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Audited Group Results for the year ended 30 September 2013 and cash dividend declaration
Life Healthcare Group Holdings Limited
Registration number: 2003/002733/06
Income tax number: 9387/307/15/1
ISIN: ZAE000145892
Share code: LHC
Audited Group Results for the year ended 30 September 2013 and cash dividend declaration
Highlights
+8.3% Group revenue increased by 8.3% to R11 843 million
+12.2% Cash generated from operations was up 12.2% to R3 414 million
+2.7% Paid patient days (PPDs) were up 2.7%
162.1 cents Normalised earnings per share increased by 17.4% to 162.1 cents per share
+ 20% Final dividend of 72 cents per share, giving a total dividend of 126 cents per share
Condensed consolidated statement of comprehensive income
for the year ended 30 September 2013
R Million 2013 Change 2012
Audited % Audited
Revenue 11 843 8.3 10 937
Other income 121 114
Operating expenses (9 012) (8 540)
Loss on remeasuring of fair value of equity interest before business combination - (3)
Additional receipt on previously disposed business - 2
Profit on disposal of businesses - 30
Loss on derecognition of finance lease asset (4) -
Gain on bargain purchase - 2
Operating profit 2 948 16.0 2 542
Fair value gain/(loss) on derivative financial instruments 9 (2)
Gain on derecognition of finance lease liability 22 -
Finance income 15 22
Finance cost (226) (235)
Share of associates net profit after tax 65 85
Profit before tax 2 833 2 412
Tax expense (779) (669)
Profit after tax 2 054 17.8 1 743
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Currency translation differences 11 -
Total comprehensive income for the year 2 065 18.5 1 743
Profit after tax attributable to:
Ordinary equity holders of the parent 1 761 17.7 1 496
Non-controlling interest 293 247
2 054 17.8 1 743
Total comprehensive income attributable to:
Ordinary equity holders of the parent 1 767 18.1 1 496
Non-controlling interest 298 247
2 065 18.5 1 743
Weighted average number of shares in issue (million) 1 038 1 040
Earnings per share (cents) 169.7 17.9 143.9
Headline earnings per share (cents) 169.7 20.6 140.7
Diluted earnings per share (cents) 169.5 18.0 143.7
Diluted headline earnings per share (cents) 169.5 20.6 140.5
Headline earnings
Profit attributable to ordinary equity holders 1 761 1 496
Headline earnings adjustable items
Loss on remeasuring of fair value of equity interest before business combination - 3
Additional receipt on previously disposed business - (2)
Profit on disposal of businesses - (30)
Gain on bargain purchase - (2)
Profit on disposal of property, plant and equipment (4) (9)
Loss on derecognition of finance lease asset 4 -
Tax - 7
Headline earnings 1 761 20.4 1 463
Condensed consolidated statement of financial position
for the year ended 30 September 2013
R Million 2013 2012
Audited Audited
ASSETS
Non-current assets 8 343 7 771
Property, plant and equipment 4 518 4 010
Intangible assets 2 084 2 181
Other non-current assets 1 741 1 580
Current assets 1 627 1 485
Other current assets 1 327 1 239
Cash and cash equivalents 300 246
TOTAL ASSETS 9 970 9 256
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 4 525 3 941
Non-controlling interest 1 082 937
TOTAL EQUITY 5 607 4 878
LIABILITIES
Non-current liabilities 2 150 2 445
Interest-bearing borrowings 1 657 1 929
Other non-current liabilities 493 516
Current liabilities 2 213 1 933
Other current liabilities 1 528 1 473
Interest-bearing borrowings 452 460
Bank overdraft 233 -
TOTAL LIABILITIES 4 363 4 378
TOTAL EQUITY AND LIABILITIES 9 970 9 256
Condensed consolidated statement of changes in equity
for the year ended 30 September 2013
R Million Total Non- Total
capital and controlling equity
reserves interest
Balance at 1 October 2012 3 941 937 4 878
Total comprehensive income for the year 1 767 298 2 065
Profit for the year 1 761 293 2 054
Other comprehensive income 6 5 11
Gains on transactions with non-controlling interests 10 (10) -
Non-controlling interests arising on business combination - - -
Distribution to shareholders (1 188) (143) (1 331)
Life Healthcare Employee Share Trust 9 - 9
Long-term incentive scheme 28 - 28
Treasury shares (67) - (67)
Profit on disposal of treasury shares 31 31
Tax on profit on disposal of treasury shares (6) (6)
Balance at 30 September 2013 4 525 1 082 5 607
Balance at 1 October 2011 3 518 867 4 385
Total comprehensive income for the year 1 496 247 1 743
Profit for the year 1 496 247 1 743
Other comprehensive income - - -
Transactions with non-controlling interests 5 (5) -
Non-controlling interests arising on business combination - 2 2
Distribution to shareholders (1 031) (174) (1 205)
Treasury shares (76) - (76)
Long-term incentive scheme 26 - 26
Life Healthcare Employee Share Trust 3 - 3
Balance at 30 September 2012 3 941 937 4 878
Condensed consolidated statement of cash flows
for the year ended 30 September 2013
R Million 2013 2012
Audited Audited
Cash generated from operations 3 414 3 042
Tax paid (804) (748)
Net cash generated from operating activities 2 610 2 294
Net cash utilised in investing activities1 (772) (1 268)
Net cash utilised in financing activities2 (2 017) (1 182)
Net decrease in cash and cash equivalents (179) (156)
Cash and cash equivalents - beginning of the year 246 400
Cash balances acquired through business combinations - 2
Cash and cash equivalents - end of the year 67 246
1 The cash utilised in investing activities includes the investment made in Max during the prior period.
2 The cash utilised in financing activities includes the new funding regarding the acquisition of Max during the prior period.
Basis of presentation and accounting policies
The condensed consolidated annual financial statements have been prepared in accordance with IAS 34 Interim Financial
Reporting and in the manner required by the Companies Act of South Africa and the JSE Listing Requirements. These
financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS) and
International Financial Reporting Interpretations Committee (IFRIC) interpretations and the AC500 Standards issued and effective
as at 30 September 2013. The condensed consolidated annual financial statements should be read in conjunction with the
annual financial statements for the year ended 30 September 2013 which have been prepared in accordance with IFRS.
These accounting policies have been consistently applied to all the years presented, unless otherwise stated.
These financial results have been prepared under the supervision of PP van der Westhuizen (CA)(SA), the Chief
Financial Officer of the Group.
Report of the independent auditor
These results have been audited by PricewaterhouseCoopers Inc. Registered auditors. Their unqualified audit opinion is
available for inspection at the Companys registered office.
Changes in ownership interest in subsidiaries as a result of non-controlling interest transactions
The Group had marginal increases and decreases in its shareholdings in some of its subsidiary companies due to
transactions with minority shareholders.
Segmental report
During the reporting years all the operating segments operated in Southern Africa and therefore no geographical segments are presented.
Assets and liabilities are not reviewed on an individual segment basis but rather on a Group basis and are therefore not presented.
There are no inter-segment revenue streams.
R Million 2013 2012
Audited Audited
Operating segments
Revenue
Southern Africa
Hospitals 11 010 10 185
Healthcare Services 831 748
Other 2 4
Total 11 843 10 937
Profit before items below
Southern Africa
Hospitals 2 694 2 242
Healthcare Services 167 121
Other 121 235
Operating profit before items detailed below 2 982 2 598
Amortisation of intangible assets (116) (124)
Profit on disposal of businesses - 30
Gain on bargain purchase - 2
Retirement benefit asset 75 42
Post-retirement medical aid 11 (5)
Loss on remeasuring of fair value of equity interest before business combination - (3)
Additional receipt on previously disposed business - 2
Loss on derecognition of finance lease asset (4) -
Operating profit 2 948 2 542
Fair value gain/(loss) on derivative financial instruments 9 (2)
Gain on derecognition of finance lease liability 22
Finance income 15 22
Finance costs (226) (235)
Share of associates net profit after tax 65 85
Profit before tax 2 833 2 412
Operating profit before items detailed includes the segments share of shared services and rental costs. These costs are all at market
related rates.
Commentary
Overview
Life Healthcare performed well during the year under review and continues to be in a healthy financial position to
deliver its strategic objectives of growth, efficiency and sustainability. Activities as measured by hospital paid patient
days (PPDs), increased by 2.7% on the back of a stronger second half where PPDs grew by 3.8%. An additional 95 active
beds have been added to the business to cater for this additional demand. The Groups average occupancy for the year was
71.7% (2012: 71.2%). Driving efficiency improvement is a key strategy for the Group resulting in margins improving
despite salary pressures and the depreciation of the Rand. The drive is to ensure services remain affordable and to improve
margins. Life Healthcare continued to improve on its quality metrics as evidenced by an improvement in both clinical
outcomes and hospital acquired infection rates.
The performance of Max Healthcare Institute Limited (Max) India, continues to improve as revenue grows due to higher
occupancies and the operationalisation of more beds in the new hospitals. Cost saving initiatives in combination with the
higher occupancies resulted in an improvement in margins.
Financial performance
Group revenue increased by 8.3% to R11 843 million (2012: R10 937 million). Hospital division revenue increased by
8.1% to R11 010 million (2012: R10 185 million) driven by the 2.7% increase in PPDs and higher revenue per PPD of 5.3%.
Healthcare Services revenue increased by 11.1% to R831 million (2012: R748 million).
The alternative re-imbursement model (ARM) provides an incentive to actively manage input costs, which together with
higher occupancies and excellent cost of sales management allowed the Group to leverage efficiencies across its fixed
cost base resulting in normalised EBITDA¹ increasing by 14.6% to R3 332 million (2012: 2 907 million).
Profit after tax increased by 17.8% to R2 054 million (2012: 1 743 million).
R Million 30 September 30 September
2013 2012
Normalised EBITDA
Operating profit 2 948 2 542
Profit on disposal of business - (30)
Loss on derecognition of finance lease asset 4 -
Profit on disposal of property (4) (9)
Gain on bargain purchase - (2)
Additional receipt on previously disposed business - (2)
Loss on remeasuring of fair value of equity interest before business combination - 3
Depreciation on property, plant and equipment 354 318
Amortisation of intangible assets 116 124
Retirement benefit asset (75) (42)
Post-retirement medical aid (11) 5
Normalised EBITDA 3 332 2 907
Normalised EBITDA as % of turnover 28.1% 26.6%
Cash flow
The business generated healthy cash flows. Streamlined administrative processes contributed to tight working capital
management resulting in an increase of 12.2% to R3 414 million (2012: R3 042 million) in cash generated from operations,
representing 102.5% (2012: 104.6%) of normalised EBITDA.
Financial position
The Group is in a strong financial position with low gearing. Net debt to normalised EBITDA at 30 September 2013 was
0.63 times (2012: 0.73 times), well within the bank covenants of 3 times. This low gearing provides the Group with the
financial flexibility to continue to invest locally and internationally.
Headline earnings per share (HEPS) and normalised earnings per share
Headline earnings per share increased by 20.6% to 169.7 cps (2012: 140.7 cps). Earnings per share on a normalised
basis, which excludes non trading related items listed below, increased by 17.4% to 162.1 cps (2012: 138.1 cps).
R Million 30 September Change 30 September
2013 % 2012
Audited Audited
Normalised earnings
Profit attributable to ordinary equity holders 1 761 1 496
Adjustments (net of tax):
Profit on disposal of businesses - (25)
Loss on derecognition of finance lease asset 3 -
Profit on disposal of property, plant and equipment (3) (7)
Gain on bargain purchase - (2)
Additional receipt on previously disposed business - (2)
Loss on remeasuring of fair value of equity interest before business combination - 3
Gain on derecognition of finance lease liability (16) -
Retirement funds (62) (27)
Normalised earnings 1 683 17.2 1 436
Amortisation of intangible assets 84 89
Normalised earnings excluding amortisation of intangible assets 1 767 1 525
Normalised EPS (cents) 162.1 17.4 138.1
Normalised EPS - excluding amortisation (cents) 170.2 16.1 146.6
Capital expenditure
During the current financial year, Life Healthcare invested R829 million (2012: R1 433 million, of which R840 million
was on acquisitions) comprising capital projects of R761 million (2012: R593 million) and R68 million to maintain the
26% shareholding in Max. A further R1 112 million has been committed for capital projects of which R835 million is anticipated
to be spent in 2014. This investment in the Groups facilities ensures that the demand for services is met and the Group
remains abreast of modern technology and standards.
Changes to board of directors
Professor GJ Gerwel passed away on 28 November 2012. MA Brey was appointed as chairman of the board on 14 February
2013. KM Gordhan resigned and RJ Hogarth retired as directors on 22 February 2013 and 31 May 2013 respectively. PP van der
Westhuizen took over as the new Chief Financial Officer on 1 June 2013.
Cash dividend declaration
The directors approved and declared a final gross cash dividend of 72 cent per ordinary share (2012: 60 cents per ordinary share)
out of income reserves on 14 November 2013. The company has utilised secondary tax on companies credits amounting to 0.65276
cents per share. The balance of the dividend will be subject to dividend withholding tax at a rate of 15%, which will
result in a net dividend of 61.29791 cents per share to those shareholders who are not exempt in terms of section 64F
of the Income Tax Act.
The company's tax reference number is 9387/307/15/1. The issued share capital at the declaration date is 1 042 209 750 ordinary
shares. In compliance with the requirements of the JSE Limited, the following dates are applicable:
Last day to trade cum the dividend Friday, 29 November 2013
Trading ex the dividend commences Monday, 2 December 2013
Record date Friday, 6 December 2013
Payment date Monday, 9 December 2013
Share certificates may not be dematerialised or rematerialised between Monday, 2 December 2013 and Friday, 6 December
2013, both days inclusive.
Outlook
The Group will continue to focus on its growth objectives in South Africa by adding additional beds through brownfield
expansion, new greenfield facilities and mental healthcare. Life Healthcare has 325 new beds which are expected to be
operational within the next 12 to 15 months, over 500 beds where Health department licence approval has been obtained but
where local and municipal approvals are outstanding and over 1 100 beds where licence applications are pending. Max
will continue to increase the number of operational beds as more beds are opened in its new hospitals. The Group will
continue to look for investment opportunities in its selected emerging markets.
The focus to drive operational efficiencies in South Africa through optimising cost of sales and procurement,
streamlined administrative processes, the re-engineering of certain IT systems, and improving hospital occupancies to enable the
leveraging of the fixed cost base, remains.
The quality management programme of the Group is a comprehensive, consistently applied and measured programme which
benchmarks clinical interventions against international best practise with the aim of enhancing patient outcomes. In
addition the Life Healthcare recognises the shortage of healthcare skills and will continue to invest heavily in the training
of doctors, nurses and pharmacists. The proposed Competition Commission market inquiry into the healthcare sector is
expected to start in 2014. The inquiry represents an opportunity to factually demonstrate what the real cost drivers of
the healthcare industry are as well as proposing structural changes to make the industry more efficient and affordable and
we will participate fully.
Thanks
The contribution of the doctors, nurses and employees of Life Healthcare has greatly enhanced the quality of our
performance. We thank them for their contributions.
Approved by the board of directors on 14 November 2013 and signed on its behalf:
Mustaq Brey Michael Flemming
Chairman Chief executive officer
14 November 2013
¹ Life Healthcare defines normalised EBITDA as operating profit plus depreciation, amortisation of intangible assets,
impairment of intangible assets as well as excluding profit/loss and fair value adjustments on disposal of businesses
and surpluses/deficits on retirement benefits.
Executive directors
CMD Flemming (chief executive officer), PP van der Westhuizen (chief financial officer)
Non-executive directors
MA Brey (chairman), FA du Plessis, PJ Golesworthy, LM Mojela, TS Munday,
JK Netshitenzhe, MP Ngatane, GC Solomon
Company secretary
F Patel
Registered office
Oxford Manor, 21 Chaplin Road, Illovo Private Bag X13, Northlands 2116
Sponsors
Rand Merchant Bank, a division of FirstRand Bank Limited
Note regarding forward-looking statements: The Company advises investors that 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.
The auditor's report does not necessarily report on all the information contained in this 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
financial information from the company's registered office.
For more information see: www.lifehealthcare.co.za
Date: 14/11/2013 05:47:00 Produced by the JSE SENS Department. The SENS service is an information dissemination service administered by the JSE Limited ('JSE').
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