquired 2                                                           60    
Property, plant and equipment                                                                 68    
Trade and other receivables                                                                   17    
Cash and cash equivalents                                                                      8    
Interest-bearing borrowings                                                                   (4)   
Trade and other payables                                                                     (29)   
Goodwill                                                                                    (153)   
1 Contingent consideration is based on performance and is expected to become payable between six to 
  12 months from the date of acquisition.
2 The fair values identified on acquisition are provisional and subject to further review.

R'm                                                                                          ESC    
Cash outflow to acquire business, net of cash acquired                                              
Initial cash consideration                                                                   195    
Less: Cash at acquisition                                                                     (8)   
                                                                                             187    
Impact on consolidated information from date of acquisition                                         
Revenue                                                                                       19    
Net profit                                                                                     7    
Impact on consolidated information if business combination took place                    
on 1 October 2018 (six months)                                                           
Revenue                                                                                       29    
Net profit                                                                                    10    

NOTES
1. Interest-bearing borrowings
                                                                                             R'm    
   Balance at 30 September 2018                                                           15 956    
   Proceeds from interest-bearing borrowings                                               1 576
   Proceeds from preference shares                                                           500    
   Repayment of interest-bearing borrowings                                               (2 122)   
   Repayment of preference shares                                                           (488)   
   Arising on acquisition of subsidiary                                                        4    
   Amortisation of debt raising fees capitalised                                              14    
   Other movements                                                                            58    
   Exchange differences                                                                      169    
   Balance at 31 March 2019                                                               15 667    

2. Financial instruments
   Fair value
   Other non-current liabilities, other current assets and liabilities as presented in the 
   statement of financial position, include contingent consideration liabilities and derivative 
   financial instruments (assets and liabilities) at fair value (through profit of loss). 
   
   The derivative assets and liabilities used for hedging, as presented in the statement of financial 
   position, are the financial assets and liabilities that are measured at fair value.

   The fair values of quoted investments are based on current bid prices. If the market for a financial 
   asset is not active and for unlisted securities, the Group establishes fair value by using valuation
   techniques. These include the use of recent arm's length transactions, reference to other instruments 
   that are substantially the same, discounted cash flow analysis and option pricing models, making 
   maximum use of market inputs and relying as little as possible on entity-specific inputs.

   The Group's financial instruments held at fair value, are measured subsequent to their initial 
   recognition and are grouped into levels 1 to 3 based on the extent to which the fair values are 
   observable. All of the resulting fair value estimates for the derivative financial instruments used 
   for hedging are included in level 2. The contingent considerations are included in level 3. The fair 
   value of interest rate swaps is calculated as the mark-to-market valuation, which represents the 
   mid-market value of the instrument as determined by the financial institution at 31 March 2019.

   The fair value of forward exchange contracts is determined using forward exchange rates at the 
   statement of financial position date, with the resulting value discounted back to the present value,
   as determined by the financial institution at 31 March 2019.                   

   There were no transfers between levels 1, 2 and 3 during the period.

   Basis of presentation and accounting policies          
   The condensed consolidated interim financial statements contained in the interim report are prepared 
   in accordance with the requirements of the JSE Limited (JSE) Listings Requirements for preliminary 
   reports, and the requirements of the South African Companies Act No 71 of 2008 (as amended) applicable 
   to summary financial statements. The accounting policies are consistent with those applied in the 
   previous consolidated annual financial statements, except for the adoption of the new standards as 
   set out below. The Listings Requirements require preliminary reports to be prepared in accordance 
   with the framework concepts and the measurement and recognition requirements of International 
   Financial Reporting Standards (IFRS) and the South African Institute of Chartered Accountants 
   (SAICA) Financial Reporting Guides as issued by the Accounting Practices Committee and Financial 
   Pronouncements as issued by the Financial Reporting Standards Council and to also, as a minimum, 
   contain the information required by IAS 34 Interim Financial Reporting.

   These interim financial results have been prepared under the supervision of PP van der Westhuizen (CA(SA)), 
   the Group Chief Financial Officer.

   Unaudited results
   The results for the period ended 31 March 2019 have not been reviewed or audited by the Group's auditors.

   The directors take full responsibility for the preparation of the interim report.

   New accounting standards            
   The Group has adopted IFRS 9 and IFRS 15 from 1 October 2018, and changed its accounting policies accordingly.
   The Group elected not to restate any comparative information. The impact of adopting these new standards
   has been applied retrospectively with an adjustment to the Group's opening retained earnings.

   IFRS 15 Revenue from Contracts with Customers          
   All contracts within the Group have been assessed against the new standard, and the implementation does 
   not have an impact on the Group's recognition and measurement of revenue. Therefore, no adjustment to 
   opening retained earnings was required.

   IFRS 9 Financial Instruments
   IFRS 9 replaces the provisions of IAS 39 that relate to the recognition, classification and measurement 
   of financial assets and financial liabilities, derecognition of financial instruments, impairment of 
   financial assets and hedge accounting.

   Classification and measurement
   The Group currently carries the following financial assets – trade and other receivables, cash and cash 
   equivalents, other assets and derivative financial instruments. Trade and other receivables, as well as 
   other assets, are measured at amortised cost as the objective of the business model is to hold these 
   financial assets for the collection of the contractual cash flows, and the contractual cash flows 
   under the instrument represent payments of principal and interest. Reclassification is therefore not 
   required. Derivative financial assets are measured at fair value through profit or loss, and no 
   reclassification is required.
    
   Impairment of financial assets
   The Group was required to revise its impairment methodology under IFRS 9 for each class of financial
   asset. The impact on the Group is a decrease in the provision for receivables of R20 million. The Group 
   applied the simplified approach to measure the expected credit losses (ECL) which uses a lifetime 
   expected loss allowance. The impact of the change on the Group's retained earnings is disclosed in 
   the table below. While cash and cash equivalents are also subject to the impairment requirements of 
   IFRS 9, the impairment loss will be immaterial.

   The impact of the changes on the Group's retained earnings is as follows:
                                                                                             R'm    
   Opening balance as at 1 October 2018 (as previously reported)                           1 569    
   Decrease in provision for receivables (under IFRS 9)                                       20    
   Opening balance as at 1 October 2018 (restated)                                         1 589    

   Transition
   The Group has elected to apply the new standard retrospectively without restating comparatives, with 
   the impact recognised as an adjustment to opening retained earnings. As a result of the decrease in 
   the provision other current assets increased by R20 million.
  
   Impact of standards issued but not yet applied by the Group
   IFRS 16: The Group will adopt IFRS 16 Leases from 1 October 2019. Under the new standard, Life Healthcare 
   as lessee will recognise right-of-use assets and lease liabilities for all lease contracts (with limited 
   exceptions) on the statement of financial position. Property lease contracts have the most significant 
   impact on the Group. The assessment is ongoing and an update will be provided at year end. An initial 
   assessment was included in the previous consolidated annual financial statements.      

COMMENTARY
Overview
Despite a challenging healthcare trading environment, our focus on operational excellence has delivered a
healthy overall performance. The Group experienced a positive six months for the period ended 31 March 2019,
with Group revenue growing by 9.5% while normalised Group EBITDA increased by 2.2%.
 
While we expect tough operating conditions to remain, we are optimistic about the Group's growth prospects
both in southern Africa and internationally. In South Africa, we are broadening our business lines across the
healthcare continuum. We are also engaging positively with government to explore ways to improve access to
quality healthcare in the country, and look forward to strengthening these efforts in the coming months.
Internationally, we are expanding our radiology product development business within Alliance Medical through 
Life Molecular Imaging (LMI). We remain optimistic about our international business despite the uncertainty 
posed by Brexit, as we have considered the potential business impact and implemented plans to mitigate 
material risks.
 
To complement our growth focus, we have initiated several efficiency programmes for sustainability. 
These include nursing optimisation, procurement, and a focus on cost of sales and other administrative costs. 
In addition, we are progressing on our integration effort.

Operational review
Southern Africa
Southern Africa includes hospitals and complementary services, healthcare services and growth initiatives but
excludes corporate.

Revenue from southern Africa increased by 5.8% to R8.8 billion (2018: R8.4 billion). Revenue from hospitals
and complementary services grew by 5.7% mainly due to a 5.9% increase in revenue per paid patient day (PPD)
and a 0.3% decline in PPDs (2018: +2.0%). The increase in revenue per PPD is made up of a 5.1% tariff increase
and a 0.8% positive case mix change. The lower activity volumes are due to a quiet Q1 FY2019, ongoing
funder-managed care initiatives and lower admissions for respiratory diseases which commenced in H2 FY2018. 
The overall weighted occupancy for the period decreased slightly to 67.7% (2018: 68.3%), with 41 brownfield 
expansion beds being added. Complementary services continued to show good growth with revenue increasing by 
7.7%. Healthcare services performed well due to new contracts gained by Life Employee Health Solutions.
 
Normalised EBITDA increased by 2.4% with an EBITDA margin of 21.4% for the period (2018: 22.1%). The EBITDA
margin was affected by the impact of lower activity on the operational leverage of the acute business,
increased growth in the healthcare services business at lower margins and investments in growth initiatives. 
We continue to focus on efficiency initiatives covering nursing optimisation, procurement, cost of sales and
administrative costs to mitigate the impact. If the impact of the growth initiatives is excluded, normalised 
EBITDA increased by 3.0%. We remain confident that these growth initiatives are key to our sustainability and 
relevance, as they aim to broaden Life Healthcare's exposure across the healthcare continuum, and include 
expanding the new outpatient models business and developing the diagnostic opportunity.
 
Quality remains of paramount importance for the Group, and we continue to focus on improving our quality
outcomes, with patient safety adverse events declining. In line with the our strategy to increase transparency
around quality outcomes, the southern Africa business became the first hospital group in South Africa to publish
quality scores on a per hospital basis from October 2018. These scores can be viewed on Life Healthcare's
website.

International
Diagnostic services' revenue grew by 18.4% to R2.7 billion (2018: R2.3 billion) driven by growth in PET-CT
scan volumes (up 17.2%), the acquisition of the Italian clinics during H2 FY2018, an acquisition of three
scanning facilities in the UK in the current period, and a solid underlying performance in Ireland. Normalised
EBITDA increased by 21.2% to R628 million (2018: R518 million) and comes off the back of continued operational
and clinical excellence and improved performance in the PET and mobile business in the UK. The normalised
EBITDA margin improved to 22.9% (2018: 22.4%) but was negatively impacted by supply challenges within our
radiopharmacy production units, resulting in increased costs. The results were positively impacted by 
the weakening of the rand against the pound sterling and euro. 
 
Healthcare services' (Scanmed) revenue for the period increased by 3.1% to R664 million (2018: R644 million). 
Normalised EBITDA decreased to R42 million (2018: R60 million) resulting in the normalised EBITDA margin 
decreasing to 6.3% (2018: 9.3%). Healthcare services' performance was impacted by reduced overquota referrals 
in H1 FY2019, increased competition in orthopaedics and costs relating to IT automation projects and the
strengthening of the management team.
 
LMI (formerly Piramal Imaging), our primary international growth initiative, performed better than expected
and contributed revenue of R146 million and a normalised EBITDA loss of R13 million.

Corporate
Corporate was impacted by the additional cost of human resource capacity created at a Group level to support
the growth initiatives in South Africa and internationally. A number of efficiency programmes have been
initiated which are expected to result in future efficiency gains, and in addition the Group has invested 
in data analytics capabilities to assist in delivering growth initiatives.

Sale of equity investment in Max Healthcare Institute Limited (Max)
The disposal of Max is expected to conclude by the end of June 2019 and funds are expected to flow by
financial year end. The results for the period include the impact of the mark-to-market loss on the 
foreign exchange option contracts, taken out to protect the proceeds. These option contracts resulted in 
a loss of R256 million, net of tax. The loss will be offset by the higher proceeds and related profit 
on the disposal.

Financial performance
Group revenue increased by 9.5% to R12.4 billion (2018: R11.3 billion) consisting of a 5.8% increase in
southern African revenue to R8.8 billion (2018: R8.4 billion); and a 20.0% increase in international revenue to
R3.6 billion (2018: R3.0 billion).

Normalised EBITDA increased by 2.2% to R2.73 billion (2018: R2.67 billion).

Normalised EBITDA was impacted by tough trading conditions and investments in growth initiatives. Normalised
EBITDA excluding growth initiatives increased by 3.8%.

                                                                 2019            %       2018    
                                                                  R'm       change        R'm    
Normalised EBITDA                                                                                
  Operating profit                                              1 803         (3.6)     1 870    
  Depreciation on property, plant and equipment                   619         13.0        548    
Amortisation of intangible assets                                 311         22.0        255    
Normalised EBITDA                                               2 733          2.2      2 673    
  Southern Africa                                               1 890          2.4      1 845    
  International                                                   657         13.7        578    
  Corporate                                                       186        (25.6)       250    

Growth initiatives (South Africa and international)                41                       -    
Normalised EBITDA excluding growth initiatives                  2 774          3.8      2 673    

Cash flow
The Group produced good cash flows from operations and continues to anticipate positive free cash flow.

Financial position
Net debt to normalised EBITDA as at 31 March 2019 was 2.83 times (30 September 2018: 2.73 times). 
The banks' covenant for net debt to EBITDA is 3.50 times.

Capital expenditure
During the current financial period, Life Healthcare invested approximately R1.2 billion (2018: R1.0 billion), 
comprised mainly of capital projects of R925 million (2018: R882 million) and a new acquisition (net of cash 
acquired) by Alliance Medical of R187 million. The maintenance capex for the period was R527 million 
(2018: R309 million).
 
Headline earnings per share (HEPS) and normalised earnings per share (EPS)
HEPS decreased by 49.9% to 26.9 cps (2018: 53.7 cps). EPS on a normalised basis, which excludes
non-trading-related items listed below, decreased by 9.4% to 49.1 cps (2018: 54.2 cps). The presentation 
of normalised earnings is a non-IFRS measure.

EPS and HEPS have been negatively impacted by the mark-to-market loss of R256 million (net of tax) on the
Max foreign exchange option contracts, diluting EPS and HEPS by 17.6 cps.

                                                                 2019            %       2018    
                                                                  R'm       change        R'm    
Weighted average number of shares in issue (million)            1 456          2.3      1 423    
Normalised earnings                                                                              
Profit attributable to ordinary equity holders                    357                     777    
Adjustments (net of tax)                                                                         
  Fair value adjustments to contingent consideration               38                       -    
  Fair value loss on Max foreign exchange option contracts        256                       -    
  Impairment of assets and investments                             37                      17    
  Profit on disposal of property, plant and equipment              (3)                    (30)   
  Transaction costs                                                30                       8    
  Other                                                             1                       -    
Normalised earnings                                               716         (7.3)       772    
Normalised EPS (cents)                                           49.1         (9.4)      54.2    

Normalised EPS was impacted by the investments in growth initiatives and by the additional cost 
of human resource capacity at Group level to support the growth initiatives. Normalised EPS 
excluding the current losses on these initiatives is 54.0 cents, which is in line with the 
prior period.

Changes to board of directors
There have been no changes to the board of directors for the period ended 31 March 2019.

Cash dividend declaration
The board approved an interim gross cash dividend of 40 cents per ordinary share for the period ended 
31 March 2019. The dividend has been declared from income reserves. A dividend withholding tax of 20% will 
be applicable to all shareholders not exempt therefrom, after deduction of which the net cash dividend is 
32 cents per share.

The Company's total number of issued ordinary shares is 1 467 349 162 as at 29 May 2019. 
The Company's income tax reference number is 9387/307/15/1.

In compliance with the requirements of the JSE, the following salient dates are applicable:

Last date to trade cum dividend                                         Tuesday, 18 June 2019    
Shares trade ex the dividend                                          Wednesday, 19 June 2019    
Record date                                                              Friday, 21 June 2019    
Payment date                                                             Monday, 24 June 2019    

Share certificates may not be dematerialised or rematerialised between Wednesday, 19 June 2019 and 
Friday, 21 June 2019, both days inclusive.
 
Outlook
Southern Africa
Based on current trends we expect H2 FY2019 PPD growth to be marginally positive. The Group will 
continue to take a cautious approach with regard to bed expansion, adding a further 80 mental health 
beds. Organic capex for the year is expected at approximately R1.1 billion. We will continue to focus 
on improving clinical quality and delivering value via our operational efficiency programmes.

International
Diagnostic services will complete the roll-out of the PET 2 contract and continue to roll-out integrated
diagnostic centres (IDCs) through signing additional long-term contracts. We expect continued good growth 
in PET-CT volumes. The Italian operations will focus on growing the clinic business through acquisitions 
and consolidation of certain clinics. Capex for the year is expected at approximately R1.1 billion.
 
Scanmed will continue to focus on aligning its business to best operating practices, and driving further
efficiencies to manage costs. Capex for the year is expected at approximately R87 million.

Growth initiatives
The Group will invest further into its growth initiatives (new outpatient models, radiology and LMI).

Trading statement for the 12 months ending 30 September 2019
Life Healthcare's results for the 12 months ending 30 September 2019 are expected to show an increase of
more than 20% in EPS (minimum increase of 21.7 cps to at least 130.3 cps) from those reported for the 
financial year ended 30 September 2018 (EPS: 108.6 cps). This is primarily due to the impact of the 
expected disposal of Life Healthcare's equity investment in Max by the financial year end.

A detailed trading statement will be released in early November 2019. The forecast financial information 
on which this trading statement is based has not been reviewed and reported on by the Group's external 
auditors.

Shareholders are advised that the investor presentation for the six months ended 31 March 2019 is published
on Life Healthcare's website (www.lifehealthcare.co.za).

Thanks
The contribution of the doctors, nurses and employees of Life Healthcare have greatly enhanced the quality
of our performance. We thank them for their contributions.


Approved by the board of directors on 29 May 2019 and signed on its behalf:

Mustaq Brey         Shrey Viranna
Chairman            Group Chief Executive Officer


ADMINISTRATION
Executive directors
SB Viranna (Group Chief Executive Officer)
PP van der Westhuizen (Group Chief Financial Officer)

Non-executive directors
MA Brey (Chairman), PJ Golesworthy, ME Jacobs, 
AM Mothupi, JK Netshitenzhe, MP Ngatane, 
M Sello, GC Solomon, RT Vice

Company secretary
A Parboosing

Registered office
Oxford Manor, 21 Chaplin Road, Illovo
Private Bag X13, Northlands 2116

Sponsors: Rand Merchant Bank, a division of FirstRand Bank Limited

Date: 30 May 2019

Note regarding forward-looking statements
Any forward-looking statements or projections made by the Company, including those made in this
announcement, are subject to risk and uncertainties that may cause actual results to differ 
materially from those projected.

www.lifehealthcare.co.za
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