Group UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2018,

Transcription

1 UNAUDITED GROUP RESULTS FOR THE PERIOD ENDED 31 MARCH 2018, SCRIP DISTRIBUTION WITH CASH DIVIDEND ALTERNATIVE, FURTHER CAUTIONARY AND TRADING STATEMENT Group

2 LIFE HEALTHCARE UNAUDITED GROUP RESULTS 2018 Highlights Revenue +17.5% to R11.3 billion Cash generated from operations +37.3% to R2.7 billion Normalised EBITDA +10.5% to R2.7 billion Interim dividend of 38 cents per share +8.6% Headline earnings per share increased to 53.7 cents %

3 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Condensed consolidated statement of profit or loss and other comprehensive income for the period ended 31 March % change Revenue Operating expenses (9 453) (7 848) Operating profit Transaction costs (8) (254) Impairment of investments (17) (142) Profit on disposal of property, plant and equipment 39 5 Fair value adjustment of contingent consideration (18) Reorganisation and contract mobilisation costs (18) Fair value loss on derivative financial instruments (2) (18) Other (19) Finance income Finance cost (488) (713) Share of associates and joint ventures net loss after tax (64) (9) Profit before tax Tax expense (419) (331) Profit after tax Other comprehensive income/(loss), net of tax Items that may be reclassified to profit or loss Movement in foreign currency translation reserve (911) (638) Items that will not be reclassified to profit or loss Retirement benefit asset and post-employment medical aid (4) (6) Total comprehensive income/(loss) for the period (341) Profit after tax attributable to: Ordinary equity holders of the parent Non-controlling interest Total comprehensive income/(loss) attributable to: Ordinary equity holders of the parent (126) 74.6 (496) Non-controlling interest (341) Weighted average number of shares in issue (million) Earnings per share (cents) Headline earnings per share (cents) Diluted earnings per share (cents) Diluted headline earnings per share (cents) Headline earnings () Profit attributable to ordinary equity holders Headline earnings adjustable items (net of tax) Impairment of investments Profit on disposal of property, plant and equipment (30) (5) Headline earnings Group

4 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Condensed consolidated statement of financial position as at 31 March 2018 Notes 31 March September Assets Non-current assets Property, plant and equipment Intangible assets Other non-current assets Current assets Cash and cash equivalents Other current assets Total assets Equity and liabilities Capital and reserves Stated capital Reserves Non-controlling interest Total equity Liabilities Non-current liabilities Interest-bearing borrowings Derivative financial instruments Other non-current liabilities Current liabilities Bank overdraft Interest-bearing borrowings Other current liabilities Total liabilities Total equity and liabilities

5 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Condensed consolidated statement of changes in equity for the period ended 31 March 2018 Total capital and reserves Noncontrolling interest Total equity Balance at 1 October Total comprehensive (loss)/income for the period (126) Profit for the period Other comprehensive loss (903) (12) (915) Issue of new shares as a result of scrip distribution Transactions with non-controlling interests (107) 21 (86) Distributions to shareholders (652) (150) (802) Life Healthcare employee share trust charge Long Term incentive scheme charge Balance at 31 March Balance at 1 October Total comprehensive (loss)/income for the period (496) 155 (341) Profit for the period Other comprehensive loss (640) (4) (644) Issue of new shares as a result of scrip distribution Non-controlling interest arising on restructuring Non-controlling interest arising on business combination 3 3 Increase in ownership interest in subsidiaries (180) (180) Distributions to shareholders (973) (165) (1 138) Life Healthcare employee share trust charge Long Term incentive scheme charge Purchase of treasury shares (13) (13) Balance at 31 March Group

6 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Condensed consolidated statement of cash flows for the period ended 31 March % change Cash generated from operations Interest received Tax paid (548) (513) Net cash generated from operating activities Capital expenditure (882) (603) Acquisition of Alliance Medical (net of cash acquired) (9 932) Other investments (24) (109) Other (72) (261) Net cash utilised in investing activities (978) (10 905) Interest-bearing borrowings raised Interest-bearing borrowings repaid (5 386) (4 307) Dividends paid (292) (484) Interest paid (519) (673) Other (161) (183) Net cash (utilised)/generated in financing activities (1 256) Net (decrease)/increase in cash and cash equivalents (77) Cash and cash equivalents beginning of the period 726 (426) Effect of foreign currency movement (141) (71) Cash and cash equivalents end of the period

7 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Segmental report for the period ended 31 March 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. Inter-segment revenue of R2 million (: R2 million) that is eliminated relates to revenue between Life Employee Health Solutions and the southern Africa business, where the need exists Operating segments Revenue Southern Africa Hospitals and complementary services Healthcare services Alliance Medical Diagnostic services Poland Healthcare services Total EBITDA Southern Africa Hospitals and complementary services Healthcare services Alliance Medical Diagnostic services Poland Healthcare services Corporate Total Group

8 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Segmental report continued 2018 Depreciation Southern Africa Hospitals and complementary services (261) (226) Healthcare services (10) (7) Alliance Medical Diagnostic services (226) (158) Poland Healthcare services (29) (30) Corporate (22) (20) Total (548) (441) EBITA Southern Africa Hospitals and complementary services Healthcare services Alliance Medical Healthcare services Poland Healthcare services 31 (3) Corporate Total Amortisation Southern Africa Hospitals and complementary services (65) (65) Alliance Medical Diagnostic services (180) (111) Poland Healthcare services (10) (11) Total (255) (187) Operating profit Southern Africa Hospitals and complementary services Healthcare services Alliance Medical Diagnostic services Poland Healthcare services 21 (14) Corporate Total

9 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Transaction costs (8) (254) Impairment of investments (17) (142) Profit on disposal of property, plant and equipment 39 5 Fair value adjustment of contingent consideration (18) Reorganisation and contract mobilisation costs (18) Fair value loss on derivative financial instruments (2) (18) Other (19) Finance income Finance costs (488) (713) Share of associates and joint ventures net loss after tax (64) (9) Profit before tax Operating profit before items detailed includes the segment s share of shared services and rental costs. These costs are all at market-related rates. 31 March September Total assets before items below Southern Africa Alliance Medical Poland India Employee benefit assets Deferred tax assets Derivative financial assets 2 2 Income tax receivable Total assets per the balance sheet Net debt Southern Africa Alliance Medical Poland Cash and cash equivalents Southern Africa (554) 49 Alliance Medical Poland Net debt is a key measure for the Group, which comprises all interest-bearing borrowings, overdraft balances and cash on hand. Group

10 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Acquisitions and disposals of investments 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. The individual transactions are not material. Business combinations The Group acquired an occupational health and wellness business on 1 October for a total consideration of R28 million (including a contingent consideration of R4.2 million). No significant contingent liabilities existed at the acquisition date. Notes 1. Interest-bearing borrowings Total borrowings at 30 September Additional loans raised Repayment of existing loans (5 386) Exchange difference (604) Total borrowings at 31 March Basis of presentation and accounting policies The condensed consolidated interim financial statements contained in the interim report are prepared in accordance with the requirements of the JSE Limited Listings Requirements for preliminary reports, and the requirements of the Companies Act of South Africa applicable to summary financial statements, and are consistent with those applied in the previous consolidated annual 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 South African Institute of Chartered Accountants (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. These interim financial results have been prepared under the supervision of PP van der Westhuizen (CA(SA)), the Group Chief Financial Officer. Unaudited results The results for the period ended 31 March 2018 have not been reviewed or audited by the Group s auditors. The directors take full responsibility for the preparation of the interim report.

11 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Commentary Overview The Group s results for the six months ended 31 March 2018 reflect a good performance from the southern African operations with a return to positive paid patient day (PPD) growth, an excellent turnaround in the Scanmed S.A. (Scanmed) operations in Poland and a solid performance from Alliance Medical Group Limited (Alliance Medical) in a changing UK environment. Group revenue grew by 17.5%, normalised EBITDA increased by 10.5% and headline earnings per share is up 116.5%. Operational review Southern Africa Revenue from the southern African operations increased by 9.7% to R8.4 billion (: R7.6 billion). Revenue in hospitals and complementary services grew by 7.9%. The business benefited from the 2.0% increase (:-1.0%) in PPDs and a higher revenue per PPD of 6.0%, made up of a 5.9% tariff increase and a 0.1% positive case mix impact. The overall weighted occupancy for the period remained relatively constant at 68.3% (: 68.4%), with 88 brownfield expansion beds being added. Complementary services continues to reflect good growth across its different business lines with revenue increasing by 15.3%. Healthcare services benefited from the acquisition of an occupational health and wellness business in October as well as the return of 700 Gauteng mental health patients. Normalised EBITDA increased by 5.8% with an EBITDA margin of 25.0% for the period. This is in line with the margin from H2 (25.0%) but was lower than H1 (26.0%). The EBITDA margin was affected by higher salaries, an increase in the clinical division costs, healthcare services growth occurring within the context of lower EBITDA margins and the positive impact of a change in case mix. The Group continues to focus on its quality outcomes with both the overall patient experience score improving and the patient incident rate declining, reflecting an improvement in the clinical outcomes. Group

12 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Commentary continued Alliance Medical Alliance Medical s revenue increased by 56.3% to R2.3 billion (: R1.5 billion) and normalised EBITDA increased by 26.3% to R518 million (: R410 million) as a result of the inclusion of the six months results in H (H1 : 4.3 months). On a like-for-like basis revenue grew by 7.2% on the back of strong growth in PET-CT volumes, the acquisition of Life Radiopharma Group in northern Europe in H2 and solid underlying performance in Italy and Ireland. The EBITDA margin declined to 23.1% (: 27.7%) on a like-for-like basis, impacted by increased competition affecting prices in the UK mobile market, upfront costs on the PET-CT contract as the final static sites are rolled out, faster growth in northern Europe which comes off a lower EBITDA margin, as well as the loss of the BMI contract in the UK. The focus in the UK continues to be partnership solutions with hospital trusts, progressively moving away from mobile infrastructure to static long-term facilities and contracts. Alliance Medical opened its first community diagnostic centre (CDC) in March and has contracts signed with an additional nine trusts. Poland Scanmed revenue for the period increased by 21.5% to R644 million (: R530 million). Normalised EBITDA increased by more than 100% to R60 million (: R27 million) with the EBITDA margin increasing to 9.3% (: 5.1%). 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 NFZ contracts covering 95% of the Scanmed business have been concluded at improved average pricing. The prior period also included a downward adjustment to EBITDA of R23 million mainly relating to overquota revenue. India Max Healthcare Institute Limited (Max Healthcare) reported disappointing results for the six months to March 2018 with the business negatively impacted by the Shalimar Bagh incident in December resulting in a knock-on effect on the balance of the Delhi business. In addition, the increased regulatory environment negatively impacted EBITDA margins. The impact on the Group for the period is a R67 million loss compared to a loss of R12 million in. Management The Group is in the process of strengthening its Group executive structure. Dr Shrey Viranna was appointed Group CEO on 1 February 2018 and since then Brett Mill and Tanya Little have been appointed in executive roles focusing on Group integration, business development and analytics. Financial performance Group revenue increased by 17.5% to R11.3 billion (: R9.6 billion) consisting of a 9.7% increase in southern African revenue to R8.4 billion (: R7.6 billion); R2.3 billion (: R1.5 billion) revenue contribution from Alliance Medical; and R644 million (: R530 million) revenue contribution from Poland. Normalised EBITDA¹ increased by 10.5% to R2.7 billion (: R2.4 billion). 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 and income.

13 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Six months 31 March 2018 % change Six months 31 March Normalised EBITDA Operating profit Depreciation Amortisation Normalised EBITDA Southern Africa Alliance Medical Poland Cash flow The Group produced strong cash flows from operations (up 37.3%) due to improved working capital management. Financial position The Group has concluded the refinancing of the UK bridge facilities and arranged GBP and EUR facilities for corporate requirement purposes. Net debt to normalised EBITDA as at 31 March 2018 was 2.40 times (30 September : 2.55 times). The bank covenant for net debt to EBITDA is 3.50 times (30 September : 3.50 times). Capital expenditure During the current financial period, Life Healthcare invested approximately R1 billion (: R10.9 billion, including the acquisition of Alliance Medical), mainly comprising capital projects of R882 million (: R603 million). The maintenance capex for the period was R309 million (: R327 million). Headline earnings per share (HEPS) and normalised earnings per share (EPS) HEPS increased by 116.5% to 53.7 cps (: 24.8 cps). EPS on a normalised basis, which excludes non-trading related items, increased by 4.0% to 54.2 cps (: 52.1 cps). As a result of the issue of rights offer shares in April, the weighted average number of shares in issue relating to the prior year has been adjusted (increased) to take into account the bonus element due to these shares having been issued at a discount. This is in accordance with IFRS. Group

14 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Commentary continued The effect on the previously reported EPS and HEPS is as follows: Adjusted 31 March Impact of adjustment Previously reported 31 March Weighted average number of shares in issue (million) EPS (cents) 12.7 (1.0) 13.7 HEPS (cents) 24.8 (1.9) 26.7 Normalised EPS (cents) 52.1 (3.9) March 2018 % change 31 March Weighted average number of shares in issue (million)¹ Normalised earnings Profit attributable to ordinary equity holders Transaction costs Impairment of investments Profit on disposal of property, plant and equipment (30) (5) Fair value adjustment of contingent consideration 18 Reorganisation and contract mobilisation costs 18 Other 19 Normalised earnings Normalised EPS (cents) ¹ The weighted average number of shares in issue increased by 25.6% due to the rights offer in April, diluting normalised EPS. Changes to board of directors Dr S Viranna was appointed as Group CEO effective 1 February 2018.

15 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Scrip Distribution and Cash Dividend alternative 1. Introduction The board has declared an interim distribution for the period ended 31 March 2018, by way of the issue of fully paid Life Healthcare Group Holdings Limited ordinary shares of cent each (the Scrip Distribution) payable to ordinary shareholders (Shareholders) recorded in the register of the Company at the close of business on the Record Date, being Friday, 22 June Shareholders will be entitled, in respect of all or part of their shareholding, to elect to receive a gross cash dividend of 38 cents per ordinary share in lieu of the Scrip Distribution, which will be paid only to those Shareholders who elect to receive the cash dividend, in respect of all or part of their shareholding, on or before 12:00 on Friday, 22 June 2018 (the Cash Dividend). The Cash 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 30.4 cents per share. The new ordinary shares will, pursuant to the Scrip Distribution, be settled by way of capitalisation of the Company s distributable retained profits. The Company s total number of issued ordinary shares is as at 31 May The Company s income tax reference number is 9387/307/15/1. 2. Terms of the Scrip Distribution The Scrip Distribution will be done at a 2.5% discount to the 15-day volume weighted average price (VWAP). The number of Scrip Distribution shares to which each of the Shareholders will become entitled pursuant to the Scrip Distribution (to the extent that such Shareholders have not elected to receive the Cash Dividend) will be determined by reference to such Shareholder s ordinary shareholding in Life Healthcare Group Holdings Limited (at the close of business on the Record Date, being Friday, 22 June 2018) in relation to the ratio that 38 cents multiplied by bears to the VWAP of an ordinary Life Healthcare Group Holdings Limited share traded on the JSE during the 15-day trading period ending on Thursday, 7 June Where the application of this ratio gives rise to a fraction of an ordinary share, such fraction will be rounded down to the nearest whole number, resulting in allocations of whole ordinary shares and a cash payment for the fraction. The applicable cash payment will be determined with reference to the VWAP of an ordinary Life Healthcare Group Holdings Limited share traded on the JSE on Wednesday, 20 June 2018, (being the day on which an ordinary Life Healthcare Group Holdings Limited share begins trading ex the entitlement to receive the Scrip Distribution or the Cash Dividend alternative), discounted by 10%. The applicable cash payment will be announced on Stock Exchange News Service (SENS) on Thursday, 21 June Details of the ratio will be announced on the SENS of the JSE in accordance with the timetable that follows. Group

16 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Commentary continued 3. Circular and salient dates A circular providing Shareholders with full information on the Scrip Distribution and the Cash Dividend alternative, including a Form of Election to elect to receive the Cash Dividend alternative will be posted to Shareholders on or about Wednesday, 6 June The salient dates of events thereafter are as follows: 2018 Announcement released on SENS in respect of the ratio applicable to the Scrip Distribution, based on the 15-day VWAP ending on Monday, 11 June, by 11:00 on Announcement published in the press of the ratio applicable to the Scrip Distribution, based on the 15-day VWAP ending on Monday, 11 June on Last day to trade in order to be eligible for the Scrip Distribution and the Cash Dividend alternative Ordinary shares trade ex the Scrip Distribution and the Cash Dividend alternative on Listing and trading of maximum possible number of ordinary shares on the JSE in terms of the Scrip Distribution from the commencement of business on Announcement released on SENS in respect of the cash payment for fractional entitlements, based on the VWAP traded on the JSE on Wednesday, 20 June 2018, discounted by 10% on Last day to elect to receive the Cash Dividend alternative instead of the Scrip Distribution, Forms of Election to reach the transfer secretaries by 12:00 on Record Date in respect of the Scrip Distribution and the Cash Dividend alternative Scrip Distribution certificates posted and Cash Dividend payments made, CSDP/broker accounts credited/updated, as applicable, on Announcement relating to the results of the Scrip Distribution and the Cash Dividend alternative released on SENS on Announcement relating to the results of the Scrip Distribution and the Cash Dividend alternative published in the press on JSE listing of ordinary shares in respect of the Scrip Distribution adjusted to reflect the actual number of ordinary shares issued in terms of the Scrip Distribution at the commencement of business on or about Tuesday, 12 June Wednesday, 13 June Tuesday, 19 June Wednesday, 20 June Wednesday, 20 June Thursday, 21 June Friday, 22 June Friday, 22 June Monday, 25 June Monday, 25 June Tuesday, 26 June Wednesday, 27 June All times provided are South African local times. The above dates and times are subject to change. Any change will be announced on SENS. Share certificates may not be dematerialised or rematerialised between Wednesday, 20 June 2018 and Friday, 22 June 2018, both days inclusive.

17 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Outlook Southern Africa In southern Africa, the Group expects PPDs to continue to grow in line with H with continued good growth in complementary and healthcare services. The Group will continue to take a cautious approach with regard to bed expansion, aiming to add up to 20 brownfield expansion beds, bringing the total number of beds added in 2018 to approximately 110. Capex for the year is expected at approximately R1.3 billion. The Group will continue to focus on improving the patient experience as well as the clinical outcomes and driving operational efficiency. Alliance Medical Alliance Medical will continue to execute on its growth strategies in both existing territories and new potential markets. In the UK, the focus will be on moving to longer-term contracts and on CDC opportunities as the competitive environment in the mobile business is expected to remain. The good growth in PET-CT volumes is expected to continue in H2. Italy will continue to focus on growing its clinic business. Capex for the year, including acquisitions is expected to be approximately R1.5 billion. Poland Prospects for Scanmed have improved on the back of the new four-year contracts with 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 R53 million. India Max Healthcare will continue to focus on operational efficiencies and cost optimisation to mitigate the regulatory impact as well as focusing on improving revenue from its preferred business channels. Discussions regarding the sale of the Life Healthcare equity in Max Healthcare are in progress. Further cautionary Further to the cautionary announcement on SENS on 5 April 2018, shareholders are advised that the Company is still in discussions to dispose of its equity interest in Max Healthcare. The transaction, if successfully concluded, may have a material effect on the price of the Company s shares. Accordingly, shareholders are advised to continue to exercise caution when dealing in the Company s shares until a further announcement is made. Trading statement for the 12 months ended 30 September 2018 Life Healthcare s results for the 12 months ended 30 September 2018 are expected to show an increase of at least 20% in EPS (minimum increase of 12.4 cps to at least 74.6 cps) and at least 20% in HEPS (minimum increase of 15.5 cps to at least 92.9 cps) from reported EPS and HEPS for the financial year ended 30 September (EPS: 62.2 cps and HEPS: 77.4 cps). This is primarily due to the inclusion of Alliance Medical for 12 months (: 10.3 months), the non-recurring impact of the transaction costs as well as the funding costs related to the Alliance Medical acquisition and the impairment of Poland in. Group

18 LIFE HEALTHCARE UNAUDITED GROUP RESULTS Commentary continued A detailed trading statement will be released in early November The forecast financial information on which this trading statement is based has not been reviewed and reported on by the Group s external auditors. Shareholders are advised that the investor presentation for the six months ended 31 March 2018 is published on Life Healthcare s website ( 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. Approved by the board of directors on 31 May 2018 and signed on its behalf by: Mustaq Brey Chairman S Viranna Group Chief Executive Officer Executive directors: S 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, MEK Nkeli, 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: 1 June 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. LIFE HEALTHCARE GROUP HOLDINGS LIMITED Registration number: 2003/002733/06 Income tax number: 9387/307/15/1 ISIN: ZAE Share code: LHC

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20 Group HEAD OFFICE Oxford Manor, 21 Chaplin Road, Illovo, 2196 Tel: