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Group results for the year ended 30 September 2019, cash dividend declaration and trading statement
LIFE HEALTHCARE GROUP HOLDINGS LIMITED
(Incorporated in the Republic of South Africa)
Registration number: 2003/002733/06
Income tax number: 9387/307/15/1
ISIN: ZAE000145892
Share code: LHC
("Life Healthcare" or "the Company" or "the Group")
GROUP RESULTS FOR THE YEAR ENDED 30 SEPTEMBER 2019, CASH DIVIDEND DECLARATION AND TRADING STATEMENT
Highlights:
- Revenue: +9.3% to R25.7 billion
- Normalised EBITDA: +3.5% to R5.7 billion
- Normalised earnings per share: +5.6% to 116.4 cents
- Cash generated from operations: +7.7% to R5.9 billion
- Final dividend per share: +6.0% to 53.0 cents
2019 % 2018
Revenue (R'm) 25 672 9.3 23 488
Normalised EBITDA (R'm) 5 727 3.5 5 535
Weighted average number of shares (million) 1 456 0.3 1 451
Earnings per share (EPS) (cents) 176.4 62.4 108.6
Headline earnings per share (HEPS) (cents) 88.7 (18.5) 108.8
Normalised earnings per share (NEPS) (cents) 116.4 5.6 110.2
Final dividend per share (DPS) (cents) 53.0 6.0 50.0
Life Healthcare delivered a healthy overall performance, despite challenging trading environments in most of
the markets in which we operate. The strong revenue growth of 9.3% is a result of robust volume growth in the
PET-CT contract in the United Kingdom and a strong H2 FY2019 performance in southern Africa.
Good progress has been made in the imaging market as well as broadening our business lines across the
healthcare continuum in South Africa. Internationally, we are expanding our radiology product development
business within Alliance Medical Group Limited (Alliance Medical) through Life Molecular Imaging (LMI).
To complement our growth focus, we have initiated several efficiency programmes for sustainability, which we
expect will deliver substantial savings. These include nursing optimisation, improved procurement, capex
optimisation, focusing on cost of sales management and other administrative costs. The investment in these
programmes impacted normalised EBITDA negatively by R124 million.
Southern Africa
Revenue from southern Africa increased by 7.1% to R18.5 billion (2018: R17.2 billion). Revenue from
hospitals and complementary services grew by 6.8% mainly due to a 5.8% increase in revenue per paid patient day
(PPD) and a 0.8% growth in PPDs (2018: +1.1%). The increase in revenue per PPD is made up of a 4.8% tariff increase
and a 1.0% positive case mix change. Even though the Group experienced negative activity volumes in the first
half of the financial year (H1 FY2019: -0.3%), we delivered positive PPD growth of 0.8% for the full year due
to strong PPD growth of 1.8% in H2 FY2019. This growth is largely due to doctor recruitment gains over the
last two years, network gains and an increase in acuity from surgical cases.
Complementary services continued to show good growth with revenue increasing by 9.2%, benefitting from the
opening of the new mental health unit, Life Brackenview in April 2019, and good growth in renal dialysis.
Healthcare services performed well with revenue growing by 12.2% largely due to new contracts gained by Life
Employee Health Solutions.
Normalised EBITDA increased by 2.6% with an EBITDA margin of 23.8% for the year (2018: 24.9%).
The EBITDA margin was impacted by the lower PPD activity in December 2018 and January 2019 which affected
operational leverage in H1 FY2019, the cost of additional human resource capacity at a Group level to support
growth initiatives and the initial cost of efficiency programmes which are expected to deliver future
efficiency gains.
International
Diagnostic services' revenue grew by 13.4% to R5.6 billion (2018: R4.9 billion) driven by strong growth
in PET-CT scan volumes in the United Kingdom (up 15.9%), the full year impact of the acquisition of the
Italian clinics during H2 FY2018, the acquisition of scanning facilities in the United Kingdom in
December 2018, and a solid underlying performance in Ireland. Normalised EBITDA increased by 3.9% to
R1.3 billion (2018: R1.2 billion). The results were positively impacted by the weakening of the rand
against the pound sterling and euro. The normalised EBITDA margin decreased to 22.4% (2018: 24.5%).
The margin was negatively impacted by supply challenges within our radiopharmacy production units while
we are currently undertaking an 18-month planned refurbishment programme, resulting in increased costs.
Excluding this impact the margin was 23.6%.
Healthcare services' (Scanmed in Poland) revenue for the year increased by 7.1% to R1 349 million
(2018: R1 260 million). Normalised EBITDA increased to R97 million (2018: R85 million) resulting in the
normalised EBITDA margin increasing to 7.2% (2018: 6.7%).
Regulatory changes impacted minimum employment costs in Poland primarily resulted in a R125 million impairment
in the carrying value of the Polish investment in the Group's results during the year ended 30 September 2019.
Disposal of equity investment in Max Healthcare Institute Limited (Max)
The disposal of Max was concluded during the current year and funds were received on 21 June 2019.
The results for the year include the profit on the sale of R1.5 billion before withholding tax of
R94 million, transactions costs of R118 million and the loss on foreign exchange options contracts
of R292 million (net of tax).
The net cash proceeds of R3.8 billion, after withholding tax, the hedge costs and transaction costs, was
utilised to repay debt.
EPS, HEPS and NEPS
EPS increased by 62.4% to 176.4 cps (2018: 108.6 cps) primarily due to the impact of the disposal of Max.
The decrease of HEPS by 18.5% to 88.7 cps (2018: 108.8 cps) is due to the impact of the mark-to-market loss of
R292 million (net of tax) on the Max foreign exchange option contracts, diluting HEPS by 20.1 cps. NEPS, which
excludes non-trading related items, increased by 5.6% to 116.4 cps (2018: 110.2 cps). NEPS was impacted by the
investments in growth initiatives and by the cost of additional human resource capacity created at Group
level to support the growth initiatives. NEPS excluding the current losses on the growth initiatives is
118.5 cps (7.5% increase on FY2018).
Cash dividend declaration
The board approved a final gross cash dividend of 53.0 cents per ordinary share for the year ended
30 September 2019. The dividend has been declared from income reserves. The dividend is subject to South African
dividend withholding tax of 20%, which will be applicable to all shareholders not exempt therefrom, after deduction
of which the net cash dividend is 42.4 cents per share.
The Company's total number of issued ordinary shares is 1 467 349 162 as at 20 November 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, 10 December 2019
Shares trade ex the dividend Wednesday, 11 December 2019
Record date Friday, 13 December 2019
Payment date Tuesday, 17 December 2019
Share certificates may not be dematerialised or rematerialised between Wednesday, 11 December 2019
and Friday, 13 December 2019, both days inclusive.
Outlook
Tough operating conditions will remain, largely due to the slow economic growth in South Africa. The Group
does, however, see good pockets of growth opportunities, both in southern Africa and internationally.
In southern Africa, the Group expects flat acute PPDs in a market of increased network arrangements and good
growth in complementary services. The Group plans to add approximately 50 beds during the following financial
year.
Diagnostic services will complete the roll-out of the PET-CT 2 contract and the current refurbishment programme
of radiopharmacy facilities. The additional radiopharmacy facility should be operational in FY2020, until
then the business will continue to manage production carefully. 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.
The Group is exploring strategic options to potentially exit Poland-based operations.
The Group will invest further into its growth initiatives and continue driving our operational efficiency
programmes.
TRADING STATEMENT FOR THE SIX MONTHS ENDING 31 MARCH 2020
Life Healthcare's results for the six months ending 31 March 2020 are expected to show an increase of more
than 20% in EPS (minimum increase of 4.9 cps to at least 29.4 cps) and HEPS (minimum increase of 5.4 cps to at
least 32.3 cps) from those reported for the six months ended 31 March 2019 (EPS: 24.5 cps and HEPS: 26.9 cps).
This is primarily due to the mark-to-market loss recognised in H1 FY2019 on the option contracts, taken out to protect
the proceeds received on the Max disposal.
A detailed trading statement will be released mid-May 2020. The forecast financial information on which this
trading statement is based has not been reviewed and reported on by the Group's external auditors.
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. An adjustment to the Group's opening retained earnings was made as
a result of IFRS 9.
Report of the independent auditors
This short form announcement is extracted from audited information, but is not itself audited. The consolidated
financial statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon.
The auditor's report does not necessarily report on all the information contained in the announcement.
Shareholders are therefore advised that, in order to obtain a full understanding of the nature of the auditor's
engagement, they should obtain a copy of the auditor's report together with the accompanying consolidated financial
statements from the Company's registered office.
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 and have not been reviewed or reported on by the Group's
external auditor.
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
Group Company secretary: A Parboosing
Registered office: Oxford Manor, 21 Chaplin Road, Illovo. Private Bag X13, Northlands, 2116
Sponsor: Rand Merchant Bank, a division of FirstRand Bank Limited. 1 Merchant Place, Cnr Fredman Drive and
Rivonia Road, Sandton
Date: 21 November 2019
SHORT FORM ANNOUNCEMENT
Shareholders are advised that this short form announcement represents a summary of the information
contained in the full announcement. The full announcement is available for viewing at
https://senspdf.jse.co.za/documents/2019/JSE/ISSE/LHC/Final2019.pdf and on Life Healthcare's website
(www.lifehealthcare.co.za). This short form announcement does not contain full or complete details.
Any investment decision should be based on consideration of the full announcement and shareholders and/or
investors are encouraged to review the full announcement. The full announcement is also available, at no
charge, for inspection at the registered office of Life Healthcare and at the offices of the Company's
sponsor, during office hours.
Copies of the full announcement may also be requested directly from the Group Company Secretary,
Avanthi Parboosing (avanthip@life.co.za).
The contents of this short form announcement are the responsibility of the board of Life Healthcare.
Date: 21/11/2019 07:05:00
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