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Audited Group results for the year ended 30 September 2012 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 2012 and cash dividend declaration
For more information see: www.lifehealthcare.co.za
Paid patient days (PPD): +6,1%
Revenue: +11,5% to R10 937 million
Operating profit: +17,0% to R2 542 million
Cash generated from operations: +18,7% to R3 042 million
Normalised earnings per share: +15,8% to 138,1 cents
Final dividend: 60 cents
Total dividend: 105 cents
CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
for the year ended 30 September 2012
R Million 12 months Change 12 months
30 Sept % 30 Sept
2012 2011
Audited Audited
Revenue 10 937 11,5 9 812
Other income 114 102
Operating expenses (8 540) (7 838)
(Loss)/Gain on remeasuring of fair value of equity interest before business combination (3) 92
Additional receipt on previously disposed business 2 5
Profit on disposal of businesses 30 -
Gain on bargain purchase 2 -
Operating profit 2 542 17,0 2 173
Fair value (loss)/gain on derivative financial instruments (2) 14
Finance income 22 37
Finance cost (235) (250)
Share of associates' net profit after tax 85 115
Profit before tax 2 412 2 089
Tax expense (669) (597)
Profit after tax 1 743 16,8 1 492
Other comprehensive income
Currency translation differences - 2
Total comprehensive income for the year 1 743 16,7 1 494
Profit after tax attributable to:
Ordinary equity holders of the parent 1 496 16,2 1 287
Non-controlling interest 247 205
1 743 16,8 1 492
Total comprehensive income attributable to:
Ordinary equity holders of the parent 1 496 1 288
Non-controlling interest 247 206
1 743 1 494
Weighted average shares in issue (million) 1 040 1 042
Earnings per share (cents) 143,9 16,4 123,6
Headline earnings per share (cents) 140,7 17,7 119,5
Diluted earnings per share (cents) 143,7 16,3 123,6
Diluted headline earnings per share (cents) 140,5 17,6 119,5
Headline earnings
Profit attributable to ordinary equity holders 1 496 1 287
Headline earnings adjustable items (net of tax)
Impairment of intangible assets - 54
Loss/(Gain) on remeasuring of fair value of equity interest before business combination 3 (92)
Additional receipt on previously disposed business (2) (4)
Profit on disposal of businesses (25) -
Gain on bargain purchase (2) -
Profit on disposal of property, plant and equipment (7) (1)
Headline earnings 1 463 17,6 1 244
CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
for the year ended 30 September 2012
R Million 30 Sept 30 Sept
2012 2011
Audited Audited
Assets
Non-current assets 7 771 6 775
Property, plant and equipment 4 010 3 753
Intangible assets 2 181 2 296
Other non-current assets1 1 580 726
Current assets 1 485 1 693
Other current assets 1 239 1 293
Cash and cash equivalents 246 400
TOTAL ASSETS 9 256 8 468
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 3 941 3 518
Non-controlling interests 937 867
TOTAL EQUITY 4 878 4 385
LIABILITIES
Non-current liabilities 2 445 2 084
Interest-bearing borrowings2 1 929 1 565
Other non-current liabilities 516 519
Current liabilities 1 933 1 999
Other current liabilities 1 473 1 539
Current portion of interest-bearing borrowings 460 460
TOTAL LIABILITIES 4 378 4 083
TOTAL EQUITY AND LIABILITIES 9 256 8 468
1 The increase includes the investment made in MHC during the current year.
2 The increase includes the new funding regarding the acquisition of MHC during the current year.
CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS
for the year ended 30 September 2012
R Million 12 months 12 months
30 Sept 30 Sept
2012 2011
Audited Audited
Cash generated from operations 3 042 2 562
Income tax paid (748) (617)
Net cash generated from operating activities 2 294 1 945
Net cash utilised in investing activities1 (1 268) (688)
Net cash utilised in financing activities2 (1 182) (1 378)
Net decrease in cash and cash equivalents (156) (121)
Cash and cash equivalents beginning of the year 400 482
Cash balances acquired through business combinations 2 39
Cash and cash equivalents end of the year 246 400
1 The increase includes the investment made in MHC during the current year.
2 The increase includes the new funding regarding the acquisition of MHC during the current year.
CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
for the year ended 30 September 2012
R Million Total Non- Total
capital controlling equity
and interest
reserves
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 interest arising on business acquisition - 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 contribution 3 - 3
Balance at 30 September 2012 3 941 937 4 878
Balance at 1 October 2010 2 849 667 3 516
Total comprehensive income for the year 1 288 206 1 494
Profit for the year 1 287 205 1 492
Other comprehensive income 1 1 2
Transactions with non-controlling interests 12 - 12
Non-controlling interest arising on business acquisition - 128 128
Change in ownership that does not result in loss of control - 16 16
Distribution to shareholders (625) (150) (775)
Treasury shares (6) - (6)
Balance at 30 September 2011 3 518 867 4 385
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 Year ended Year ended
30 Sept 30 Sept
2012 2011
Audited Audited
Operating segments
Revenue
Hospitals 10 185 9 136
Healthcare Services 748 674
Other 4 2
Total 10 937 9 812
Profit before items detailed below
Hospitals 2 242 1 917
Healthcare Services 121 141
Other 235 191
Operating profit before items detailed below 2 598 2 249
Amortisation of intangible assets (124) (110)
Impairment of intangible assets - (65)
Profit on disposal of businesses 30 -
Gain on bargain purchase 2 -
Retirement benefit asset 42 2
Post-retirement medical aid (5) -
(Loss)/Gain on remeasuring of fair value of equity interest before business combination (3) 92
Additional receipt on previously disposed business 2 5
Operating profit 2 542 2 173
Fair value (loss)/gain on derivative financial instruments (2) 14
Finance income 22 37
Finance costs (235) (250)
Share of associate's net profit after tax 85 115
Profit before tax 2 412 2 089
Operating profit before items detailed above includes the segments share of shared services and rental costs. These costs are all at market
related rates.
Changes in ownership interest in subsidiaries as a result of non-controlling interest transactions
The Group had marginal increases/decreases in its shareholdings in subsidiary companies due to transactions with minority shareholders.
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 2012. The condensed consolidated annual financial statements
should be read in conjunction with the annual financial statements for the year ended 30 September 2012 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 Roger Hogarth
(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.
COMMENTARY
Growth
Life Healthcare continued to grow its business and improve operational efficiencies during 2012, delivering strong financial
results. Activities as measured by hospital paid patient days (PPDs) increased by 6,1% as a result of an increased demand for
hospital services, the expansion of our acute hospital, mental health and acute rehabilitation facilities and the inclusion of Life
Midmed which became a subsidiary in August 2011. An additional 311 registered beds have been added to the business during the
financial year ended 30 September 2012 to cater for the increased demand, including the opening of Life Piet Retief and two mental
health facilities;Life St Josephs and Life Poortview. The total number of registered beds at 30 September 2012 was 8 227 (2011: 7 916).
During the current financial year, Life Healthcare invested R1 433 million (2011: R780 million) including capital projects of R593 million
(2011: R740 million) and R823 million for the acquisition of a 26% stake in Max Healthcare Institute Limited (MHC), India. An amount of R165
million (2011: R131 million) was spent on repairs and maintenance. This investment in the Groups facilities ensures that the demand for
services is met and the Group remains abreast of modern technology and standards.
The Group entered the fast growing Indian healthcare market in January 2012. MHC has recently completed the construction of an
additional four hospitals (904 beds) bringing its total number of beds to 1 943 as at the end of September 2012. Currently 1 318
beds are operational as MHC ramps up the occupancy of the new facilities.
Efficiency
While the Group increased its active beds, bed occupancies were maintained at 71,2% (2011:71,0%). This together with the strong
procurement of consumables and administrative efficiencies contributed to improved operating efficiencies resulting in normalised
EBITDA (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/property and surpluses/deficits on
retirement benefits) margin improving from 26,0% in 2011 to 26,6% in 2012.
Streamlined administrative processes including the roll-out of the Impilo accommodation module and the improvement in
collections on government debt contributed to tight working capital management. Cash generated from operations was 104,6% (2011: 100,6%) of
normalised EBITDA.
Sustainability
In 2012 Life Healthcare improved on its patient satisfaction scores, reduced both the patient and employee incident rates and
had an improvement in clinical outcomes resulting in a reduction in Healthcare associated infections and in the AMI mortality rate.
Management and staff remain an integral part of the Groups success. In order to assist with recruitment, motivation and
retention, two schemes were introduced; the Long Term Incentive Plan for senior management and a share plan for employees. The Life
Healthcare Employee Share Trust purchased shares to the value of R50 million in July 2012. Dividends flow to qualifying employees
immediately, who will receive the shares between the fifth and seventh anniversaries.
Training of medical professionals is of national importance. Life Healthcare has committed R13 million a year for six years (R78
million) which, through the Colleges of Medicine South Africa, will facilitate the training of 60 specialists. The Group is also
training 1250 nurses and currently has 71 pharmacist assistants and 15 pharmacy interns in training.
Financial performance
Group revenue increased by 11,5% to R10 937 million (2011: R9 812 million). Hospital division revenue increased by 11,5% to R10
185 million (2011: R9 136 million) driven by the 6,1% increase in PPDs and higher revenue per PPD of 5,1%. Healthcare Services
revenue increased by 11,0% to R748 million (2011: R674 million). Life Esidimeni revenue grew in line with inflation while Life
Occupational Health expanded, signing new large contracts and selling of additional services to existing clients.
A key management measure, which is a non-IFRS measure of business performance, is normalised EBITDA which increased by 14,1% to
R2 907 million (2011: R2 548 million).
R Million 30 Sept 30 Sept
2012 2011
Normalised EBITDA
Operating profit 2 542 2 173
Profit on disposal of business (30) -
Profit on disposal of property (9) -
Gain on bargain purchase (2) -
Additional receipt on previous disposed business (2) (5)
Loss/(Gain) on remeasuring of fair value of equity interest before business combination 3 (92)
Depreciation on property, plant and equipment 318 299
Impairment of intangible assets - 65
Amortisation of intangible assets 124 110
Retirement benefit asset (42) (2)
Post-retirement medical aid 5 -
Normalised EBITDA 2 907 2 548
Normalised EBITDA as % of turnover 26,6% 26,0%
Operating profit increased by 17,0% to R2 542 million (2011: R2 173 million), mainly due to improved Hospital division results,
while the Services division recorded a decline in profits mainly due to an impairment charge in Life Esidimeni. Profit after tax
attributable to ordinary shareholders increased by 16,2% to R1 496 million (2011: R1 287 million).
Non-controlling interest
The Group believes in working with its supporting doctors. To align mutual interests they are invited to hold equity in local
operating subsidiaries. The profit after tax attributable to non-controlling interests increased by 20,5% to R247 million (2011:
R205 million) This is mainly due to the inclusion of Life Midmed, as a subsidiary for the full year, which was acquired in August 2011.
Cash flow
The business generated healthy cash flows. Cash generated from operations increased by 18,7% to R3 042 million (2011: R2 562
million). Investing activities utilised amounted to R1 268 million (2011: R688 million) mainly due to the acquisition of the 26%
interest in MHC at a cost of R823 million. The cash outflow from financing activities of R1 182 million (2011: R1 378 million)
includes the issuing of preference shares (R820 million), which are classified as debt for accounting purposes, for the MHC acquisition,
distributions to shareholders of R1 031 million (2011: R625 million) and repayment of debt of R509 million (2011: R497 million)
and finance cost of R235 million (2011: R166 million).
Financial position
The Group is in a strong financial position with a low gearing. Net debt, including the MHC funding, to normalised EBITDA is 0,73
(2011: 0,66) times as of 30 September 2012. This low gearing provides the Group with the financial flexibility to continue to invest
and execute its strategic plans.
Earnings per share (EPS), headline earnings per share (HEPS) and normalised earnings per share
EPS and HEPS increased by 16,4% and 17,7% to 143,9 cents (2011: 123,6 cents) and 140,7 cents (2011: 119,5 cents) respectively.
Earnings on a normalised basis, which excludes non trading related items as setout below, increased by 15,8% to 138,1 cents
(2011: 119,3 cents) and excluding the amortisation of intangibles by 15,5% to 146,6 cents (2011: 126,9 cents).
R Million 30 Sept Change 30 Sept
2012 % 2011
Normalised earnings
Profit attributable to ordinary equity holders 1 496 1 287
Adjustments (net of tax):
Profit on disposal of businesses (25) -
Profit on disposal of property (7) -
Gain on bargain purchase (2) -
Additional receipt on previously disposed business (2) (4)
Loss/(Gain) on remeasuring of fair value of equity interest before business combination 3 (92)
Impairment of intangible assets - 54
Retirement funds (27) (2)
Normalised earnings 1 436 15,5 1 243
Amortisation of intangible assets 89 79
Normalised earnings excluding amortisation of intangible assets 1 525 15,4 1 322
Normalised EPS (cents) 138,1 15,8 119,3
Normalised EPS excluding amortisation (cents) 146,6 15,5 126,9
Changes to board of directors
There have been no changes to the board of directors during the period ended 30 September 2012.
Shareholders dividend
The directors approved a final gross cash dividend of 60 cent per ordinary share (2011: 54 cents per ordinary share)
out of income reserves on 15 November 2012 and no secondary tax on companies' credits has been used. The dividend will be
subject to a dividend tax at a rate of 15%, which will result in a net dividend of 51 cents per share to those shareholders
who are not exempt in terms of section 64F of the Income Tax Act.
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, 30 November 2012
Trading ex the dividend commences Monday, 3 December 2012
Record date Friday, 7 December 2012
Payment date Monday, 10 December 2012
Share certificates may not be dematerialised or rematerialised between Monday, 3 December 2012 and Friday, 7 December 2012,
both days inclusive.
Outlook
The Group expects to see continued increased demand for hospital services due to the high incidence of disease together with a
growing medical aid population, the impact of aging and preferred network arrangements. The Group has plans to add an additional 1
000 beds over the next three to four years to cater for this additional demand and has a combination of licence approvals and
licence applications pending for over 550 beds. R752 million has been allocated for capital projects for the 2013 financial year. The
Group will continue to look for growth opportunities in India and the east and west coasts of Africa.
The Group continues to focus on driving efficiencies to ensure services remain affordable and to expand access to its services.
Thanks
The contribution of the doctors, nurses and other employees of Life Healthcare have greatly enhanced the quality of our
performance. For their effort, we extend our thanks.
Approved by the board of directors on 15 November 2012 and signed on its behalf:
Professor Jakes Gerwel Michael Flemming
Chairman Chief Executive Officer
15 November 2012
Executive directors: CMD Flemming (Chief Executive Officer), RJ Hogarth (Chief Financial Officer)
Non-executive directors: Prof GJ Gerwel (Chairman), MA Brey, FA du Plessis, PJ Golesworthy, KM Gordham, 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.
At Life Healthcare - our three key strategic focus areas are...
Growth
Efficiency
Sustainability
Date: 16/11/2012 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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