LIFE HEALTHCARE GROUP HOLDINGS LIMITED - Summarised consolidated results for the year ended 30 September 2018, and cash dividend declaration

Release Date: 23/11/2018 07:05
Code(s): LHC
 
Wrap Text
Summarised consolidated results for the year ended 30 September 2018, 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


Summarised consolidated results for the year ended 30 September 2018, 
and cash dividend declaration

Highlights
Revenue
+12.9%
to R23.5 billion

Cash generated from operations
+18.0%
 to R5.5 billion
 
Normalised EBITDA
+10.7% 
to R5.5 billion

Normalised earnings per share 
+17.4% 
to 110.2 cents

Headline earnings per share 
+40.6% 
to 108.8 cents

Final dividend of 50 cents per share
+11.1%

Summarised consolidated statement of profit or loss and other comprehensive income
for the year ended 30 September 2018
                                                                                                               
                                                                        2018                 %            2017    
                                                                         R’m            change             R’m    
Revenue                                                               23 488              12.9          20 797    
Operating expenses                                                   (19 640)                          (17 177)   
Operating profit                                                       3 848               6.3           3 620    
Fair value adjustment to contingent consideration                        (18)                               43    
Transaction costs relating to acquisitions                               (38)                             (267)   
Impairment of assets and investments                                     (34)                             (167)   
Profit on remeasuring previously held interest in                                                   
associate to fair value                                                    -                                 6    
Profit/(loss) on disposal of property, plant and equipment                35                               (37)   
Gain on derecognition of lease assets and liabilities                     79                                 -    
Fair value profit/(loss) on derivative financial instruments             127                               (92)   
Other                                                                    (95)                              (20)   
Finance income                                                            40                               162    
Finance cost                                                          (1 002)                           (1 299)   
Share of associates’ and joint ventures’ net loss after tax             (105)                              (15)    
Profit before tax                                                      2 837                             1 934    
Tax expense                                                             (923)                             (815)   
Profit after tax                                                       1 914              71.0           1 119    
Other comprehensive income, net of tax                                                                            
Items that may be reclassified to profit or loss                                                                  
Movement in foreign currency translation reserve                         183                               127    
Items that will not be reclassified to profit or loss                                                             
Retirement benefit asset and post-employment medical aid                   -                                13    
Total comprehensive income for the year                                2 097              66.6           1 259    
Profit after tax attributable to:                                                                                 
Ordinary equity holders of the parent                                  1 575              93.5             814    
Non-controlling interest                                                 339                               305    
                                                                       1 914              71.0           1 119    
Total comprehensive income attributable to:                                                                       
Ordinary equity holders of the parent                                  1 757              84.6             952    
Non-controlling interest                                                 340                               307    
                                                                       2 097              66.6           1 259    
Weighted average number of shares in issue (million)                   1 451              10.8           1 310    
Earnings per share (cents)                                             108.6              74.6            62.2    
Headline earnings per share (cents)                                    108.8              40.6            77.4    
Diluted earnings per share (cents)                                     108.1              74.4            62.0    
Diluted headline earnings per share (cents)                            108.3              40.3            77.2    
Headline earnings (R’m)                                                                                           
Profit attributable to ordinary equity holders                         1 575                               814    
Headline earnings adjustable items (net of tax)                                                                   
Impairment of assets and investments                                      34                               167    
Profit on remeasuring previously held                                      -                                (4)   
interest in associate to fair value                                                                                  
(Profit)/loss on disposal of property, plant and equipment               (30)                               37    
Headline earnings                                                      1 579              55.7           1 014    
                                                                                                                     
                                                                     

Summarised consolidated statement of financial position
as at 30 September 2018
                                                                                                                      
                                                                 Notes                    2018                2017    
                                                                                           R’m                 R’m    
Assets                                                                                                                
Non-current assets                                                                      30 558              31 459    
Property, plant and equipment                                                           12 243              11 131    
Intangible assets                                                                       17 084              16 281    
Other non-current assets                                                                 1 231               4 047    
Current assets                                                                           8 584               5 180    
Cash and cash equivalents                                                                1 494               1 176    
Other current assets                                                                     4 249               4 004    
Asset classified as held for sale                                                        2 841                   -    
                                                                                                                      
Total assets                                                                            39 142              36 639    
Equity and liabilities                                                                                                
Capital and reserves                                                                                                  
Stated capital                                                                          13 510              13 084    
Reserves                                                                                 1 406               1 296    
Non-controlling interest                                                                 1 286               1 171    
Total equity                                                                            16 202              15 551    
Liabilities                                                                                                           
Non-current liabilities                                                                 14 764               9 991    
Interest-bearing borrowings                                          1                  12 870               7 786    
Other non-current liabilities                                                            1 894               2 205    
Current liabilities                                                                      8 176              11 097    
Bank overdraft                                                                             488                 450    
Interest-bearing borrowings                                          1                   3 086               6 301    
Other current liabilities                                                                4 602               4 346    
                                                                                                                      
Total liabilities                                                                       22 940              21 088    
Total equity and liabilities                                                            39 142              36 639    
                                                                                                                         


Summarised consolidated statement of changes in equity
for the year ended 30 September 2018
                                                                                                                            
                                                                       Total                                                
                                                                     capital              Non-                              
                                                                         and       controlling               Total          
                                                                    reserves          interest              equity          
                                                                         R’m               R’m                 R’m          
Balance at 1 October 2017                                             14 380             1 171              15 551          
Total comprehensive income for the year                                1 757               340               2 097          
Profit for the year                                                    1 575               339               1 914          
Other comprehensive income                                               182                 1                 183          
Issue of new shares as a result of scrip distributions                   450                 -                 450          
Transactions with non-controlling interests                             (474)               19                (455)         
Distributions to shareholders                                         (1 208)             (244)             (1 452)         
Net movement in treasury shares for staff benefit schemes                (66)                -                 (66)         
Share-based payment charge for staff benefit schemes                      77                 -                  77          
Balance at 30 September 2018                                          14 916             1 286              16 202          
                                                                                                                            
Balance at 1 October 2016                                              5 486             1 312               6 798          
Total comprehensive income for the year                                  952               307               1 259          
Profit for the year                                                      814               305               1 119          
Other comprehensive income                                               138                 2                 140          
Issue of new shares as a result of scrip distributions                   712                 -                 712          
Issue of new shares as a result of the rights offer,                                                     
net of costs                                                           8 770                 -               8 770          
Gains on transactions with non-controlling interests                       6                (6)                  -          
Transactions with non-controlling interests                               (6)             (205)               (211)         
Non-controlling interest arising on business combination                   -                17                  17          
Distributions to shareholders                                         (1 477)             (254)             (1 731)         
Purchase of treasury shares for staff benefit schemes                   (125)                -                (125)         
Share-based payment charge for staff benefit schemes                      62                 -                  62          
Balance at 30 September 2017                                          14 380             1 171              15 551          
                                                                                                        

Summarised consolidated statement of cash flows
for the year ended 30 September 2018
                                                                                                                      
                                                                        2018                 %                2017    
                                                                         R’m            change                 R’m    
Cash generated from operations                                         5 503              18.0               4 663    
Transaction costs paid                                                   (38)                                 (210)   
Interest received                                                         40                                   162    
Tax paid                                                              (1 065)                                 (891)   
Net cash from operating activities                                     4 440              19.2               3 724    
Capital expenditure                                                   (2 244)                               (1 656)   
Acquisition of Alliance Medical (net of cash acquired)                     -                                (9 568)   
Other investments (net of cash acquired) and contingent                                                  
considerations paid                                                   (1 131)                                 (733)   
Other                                                                     11                                    72    
Net cash utilised in investing activities                             (3 364)                              (11 885)   
Proceeds from interest-bearing borrowings                              8 437                                18 685    
Repayment of interest-bearing borrowings                              (6 784)                              (15 462)   
Proceeds from issue of shares as a result of the rights                                                  
offer, net of costs                                                        -                                 8 770    
Finance costs paid                                                      (903)                               (1 210)   
Dividends paid                                                          (758)                                 (765)   
Other                                                                   (818)                                 (720)   
Net cash (utilised in)/generated from financing activities              (826)                                9 298    
Net increase in cash and cash equivalents                                250                                 1 137    
Cash and cash equivalents - beginning of the year                        726                                  (426)   
Effect of foreign exchange rate movements                                 30                                    15    
Cash and cash equivalents - end of the year                            1 006                                   726    
                                                                                                                         
                                                                       
                                                                     
Segment information 
for the year ended 30 September 2018
The hospitals and complementary services segment comprises all the acute hospitals and complementary services in southern 
Africa. The healthcare services segment comprises Life Esidimeni and Life Employee Health Solutions in southern Africa.

Alliance Medical comprises diagnostic services in the United Kingdom and Europe, and Poland comprises healthcare services 
in Poland.

The operating businesses have been aggregated into different segments based on the similar nature of products and services, 
similar economic characteristics, similar type of customers and operating in a similar regulatory environment.

Inter-segment revenue of R4 million (2017: R5 million) is eliminated and relates to revenue between Life Employee Health 
Solutions and the southern Africa business.
                                                                                                          
                                                                     2018                         2017    
                                                                      R’m                          R’m    
Revenue                                                                                                   
Southern Africa                                                                                           
Hospitals and complementary services                               16 118                       15 019    
Healthcare services                                                 1 122                          871    
Alliance Medical                                                                                          
Diagnostic services                                                 4 988                        3 812    
Poland                                                                                                    
Healthcare services                                                 1 260                        1 095    
                                                                   23 488                       20 797    
Normalised EBITDA (1)                                                                                     
Southern Africa                                                                                           
Hospitals and complementary services                                3 703                        3 420    
Healthcare services                                                   131                          121    
Alliance Medical                                                                                          
Diagnostic services                                                 1 161                          908    
Poland                                                                                                    
Healthcare services                                                    85                           44    
Corporate                                                             455                          508    
                                                                    5 535                        5 001    
(1) Life Healthcare defines normalised EBITDA as operating profit before depreciation on property, 
    plant and equipment, amortisation of intangible assets and non-trading-related costs or income.
                                                                                                         
                                                                     2018                        2017    
                                                                      R’m                         R’m     
Depreciation                                                                                             
Southern Africa                                                                                          
Hospitals and complementary services                                 (531)                       (475)   
Healthcare services                                                   (17)                        (14)   
Alliance Medical                                                                                         
Diagnostic services                                                 (480)                       (390)    
Poland                                                                                                   
Healthcare services                                                  (59)                        (58)    
Corporate                                                            (46)                        (34)    
                                                                  (1 133)                       (971)   
EBITA (2)                                                                                                 
Southern Africa                                                                                          
Hospitals and complementary services                                3 172                       2 945    
Healthcare services                                                   114                         107    
Alliance Medical                                                                                         
Diagnostic services                                                   681                         518    
Poland                                                                                                   
Healthcare services                                                    26                         (14)   
Corporate                                                             409                         474    
                                                                    4 402                       4 030    
Amortisation                                                                                             
Southern Africa                                                                                          
Hospitals and complementary services                                 (131)                       (135)   
Alliance Medical                                                                                         
Diagnostic services                                                  (387)                       (284)    
Poland                                                                                                   
Healthcare services                                                   (19)                        (20)    
                                                                     (537)                       (439)   
Operating profit before items detailed on below                                                         
Southern Africa                                                                                          
Hospitals and complementary services                                3 041                       2 810    
Healthcare services                                                   114                         107    
Alliance Medical                                                                                         
Diagnostic services                                                   294                         234    
Poland                                                                                                   
Healthcare services                                                     7                         (34)   
Corporate                                                             409                         474    
                                                                     
(2)  EBITA = normalised EBITDA less depreciation.      


                                                                     2018                        2017    
                                                                      R’m                         R’m    
Operating profit before items detailed below                        3 865                       3 591    
Retirement benefit asset and post-employment medical                                     
aid income                                                             34                          29    
Severance payments                                                    (51)                          -    
Operating profit                                                    3 848                       3 620    
Fair value adjustment to contingent consideration                     (18)                         43    
Transaction costs relating to acquisitions                            (38)                       (267)   
Impairment of assets and investments                                  (34)                       (167)   
Profit on remeasuring previously held interest in associate                              
to fair value                                                           -                           6    
Profit/(loss) on disposal of property, plant and equipment             35                         (37)   
Gain on derecognition of lease assets and liabilities                  79                           -    
Fair value profit/(loss) on derivative financial instruments          127                         (92)   
Other                                                                 (95)                        (20)   
Finance income                                                         40                         162    
Finance costs                                                      (1 002)                     (1 299)   
Share of associates’ and joint ventures’ net loss after tax          (105)                        (15)    
Profit before tax                                                   2 837                       1 934    
                                                                                                         
Operating profit before items detailed includes the segment’s share of shared services and rental costs. 
These costs are all at market-related rates.                 
                                                                                                         
                                                                     2018                        2017    
                                                                      R’m                         R’m    
Total assets before items below                                                                          
Southern Africa                                                    12 998                      12 542    
Alliance Medical                                                   19 559                      17 815    
Poland                                                              2 519                       2 280    
India (classified as held for sale in the current year)             2 841                       2 960    
                                                                   37 917                      35 597    
Employee benefit assets                                               401                         399    
Deferred tax assets                                                   700                         608    
Derivative financial assets                                           100                           2    
Income tax receivable                                                  24                          33    
Total assets per the balance sheet                                 39 142                      36 639    
Net debt                                                                                                 
Southern Africa                                                     8 018                       7 976    
Alliance Medical                                                    5 854                       4 276    
Poland                                                              1 078                       1 109    
                                                                   14 950                      13 361    
Cash and cash equivalents (net)                                                                          
Southern Africa                                                       (82)                         49    
Alliance Medical                                                      944                         590    
Poland                                                                144                          87    
                                                                    1 006                         726    
                                                                                                         
Net debt is a key measure for the Group, which comprises all interest-bearing borrowings, overdraft 
balances and cash on hand.

Acquisitions and disposals of investments in subsidiaries
Transactions with non-controlling interests
Increase and decrease in ownership interest in southern Africa subsidiaries
The Group had increases and decreases in its percentage shareholding in some of its subsidiary companies due 
to transactions with minority shareholders. The largest impact on the Group cash flows were the acquisition 
of additional shares in Metropol Hospitals Proprietary Limited (R376 million cash outflow) and Border 
Hospitals Proprietary Limited (R94 million cash outflow).

Business combinations
The following acquisitions took place during the current financial year.

                                                                 EOH                                           Business    
                                                              Abantu                                                 of    
                                                         Proprietary                                            Piramal    
                                                             Limited                                         Imaging SA    
                                                               (EOH)                                          and three    
                                                          and Centro                                       subsidiaries    
                                                            Alfa srl                 Imed srl                  (Piramal)   
Acquirer                                                        Life                 Alliance                  Alliance    
                                                            Employee                  Medical                   Medical    
                                                              Health                                                       
                                                           Solutions                                                       
                                                        and Alliance                                                       
                                                             Medical                                                       
                                                        respectively                                                       
                                                                                                                           
Country of incorporation                                      South                     Italy              Switzerland, 
                                                              Africa                                    with businesses    
                                                                 and                                        in Germany,    
                                                               Italy                                     United Kingdom    
                                                        respectively                                                and    
                                                                                                          United States    

Acquisition date                                     1 October 2017             17 March 2018              25 June 2018    
                                                                 and                                                       
                                                        5 September                                                        
                                                                2018                                                       
                                                        respectively                                                       
                                                                                                                           

Percentage voting equity interest acquired                      100%                     100%                      100%    

Primary reasons for business combination               Expanding the        In line with Life           The acquisition    
                                                  Group’s footprint              Healthcare’s                of Piramal    
                                                        in the Life               strategy to                   expands    
                                                     Employee Health              establish a               the Group’s    
                                                  Solutions business                 sizeable                 molecular     
                                                          as well as            international                   imaging    
                                                      continuing its            business, the                 business     
                                                         strategy to           acquisition of                  with the     
                                                     acquire clinics            Imed ensured               developement     
                                                            in Italy             a footprint              and ownership     
                                                                                   in another          of a proprietary 
                                                                              region in Italy             broader range     
                                                                              and complements           of non-invasive    
                                                                                  the Group’s                 molecular    
                                                                          existing diagnostic                   imaging    
                                                                             services segment             PET solutions    

Qualitative factors that make up goodwill 
recognised                                           Attributable to          Attributable to             Attributable     
                                                     future earnings          future earnings         to the workforce     
                                                           potential                potential               and future     
                                                       and synergies            and synergies                 earnings 
                                                                                                             potential     
                                                                                                                  from 
                                                                                                     commercialisation     
                                                                                                     of the proprietary    
                                                                                                      molecular imaging    
                                                                                                          PET solutions    
  
Contingent liabilities at acquisition                           None                     None                      None    


Details of the fair values of net assets acquired and goodwill 
are as follows:                                                                        
R’m                                                                EOH and        
                                                            Centro Alfa srl          Imed srl              Piramal    
Total purchase consideration                                            (44)             (542)                (422)   
Cash portion                                                            (37)             (542)                 (16)   
Contingent consideration(1)                                              (7)                -                 (406)   
Fair value of net assets acquired(2)                                     15               223                  180    
Inventories                                                               -                 -                    3    
Trade and other receivables                                               1                39                   62    
Trade and other payables                                                 (8)              (68)                (141)   
Retirement benefit liability                                              -               (25)                   -    
Cash and cash equivalents                                                 2               124                   11    
Income tax (payable)/receivable                                           -                (1)                   5    
Interest-bearing borrowings                                              (3)                -                    -    
Property, plant and equipment                                            17                51                   19    
Intellectual property                                                     -                 -                  221    
Customer relationships                                                    7               124                    -    
Software                                                                  -                 2                    -    
Deferred tax liabilities                                                 (1)              (23)                   -    
                                                                                                                      
Goodwill                                                                (29)             (319)                (242)   
1 Contingent consideration (Piramal)                                                                                     
  The contingent consideration will become payable when the acquired business is generating a positive cash contribution, 
  measured on a cumulative basis from the date of acquisition. The contingent consideration is a 50% share of pre-tax 
  cash generated for a period of 10 years post-acquisition or a maximum amount payable of USD200 million. The amount 
  included is the calculated payment, based on long-term forecasts adjusted for probabilities associated with the success 
  of the product developed, discounted to present value using a discount rate of 11.3%.
2 The fair values identified on acquisition, relating to Piramal and Imed, are provisional and subject to further review, 
  and will be finalised during the 2019 financial year.                                    
                                                                    EOH and       
                                                                     Centro                                           
R’m                                                                Alfa srl          Imed srl              Piramal    
Cash outflow to acquire businesses, net of cash acquired                                                              
Initial cash consideration                                               37               542                   16    
Less: Cash at acquisition                                                (2)             (124)                 (11)   
                                                                         35               418                    5    
Impact on consolidated information from date of acquisition                                                           
Revenue                                                                 136               125                   66    
Net profit/(loss)                                                         6                16                  (82)   
Impact on consolidated information if each business                                                      
combination took place on 1 October 2017                                                                 
Revenue                                                                 145               236                  228    
Net profit/(loss)                                                         6                32                 (125)   


Notes
1. Interest-bearing borrowings

                                                                     R’m               
Total borrowings at 30 September 2017                             14 087           
Proceeds from interest-bearing borrowings                          8 437             
Repayment of interest-bearing borrowings                          (6 784)          
Derecognition of finance lease liabilities                           (94)              
Interest accrued                                                     874               
Interest paid                                                       (738)             
Other movements                                                      (43)              
Exchange differences                                                 217               
Total borrowings at 30 September 2018                             15 956            

Basis of presentation and accounting policies
The summarised consolidated financial statements are prepared in accordance with the requirements of the JSE Limited 
(JSE) Listings Requirements for preliminary reports, and the requirements of the South African Companies Act 71 of 
2008 (as amended) 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 IFRS and are consistent with those applied in the 
previous consolidated financial statements, except for the adoption of new, revised or amended standards.

These financial results have been prepared under the supervision of PP van der Westhuizen (CA(SA)), the Group Chief 
Financial Officer.

Report of the independent auditor
This summarised report is extracted from audited information, but is not itself audited. The consolidated financial 
statements were audited by PricewaterhouseCoopers Inc., who expressed an unmodified opinion thereon. The audited 
consolidated 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 consolidated financial statements.


Commentary
Overview
The Group results for the year ended 30 September 2018 reflect a strong overall performance with Group 
revenue growing by 12.9%, normalised EBITDA increasing by 10.7% and headline earnings per share up by
40.6%. The Group continues to diversify its revenue streams with 35% (2017: 28%) of Group revenue coming from 
outside the acute hospital business. The southern African operations returned to positive paid patient day 
(PPD) growth and continued to benefit from the strategy of expanding the complementary services business. In 
the Group’s international operations, Scanmed S.A. (Scanmed) continued with its business turnaround and performed 
in line with H1 2018 and Alliance Medical Group Limited (Alliance Medical) delivered a good performance for the 
2018 year. In the Alliance Medical UK business, molecular imaging(PET-CT) continued to experience solid scan 
volume growth with 2018 volumes increasing by 15.2% over the prior year. The diagnostic imaging business in 
the UK was impacted by increased mobile competition and a decrease in National Health Service (NHS) prices, and 
the strategic focus continues to move away from short-term contracts to long-term partnership solutions with 
hospital trusts. The Irish, Italian and northern Europe diagnostic businesses within Alliance Medical performed 
well over the year.

Operational review
Southern Africa
Revenue from the southern African operations increased by 8.5% to R17.2 billion (2017: R15.9 billion). Revenue 
in hospitals and complementary services grew by 7.3%. The business benefitted from the 1.1% increase in PPDs 
(2017: -1.7%) and a higher revenue per PPD of 6.1%, made up of a 5.6% tariff increase and a 0.5% positive case 
mix impact. The overall weighted occupancy for the year remained relatively constant at 69.7% (2017: 70.0%), 
with 131 brownfield expansion beds being added. Complementary services continue to reflect good growth across 
its different lines of business with revenue increasing by 14.0%. Healthcare services benefitted from the 
acquisition of the occupational health and wellness business (EOH) in October 2017 as well as the return of the 
Gauteng mental healthcare users.

Normalised EBITDA increased by 5.9% with an EBITDA margin of 24.9% for the year (2017: 25.5%). The EBITDA margin 
for hospitals and complementary services reflected a marginal improvement on 2017 with the overall margin being 
impacted by strong healthcare services growth occurring within the context of lower EBITDA margins and increased 
corporate costs due to the investment in future growth projects.

The Group continues to improve on its quality outcomes with the overall patient experience improving and the 
patient incident rate declining. In line with the Group’s strategy of increasing transparency around quality 
outcomes, the southern African business became the first hospital group in South Africa to publish quality scores 
on a per hospital basis from October 2018.

Alliance Medical
Alliance Medical’s revenue increased by 30.8% to R5.0 billion (2017: R3.8 billion) and normalised EBITDA increased 
by 27.9% to R1.2 billion (2017: R0.9 billion) due to the inclusion of its results for the full 12 months in 2018 
(2017: 10.3 months), and the subsequent acquisitions of the Italian clinics, Imed and Centro Alfa, as well as 
Piramal. The weakening of the rand against the pound sterling and euro also contributed to the increase. On a 
12-month basis, revenue grew by 8.4% compared to 2017, on the back of strong growth in PET-CT volumes, the subsequent 
acquisitions and a solid underlying performance in Italy and Ireland. The Alliance Medical results include the 
acquisition of Piramal, the Group’s investment in a clinical trials business, contributing revenue of R66 million 
and a loss of R45 million at an EBITDA level. Piramal has a track record in research, development, marketing and 
sales of non-invasive molecular imaging PET solutions. The EBITDA margin on a 12-month basis was 23.3% (2017: 24.2%). 
The margin was impacted by Piramal, as well as the lower margin in the Life Radiopharma business (acquired in 
H2 2017). The margin excluding Piramal and Life Radiopharma is 25.3% (2017: 24.4%). Alliance Medical opened its 
first integrated diagnostic centre (IDC) in March 2018 and has contracts signed with an additional 12 trusts.

The Group agreed to transition certain members of the Alliance Medical management into non-executive roles. As part 
of this transition, the Group agreed to acquire the management’s equity holding of 6.22% and settle the B-share 
liability for GBP35.7 million (R640 million). As a result of this settlement, the Group recognised a net gain of 
R23 million (2017: loss of R65 million) in profit or loss.

Poland
Scanmed revenue for the year increased by 15.1% to R1 260 million (2017: R1 095 million). Normalised EBITDA 
increased by 93.2% to R85 million (2017: R44 million) with the EBITDA margin increasing to 6.7% (2017: 4.0%). These 
strong results are primarily as a result of the business turnaround driven by the management team and the continued 
integration and efficiency initiatives. In addition, new four-year Narodowy Fundusz Zdrowia (NFZ) contracts covering 
95% of the Scanmed business have been concluded at improved average pricing. The prior year also included a downward 
adjustment to EBITDA of R23 million mainly relating to overquota revenue.

India
In September 2018, the board accepted an offer from the global investment firm Kohlberg Kravis Roberts and Co LP.
(KKR) of 80 rupees per share for the Life Healthcare equity shareholding in Max Healthcare Institute Limited (Max). 
The offer values the Life Healthcare stake at approximately R4.3 billion before costs and the impact of exchange rate
fluctuations (the R4.3 billion is an indicative amount based on the rate of exchange as at 19 September 2018, R1 = 
INR4.93). The final amount will be determined based on the rate of exchange when the transaction is finalised. The 
offer is subject to the signing of a sale agreement and regulatory approvals. The Group entered into foreign 
exchange option contracts to manage exposure to fluctuations in the exchange rates on the proceeds relating to 
the sale.

The Group ceased equity accounting the investment on 30 June 2018, since the IFRS 5 criteria had been met on 
1 July 2018. The results relating to Max for the nine-month period reflect a loss of R118 million (2017: loss of 
R27 million).


Financial performance
Group revenue increased by 12.9% to R23.5 billion (2017: R20.8 billion) consisting of an 8.5% increase 
in southern African revenue to R17.2 billion (2017: R15.9 billion); R5.0 billion (2017: R3.8 billion) revenue 
contribution from Alliance Medical and R1 260 million (2017: R1 095 million) revenue contribution from Poland.
Normalised EBITDA increased by 10.7% to R5.5 billion (2017: R5.0 billion).
                                                                                                               
                                                                       2018               %           2017     
                                                                        R’m          change            R’m      
Normalised EBITDA                                                                                              
Operating profit                                                      3 848             6.3          3 620    
Depreciation on property, plant and equipment                         1 133            16.7            971     
Amortisation of intangible assets                                       537            22.3            439      
Retirement benefit asset and post-employment                                      
medical aid income                                                      (34)                           (29)     
Severance payments                                                       51                              -        
Normalised EBITDA                                                     5 535            10.7          5 001    
Southern Africa                                                       4 289             5.9          4 049    
Alliance Medical                                                      1 161            27.9            908      
Poland                                                                   85            93.2             44
                                                                                                               
Cash flow                                                                                                      
The Group produced strong cash flows from operations, increasing by 18.0%, due to improved working capital 
management and a better operational performance.                                                        

Financial position
The Group concluded the refinancing of the UK bridge facilities in November 2017 and arranged GBP225 million and 
EUR302.5 million facilities for general corporate requirements.

Net debt to normalised EBITDA as at 30 September 2018 was 2.73 times (2017: 2.55 times). The bank covenant for 
net debt to EBITDA is 3.50 times (2017: 3.50 times).

Capital expenditure
During the current financial period, Life Healthcare invested R3.4 billion (2017: R12.0 billion, including the 
acquisitions of Alliance Medical), mainly comprising capital projects of R2.1 billion (2017: R1.6 billion), new 
acquisitions (net of cash acquired) by Alliance Medical of R434 million (2017: R292 million) and settling the 
B-share liability for R640 million. The Group has approved R2.6 billion for its 2019 capital expenditure 
programme. The maintenance capex for the year was R878 million (2017: R837 million).

Headline earnings per share (HEPS) and normalised earnings per share (EPS)
HEPS increased by 40.6% to 108.8 cps (2017: 77.4 cps). EPS on a normalised basis, which excludes non-trading 
related items, increased by 17.4% to 110.2 cps (2017: 93.9 cps).
                                                                                                               
                                                                       2018               %           2017        
                                                                        R’m          change            R’m         
Weighted average number of shares in issue (million)(1)               1 451            10.8          1 310    
Normalised earnings                                                                                            
Profit attributable to ordinary equity holders                        1 575                            814    
Adjustments (net of tax)                                                                                       
Retirement benefit asset and post-employment medical                
aid income                                                              (24)                           (21)    
Fair value adjustment to contingent consideration                        18                            (43)   
Transaction costs relating to acquisitions                               38                            267    
Impairment of assets and investments                                     34                            167    
Profit on remeasuring previously held interest in                   
associate to fair value                                                   -                             (4)   
(Profit)/loss on disposal of property, plant                        
and equipment                                                           (30)                            37    
Gain on derecognition of lease assets and liabilities                   (71)                             -    
Fair value gain on foreign exchange option contracts                    (17)                            (7)   
Other                                                                    75                             20    
Normalised earnings                                                   1 598            29.9          1 230    
Normalised EPS (cents)                                                110.2            17.4           93.9    
                                                                                                               
(1) The weighted number of shares in issue in the current year increased by 10.8% due to the effect of the rights 
    offer shares issued in April 2017 as well as the scrip distribution shares issued during the current year.

Changes to board of directors
SB Viranna was appointed as Group Chief Executive Officer effective 1 February 2018.

MEK Nkeli resigned as an independent non-executive director with effect from 31 May 2018.

AM Mothupi was appointed chairman of the social, ethics and transformation committee with effect from 31 May 2018.

Cash dividend declaration
The board approved a final gross cash dividend of 50 cents per ordinary share for the year ended 30 September 2018. 
The dividend has been declared from income reserves. A dividend withholding tax of 20% will be applicable to all 
shareholders not exempt therefrom, after deduction of which the net cash dividend is 40 cents per share.

 The Company’s total number of issued ordinary shares is 1 467 349 162 as at 22 November 2018. The Company’s income 
 tax reference number is 9387/307/15/1.


In compliance with the requirements of the JSE, the following salient dates are applicable:
   Last date to trade cum dividend                   Tuesday, 11 December 2018    
   Shares trade ex the dividend                    Wednesday, 12 December 2018    
   Record date                                        Friday, 14 December 2018    
   Payment date                                      Tuesday, 18 December 2018    

Share certificates may not be dematerialised or rematerialised between Wednesday, 12 December 2018 and Friday, 
14 December 2018, both days inclusive.


Outlook
Southern Africa
In southern Africa, the Group expects PPDs to continue to grow conservatively with continued good growth in
complementary and healthcare services. Although the Group will continue to take a cautious approach with regard 
to bed expansion, adding 80 greenfield mental health beds in Q2 2019 to facilitate the growing demand in this 
business. Capex for the year is expected at approximately R1.2 billion. The Group has realigned the southern 
African management team to enable a greater focus on increasing operational leverage, driving efficiencies, 
improving clinical quality outcomes and clinical efficiency, broadening the service offering outside of the 
acute spectrum and ensuring continued good growth with improved margins within healthcare services.
Alliance Medical
Alliance Medical will continue to execute on its growth strategies and good PET-CT volume growth is expected to
continue in the UK. In addition, the UK business will look to roll out five IDCs while focusing on signing 
additional long-term contracts. The businesses in Italy and Ireland are expected to show good growth on the back 
of volume increases, the growth of the clinic business in Italy as well as introducing the clinic model to 
Ireland. Capex for the year is expected to be approximately R1.2 billion.
Poland
Prospects for Scanmed have improved on the back of the new four-year contracts with the NFZ. The Group will 
continue to focus on driving further efficiencies and aligning the business to the Group’s best operating 
practices. The effects of these plans, implemented to sustain growth and manage costs, will be seen over a 
reasonable period of time. Capex for the year is expected at approximately R77 million.

Thanks
The contribution of the doctors, nurses, other healthcare professionals and employees of the Life Healthcare 
Group have greatly enhanced the quality of our performance. We thank them for their contributions.

Approved by the board of directors on 22 November 2018 and signed on its behalf:
Mustaq Brey                           Shrey Viranna
Chairman                              Group Chief Executive Officer


Executive directors: 
SB Viranna (Group Chief Executive Officer), PP van der Westhuizen (Group Chief Financial Officer)

Non-executive directors: 
MA Brey (Chairman), PJ Golesworthy, ME Jacobs, AM Mothupi, JK Netshitenzhe, MP Ngatane, M Sello, 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

Date: 23 November 2018

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, and such information has not been reviewed or reported by the Company's auditors.

LIFE HEALTHCARE GROUP HOLDINGS LIMITED
Registration number: 2003/002733/06
Income tax number: 9387/307/15/1
ISIN: ZAE000145892
Share code: LHC

Head office
Oxford Manor
21 Chaplin Road
Illovo, 2196
Tel: 011 219 9000

www.lifehealthcare.co.za
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