Wrap Text
Audited summarised consolidated results
and cash dividend declaration
for the year ended 30 September 2014
LIFE HEALTHCARE GROUP HOLDINGS LIMITED
Registration number: 2003/002733/06
Income tax number: 9387/307/15/1
ISIN: ZAE000145892
Share code: LHC
AUDITED SUMMARISED CONSOLIDATED RESULTS AND CASH DIVIDEND DECLARATION FOR THE YEAR ENDED 30 SEPTEMBER 2014
- Group revenue increased to R13 046 million +10.2%
- Paid patient days (PPDs) +2.0%
- Normalised earnings per share increased by 12.0% to 168.6 cents
- Final dividend of 78 cents per share, giving a total dividend of 141 cents per share +11.9%
SUMMARISED CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
FOR THE YEAR ENDED 30 SEPTEMBER 2014
30 September
30 September Change 2013
R'm 2014 % Restated
Revenue 13 046 10.2 11 834
Other income 115 117
Operating expenses (10 011) (9 073)
Profit on disposal of a business 2 -
Transaction cost (16) -
Profit on disposal of investment in associate 957 -
Loss on derecognition of finance lease asset - (4)
Gain on bargain purchase 1 -
Impairment of property, plant and equipment (1) -
Operating profit 4 093 42.4 2 874
Fair value gain on derivative financial instruments 49 9
Gain on derecognition of finance lease liability - 22
Finance income 22 15
Finance cost (230) (226)
Share of associates' and joint ventures' net profit after tax 39 70
Profit before tax 3 973 2 764
Tax expense (875) (760)
Profit after tax 3 098 54.6 2 004
Other comprehensive income, net of tax
Items that may be reclassified subsequently to profit or loss
Currency translation differences (1) 11
Items that may not be reclassified to profit or loss
Retirement benefit asset 19 42
Post-retirement medical aid 2 8
Total comprehensive income for the year 3 118 51.0 2 065
Profit after tax attributable to:
Ordinary equity holders of the parent 2 774 62.1 1 711
Non-controlling interest 324 293
3 098 54.6 2 004
Total comprehensive income attributable to:
Ordinary equity holders of the parent 2 796 58.2 1 767
Non-controlling interest 322 298
3 118 51.0 2 065
30 September
30 September Change 2013
2014 % Restated
Weighted average number of shares
in issue (million) 1 037 1 038
Earnings per share (cents) 267.5 62.3 164.8
Headline earnings per share (cents) 177.8 7.9 164.8
Diluted earnings per share (cents) 266.7 61.9 164.7
Diluted headline earnings per share (cents) 177.3 7.7 164.7
Headline earnings (R'm)
Profit attributable to ordinary equity holders 2 774 1 711
Headline earnings adjustable items
Impairment of property, plant and equipment 1 -
Profit on disposal of a business (2) -
Profit on disposal of investment in associate (957) -
Gain on bargain purchase (1) -
Profit on disposal of property, plant and equipment - (4)
Loss on derecognition of finance lease asset - 4
Tax 29 -
Headline earnings 1 844 7.8 1 711
SUMMARISED CONSOLIDATED STATEMENT OF FINANCIAL POSITION
AS AT 30 SEPTEMBER 2014
30 September 1 October
30 September 2013 2012
R'm 2014 Restated Restated
ASSETS
Non-current assets 9 700 8 349 7 776
Property, plant and equipment 5 901 4 517 4 008
Intangible assets 2 318 2 084 2 181
Other non-current assets 1 481 1 748 1 587
Current assets 2 113 1 620 1 480
Other current assets 1 691 1 323 1 236
Cash and cash equivalents 422 297 244
TOTAL ASSETS 11 813 9 969 9 256
EQUITY AND LIABILITIES
Capital and reserves
Capital and reserves 4 792 4 525 3 941
Non-controlling interest 1 108 1 081 936
TOTAL EQUITY 5 900 5 606 4 877
LIABILITIES
Non-current liabilities 2 909 2 150 2 445
Interest-bearing borrowings 2 344 1 657 1 929
Other non-current liabilities 565 493 516
Current liabilities 3 004 2 213 1 934
Other current liabilities 1 842 1 528 1 474
Interest-bearing borrowings 1 007 452 460
Bank overdraft 155 233 -
TOTAL LIABILITIES 5 913 4 363 4 379
TOTAL EQUITY AND LIABILITIES 11 813 9 969 9 256
SUMMARISED CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
FOR THE YEAR ENDED 30 SEPTEMBER 2014
Total
capital Non-
and controlling Total
R'm reserves interest equity
Balance at 1 October 2013 (restated) 4 525 1 081 5 606
Total comprehensive income for the year 2 796 322 3 118
Profit for the year 2 774 324 3 098
Other comprehensive income 22 (2) 20
Gains on transactions with non-controlling interests 8 (8) -
Non-controlling interest arising on business combination - 6 6
Increase in ownership interest in subsidiaries (102) - (102)
Distributions to shareholders (2 449) (293) (2 742)
Life Healthcare Employee Share Trust 17 - 17
Long Term Incentive Scheme 18 - 18
Treasury shares (21) - (21)
Balance at 30 September 2014 4 792 1 108 5 900
Balance at 1 October 2012 (as previously reported) 3 941 937 4 878
Adjustments relating to changes in accounting policy - (1) (1)
Balance at 1 October 2012 (restated) 3 941 936 4 877
Total comprehensive income for the year 1 767 298 2 065
Profit for the year 1 711 293 2 004
Other comprehensive income 56 5 61
Gains on transactions with non-controlling interests 10 (10) -
Distributions to shareholders (1 188) (143) (1 331)
Treasury shares (67) - (67)
Long Term Incentive Scheme 28 - 28
Life Healthcare Employee Share Trust 9 - 9
Profit on disposal of treasury shares 31 - 31
Tax on profit on disposal of treasury shares (6) - (6)
Balance at 30 September 2013 (Restated) 4 525 1 081 5 606
SUMMARISED CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED 30 SEPTEMBER 2014
30 September
30 September 2013
R'm 2014 Restated
Cash generated from operations 3 516 3 422
Tax paid (980) (804)
Net cash generated from operating activities 2 536 2 618
Net cash utilised in investing activities1 (98) (781)
Net cash utilised in financing activities2 (2 266) (2 017)
Net increase/(decrease) in cash and cash equivalents 172 (180)
Cash and cash equivalents - beginning of the year 64 244
Cash balances acquired through business combinations 23 -
Effect of foreign currency movement 8 -
Cash and cash equivalents - end of the year 267 64
1 The cash utilised in investing activities includes the investment made in Scanmed Multimedis S.A. (Scanmed), Poland, and the
disposal of the investment in associate held in Joint Medical Holdings Limited (JMH).
2 The cash utilised in financing activities includes the new term debt raised and previous term debt settled.
SEGMENTAL REPORT
The Hospital segment comprises all the private hospitals in Southern Africa, the Healthcare Services segment comprises Life
Esidimeni and Life Occupational Healthcare and International comprises Poland while the Other segment comprises Corporate.
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.
Year ended
Year ended 30 September
30 September 2013
2014 Restated
R'm
Operating segments
Revenue
Southern Africa
Hospitals 12 007 11 001
Healthcare Services 864 831
Other - 2
International
Poland 175 -
Total 13 046 11 834
Profit before items detailed below
Southern Africa
Hospitals 2 905 2 607
Healthcare Services 135 167
Other 213 213
International
Poland 3 -
Operating profit before items detailed below 3 256 2 987
Amortisation of intangible assets (122) (116)
Impairment of property, plant and equipment (1) -
Profit on disposal of investment in associate 957 -
Profit on disposal of a business 2 -
Gain on bargain purchase 1 -
Retirement benefit asset 15 7
Post-retirement medical aid 1 -
Transaction cost (16) -
Loss on derecognition of finance lease asset - (4)
Operating profit 4 093 2 874
Fair value gain on derivative financial instruments 49 9
Gain on derecognition of finance lease liability - 22
Finance income 22 15
Finance costs (230) (226)
Share of associates' and joint ventures' net profit after tax 39 70
Profit before tax 3 973 2 764
Operating profit before items detailed includes the segment's 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 and decreases in its shareholdings in some of its subsidiary companies due to transactions with
minority shareholders.
Disposal of investment in associate
On 24 February 2014, the Group disinvested its 49.3% shareholding in JMH via a share buy-back to the value of R1 209 million
followed by a direct purchase of R156 million. This resulted in a profit on sale of associate of R957 million.
Increase in ownership interest resulting in a company becoming a wholly owed subsidiary
On 1 April 2014, the Group acquired additional 13.7% shares in Wilgeheuwel Hospital Proprietary Limited for R96 million, resulting
in Wilgeheuwel Hospital Proprietary Limited becoming a wholly owned subsidiary of the Group.
Business combinations
On 5 October 2013, the Group acquired 100% of the shares in Sport Science Day Surgery Clinic Proprietary Limited (SSDSC) for
R8 million.
On 16 April 2014, the Group acquired a 57.1% interest in Scanmed Multimedis S.A (Scanmed), incorporated in Poland. On 24 April 2014,
the Group acquired an additional 23.3% interest in Scanmed.
The company had no significant contingent liabilities at the acquisition date.
From the date of acquisition, Scanmed contributed revenue of R175 million and net loss after tax of R13 million which was recognised
in the statement of comprehensive income.
The following presents the net impact on the consolidated information of the Group as if the business combination took place on 1
October 2013:
R'm
Revenue 382
Net loss (28)
Details of the net assets acquired and goodwill are as follows:
Purchase consideration
Total purchase consideration (427)
Cash portion (391)
Non-cash portion (36)
Fair value of net assets acquired
Fair value of net assets acquired 211
Fair value of non-controlling interest recognised (63)
Goodwill arising on acquisition (279)
The fair value of the assets and liabilities arising from the acquisition were as follows:
Acquiree
fair value
2014
R'm
Inventories 6
Accounts and other receivable 53
Accounts and other payable (75)
Cash balances 22
Current tax liability (1)
Borrowings (363)
Property, plant and equipment 545
Deferred tax (4)
Intangible assets 28
211
Acquiree
fair value
2014
R'm
Since the initial acquisition, the Group increased
its shareholding in Scanmed to 98.56%.
Increase in ownership interest:
Total purchase consideration (70)
Cash portion (70)
Fair value of non-controlling interest recognised 57
Increase in ownership interest in subsidiary (13)
Acquisition of investments
On 30 June 2014, Scanmed acquired 100% of Gastromed
Limited, incorporated in Poland.
The company had no significant contingent liabilities
at the acquisition date.
The following presents the net impact on the
consolidated information of the Group as if
the business combination took place on 1 October 2013:
Revenue 24
Net profit 1
Details of the net assets acquired and
goodwill are as follows:
Purchase consideration
Total purchase consideration (49)
Cash portion (49)
Fair value of net assets acquired
Fair value of net assets acquired 2
Goodwill arising on acquisition (47)
Basis of presentation and accounting policies
The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited Listings
Requirements for preliminary reports, and the requirements of the Companies Act applicable to summary financial statements. The
Listings Requirements require preliminary reports to be prepared in accordance with the framework concepts and the measurement
and recognition requirements of International Financial Reporting Standards (IFRS) and the SAICA Financial Reporting Guides as
issued by the Accounting Practices Committee and Financial Pronouncements as issued by the Financial Reporting Standards Council
and to also, as a minimum, contain the information required by IAS 34 Interim Financial Reporting.
The accounting policies applied in the preparation of the consolidated financial statements from which the summary consolidated
financial statements were derived are in terms of International Financial Reporting Standards and are consistent with those
accounting policies applied in the preparation of the previous consolidated annual financial statements, except for the adoption of
the new and revised standards.
The adoption of the IFRS 11 Joint Arrangements and the revised IAS 19 Employee Benefits required a restatement of the comparative
figures. The impact of this change is not material. Full details are disclosed in the annual financial statements.
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
This summarised report is extracted from audited information, but is not itself audited. The annual financial statements were
audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited annual financial statements and the
auditor's report thereon are available for inspection at the Company's registered office.
The directors take full responsibility for the preparation of the preliminary report and that the financial information has been
correctly extracted from the underlying annual financial statements.
COMMENTARY
Overview
Life Healthcare continued to grow during the year under review and continues to be in a healthy financial position to deliver on its
strategic objectives of growth, efficiency, quality and sustainability. Activities as measured by hospital paid patient days (PPDs)
increased by 2.0%. An additional 249 active beds have been added to the business. These beds were capacity expansion beds at
existing facilities and covered 16 hospitals across the Group. The Group's average occupancy for the year was 71.9% (2013: 71.7%).
Occupancies continue to remain high in the Group's intensive and high care units (77%) and in the Group's Mental Health and Acute
Rehabilitation units (77%). Driving efficiency improvement remains a key strategy for the Group and margins remained relatively flat
during the year despite pressures from the depreciating Rand, salaries and overheads. Life Healthcare continued to improve on its
quality metrics as evidenced by an improvement in both clinical outcomes and hospital associated infection rates.
Max Healthcare Institute Limited ("Max"), India grew revenue by 23.5% for the year to September 2014 compared to the prior year.
EBITDA margins in India continued to improve due to the higher occupancies and efficiency initiatives.
Scanmed was added from April 2014.
Financial performance
Group revenue, increased by 10.2% to R13 046 million (2013: R11 834 million). Hospital division revenue increased by 9.1% to R12 007
million (2013: R11 001 million) driven by a 2.0% increase in PPDs and higher revenue per PPD of 7.1% made up of a pricing increase
of 6.6% and case mix change of 0.5% due to more surgical cases. Healthcare Services increased revenue by 4.0% to R864 million (2013:
R831 million) being negatively impacted by the return of Matikwana Hospital to the public sector as of 31 March 2014.
The revenue contribution from Scanmed was R175 million.
Revenue on a continuing basis (including revenue from Scanmed) increased by 10.7% to R12 989 million (2013: R11 731 million).
Normalised EBITDA1 increased by 8.2% to R3 611 million (2013: R3 337 million). Normalised EBITDA on a continuing basis increased by
8.6% to R3 597 million (2013: R3 311 million). The EBITDA contribution from Scanmed was R16 million. The Group continues to focus on
driving efficiencies across the business.
The alternative reimbursement model (ARM) together with higher occupancies and excellent costs of sales management allowed the Group
to manage EBITDA margins despite cost pressures from the depreciation of the Rand, salary and overhead pressures.
1 Life Healthcare defines normalised EBITDA as operating profit plus depreciation, amortisation of intangible assets, impairment of
property, plant and equipment as well as excluding profit/loss on the disposal of businesses, fair value adjustments and
surpluses/deficits on retirement benefits.
30 September
30 September 2013
R'm 2014 % Restated
Normalised EBITDA
Operating profit 4 093 2 874
Profit on disposal of investment in associate (957) -
Loss on derecognition of finance lease asset - 4
Profit on disposal of property - (4)
Gain on bargain purchase (1) -
Impairment of property, plant and equipment 1 -
Profit on disposal of business (2) -
Depreciation on property, plant and equipment 355 354
Transaction cost 16 -
Amortisation of intangible assets 122 116
Retirement benefit asset (15) (7)
Post-retirement medical aid (1) -
Normalised EBITDA 3 611 8,2 3 337
Discontinued operations2 (14) (26)
Normalised EBITDA - continued operations 3 597 8,6 3 311
Southern Africa 3 581 8,2 3 311
Poland 16 -
2 Discounted operations are businesses that for comparative purposes are disclosed separately due to only being included for part of
a period. The businesses were disposed/closed during the current period and included Matikwana Hospital where the contract with the
Government came to an end in March 2014.
Cash flow
The business generated good cash flows. Streamlined administrative processes contributed to tight working capital management
resulting in an increase of 2.7% to R3 516 million (2013: R3 422 million) in cash generated from operations, representing 97.4%
(2013: 102.5%) of normalised EBITDA.
Financial position
The Group is in a strong financial position with a low gearing. Net debt to normalised EBITDA as at
30 September 2014 was 0.84 times (2013: 0.63 times) well within the bank covenants of 2.75 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 7.9% to 177.8 cps (2013: 164.8 cps). Earnings per share on a normalised basis, which
excludes non trading related items listed below and the effect of disposed/closed businesses, increased by 12.0% to 168.6 cps
(2013: 150.6 cps).
30 September
30 September Restated
R'm 2014 % 2013
Normalised earnings
Profit attributable to ordinary equity holders 2 774 1 711
Decrease in profits due to the impact of businesses disposed/closed3 (net of tax):
(54) (120)
Adjusted profit attributable to ordinary equity holders from continued operations
2 720 1 591
Profit on disposal of a business (1) -
Loss on derecognition of finance lease asset - 3
Profit on disposal of property, plant and equipment - (3)
Profit on disposal of investment in associate (929) -
Gain on bargain purchase (1) -
Gain on derecognition of finance lease liability - (16)
Impairment of property, plant and equipment 1 -
Retirement funds (11) (5)
Retirement funds (included in employee benefits expense) (7) (7)
Transaction cost 16 -
Fair value gain on foreign exchange hedge contract (40) -
Normalised earnings from continued operations 1 748 11,8 1 563
Amortisation of intangible assets 84 84
Normalised earnings from continued operations excluding amortisation of intangible assets
1 832 1 647
Normalised EPS (cents) from continued operations 168,6 12,0 150,6
Normalised EPS from continued operations - excluding amortisation (cents)
176,7 158,7
3 Includes Matikwana Hospital and JMH.
Capital expenditure
During the current financial year, Life Healthcare invested R1 480 million (2013: R828 million) comprising mainly of capital
projects of R962 million (2013: R760 million) and R510 million for the purchase of Scanmed (2013: R68 million to maintain the 26%
shareholding in Max). A further R1 938 million has been committed for capital projects (excluding investment opportunities) of which
R1 551 million is expected to be spent in 2015. This investment in the Group's facilities ensures that the demand for services is
met and the Group remains abreast of modern technology and standards.
Changes to board of directors
ME Jacobs and RT Vice were appointed to the board from 1 January 2014.
TS Munday retired from the board with effect from 30 January 2014 at the annual general meeting.
CMD Flemming retired from the board with effect 31 March 2014 and A Meyer was appointed as the new chief executive officer on 1
April 2014.
Cash dividend declaration
The directors approved a final gross cash dividend of 78 cents per ordinary share (2013: 72 cents per ordinary share) for the year
ended 30 September 2014. The dividend has been declared from income reserves and no secondary tax on companies' credits have been
utilised. The total final dividend amounting to R813 million will be subject to dividend withholding tax at a rate of 15%, which
will result in a net dividend of 66.30000 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, 28 November 2014
Trading ex the dividend commences: Monday, 1 December 2014
Record date: Friday, 5 December 2014
Payment date: Monday, 8 December 2014
Share certificates may not be dematerialised or rematerialised between Monday, 1 December 2014 and Friday, 5 December 2014, both
days inclusive.
Outlook
The Group will continue to focus on its growth objectives in southern Africa, India and Poland. Over 250 new beds will be added in
2015 through the opening of Life Hilton Private Hospital and through brownfield expansion. The complementary services line will grow
by adding more than 30 renal dialysis stations in the next year.
Max will focus on growing revenue and improving operational efficiencies.It will also continue to operationalise the beds not yet
active and is in advanced stages of further brownfield expansions.
In Poland the Group will continue to execute on its strategy of establishing a comprehensive network of facilities and will explore
more acquisition opportunities.
The pressure on costs will remain in light of the weakening of the Rand exchange rate, wage expectations and other overhead costs
but the Group will continue to focus on efficiency programmes to lessen the impact.
The Group concluded the Max equalisation on 10 November 2014 and now owns 46.25% of the business. The additional amount invested was
R1.35 billion.
The quality management programme of the Group is a comprehensive, consistently applied and measured programme which benchmarks
clinical interventions against international best practice with the aim of enhancing patient outcomes. In addition Life Healthcare
recognises the shortage of healthcare skills and will continue to invest heavily in the training of doctors, nurses and pharmacists.
The Competition Commission Market Inquiry into the healthcare sector will continue into 2015. 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 have greatly enhanced the quality of our performance. We
thank them for their contributions.
A special word of thanks from the board and the Company to Michael Flemming for his contribution to the success of the Group over a
number of years and all the best wishes to him.
Approved by the board of directors on 13 November 2014 and signed on its behalf:
Mustaq Brey Andre Meyer
Chairman Chief executive officer
Executive directors
A Meyer (Chief Executive Officer), PP van der Westhuizen (Chief Financial Officer)
Non-executive directors
MA Brey (Chairman), FA du Plessis, PJ Golesworthy, ME Jacobs, LM Mojela, JK Netshitenzhe, MP Ngatane, GC Solomon, RT Vice
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
SENS release date: 14 November 2014
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.
LIFE HEALTHCARE GROUP HOLDINGS LIMITED
Registration number: 2003/002733/06 Income tax number: 9387/307/15/1 ISIN: ZAE000145892 Share code: LHC
www.lifehealthcare.co.za
Date: 14/11/2014 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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