Life Healthcare is in a strong financial position despite the negative impact of the COVID-19 pandemic
People centricity remains a key focus for the success of the Group’s business
Johannesburg, 27 May 2021 - Life Healthcare Group Holdings Limited, one of South Africa’s largest healthcare organisations, today released its unaudited interim financial results for the six months ended 31 March 2021.
Financial highlights include:
- Group revenue from continuing operations increased by 4.0% while normalised EBITDA from continuing operations declined by 14.3%
- The international segment performed strongly with revenue growth of 27.2% while normalised EBITDA grew by 48.8%
- The southern Africa segment showed good recovery for the last six months compared to the last six months of the previous financial year
- Good working capital management and improved trading resulted in cash generated from operations amounted to R2.3 billion
- The Group completed the sale of Scanmed S.A (Scanmed) with R681 million in net proceeds that was utilized to reduce debt levels of the Group
- The Group is in a strong financial position with available undrawn facilities of R6.4 billion
Life Healthcare’s trading performance for the six months ended 31 March 2021 (the current period) showed strong recovery from the last six months of the previous financial year. During the current period, the Group experienced the full impact of the second COVID-19 wave, whereas the effect of the first COVID-19 wave in the six months ended 31 March 2020 was felt primarily in the international business with the southern African business impacted for only a two week period in March 2020. Group revenue increased by 4.0%, normalised EBITDA declined by 14.3% and the normalised EBITDA margin declined to 18.6%.
Group Chief Executive, Peter Wharton-Hood says, “We could not have achieved this performance and have cared for South Africans during this difficult time of the pandemic without the dedication and unwavering support of all our front-line employees, including our doctors. Life Healthcare’s vision is to be a global, people-centred, diversified healthcare organisation. The delivery of this ambition rests on investing in our nurses, clinicians and in our doctor partnerships. With our purpose of making life better people will always remain at the centre of care in all that we do.
The Group’s improved performance and the disposal of Scanmed contributed to a strengthening of Life Healthcare’s financial position with net debt to normalised EBITDA reducing to 2.78 times. The Group continues to adopt a cautious approach due to the ongoing impact of COVID-19 and has curtailed its capital expenditure in the first half. The Company has therefore decided to not declare an interim dividend and will review this position at the end of its financial year.
The international segment, Alliance Medical Group (AMG), performed strongly with revenue growth of 27.2% and normalised EBITDA growth of 48.8%. This performance was driven by good recovery in scan volumes in most regions it operates and a positive contribution from additional COVID-19 solutions. AMG experienced strong growth in volumes within its PET-CT centres in the United Kingdom (UK) towards the end of the current period.
The Group announced the sale of Scanmed in Poland in November 2020. This process was concluded on 26 March 2021, and the net proceeds of R681 million were used to reduce debt.
The southern African business was impacted by a severe second COVID-19 wave during the period, resulting in a decline in revenue of 3.4% and a decline in normalised EBITDA of 32.5%. The southern African normalised EBITDA margin declined to 16.6% due to negative operating leverage resulting from both lower activity levels and higher COVID-19-related operating costs.
Pleasingly, there has been sequential improvement in activities in the current period compared with the six months ended 30 September 2020. The acute hospital business has shown a solid recovery despite the severe second COVID-19 wave impact as we have applied learnings from the first COVID-19 wave and benefitted from a rebound in elective surgical cases between the two waves. Furthermore, there has been consistent growth in complementary and healthcare services driven by additional service offerings and some capacity growth.
Growth initiatives are important to the Group not only to continue to provide the best quality care, but also to drive shareholder value. Wharton-Hood, says, “We will grow the AMG radiology business within the UK, as well as in Europe, as a key partner to the public sector. In addition, we are planning to invest in radiology infrastructure and supporting technology to grow our imaging business in South Africa once initial imaging transactions are completed.”
Life Healthcare continues to adopt a cautious approach due to the ongoing impact of COVID-19, particularly with the southern African business and the uncertainties around a potential third COVID-19 wave. Despite this, Life Healthcare expects a continued positive performance for the six months to 30 September 2021 (H2-2021) from AMG given the continuing demand for scans across the business.
The Group will contribute to southern Africa’s vaccination efforts by including 22 sites as vaccination sites and approximately 20 employer sites (via Life Employee Health Solutions) in the immediate future and may expand the number of sites should there be a need. We continue to support Government to ensure maximum vaccination capacity is achieved and we understand the crucial role we must play in supporting the vaccine rollout. The hospital management and staff supported the Sisonke early access vaccination programme for healthcare workers by assisting with sites, which included four of our own hospitals as well as an outreach site.
“In southern Africa, we anticipate continued growth in revenue and EBITDA in H2-2021 if the recent activity trends continue, but this would be subject to the potential impact of a third wave in the period,” concluded Wharton-Hood.