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LIFE HEALTHCARE GROUP HOLDINGS LTD - Unaudited Group results and cash dividend declaration for the six month period ended 31 March 2013

Release Date: 14/05/2013 07:05
Code(s): LHC     PDF:  
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Unaudited Group results and cash dividend declaration for the six month period ended 31 March 2013

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 and cash dividend declaration for the six month period ended 31 March 2013

Paid patient days (PPDs): 
+1,5%
Revenue: 
+7,0% to R5 638 million
Operating profit: 
+12,7% to R1 361 million
Normalised earnings per share: 
+14,5% to 71,3 cents
Interim cash dividend: 
+20% to 54 cents


  CONDENSED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME                                                                                          
  for the period ended 31 March 2013                                                                                                                    
                                                                                         6 months                           6 months          12 months   
                                                                                         31 March                           31 March            30 Sept   
                                                                                             2013          Change               2012               2012   
  R Million                                                                             Unaudited               %          Unaudited            Audited                                                                                                                                                  
  Revenue                                                                                   5 638             7,0              5 271             10 937   
  Other income                                                                                 57                                 50                114   
  Operating expenses                                                                       (4 330)                            (4 144)            (8 540)  
  Loss on remeasuring of fair value of equity interest before business combination              -                                 (3)                (3)  
  Additional receipt on previous disposed business                                              -                                  2                  2   
  Profit on disposal of businesses                                                              -                                 32                 30   
  Loss on derecognition of finance lease asset                                                 (4)                                 -                  -   
  Gain on bargain purchase                                                                      -                                  -                  2   
  Operating profit                                                                          1 361            12,7              1 208              2 542   
  Fair value gain/(loss) on derivative financial instruments                                    5                                  8                 (2)   
  Gain on derecognition of finance lease liability                                             22                                  -                  -   
  Finance income                                                                                6                                 10                 22   
  Finance cost                                                                               (119)                              (119)              (235)  
  Share of associates' net profit after tax                                                    25                                 47                 85   
  Profit before tax                                                                         1 300                              1 154              2 412   
  Tax expense                                                                                (373)                              (346)              (669)  
  Profit after tax                                                                            927            14,7                808              1 743   
  Other comprehensive income, net of tax                                                                                                                  
  Items that may be reclassified subsequently to profit or loss                                                                                           
  Currency translation differences                                                              4                                 (2)                 -   
  Total comprehensive income for the period                                                   931            15,5                806              1 743   
  Profit after tax attributable to:                                                                                                                       
  Ordinary equity holders of the parent                                                       790            14,5                690              1 496   
  Non-controlling interest                                                                    137                                118                247   
                                                                                              927            14,7                808              1 743   
  Total comprehensive income attributable to:                                                                                                             
  Ordinary equity holders of the parent                                                       792                                689              1 496   
  Non-controlling interest                                                                    139                                117                247   
                                                                                              931                                806              1 743   
  Weighted average shares in issue (million)                                                1 039                              1 041              1 040   
  Earnings per share (cents)*                                                                76,1            14,8               66,3              143,9   
  Headline earnings per share (cents)*                                                       76,4            19,8               63,8              140,7   
  Diluted earnings per share (cents)*                                                        76,0            14,6               66,3              143,7   
  Diluted headline earnings per share (cents)*                                               76,3            19,6               63,8              140,5   
  Headline earnings                                                                                                                                       
  Profit attributable to ordinary equity holders                                              790                                690              1 496   
  Headline earnings adjustable items (net of tax)                                                                                                         
  Loss on remeasuring of fair value of equity interest before business combination              -                                  3                  3   
  Additional receipt on previously disposed business                                            -                                 (2)                (2)  
  Profit on disposal of businesses                                                              -                                (27)               (25)  
  Gain on bargain purchase                                                                      -                                  -                 (2)  
  Profit on disposal of property                                                                -                                  -                 (7)  
  Loss on derecognition of finance lease asset                                                  3                                  -                  -   
  Headline earnings                                                                           793                                665              1 463   
  * Calculated on actual figures.                                                                                                                 


  CONDENSED CONSOLIDATED STATEMENT OF FINANCIAL POSITION                                                
  as at 31 March 2013                                                            
                                                                                         31 March          31 March          30 Sept   
                                                                                             2013              2012             2012   
  R Million                                                                             Unaudited         Unaudited          Audited                                                                                                 
  Assets                                                                                                                               
  Non-current assets                                                                        7 881             7 582            7 771   
  Property, plant and equipment                                                             4 144             3 791            4 010   
  Intangible assets                                                                         2 131             2 242            2 181   
  Other non-current assets                                                                  1 606             1 549            1 580   
  Current assets                                                                            1 652             1 771            1 485   
  Other current assets                                                                      1 403             1 558            1 239   
  Cash and cash equivalents                                                                   249               213              246                                                                                                   
  Total Assets                                                                              9 533             9 353            9 256   
  Equity and Liabilities                                                                                                               
  Capital and reserves                                                                                                                 
  Capital and reserves                                                                      4 101             3 629            3 941   
  Non-controlling interests                                                                   989               878              937   
  Total Equity                                                                              5 090             4 507            4 878   
  Liabilities                                                                                                                          
  Non-current liabilities                                                                   2 269             2 685            2 445   
  Interest-bearing borrowings                                                               1 797             2 213            1 929   
  Other non-current liabilities                                                               472               472              516   
  Current liabilities                                                                       2 174             2 161            1 933   
  Other current liabilities                                                                 1 287             1 402            1 473   
  Current portion of interest-bearing borrowings                                              454               474              460   
  Bank overdraft                                                                              433               285                -                                                                                                                                          
  Total Liabilities                                                                         4 443             4 846            4 378   
  Total Equity and Liabilities                                                              9 533             9 353            9 256   


  CONDENSED CONSOLIDATED STATEMENT OF CASH FLOWS                                                        
  for the period ended 31 March 2013                                                                    
                                                                                         6 months          6 months        12 months   
                                                                                         31 March          31 March          30 Sept   
                                                                                             2013              2012             2012   
  R Million                                                                             Unaudited         Unaudited          Audited                                                                                                                                         
  Cash generated from operations                                                            1 247             1 003            3 042   
  Tax paid                                                                                   (393)             (375)            (748)  
  Net cash inflow from operating activities                                                   854               628            2 294   
  Net cash utilised in investing activities1                                                 (183)             (909)          (1 268)  
  Net cash utilised in financing activities2                                               (1 101)             (193)          (1 182)  
  Net decrease in cash and cash equivalents                                                  (430)             (474)            (156)  
  Cash and cash equivalents - beginning of the year                                           246               400              400   
  Cash balances acquired through business combinations                                          -                 2                2   
  Cash and cash equivalents - end of the period                                              (184)              (72)             246   
  1 Net cash utilised in investing activities includes the investment made in Max Healthcare, India during the prior period.                                                  
  2 Net cash utilised in financing activities include the new funding regarding the acquisition of Max Healthcare, India 
    during the prior period.                                                  


  CONDENSED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY                                                                
  for the period ended 31 March 2013                                                                                   
                                                                                            Total                             
                                                                                          capital              Non-           
                                                                                              and       controlling            Total        
  R Million                                                                              reserves          interest           equity                                                                                                                   
  Balance at 1 October 2012                                                                 3 941               937            4 878   
  Total comprehensive income for the year                                                     792               139              931   
  Profit for the year                                                                         790               137              927   
  Other comprehensive income                                                                    2                 2                4   
  Distribution to shareholders                                                               (625)              (87)            (712)  
  Treasury shares                                                                             (26)                -              (26)  
  Long-term incentive scheme charge                                                            15                 -               15   
  Life Healthcare Employee Share Trust charge                                                   4                 -                4   
  Balance at 31 March 2013                                                                  4 101               989            5 090   
  Balance at 1 October 2011                                                                 3 518               867            4 385   
  Total comprehensive income for the year                                                     689               117              806   
  Profit for the year                                                                         690               118              808   
  Other comprehensive income                                                                   (1)               (1)              (2)  
  Share-based payment reserve movement                                                          7                 -                7   
  Transactions with non-controlling interests                                                   -                 2                2   
  Distribution to shareholders                                                               (562)             (108)            (670)  
  Treasury shares                                                                             (23)                -              (23)  
  Balance at 31 March 2012                                                                  3 629               878            4 507   
  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 charge                                                            26                 -               26   
  Life Healthcare Employee Share Trust charge                                                   3                 -                3   
  Balance at 30 September 2012                                                              3 941               937            4 878   


  SEGMENTAL REPORT                                                                                                                   
  During the reporting periods 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.                                                                                       
                                                                                         6 months          6 months        12 months   
                                                                                         31 March          31 March          30 Sept   
                                                                                             2013              2012             2012   
  R Million                                                                             Unaudited         Unaudited          Audited                                                                                                                                       
  Operating segments                                                                                                                   
  Revenue                                                                                                                              
  Southern Africa                                                                                                                      
  Hospitals                                                                                 5 226             4 905           10 185   
  Healthcare Services                                                                         410               365              748   
  Other                                                                                         2                 1                4   
  Total                                                                                     5 638             5 271           10 937   
  Profit before items below                                                                                                            
  Southern Africa                                                                                                                      
  Hospitals                                                                                 1 224             1 040            2 242   
  Healthcare Services                                                                          83                71              121   
  Other                                                                                        64               100              235   
  Operating profit before items detailed below                                              1 371             1 211            2 598   
  Amortisation of intangible assets                                                           (57)              (57)            (124)   
  Profit on disposal of businesses                                                              -                32               30   
  Loss on derecognition of finance lease asset                                                 (4)                -                -   
  Gain on bargain purchase                                                                      -                 -                2   
  Retirement benefit asset                                                                     41                21               42   
  Post-retirement medical aid                                                                  10                 2               (5)   
  Loss on remeasuring of fair value of equity interest before business combination              -                (3)              (3)   
  Additional receipt on previous disposed business                                              -                 2                2   
  Operating profit                                                                          1 361             1 208            2 542   
  Operating profit before items detailed above includes the segments share of shared services and rental costs.                                                   
  These costs are all at market related rates.                                                                                      

  
ACQUISITION OF INVESTMENTS
  
Changes in ownership interest in subsidiaries as a result of non-controlling interest transactions                                                                                                                                                                                                                                                                                                                                                                                                                                                        
The Group had marginal decreases in its shareholdings in some of its subsidiary companies due to transactions with minority
shareholders.
  
Basis of presentation and accounting policies                                                                                             
These condensed consolidated interim financial statements for the six months ended 31 March 2013 have been prepared in accordance
with IAS 34, Interim Financial Reporting and in the manner required by the Companies Act of South Africa, the JSE Listings 
Requirements and comply with International Financial Reporting Standards (IFRS). The condensed consolidated interim 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.  
The accounting policies applied are consistent with those applied in preparation of the annual financial statements for the year 
ended 30 September 2012, unless otherwise stated.                                                                                                                                                                                                                                                                                                                                                                        
Costs that occur unevenly during the year are anticipated or deferred in the interim report only if it would also be appropriate 
to anticipate or defer such costs at the end of the financial year.                                                                                                                                                                                                                                                                                                                                                      
These interim financial results have been prepared under the supervision of RJ Hogarth (CA)(SA), the Chief Financial Officer of
the Group.                                                                                                                                                                                                                                                                                                                                                                                                                

Unaudited results                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
The results for the period ended 31 March 2013 have not been reviewed or audited by the Groups auditors.                                                                                                                                                                                                                                                                                                                                                                                                                                                 


COMMENTARY
Overview
Life Healthcare continued to grow during the six months ended 31 March 2013 adding 80 (2012: 154 beds) acute care
hospital and mental health beds during the period to meet the growing demand for services.The growth in hospital paid
patient days (PPDs) of 1,5% was adversely impacted by the number of public holidays in the second half of March compared 
to 2012.  Efficiencies remain a priority with an occupancy of 69,0% (2012 - 70,3%) being achieved on an increased number 
of active beds, supported by cost containment programmes. The clinical quality programmes continue to deliver improved
medical outcomes as measured by our key clinical indicators as well as decreasing our Healthcare Acquired Infection (HAI)
rate.
The Groups investment in Max Healthcare, India resulted in a negative contribution of 4 cps for the six-month period
(2012: 2 cps for the two-month period). Max Healthcare, India however,  showed a good improvement in revenue for the last
six months as occupancies improved and additional beds at the new facilities became operational. Business efficiency
programmes resulted in EBITDA margins improving at hospital level.

Financial performance
Group revenue increased by 7,0% to R5 638 million (2012: R5 271 million). Hospital division revenue increased by 6,5%
to R5 226 million (2012: R4 905 million) driven by the 1,5% increase in PPDs and higher revenue per PPD of 5,0%.  The
six months to 31 March resulted in a higher proportion of medical cases over surgical cases which diluted the revenue
growth per PPD by approximately 1,5%.  Healthcare Services revenue increased by 12,3% to R410 million (2012: R365 million)
due to improved performances from both Life Esidimeni and Life Occupational Health.
The Group continues to focus on driving efficiencies across the business to ensure services remain affordable and to
improve margins. The alternative reimbursement model (ARM) provides an incentive to actively manage input costs, which
together with the strong management in procurement, employment costs and overheads allowed the Group to leverage
efficiencies across its fixed cost base resulting in an operating profit increase of 12,7% to R1 361 million (2012: 1 208
million).
A key management measure which is a non-IFRS measure of business performance is 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 and surpluses/
deficits on retirement benefits) which increased by 12,9% to R1 547 million (2012: R1 370 million). The higher proportion 
of medical cases contributed to the EBITDA margin increasing to 27,4% (2012: 26,0%).

                                                                                         6 months         6 months        12 months   
                                                                                         31 March         31 March          30 Sept   
                                                                                             2013             2012             2012   
  R Million                                                                             Unaudited        Unaudited          Audited                                                                                                                                       
  Normalised EBITDA                                                                                                                   
  Operating profit                                                                          1 361            1 208            2 542   
  Profit on disposal of businesses                                                              -             (32)              (30)   
  Loss on derecognition of finance lease asset                                                  4                -                -   
  Profit on disposal of property                                                                -                -               (9)   
  Gain on bargain purchase                                                                      -                -               (2)   
  Additional receipt on previous disposed business                                              -              (2)               (2)   
  Loss on remeasuring of fair value of equity interest before business combination              -                3                3   
  Depreciation on property, plant and equipment                                               176              160              318   
  Amortisation of intangible assets                                                            57               57              124   
  Retirement benefit asset                                                                    (41)             (21)             (42)   
  Post-retirement medical aid                                                                 (10)              (2)               5   
  Normalised EBITDA                                                                         1 547            1 370            2 907   
  Normalised EBITDA as % of turnover                                                         27,4%            26,0%            26,6%   


Cash flow
Streamlined administrative processes contributing to tighter working capital management in combination with improved
collections of government related debt resulted in cash generated from operations increasing by 24,3% to R1 247 million
(2012: R1 003 million), representing 80,6% (2012: 73,2%) of normalised EBITDA.

Financial position
The Group is in a strong financial position with a low gearing. Net debt to normalised EBITDA as of 31 March 2013 is
0,8 times, well within the bank covenants of three times. The Group has the financial flexibility to continue to invest
both locally and internationally.

Headline earnings per share (HEPS) and normalised earnings per share
Headline earnings per share increased by 19,8% to 76,4 cps (2012: 63,8 cps). Earnings per share on a normalised basis,
which excludes non-trading related items, increased by 14,5% to 71,3 cps (2012: 62,3 cps). Normalised earnings per
share excluding the impact of Max Healthcare, India increased by 18,8% to 75,3 cps (2012: 63,4 cps).

                                                                                                        
                                                                                         31 March                           31 March          30 Sept   
                                                                                             2013           Change              2012             2012   
  R Million                                                                             Unaudited                %         Unaudited          Audited                                                                                                                                                          
  Normalised earnings                                                                                                                                  
  Profit attributable to ordinary equity holders                                              790                                690            1 496   
  Adjustments (net of tax):                                                                                                                            
  Profit on disposal of businesses                                                              -                                (27)             (25)   
  Loss on derecognition of finance lease asset                                                  3                                  -                -   
  Profit on disposal of property                                                                -                                  -               (7)   
  Gain on bargain purchase                                                                      -                                  -               (2)   
  Additional receipt on previous disposed business                                              -                                 (2)              (2)   
  Loss on remeasuring of fair value of equity interest before business combination              -                                  3                3   
  Gain on derecognition of finance lease 
  liability                                                                                   (16)                                 -                -     
  Retirement funds                                                                            (36)                               (16)             (27)   
  Normalised earnings                                                                         741                                648            1 436   
  Normalised EPS (cents)*                                                                    71,3             14,5              62,3            138,1   


Capital expenditure
During the current financial year, Life Healthcare invested R216 million (2012: R1 033 million, R210 million in
Southern Africa and the investment in Max Healthcare, India R823 million). A further R536 million has been allocated for
capital projects for the remainder of the 2013 financial year. A number of these projects timing of the cash flow spend 
is dependent on local and regional authorities planning approvals. This investment in the Groups facilities ensures that
the demand for services is met and the Group remains abreast of modern technology and standards.

Cash dividend
The directors approved an interim cash dividend of 54 cents per ordinary share (2012: 45 cents per ordinary share)
amounting to R562 793 265 (2012: R468 994 388) out of income reserves. R23 689 800 of the dividend is subject to secondary 
tax on companies (STC) (2,27304 cps). The balance of the dividend amounting to R539 103 465 will be subject to dividend 
withholding tax at a rate of 15%, which will result in a net dividend of 46.24096 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, 31 May 2013
Trading ex the dividend commences                                      Monday, 3 June 2013
Record date                                                            Friday, 7 June 2013
Payment date                                                          Monday, 10 June 2013
Share certificates may not be dematerialised or rematerialised between Monday, 3 June 2013 and Friday, 7 June 2013,
both days inclusive.

Changes to the 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 and K Gordhan resigned as director on 22 February 2013. RJ Hogarth will retire as an executive director on 31 May 
2013 and will be replaced by PP van der Westhuizen who will take over as the new Chief Financial Officer.

Outlook
Despite a tougher economic environment the Group expects to see increased demand for hospital services and the
additional growth in medical cases is expected to continue. The Group plans to add an additional 1 000 acute hospital, 
mental health and acute rehabilitation beds in South Africa over the next three to four years.
The Group will continue to focus on driving operational efficiency through the management of cost of sales,
streamlining administrative processes, and the completion of the Impilo modules.
The underlying fundamentals in India for private hospital services are strong and the Group is confident that Max
Healthcare, India will continue to show improved revenues and EBITDA margins. The Group will continue to look for 
additional growth opportunities in India and Africa.

Thanks
The contribution of the doctors, nurses and other 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 13 May 2013 and signed on its behalf:
Mustaq Brey                                        Michael Flemming
Chairman                                           Chief Executive Officer
13 May 2013


Executive directors: CMD Flemming (Chief Executive Officer), RJ Hogarth (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.

For more information see: www.lifehealthcare.co.za

Date: 14/05/2013 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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