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Life Healthcare Group results strong despite tough global economy

Life Healthcare Group results strong despite tough global economy

Life Healthcare Group Holdings Limited (JSE: LHC), one of South Africa’s largest private hospital operators, today released its Annual Financial Results for the financial year to 30 September 2016.

The Group says it demonstrated a strong financial position against the backdrop of a weak macroeconomic environment in South Africa, with an increase in revenue of 12%, normalised EBITDA of 6.6%, and headline earnings per share of 7%.

Speaking at the results announcement Andre Meyer, Group CEO of Life Healthcare said, “In light of the weak economic environment, Life Healthcare delivered a solid result, largely driven by volume growth.

Poland produced a satisfactory operating performance amidst negative regulatory changes on tariffs that became effective 1 July 2016. India generated strong EBITDA growth of 29.3%, with margin improvements to 10.9%.”

Financial performance

Group revenue increased by 12% to R16,4bn (2015: R14,6bn.) With South African revenue increasing by 8.8% to R15,2bn (2015: R14bn) and the growth in revenue from Poland to R1,2bn (2015: R648m.)

The southern African Hospital division revenue increased by 9.5% to R14bn (2015: R13m) whilst the Healthcare Services revenue decreased by 2% to R849m (2015: R866m) as a result of the non-renewal of the Gauteng Department of Health contract of the Life Esidimeni business.

Normalised EBITDA increased by 6.6% to R4,3bn (2015: R4bn.)

Growth in southern African market

The southern Africa business added 176 beds, 36 renal dialysis stations and one oncology centre in the 2016 financial year.

The Group is focused on expanding the range of services it offers, and remains well positioned to serve the market. The 4% increase in PPDs came as a result of the investment in additional beds and good growth in complementary businesses. The underlying disease burden and ageing medical scheme population also continue to drive an increase in hospital utilisation as well as influencing the case mix. The Group continued to experience faster growth in medical PPDs than surgical PPDs.

Key performance indicators remain strong, with weighted occupancies higher at 72.5% (2015: 71.9%.) Margins for the year declined to 27.5% (2015: 28.3%), as a result of a number of once off costs relating to the impact of retrenchment costs at the Life Esidimeni business and legal settlement of a malpractice lawsuit dating back to 1995, before Life Healthcare acquired the particular facility.

“We continue to provide high-quality clinical care as evidenced by the good clinical outcomes, and patient experience results in our facilities,” Meyer said.

Growing our international footprint

In Poland, Scanmed expanded its network of facilities through the acquisition of PGM for R629m during the year. The Scanmed Group now compose of 624 beds, 12 inpatient cardiology centres and 40 medical facilities.

Max Healthcare added 331 beds during the period primarily through the acquisition of Saker Smart bringing the number of operational beds to 2 384. The Indian operations reported strong growth with revenue of 16.7% and EBIDTA growth of 29.3%.

Outlook for 2017

Southern Africa will take advantage of growth opportunities in 2017 through the addition of acute healthcare beds, mental health beds and through continued growth in renal dialysis and oncology.

In Poland the group will focus on improving margins through driving further efficiencies, the integration of newly acquired businesses and alignment to the Group’s best operating practices. 

Max Healthcare will continue to focus on driving revenue through improving the mix of revenue and increasing the number of operational beds in existing facilities, bedding down the Vaishali and Saker Smart acquisitions and improving operational efficiencies.

Finally, Life Healthcare has made submissions on the subject matter to the Competition Commission Health Market Inquiry. Public hearings commenced in February 2016, and Life Healthcare has participated in those hearings. We expect the process to be completed in 2017.

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